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Introduction to Global Supply Chain Networks-Part1

N. Viswanadham Indian Institute of Science

Bangalore -560 012 n.viswanadham@gmail.com

Learn the Future by living in the Present

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Contents

l Introduction to Supply Chain Networks l Some examples l Integrated Supply Chain Networks l Best practices In supply Chain Networks

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Introduction to Supply Chain Networks

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What are Supply Chain Networks? l Behind Every Product there is a Supply Chain l Earlier, the network is fully owned by one

company (Ford) l Currently, it is a network of companies, located

in different countries, involved in product design, manufacture & delivery to customers. E.g. Auto, Pharma, aerospace, electronics,

computer, food, apparel ,etc. l Components may be sourced from several

countries, assembled in another country, and distributed to the customers all over the world.

l Network coordination is important .

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Integrated Manufacturing & Service Network

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Some Examples

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Website

Assembler

Estimated Time of Delivery

Order Processing

System

Customer Configured

Order

Suppliers

Logistics Service Providers

Warehouse

Global Transportation & Logistics

Industry Supply Chain

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The Plough-Plate Food Supply Chain

Currently no one orchestrate the relationship among the supply chain actors.

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Global Supply Chain Network

USA

Distribution

Inventory hub

Europe

Retail

USA

Europe

Demand

China

India

Suppliers

InBound Logistics

Assembly

China

Korea

Manufacturing hub

Outbound Logistics

Eastern Europe

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Horizontal & Vertical Globalization

l In Horizontal FDI, MNCs duplicate the same activities in multiple countries.

l In vertical FDI, firms locate different stages of production in different countries.

l The basic difference between the two is Horizontal integration always occurs at the

same stage on the supply chain Vertical integration always occurs at different

stages of the supply chain.

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Disintegration of

Production : Barbie doll

l The plastic and hair sourced from Taiwan & Japan. l The molds & paints for decorating the dolls are from US. l Assembly in low-cost locations Indonesia, Malaysia & China. l China supplies only cotton cloth for dresses and the labor. l The export value of the dolls at Hong Kong is $2 . 35 cents of

Chinese labor, 65 cents of materials & rest for transport, overheads & profits.

l The doll sells for $10 in the US: 1$ for Mattel & the rest covers transport, marketing, wholesale and retailing in U.S.

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Multi Tier Supply Chain Network

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Source: National Research Council Staff (2000). Surviving supply chain integration: strategies for small manufacturers. Washington, DC: National Academies Press. Adapted from Lambert et al., 1998.

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Integrated Supply Chain Networks

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Integrated Supply Chain Networks

Supplier Distributor

Supplier Retailer

Manufacturer

Service Provider

Information Network

Enterprise System or Web-site

Logistics Network

Logistics Hub

Financial Network

Banks

Supply Network

Service Network

Demand Network

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Three (Material ,Information &

Financial) Flows

l Logistics network provides a streamlined material flow between all partners, reducing lead time and cost.

l Communications network provides information integration between companies of supply chain network

l Financial network connects all institutions providing Funds, letters of credit and Insurance.

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Three Sub Networks

Demand sub-network: consists of manufacturing, distribution, retailing , logistics and finance. Perfect delivery is important .

l Supply sub-network : B2B network consisting of suppliers, manufacturers, inbound logistics, Financial Institutions and Freight forwarders.

l Service sub-network: connects consumer with suppliers & manufacturers after sales service centers.

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The Three Business Processes l Procurement: Sourcing raw materials and components from the suppliers : Vendor &

logistics provider selection, Delivery scheduling & Inventory management.

l Manufacturing: Could be in a single location or geographically distributed.

l Distribution & Retail: consists of packaging, transportation and warehousing. Options include direct shipping or outsourcing to third parties.

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The Financial Supply Chain

Supplier Manufacturer

Retailer / Distributor Customer

Financial Supply Chain

Just-in-time-cash Cash Flow Forecasting

Movement of Documents & Money

Goods Supply Chain

Just-in-time-manufacturing Demand Forecasting

Movement of Documents & Goods

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The Six Dominant Players

l Suppliers l Logistics Players: B2B and B2C l Contract manufacturers l Original Equipment Manufacturers l Distributors l Retailers They are independent companies globally

distributed & highly connected

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Life-cycle-based Logistics l Logistics depends on the product life cycle

Movement of Semi finished items from one machine shop to another (Manufacturing logistics)

Movement of Finished products from end of the production line to the consumer (Outbound logistics)

Movement of Raw materials from source of supply to the beginning of the production line. (Inbound logistics)

Movement of Spare parts from manufacturers to the customers via dealers (Spare part logistics)

Movement of Used goods from consumer to the manufacturers (Reverse logistics)

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1PL, 2 PL and 3 PLs l Most manufacturers handle all logistics functions

including trucking and warehousing (1PL). l 2PLs are basic transportation and storage

providers such as truckers, warehouses and container lines and have high levels of asset intensity but low barriers to entry. Airports and Seaports as capacity providers are also

categorized as 2PLs l 3PLs provide total value added logistic solutions

Own some assets such as distribution centers and rent assets available 2PLs.

Freight management &Contract logistics

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Best Practices in SCN

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Best Practices in SCN-1

l Supply hubs: Third Party maintains inventory for the suppliers at the manufacturer site.

l Modularization: Design of component modules that can be used in multiple products

l Standardization: specifying common parts for use in multiple products and models.

l Cross docks: Transshipment facilities where goods are sorted, consolidated and loaded onto outbound trucks

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Best Practices in SCN-2

l Postponement: Final assembly done adding customer specific features such as labeling garments, packaging with customized manuals based on the customer order

l Merge-in-transit: Components shipped from different production units & warehouses are assembled during transit

l Collaborative Planning, Forecasting & Replenishment combines the collaborative intelligence of multiple trading partners in planning and fulfillment of customer demand