International Business

1
International Business

• WS8 Global Operations and Supply Chain
  Management

2
Global Operational Issues

• Standardization or localization of design
• Make or buy (outsourcing)
• Sourcing globally and off-shoring
• Location of productive activities
• Manufacturing processes and quality level
• Cultural differences
• Local and national regulations
• Supplier relationships and contracts
• Labor force and maintenance

3
Supply Chain Revolution

• Customers are more demanding today
• Transportation is less expensive and more
  reliable
• Operations performance is more efficient
• Advances in information technology
• Perfect orders are the expectation
• Increasing professionalism of all activities

4
Forces Driving Supply Chain Management

• Information technology
• Integrative management lowest total process
  cost, information sharing
• Responsiveness anticipatory versus response
  based
• Financial sophistication
• Globalization
• Amount of supply chain costs

5
Supply Chain and Logistics

• Supply chain management consists of firms
  collaborating to leverage strategic positioning
  and to improve operating efficiency
• Logistics is the work required to move and
  position inventory throughout a supply chain it
  is the combination of a firms order management,
  inventory, transportation, warehousing, materials
  handling and packaging.

6
Control Over the Flow of Inbound and Outbound
Movements
7
Prerequisites for Effective Supply Chain
Management

• Top management understanding and commitment
• The quest for excellence delivering of perfect
  orders
• Effective and efficient communication
• Relationships instead of exchanges
• Cross functional teams

8
What is a Perfect Order?

• Delivering the desired assortment and quantity of
  products to the correct location on time, damage
  free, and correctly invoiced.

9
Wal-Mart Example

• Used computers to track inventory (1969)
• Adopted bar codes (1980)
• Wireless scanning guns (late 1980s)
• Large scale or big box store
• EDI with suppliers (1985)
• Expand around central distribution centers
• Everyday low prices
• Cross docking
• Cross trained employees

10
Complexity of Supply Chain Management

• Expanding product variety
• Shorter product life cycles
• Increased outsourcing
• Globalization of business
• Continuous advances in information technology

11
Logistical Activities

• Key activities
• Customer service
• Transportation
• Inventory management
• Information flows and order processing

• Support activities
• Warehousing
• Material handling
• Purchasing
• Protective packaging
• Cooperation with operations
• Information maintenance

12
Global Sourcing Costs

• Basic price
• International freight, insurance and packing
• Import duties
• Broker fees
• Transit inventory
• Cost of letter of credit
• Travel and communication costs
• Reworking of products

13
Postponement

• Manufacturing or form postponement the goal is
  to maintain products in a neutral or
  non-committed status as long as possible
• Geographic postponement the goal is to build
  and stock a full-line inventory at one or a few
  strategic locations

14
Financial Sophistication

• Cash-to-cash conversion time required to
  convert raw material purchases into sales revenue
• Dwell time minimization ratio of time that an
  asset sits idle to the time that it is moving
• Cash spin reduce overall assets committed to
  supply chain performance

15
Logistical Performance Measurements

• Availability
• Operational performance
• Delivery speed
• Consistency
• Flexibility
• Recovery time due to a malfunction
• Service reliability

16
Categories of Supply Chain Operations
Plan Demand Forecasting Product Pricing Inventory
Management
Source Procurement Credit and Collections
Deliver Order Management Delivery
Scheduling Physical Distribution
Make Product Design Production Scheduling Facility
Management
17
Applications of IT

• Electronic business
• Electronic data interchange (EDI)
• Bar coding
• RFID
• Internet
• World Wide Web

18
Electronic Business

• Also called e-commerce
• Replacement of physical processes with electronic
  ones
• Cost savings and price reductions
• Reduction or elimination of intermediaries
• Shortening transaction times for ordering and
  delivery
• Wider presence and increased visibility

19
Electronic Business (contd)

• Greater choices and more information for
  customers - improved service
• Collection and analysis of customer data and
  preferences
• Virtual companies with lower prices (Amazon)
• Leveling the playing field for smaller companies
• Gain global access to markets, suppliers, and
  distribution channels

20
Electronic Data Interchange

• Computer-to-computer exchange of business
  documents in a standard format
• Quicker access, better customer service, less
  paperwork, better communication, increased
  productivity, improved tracing and expediting,
  improved billing and cost efficiency
• Effective in reducing the bullwhip effect

21
Bar Codes

• Computer readable codes attached to items flowing
  through the supply chain
• Contains identifying information about the item
• Generates point-of-sale data which is useful for
  determining sales trends, ordering, production
  scheduling, and delivery plans

22
RFID

• Radio frequency identification
• Microchips that act as transponders always
  looking for a radio signal
• Uses
• Tagging passenger bags and children
• Tracking containers at ports and inventory
• Trace military supplies
• Employee uniforms
• Tires
• Euro note

23
The Internet

• Instant global access to organizations,
  individuals, and information sources
• Changes the way organizations do business and
  managing the supply chain
• Removes geographical barriers
• Adds speed and accessibility to the supply chain
• Shifts advantage to the buyer

24
Right Supply Chain Strategy

• Strategy must be tailored to meet specific needs
  of customers
• Depends on the stability of demand and
  reliability of sources of supply
• Should be enabled or supported by the use of the
  Internet

25
Functional Product Demand Characteristics

• Low demand uncertainties
• More predictable demand
• Stable demand
• Long product life
• Low inventory cost
• Low profit margins
• Low product variety
• Low stock out cost

26
Innovative Product Demand Characteristics

• High demand uncertainties
• Difficult to forecast
• Variable demand
• Short selling season
• High inventory cost
• High profit margins
• High product variety
• High stock out cost

27
Classification of Products

• Predictable
• Jello
• Corn flakes
• Lawn fertilizers
• Ball point pens
• Light bulbs
• Auto replacement tires
• Tomato soup

• Unpredictable
• New music recordings
• New computer games
• Fashion clothes
• Art works
• Movies
• New product offerings

28
Stable Supply Characteristics

• Less breakdowns
• Stable and higher yields
• Less quality problems
• More supply sources
• Reliable suppliers
• Less process changes
• Less capacity constraints
• Flexible

29
Evolving Supply Characteristics

• Vulnerable to breakdowns
• Variable and lower yields
• Potential quality problems
• Limited supply sources
• Unreliable suppliers
• More process changes
• Inflexible

30
Effective Supply Chain (Supply-to-Stock)

• Economical production runs
• Finished goods inventories
• Economic buy quantities
• Large shipment sizes
• Batch order processing

31
Responsive Supply chain (Build-to-Order)

• Excess capacity
• Quick changeovers
• Short lead times
• Flexible processing
• Premium transportation
• Single order processing

32
Where to Manufacture

• Country factors political, culture, costs,
  trade barriers
• Technological factors fixed costs, minimum
  efficient scale, and flexibility
• Product factors value to weight and universal
  needs

33
Changes in Supplier Relationships

• Reduction in number
• Long term commitments
• Enhanced communication and trust
• Pre-sourcing and targeted costs
• Solicitation of suggestions
• Performance evaluations
• Resident engineers
• Sharing of savings

34
Supplier Evaluations

• Reliability
• Time element
• Quality and service
• Research and development
• Capacity
• Financial situation
• Labor relations
• Warranties
• Price