Global Supply Chain Management

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Global Supply Chain Management

• The Stories Under the Veil of
  Slogan
• Framework Details

Xilong Liu
2004.5
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Contents

• Why choose the title for the presentation?
• intention
• What will be discussed?
• framework
• Which will be offered in each part?
• details

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Intention

• Academic researches
• Eli Broad Graduate School of Management
• The Stanford Global Supply Chain Management Forum
• European Forum on Global Supply Chain management
  at Eindhoven University (Holland)
• Hong Kong Logistics and Supply Chain Forum
• Managerial Applications
• 2004 Boao Forum for Asia BFA

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Framework

• Integrating the two areas of international
  business and supply chain management.
• Consists of four main areas
• Supply management
• Logistics
• Operations management
• Marketing

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Framework
The hexagon of global supply chain management
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A global supply chain framework

• The 21st Century Logistics framework
• Designed by department of marketing and
  supply chain management, Eli Broad college of
  business, Michigan State University.
• 2004 U.S. News ranking had MSUs supply
  chain management program No. 1 for undergraduates
  and No.2 for graduates after MIT.
• Studying the relationship between supply
  chain competencies and performance

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The 21st Century Logistics framework
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continued
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A measurement model for both firm and supply
chain performance

• 13 logistics and supply chain variables
  representing five key performance areas.
• Customer service
• Customer satisfaction product
  flexibility delivery speed
• Cost management
• Functional and integrated logistics and
  supply chain cost
• Quality
• Delivery dependability responsiveness
• order flexibility delivery flexibility
• Productivity
• Information systems support order fill
  capacity
• shipment notification
• Asset management
• Fixed assets working capital

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application

• Dada gathered from U.S., ANZ for different
  business environments.
• Using regression models
• Managers need to understand the relative
  importance of the various competencies in
  particular operating arena to enhance
  performance.
• From an academic standpoint, the model appears to
  be robust across size and business scale
  differences.
• Future research will be to further refine and
  clarify the model and its measures so as to
  provide clearer insights into the competency
  relational across more operation and cultural
  settings.

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Supply managementglobal
sourcing strategy and competitive advantage

• Managing your supply chain for global
  competitiveness
• Stanford graduate school of business
• 2004 august 22-27
• Led by the worlds leading experts in global
  supply chain integration
• Hau L. Lee Seungjun Whang
• Come to Stanford, in the heart of Silicon
  Valley, and gain the tools and insights to
  mobilize your whole organization in building
  supply chain excellence.

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Sourcing importance

• Peter Drucker
• Sourcing and logistics would remain the darkest
  continent of businessthe least exploited area of
  business for competitive advantage.
• Global sourcing strategy
• Logistics identifying which production units will
  serve which particular markets and how components
  will be supplied for production.
• The interfaces among RD, manufacturing and
  marketing on a global basis.
• Global sourcing as a business practice
• Toyota is a good case

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Sourcing

• Intrafirm sourcing
• 34 of world trade is managed by multinational
  companies on an intrafirm basis
• outsourcingcontractual basis
• Problems
• Manufacturing costs
• The costs of various resources
• Exchange rate fluctuations
• Availability of infrastructure
• (transportation, communication,
  energy)
• Industrial and cultural environments
• Working with foreign host government
• Operational problems

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Long-term consequences

• Outsourcing base on an arms-length or a
  strategic partnership basis.
• Benefits of virtual network
• Easy option to access the world markets
• Reducing investment requirement improve
  ROE
• Dependence
• Operating in an uncertain business
  environment
• Dependence on independent suppliers
• IBM is a vivid case declining for this
• Gradual loss of design and manufacturing
  abilities

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Global sourcing in an unstable world economy

• 1997 the financial crisis in Asia
• 2001 the terrorist attack on America
• 2002 Argentina's financial crisis
• 2003 SARS spreading
• Localized procurementlocalization strategy
• Shifting production and procurement abroad to
  match revenues in foreign currency
• A number of new questions beg for answers

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Summary and solutions

• Global sourcing strategy requires close
  coordination of RD, manufacturing, and marketing
  activities on a global basis
• Modular production
• Easy technology transfer making
  decentralized/localized production
• feasible without losing the benefits of
  global integration
• Attain strategic flexibility in sourcing
• Company structure including a combination
  of quasi-hierarchical and
• a pure hierarchical governance structure
  for different activities or
• operations. (Teede et al. Dynamic
  capabilities and strategic
• management)

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Global sourcing using online reverse auctions

• B2B E-business
• It became a key method for both globally sourcing
  engineered components and as a tool to bargain
  with suppliers.
• Key theoretical foundations supporting the use of
  online reverse auctions include
• Lower purchase prices result in reduced costs.
• Total cost RFQs represent actual total
  costs.
• Qualified suppliers are interchangeable.
• Costs are external to the buyer, rather than
  internally generated
• Suppliers benefit from participating in online
  reverse auctions.

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11 key issues in global supply base management

• 1. The importance of trust in buyer-supplier
  relationship
• A detailed formal evaluation and selection
  of potential
• suppliers with a proven track
  record
• B-S involved in a project team
• 2. Communication is key
• Identifying information required and
  providing it
• 3. The personal aspect of supply base management
• 4. Maintaining positive B-S relationship in
  difficult economic times
• 5. One size does not fit all
• 6. Supply chain design we are all in this
  together

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continued

• 7. Measuring supply base performance
• 8. Sharing accurate information making sure
  that everyone is on the same page
• 9. Data represent different things at different
  times to different people
• 10. Reverse auctions can your organization
  really afford them?
• 11. Do we have the right people to do the job?
• Human factor is important

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Logistics managementGlobal market segmentation
for logistics services

• Two research questions
• What logistics service factors account for in
  business customer satisfaction across national
  borders?
• How do these differences reflect distinct
  segments in the global logistics services market?

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LSQlogistics service quality

• Unobservable but perceived customers value

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LSQ segmentation

• Satisfaction levels differ across customer
  segments due to the customization of LSQ
  dimensions.
• Three types of market segments
• Horizontal segments that apply to all customers
  worldwide (global)
• Horizontal segments that exist across national
  borders (for example, within a specific region)
• Vertical segments that exist within a specific
  national market

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Research propositions

• P1 Horizontal market segments exist such that
  different customer groups satisfaction level
  responses are driven by the same sets of LSQ
  dimensions of perception of order placement
  activities and perception of order receipt and in
  the same process manner.
• P2 Horizontal market segments exist such that
  customers with similar organizational
  characteristics place similar emphasis on the LSQ
  dimensions of perception of order placement
  activities and perception of order receipt.
• P3 Vertical market segments exist such that the
  effects of dimensions of LSQ on customers
  satisfaction level response are moderated by
  national and regional variables.

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Factors influencing customers preferences for
global logistics services
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Benefits

• First, costs can be reduced by avoiding redundant
  or superfluous logistics service offerings
  through the customization of logistics offerings
  for specific segments.
• Second, this same customization of logistics
  models enhances firm revenue through increased
  customer satisfaction levels, which in turn
  increase lifetime customer value to the firm.
• Third, firms can benchmark externally and
  internally on specific components of logistics
  services.

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understanding

• To benefit from these outcomes, global
  logistics providers must understand
• how customer preferences differ across LSQ
  elements.
• how these elements influence satisfaction levels.
• how these relationships are moderated by cultural
  and organizational differences.

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Operations managementdecision model
in global supply chain management

• Five models are discussed in managing buyer
  -supplier behavior, sourcing, integrated
  operations, marketing and logistics in global
  SCM.
• We focus our attention on these models because
  they address the upstream and downstream aspects
  of SCM and illustrate different modeling
  approaches.
• the models relate to (a) investment implications
  of innovation-based competition between buyer and
  supplier, (b) bidding by a prospective supplier
  of a product, (c) bid evaluation and supplier
  selection by a buyer dealing in multiple
  products, (d) integrated operations in a supply
  chain, (e) market integrated distribution.

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Buyer-supplier behavior model

• The objective functional of supplier S until the
  buyer B successfully innovates is given by

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Buyer-supplier behavior model

• The objective functional of buyer B is the
  expected gain from innovation, given by

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An institutional analysis of supply chain
innovations in global marketing channels

• background
• What might account for the relative ease of
  implementing supply chain innovations among
  domestic U.S. partners and for the relative
  difficulty of deploying the same technology among
  global distribution partners?

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A model of supply chain innovation in global
marketing channels
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Supply chain innovations

• Supply chain innovations combine developments in
  information and related technologies with new
  logistics and marketing procedures to improve
  operational efficiency and enhance service
  effectiveness.
• Innovations include ECR (efficient consumer
  response), CR (continuous replenishment),
  automated ordering utilizing scanner data, and
  many other technology-enhanced processes and
  procedures in the out-bound supply chain.
• Point-of-sale (POS), CR system transform a
  traditional push distribution channel into a
  demand pull system.

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POS
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A model of supply chain innovation in global
marketing channels
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Institutional arrangements

• an efficient new IA enables the parties not only
  to maximize the economic value from an innovation
  but also to equitably share the joint profits
  that are generated.
• Effective measurement is critical for contract
  feasibility since parties must be able to measure
  costs incurred and value received.
• a distributor might own and operate the
  centralized warehouse while the retail chain
  might be the most logical ownerinvestor for a
  different problematic asset, such as the truck
  fleet, associated with the joint POS/CR system.
• The IA utility of norms such as information
  sharing (willingness to exchange proprietary
  information), flexibility (willingness to adapt
  procedures), and solidarity (desire to maintain
  relationship)

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A model of supply chain innovation in global
marketing channels
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Institutional environment

• Regulative element refers to the demands of
  governments and regulatory bodies to comply with
  laws and other requirements.
• two basic mechanisms of imposition and
  inducement such as subsidies, tax, tariff, or
  other concessions.
• Normative element refers to a societys values
  and norms that direct behavior through social
  obligations and expectations through the
  mechanisms of authorizing and acquisition.
• Authorizing involves the development of
  socially appropriate codes of conduct while
  acquisition refers to mimicking the behaviors of
  other firms that are deemed legitimate.

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continued

• Culturalcognitive element refers to the socially
  mediated construction of a common framework of
  meaning that provides templates and scripts for
  action.
• two mechanisms, imprinting and bypassing .
• Imprinting is organizational inertia where
  past practices are sacrosanct .
• bypassing occurs where actors are so
  highly socialized into their role expectations
  that habitualized responses bypass formal
  organizational controls.

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Global exchange problems

• The specific characteristics of a global exchange
  may require such new investments and activities
  that the partners will require substantial
  contract, ownership, and social safeguards before
  adopting the innovation.
• a global channel may suffer from a fragile IE in
  terms of regulatory, normative, and
  culturalcognitive elements that prohibit the
  parties from developing a new IA.

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Problems

• Regulatory problems in global channels
• China underdeveloped infrastructure
  government regulations
• regional protectionism FTZS
  tax
• Normative problems in global channels
• Japan respect traditional practices
  strong loyalty
• Cognitive-cultural problems in global channels
• America individualism low-power weak
  uncertainty avoidance
• Japan collectivist high-power
  strong uncertainty avoidance
• China guanxi and personal connection
• WTO will make chinas IE become gradually more
  supportive of supply chain innovations.

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The intersection of research areas

• Supply chain management
• Strategy management
• Marketing management
• Institution
• E-commerce
• any other business and management areas
• MANAGEMENT SCIENCE SPECIAL ISSUES
• Marketing and Operations Management Interfaces
  and Coordination April, 2004
• E-Business and Management Science
• October and November, 2003

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Questions ?

• we can discuss and conquer them together!!!