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Why firms go global
Increase Revenue and Decrease Costs
Increase revenue
If a company can successfully expand into foreign markets it can increase its revenue. When a foreign competitor moves into your market, competing with them in their home market may help level the playing field.
Decrease costs
Making and selling more units typically lowers your cost per unit (economy of scale) Moving some business functions (e.g. manufacturing) to lower cost regions may lower overall cost.
Major trends that have led to major changes in companies' supply chains
An increase in economic integration and free trade (NAFTA, EU, APEC, ASEAN, MERCOSUR) Global competition among global companies for global consumers Technological advances that ease and lessen cost of communication
Global SCM is difficult to plan and execute because of
People, Companies, Partnerships, and Complexity
People in Global SCM
They are extremely different across cultures CAGE (Cultural, Administrative, Geographical, Economic)
Companies in Global SCM
They sometimes abandon basic decision making processes and underestimate differences E.g. Strategy, Cost/Benefit Analysis
Partnerships in Global SCM
They are necessary but difficult
Complexity in Global SCM
It is exponentially higher due to differences -Number of competitors, markets, and customers -Distances, languages, time zones, cultures, customs -Fundamental differences in approach to business and life
World markets are not _____ - _____ is still very much required
homogeneous; variety How to offer local markets variety they want, while still gaining the advantage of standardized global production
Requirement for exceptional ____ to offset potentially higher ____ in global supply chains
coordination; costs -How to effectively manage the complex links in a global supply chain from source to end user -How to compensate for the heightened risk of supply chain disruption inherent in global supply chains
Consumers expect a global brand to provide ____ levels of value in all of their markets
equitable
Configuration
Where, and in how many nations, each value chain activity is performed
Coordination
How dispersed activities, or activities performed in several different nations, are coordinated
New business paradigm forces ____
globalization
Major reasons companies globalize
-Increase revenues through expansion to new markets -Decrease costs through global SCM techniques
Twin challenges in global markets
-Heterogeneous markets (consumer preference) -Exceptional coordination required to succeed
Global _____ brands force supply chain to deliver on the promise
brands
Competitive advantage in global SCM is gained through:
-Configuration (what, where, when, why) -Coordination (staying on the same page, same goals)
Offshoring
Offshoring is relocating a function or a process to another country. Offshoring does not require that the control of the offshored functions be contracted to an external vendor. In other words, going international Ex. Production, call centers, back office (accounting/legal work), Eng…
Total Landed Cost and Risk
The steps of the supply chain vary from cities and transportation instead of staying in one factory, in several cities
Variability and Uncertainty
More "touch-points" = more complexity, variability & uncertainty
Global SC involves more ____ (about status of shipment in transit)
uncertainty
Examples of touch-points
mfg point, initial customs, then by truck, then by sea, then pt of origin customs, then transit to final point, etc.
Touch-points and variation can be a major issue/___ firms face when going global
trade-off
Potential Pressure Points
Foreign Intermodal Capacity, Foreign Port Capacity, Vessel Capacity, Panama Canal Capacity, US Port Capacity, US Intermodal Capacity, Network Imbalance
Focused factories
Provide economy of scale but increase lead time and variability
Inventory Centralization
Inventory consolidation substantially reduces total inventory holdings (square root rule)
Network structuring for production and transportation optimization. Global or local?
Global
Information systems development and control. Global or local?
Global
Inventory positioning. Global or local?
Global
Sourcing decisions. Global or local?
Global
International transport mode and sourcing decisions. Global or local?
Global
Trade-off analyses and supply chain cost control. Global or local?
Global
Customer service management. Global or local?
Local
Gathering market intelligence. Global or local?
Local
Warehouse management and local delivery. Global or local?
Local
Customer profitability analyses. Global or local?
Local
Liaison with local sales and marketing management. Global or local?
Local
Human resource management. Global or local?
Local

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