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6 session 6_global sc cfvg 2012

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6 session 6_global sc cfvg 2012

  1. 1. Dr. RAVI SHANKAR Professor Department of Management Studies Indian Institute of Technology Delhi Hauz Khas, New Delhi 110 016, India Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m) Fax: (+91)-(11) 26862620 Email: r.s.research@gmail.com http://web.iitd.ac.in/~ravi1 SESSION#6: Basics & Beyond (CFVG: 2012) MANAGEMENT OF GLOBAL SUPPLY CHAINS
  2. 2. Supply Chain Stages Supply Chain encompasses all activities associated with the flow and transformation of materials and information from the raw material stage through to the end user. Supplier Manufacturer Distributor Retailer Customer
  3. 3. Supply Chain Illustration
  4. 4. Global Supply Chains • “…designing and managing of a system that controls the flow of materials into, through, and out of the international corporation”
  5. 5. Types of Global Operations •International distribution operations •International suppliers •Off-shore manufacturing operations •Fully-integrated global supply chains
  6. 6. Types of Global SC Type of International Supply Chain Inbound Logistics Process Outbound Logistics International Distribution Domestic Domestic International International Suppliers International Domestic Domestic/ international Offshore Manufacturing International International Domestic Fully Integrated Global Supply Chain Domestic/ international Domestic/ international Domestic/ international
  7. 7. Example 1: Supply Chain for Denim Jeans
  8. 8. Example 1: Supply Chain for Denim Jeans (Contd.)
  9. 9. EXAMPLE : CONTRACT FARMING Thai agro products are in great demand in many countries. In order to improve their global competitiveness by bringing down cost, many agro-industries in Thailand have started contract farming in the neighboring countries like Laos and Cambodia. This is due to cheap production cost. The selected agro products are grown in these countries in accordance with a contact with the farmers or their agents. After harvest, the produce is shipped back to the agro industries in Thailand for processing, packaging and marketing. Through contact farming, the cost of growing raw agro- products has gone down considerably.
  10. 10. Case 1: Supply Chain Evolution at Nabisco Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
  11. 11. Case 1: Supply Chain Evolution at Nabisco (cont.) Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.
  12. 12. Case 1: Supply Chain Evolution at Nabisco (cont.)
  13. 13. EXAMPLE: TIPCO FOOD, THAILAND Thailand has the largest global market share of around 45% in processed pineapple. Tipco Food is one the largest Thai exporters of this product with a hopping figure of Baht 3.7 billion. In 2006-07, due to weakening of US dollar ($) against most of the global currencies, including Baht, Tipco global supply chain came under tremendous threat. Look at these steep drops in exchange rate. It has crumbled as follows: late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007- Baht 33 per $. For the same export, the revenue inflow from exports has gone down by about one fifth of its value few months back. Most of these export-oriented supply chains have become non- competitive in global market. As a protective measure, these export-oriented firms are focusing on local market to boost their sales. – Reference: Bangkok Post: 4 August 2007, p B4.
  14. 14. CASE STUDY 2: WAL-MART In 1979 Kmart was one of the leading companies in the retail industry, with 1,891 stores and average revenues per store of $7.25 million. At that time Wal-Mart was a small niche retailer in the South with only 229 stores and average revenues about half those of Kmart stores. In 10 years Wal-Mart had transformed itself; in 1992 it had the highest sales per square foot and the highest inventory turnover and operating profit of any discount retailer. Today Wal-Mart is the largest and highest profit retailer in the World. How did Wal-Mart do it?
  15. 15. CASE STUDY 2: WAL-MART The starting point a relentless focus on satisfying customer needs; Wal-Mart's goal was simply to provide customers with access to goods when and where they want them and to develop cost structures that enable competitive pricing.
  16. 16. Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,” Harvard Business Review 70(2; March–April 1992), pp. 60–71. Relationship between Facilities and Functions along the Wal-Mart Supply Chain
  17. 17. Wal-Mart Customers Request: Buying detergent, clothes, TV, …... Wal-Mart Stores Wal-Mart or third-party distribution centers Procter & Gamble Plastic Producer Fabric Producer Da-Fa Clothing, Inc. (China) SONY Factory (Malaysia) Electronics Components Producer Chemical Producer Zipper Producer Thread Producer Plastic Producer Case 2: Global Supply Chain Example of WalGlobal Supply Chain Example of Wal--MartMart
  18. 18. CASE STUDY 2: WAL-MART (contd..) The key to achieving this goal was to make the way the company replenishes inventory the centerpiece of its strategy. This was done by using a logistics technique known as cross-docking. In this strategy, goods are continuously delivered to Wal-Mart's warehouses from where they are dispatched to stores without ever sitting in inventory.
  19. 19. CASE STUDY 2: WAL-MART (contd..) This strategy reduced Wal-Mart's cost of sales significantly and made possible to offer everyday low prices to their customers. - Stalk et. al, Harvard Business Review (1992)
  20. 20. SCM Software • Enterprise Resource Planning (ERP) – software that integrates components of a company by sharing and organizing information and data – SAP was first ERP software – mySAP.com • web enabled modules that allow collaboration between companies along the supply chain
  21. 21. Linking Supply Chain with SAP
  22. 22. Suppliers IC Mfg PC Board Subassembly Suppliers FAT US DCs Europe DCs Far East DCs Suppliers Suppliers Retailer Retailer Retailer Case 3: Hewlett & Packard (HP) FAT = Final assembly & test IC Mfg = Integrated circuit manufacturing PC Board = Printed circuit board DCs = Distribution Centers Consumers Consumers Consumers
  23. 23. Similar is Dell Customers order computers on-line Dell Assembly Plant Monitors by SONY (Mexico) Keyboards by Acer (Taiwan) CPU by Intel (USA) Other components
  24. 24. Five core principles of Supply Chain Management?
  25. 25. Summary: Five Core Principles in Global SCM •Connectivity •Collaboration •Synchronization This principle deals with the connectivity network of supply chain partners. Connectivity can be strategic in dealing with planned linkage information integration and network architecture. Collaboration allows a closer integration of the supply chain partners by integrating, planning, forecasting and over all decision making processes across organization boundaries. True collaboration in an ongoing investment in the extended supply chain network. Synchronization between vendors, manufacturing, sales and marketing, finance, customers, and third parties is an integral part of supply chain development. When finely developed interface within the firms are between the firm and its partners are seamless, frictionless and transparent.
  26. 26. Five Core Principles (Continued) •Leverage •Scalability Scalability as it is used here, refers to the ability of the firm to develop a set of supply chain processes that can be easily duplicated with additional suppliers, customers, and 3PL’s. The Principle of Scalability requires a balance between customization and scalability. The Principle of Leverage simply suggests that the firm cluster and focus their assets on high payout opportunities with core suppliers, customers, and Third Party Logistics (3PL’s).
  27. 27. Trends in Global Supply Chain Management • Collaborative Product Development: – Example All Major Auto Companies • Virtual Manufacturing and Supply Chain Management • Demand signal closest to supplier and accurate – Point-of-sales (POS) data capture and transmission and now RFID in each piece of product eliminating the need for line of sight scanning
  28. 28. Achieving the 21st Century Supply Chain: Seven areas of opportunity 1 Use of low cost sources 3 Focused manufacturing strategies 5 Globally aligned operations 6 Built in agility “the Virtual Supply Chain” 2 Creative use of strategic partnerships OEMs, Outsourcing, sub contracting 7 Industry wide solutions 4 Distribution, logistic Optimisation Multiple Channels THE ‘GOAL’ IS TO CREATE A CUSTOMER DRIVEN AGILE BORDERLESS SUPPLY CHAIN THAT IS BASED ON LOWEST COST ECONOMICS
  29. 29. Challenges for Global Supply Chains - Six key questions 6. How closely should suppliers be integrated? 1. What should the customer interface look like? 2. Should the supply chain be geared to responsiveness or efficiency? 3. How critical are new products? 4. What economies of scale are driving the supply chain? 5. Where should the supply chain be decoupled? Buying structure Customer base Time frame The “Customer Insight” challenge
  30. 30. Thank You