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BUAD 331: Chapter 9
Why firms go global
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Increase Revenue and Decrease Costs
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Increase revenue
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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
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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
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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
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People, Companies, Partnerships, and Complexity
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People in Global SCM
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They are extremely different across cultures
CAGE (Cultural, Administrative, Geographical, Economic) |
Companies in Global SCM
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They sometimes abandon basic decision making processes and underestimate differences
E.g. Strategy, Cost/Benefit Analysis |
Partnerships in Global SCM
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They are necessary but difficult
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Complexity in Global SCM
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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
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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
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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
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equitable
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Configuration
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Where, and in how many nations, each value chain activity is performed
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Coordination
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How dispersed activities, or activities performed in several different nations, are coordinated
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New business paradigm forces ____
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globalization |
Major reasons companies globalize
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-Increase revenues through expansion to new markets
-Decrease costs through global SCM techniques |
Twin challenges in global markets
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-Heterogeneous markets (consumer preference)
-Exceptional coordination required to succeed |
Global _____ brands force supply chain to deliver on the promise
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brands |
Competitive advantage in global SCM is gained through:
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-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), Engineering design, R&D |
Total Landed Cost and Risk
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The steps of the supply chain vary from cities and transportation instead of staying in one factory, in several cities
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Variability and Uncertainty
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More "touch-points" = more complexity, variability & uncertainty
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Global SC involves more ____ (about status of shipment in transit)
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uncertainty
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Examples of touch-points
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mfg point, initial customs, then by truck, then by sea, then pt of origin customs, then transit to final point, etc.
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Touch-points and variation can be a major issue/___ firms face when going global
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trade-off
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Potential Pressure Points
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Foreign Intermodal Capacity, Foreign Port Capacity, Vessel Capacity, Panama Canal Capacity, US Port Capacity, US Intermodal Capacity, Network Imbalance
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Focused factories
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Provide economy of scale but increase lead time and variability
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Inventory Centralization
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Inventory consolidation substantially reduces total inventory holdings (square root rule)
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Network structuring for production and transportation optimization. Global or local?
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Global
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Information systems development and control. Global or local?
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Global
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Inventory positioning. Global or local?
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Global
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Sourcing decisions. Global or local?
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Global
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International transport mode and sourcing decisions. Global or local?
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Global
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Trade-off analyses and supply chain cost control. Global or local?
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Global
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Customer service management. Global or local?
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Local
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Gathering market intelligence. Global or local?
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Local
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Warehouse management and local delivery. Global or local?
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Local
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Customer profitability analyses. Global or local?
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Local
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Liaison with local sales and marketing management. Global or local?
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Local
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Human resource management. Global or local?
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Local
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