Dr. RAVI SHANKARProfessor

Department of Management Studies

Indian Institute of Technology Delhi

Hauz Khas, New Delhi 110 016, India

Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)

Fax: (+91)-(11) 26862620

Email: r.s.research@gmail.com

http://web.iitd.ac.in/~ravi1

SESSION#6: Basics & Beyond (CFVG: 2012)

MANAGEMENT OF GLOBAL

SUPPLY CHAINS

Supply Chain Stages

Supply Chain encompasses all activities associated with the flow

and transformation of materials and informationfrom the raw material stage through to the end user.

Supplier Manufacturer Distributor Retailer Customer

Supply Chain Illustration

Global Supply Chains

• “…designing and managing of a system that

controls the flow of materials into, through,

and out of the international corporation”

Types of Global Operations

•International distribution operations

•International suppliers

•Off-shore manufacturing operations

•Fully-integrated global supply

chains

Types of Global SC

Type of

International

Supply Chain

Inbound

LogisticsProcess

Outbound

Logistics

International

Distribution Domestic Domestic International

International

Suppliers International DomesticDomestic/

international

Offshore

Manufacturing International International Domestic

Fully Integrated

Global Supply

Chain

Domestic/

international

Domestic/

international

Domestic/

international

Example 1:

Supply

Chain for

Denim

Jeans

Example 1:

Supply

Chain for

Denim

Jeans

(Contd.)

EXAMPLE : CONTRACT FARMING

Thai agro products are in great demand in many countries.

In order to improve their global competitiveness by bringing down cost, many agro-industries in Thailand have started contract farming in the neighboring countries like Laos and Cambodia.

This is due to cheap production cost.

The selected agro products are grown in these countries in accordance with a contact with the farmers or their agents.

After harvest, the produce is shipped back to the agro industries in Thailand for processing, packaging and marketing.

Through contact farming, the cost of growing raw agro-products has gone down considerably.

Case 1: Supply Chain Evolution at Nabisco

Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.

Case 1: Supply Chain Evolution at Nabisco

(cont.)

Source: F. Keenan, “Logistics Gets a Little Respect,” Business Week (November 20, 2000), pp. 112–115.

Case 1: Supply Chain Evolution at Nabisco

(cont.)

EXAMPLE: TIPCO FOOD,

THAILANDThailand has the largest global market share of around 45% in

processed pineapple. Tipco Food is one the largest Thai exporters of this product with a

hopping figure of Baht 3.7 billion.

In 2006-07, due to weakening of US dollar ($) against most of the global currencies, including Baht,

Tipco global supply chain came under tremendous threat.

Look at these steep drops in exchange rate. It has crumbled as follows: late 2006- Baht 41 per $; early 2007 -Baht 37 per $; July 2007-Baht 33 per $.

For the same export, the revenue inflow from exports has gone down by about one fifth of its value few months back.

Most of these export-oriented supply chains have become non-competitive in global market.

As a protective measure, these export-oriented firms are focusing on local market to boost their sales.

– Reference: Bangkok Post: 4 August 2007, p B4.

CASE STUDY 2: WAL-MARTIn 1979 Kmart was one of the leading companies in the retail

industry, with 1,891 stores and average revenues per store of

$7.25 million.

At that time Wal-Mart was a small niche retailer in the South

with only 229 stores and average revenues about half those of

Kmart stores.

In 10 years Wal-Mart had transformed itself; in 1992 it had the

highest sales per square foot and the highest inventory turnover

and operating profit of any discount retailer.

Today Wal-Mart is the largest and highest profit retailer in the

World. How did Wal-Mart do it?

CASE STUDY 2: WAL-MARTThe starting point

a relentless focus on satisfying customer needs;

Wal-Mart's goal was simply to provide customers with access to

goods when and where they want them and to develop cost

structures that enable competitive pricing.

Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,”Harvard Business Review 70(2; March–April 1992), pp. 60–71.

Relationship between Facilities and Functions along the Wal-Mart Supply Chain

Wal-Mart

Customers Request:

Buying detergent,

clothes, TV, …...

Wal-Mart

Stores

Wal-Mart

or third-party

distribution

centers

Procter & Gamble

Plastic ProducerFabric Producer

Da-Fa Clothing, Inc. (China)

SONY Factory (Malaysia)

Electronics Components Producer

Chemical Producer

Zipper Producer

Thread Producer

Plastic Producer

Case 2: Global Supply Chain Example of WalGlobal Supply Chain Example of Wal--MartMart

CASE STUDY 2: WAL-MART (contd..)

The key to achieving this goal was to make the

way the company replenishes inventory the

centerpiece of its strategy.

This was done by using a logistics technique known

as cross-docking.

In this strategy, goods are continuously delivered to

Wal-Mart's warehouses from where they are

dispatched to stores without ever sitting in inventory.

CASE STUDY 2: WAL-MART (contd..)This strategy reduced Wal-Mart's cost of sales

significantly and made possible to offer everyday

low prices to their customers.- Stalk et. al, Harvard Business Review (1992)

SCM Software

• Enterprise Resource Planning (ERP)

– software that integrates components of a

company by sharing and organizing

information and data

– SAP was first ERP software

– mySAP.com

• web enabled modules that allow collaboration

between companies along the supply chain

Linking Supply Chain with SAP

Suppliers IC Mfg

PC Board

Subassembly

Suppliers

FAT

US DCs

Europe

DCs

Far East

DCs

Suppliers

Suppliers

Retailer

Retailer

Retailer

Case 3: Hewlett & Packard (HP)

FAT = Final assembly & test

IC Mfg = Integrated circuit manufacturing

PC Board = Printed circuit board

DCs = Distribution Centers

Consumers

Consumers

Consumers

Similar is Dell

Customers order

computers on-line

Dell

Assembly

Plant

Monitors by SONY (Mexico)

Keyboards by Acer (Taiwan)

CPU by Intel (USA)

Other components

Five core principles of

Supply Chain

Management?

Summary: Five Core Principles in Global SCM

•Connectivity

•Collaboration

•Synchronization

This principle deals with the connectivity network of supply chain partners. Connectivity can be strategic in dealing withplanned linkage information integration and network architecture.

Collaboration allows a closer integrationof the supply chain partners by integrating,planning, forecasting and over all decision making processes across organization boundaries. True collaboration in an ongoing investment in the extended supply

chain network.

Synchronization between vendors, manufacturing, salesand marketing, finance, customers, and third parties is an integral part of supply chain development. When finely developed interface within the firms are between the firm and its partners are seamless, frictionless and transparent.

Five Core Principles(Continued)

•Leverage

•ScalabilityScalability as it is used here, refers to the ability of the firm to develop a set of supply chain processes that canbe easily duplicated with additional suppliers, customers, and 3PL’s. The Principle of Scalability requires a balance between customization and scalability.

The Principle of Leverage simply suggests that the firm cluster and focus their assets on high payout opportunities with core suppliers, customers, and Third Party Logistics (3PL’s).

Trends in Global Supply Chain Management

• Collaborative Product Development: – Example All Major Auto Companies

• Virtual Manufacturing and Supply Chain Management

• Demand signal closest to supplier and accurate– Point-of-sales (POS) data capture and transmission and

now RFID in each piece of product eliminating the need for line of sight scanning

Achieving the 21st Century Supply Chain: Seven areas of

opportunity

1Use of low cost

sources

3Focused

manufacturingstrategies

5Globally aligned

operations

6Built in agility “the

Virtual SupplyChain”

2Creative use of

strategic partnershipsOEMs, Outsourcing,

sub contracting 7Industry wide

solutions

4Distribution,

logisticOptimisation

Multiple Channels

THE ‘GOAL’ IS TO CREATE A CUSTOMER DRIVEN AGILE BORDERLESS SUPPLY CHAIN THAT IS BASED ON LOWEST COST ECONOMICS

Challenges for Global Supply Chains - Six key questions

6. How closely should

suppliers be integrated?

1. What should the customer

interface look like?

2. Should the supply chain be

geared to responsiveness or efficiency?

3. How critical are

new products?

4. What economies of

scale are driving the

supply chain?

5. Where should the

supply chain be decoupled?

Buying

structure

Customer base

Time frame

The “Customer Insight”

challenge

Thank You