Global Supply Chain
Devan Howe
OM 345
Boise State University
May 3, 2002
“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 that’s
the world I am going to live
in, I might as well be good at
it.”
(Phil Condit, CEO of Boeing,
November 1999)
Presentation Overview
• Global supply chain defined
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Topic explanation
Surrounding issues
Real world example
Exercise
Summary
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.
Falling International
Trade Barriers Mean…
…Rising Profits.
Brainstorming
How can a global supply chain be
used in your organization?
Advantages of Global
Supply Chains
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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
Potential Global Supply
Chain Obstacles
• Inefficient transportation and
distribution systems
• Market instability
• Language Barriers
• Customs
• Political turmoil
• Trade imbalances
• Export surges and recessions
Combating Obstacles
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Join nation groups
Be innovative
Be flexible
Research
New technology
Vertically integrate
Form consortiums
Classical Logistic
Issues
• Facility Locations
• Sourcing
• Distribution
International influences on
logistic issues…
Costs
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Local labor rates
Local space costs
International freight tariffs
Currency exchange rates
Customs Duty
• Duty rates differ by commodity
and level of assembly
• Duty drawback
• Impact of GATT: Changes over
time
• Transfer pricing
• Duty Suspension
Taxes on Corporate
Income
• Different markups by country
• Tax havens and not havens
• Make vs. buy effect
Offset Trade and Local
Content
• Local content requirement for
government purchases
• Content for preferential duty
rates
• Offset trade requirements
Export Regulations
• Export licenses
• Denied parties list
Time
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Lead time
Cycle time
Transit time
Export license approval cycle
Customs clearance
Selecting a global
supply chain model.
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
Own and Manage Your
Own Infrastructure
Pro
• Maximum
control
Con
• Heavy costs
Use Strategic Alliances
Pro
• Convenience
• Large areas
covered
Con
• Unreliable
alliance-prone
Partner With An AssetBased 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
Partnership With a Global
Integrator of Logistics
Pro
• Customer friendly
• In-country
knowledge
• True information
systems
integration
• Uniform standards
Con
• Limited use
• Less control
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
• 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
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?
Summary of Global
Supply Chains
• Advantages include reduced costs,
delivery performance, inventory
reduction, forecast accuracy, cycletime, 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
Bibliography
“Coordinating Global Distribution: A
Customer-Intimate Approach.” . 2002.
<scm.ittoolbox.com> (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)
Bibliography, cont.
Russell, S. Roberta and Taylor, W.
Bernard. Operations
Management: Third Edition.
Upper Saddle River, New Jersey:
Prentice Hall, 2001.