Global Supply Chain

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Global Supply Chain

• Devan Howe
• OM 345
• Boise State University
• May 3, 2002

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• We are moving toward a global economy. One way
  of approaching that is to pull the covers over
  your head. Another is to say It may be more
  complicated - but thats the world I am going to
  live in, I might as well be good at it.
• (Phil Condit, CEO of Boeing, November 1999)

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Presentation Overview

• Global supply chain defined
• Topic explanation
• Surrounding issues
• Real world example
• Exercise
• Summary

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Global Supply Chain

• An integrated process where several business
  entities such as suppliers, manufacturers,
  distributors, and retailers work together to
  plan, coordinate and control materials, parts,
  and finished goods from suppliers to customers.
  One or more of these business entities operate in
  different countries.

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Falling International Trade Barriers Mean
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Rising Profits.
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Brainstorming

• How can a global supply chain be used in your
  organization?

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Advantages of Global Supply Chains

• Reduced total costs
• Inventory reduction
• Improved fulfillment cycle time
• Reduce cycle time
• Increased forecast accuracy
• Productivity increase
• Improved capacity
• Expand international connections
• Increase intellectual assets
• Delivery improvement

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Potential Global Supply Chain Obstacles

• Inefficient transportation and distribution
  systems
• Market instability
• Language Barriers
• Customs
• Political turmoil
• Trade imbalances
• Export surges and recessions

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Combating Obstacles

• Join nation groups
• Be innovative
• Be flexible
• Research
• New technology
• Vertically integrate
• Form consortiums

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Classical Logistic Issues

• Facility Locations
• Sourcing
• Distribution

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• International influences on logistic issues

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Costs

• Local labor rates
• Local space costs
• International freight tariffs
• Currency exchange rates

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Customs Duty

• Duty rates differ by commodity and level of
  assembly
• Duty drawback
• Impact of GATT Changes over time
• Transfer pricing
• Duty Suspension

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Taxes on Corporate Income

• Different markups by country
• Tax havens and not havens
• Make vs. buy effect

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Offset Trade and Local Content

• Local content requirement for government
  purchases
• Content for preferential duty rates
• Offset trade requirements

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Export Regulations

• Export licenses
• Denied parties list

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Time

• Lead time
• Cycle time
• Transit time
• Export license approval cycle
• Customs clearance

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Selecting a global supply chain model.
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Different Types of Global Supply Chain Models

• Own and manage your own infrastructure
• Use strategic alliances
• Partner with an asset-based third-party
• Partnership with a global integrator of logistics
  services

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Own and Manage Your Own Infrastructure

• Pro
• Maximum control

• Con
• Heavy costs

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Use Strategic Alliances

• Pro
• Convenience
• Large areas covered

• Con
• Unreliable alliance-prone

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Partner With An Asset-Based Third-Party

• Pro
• Operational standards
• Uniform identity and marketing strength
• Dedicated mgmt structure

• Con
• Ignorance of complex customs regulations
• Lack of connections
• Local economic downturns

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Partnership With a Global Integrator of Logistics

• Pro
• Customer friendly
• In-country knowledge
• True information systems integration
• Uniform standards

• Con
• Limited use
• Less control

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Example Digital Equipment Corporation

• Implemented a global supply chain model and
• Reduced plants from 33 to 12
• Manufacturing costs decreased by 500 million
• Logistics cost decreased by more than 300
  million
• Reduced service facilities from 34 to 17

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• Annual cost reductions of more than 80 million
• Physical assets reduced by 34 million
• Inventory reduced by 74 million
• Increased unit reduction by 500 percent
• Increased revenue

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Exercise

• Discuss current firm problems and how the
  implementation of an effective global supply
  chain model can help correct them.
• What model best fits your firm? Why?

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Summary of Global Supply Chains

• Advantages include reduced costs, delivery
  performance, inventory reduction, forecast
  accuracy, cycle-time, productivity, capacity,
  service, international connections
• Overcomes a variety of international obstacles
• Selecting and implementing a global supply chain
  model is effective when combined with flexibility

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Bibliography

• Coordinating Global Distribution A
  Customer-Intimate Approach. . 2002.
• ltscm.ittoolbox.comgt (08 May 2002)
• Global Business Issues. . 2002.
  www.gsca.com/globusis.htm (08 May 2002)
• A View of Globalization From the Top.
• www.theglobalist.com/nor/readlips/archive/archive
  _series.stml (08 May 2002)

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Bibliography, cont.

• Russell, S. Roberta and Taylor, W. Bernard.
  Operations Management Third Edition. Upper
  Saddle River, New Jersey Prentice Hall, 2001.