shanghai jiaotong universityoperations and logistics management research center global supply chain...

Shanghai Jiaotong University Operations and Logistics Management Research Center

Global Supply Chain Management

The Stories Under the Veil of Slogan:

Framework & Details

Xilong Liu

2004.5

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Contents

Why choose the title for the presentation? intention

What will be discussed? framework

Which will be offered in each part? details

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Intention Academic researches Eli Broad Graduate School of Management The Stanford Global Supply Chain Management Forum European Forum on Global Supply Chain management at E

indhoven University （ Holland ） Hong Kong Logistics and Supply Chain Forum

Managerial Applications 2004 Boao Forum for Asia — BFA

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Framework Integrating the two areas of international business and supply chain management.

Consists of four main areas:

• Supply management• Logistics• Operations management• Marketing

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Framework

The hexagon of global supply chain management

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A global supply chain framework The 21st Century Logistics framework Designed by department of marketing and supply chain

management, Eli Broad college of business, Michigan State University.

——2004 U.S. News ranking had MSU’s supply chain management

program No. 1 for undergraduates and No.2 for graduates after MIT.

Studying the relationship between supply chain competencies and performance

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The 21st Century Logistics framework

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continued

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A measurement model for both firm and supply chain performance

13 logistics and supply chain variables representing five key performance areas.

Customer service Customer satisfaction; product flexibility; delivery speed Cost management Functional and integrated logistics and supply chain cost Quality Delivery dependability; responsiveness; order flexibility; delivery flexibility Productivity Information systems support; order fill capacity; shipment notification Asset management Fixed assets; working capital

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application Dada gathered from U.S., ANZ for different business

environments. Using regression models Managers need to understand the relative importance of the

various competencies in particular operating arena to enhance performance.

From an academic standpoint, the model appears to be robust across size and business scale differences.

Future research will be to further refine and clarify the model and its measures so as to provide clearer insights into the competency relational across more operation and cultural settings.

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Supply managementglobal sourcing strategy and competitive advantage

• Managing your supply chain for global competitiveness• Stanford graduate school of business• 2004 august 22-27• Led by the world’s leading experts in global supply

chain integration• Hau L. Lee & Seungjun Whang

Come to Stanford, in the heart of Silicon Valley, and gain the tools and insights to mobilize your whole organization in building supply chain excellence.

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Sourcing importance Peter Drucker• Sourcing and logistics would remain the darkest continent of

business—the least exploited area of business for competitive advantage.

Global sourcing strategy• Logistics identifying which production units will serve which

particular markets and how components will be supplied for production.

• The interfaces among R&D, manufacturing and marketing on a global basis.

Global sourcing as a business practice• Toyota is a good case

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Sourcing Intrafirm sourcing• 34% of world trade is managed by multinational companies

on an intrafirm basis outsourcing—contractual basis Problems• Manufacturing costs• The costs of various resources• Exchange rate fluctuations• Availability of infrastructure (transportation, communication, energy)• Industrial and cultural environments• Working with foreign host government• Operational problems

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Long-term consequences Outsourcing base on an arm’s-length or a strategic

partnership basis. Benefits of virtual network Easy option to access the world markets

Reducing investment requirement improve ROE

Dependence Operating in an uncertain business environment

Dependence on independent suppliers

IBM is a vivid case declining for this

Gradual loss of design and manufacturing abilities

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Global sourcing in an unstable world economy

1997 the financial crisis in Asia

2001 the terrorist attack on America

2002 Argentina's financial crisis 2003 SARS spreading

Localized procurement—localization strategy

Shifting production and procurement abroad to match revenues in foreign currency

A number of new questions beg for answers

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Summary and solutions Global sourcing strategy requires close coordination

of R&D, manufacturing, and marketing activities on a global basis

Modular production Easy technology transfer making decentralized/localized production

feasible without losing the benefits of global integration

Attain strategic flexibility in sourcing Company structure including a combination of quasi-hierarchical and

a pure hierarchical governance structure for different activities or

operations. (Teede et al. Dynamic capabilities and strategic

management)

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Global sourcing using online reverse auctions

B2B E-business It became a key method for both globally sourcing

engineered components and as a tool to bargain with suppliers.

Key theoretical foundations supporting the use of online reverse auctions include:

• Lower purchase prices result in reduced costs.• ‘‘Total cost’’ RFQs represent actual total costs.• Qualified suppliers are interchangeable.• Costs are external to the buyer, rather than internally generated • Suppliers benefit from participating in online reverse auctions.

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11 key issues in global supply base management

1. The importance of trust in buyer-supplier relationship

• A detailed formal evaluation and selection of potential

suppliers with a proven track record

• B-S involved in a project team

2. Communication is key

• Identifying information required and providing it

3. The personal aspect of supply base management

4. Maintaining positive B-S relationship in difficult economic times

5. One size does not fit all

6. Supply chain design: we are all in this together

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continued

7. Measuring supply base performance

8. Sharing accurate information: making sure that everyone is on

the same page

9. Data represent different things at different times to different

people

10. Reverse auctions: can your organization really afford them?

11. Do we have the right people to do the job?

Human factor is important

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Logistics managementGlobal market segmentation for

logistics services

Two research questions:

What logistics service factors account for in

business customer satisfaction across national

borders?

How do these differences reflect distinct

segments in the global logistics services market?

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LSQ—logistics service quality Unobservable but perceived customers’ value

Order placement

Personnel contact quality (PQ); order release quantities (OR); ordering procedures (OP); information quality (IQ)

Orderreceipt

order discrepancy handling (OD) ; order condition (OC); order accuracy (OA); order quality (OQ); timeliness (TI)

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LSQ segmentation Satisfaction levels differ across customer segments

due to the customization of LSQ dimensions.

Three types of market segments Horizontal segments that apply to all customers

worldwide (global)

Horizontal segments that exist across national borders (for example, within a specific region)

Vertical segments that exist within a specific national market

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Research propositions P1: Horizontal market segments exist such that different

customer groups’ satisfaction level responses are driven by the same sets of LSQ dimensions of perception of order placement activities and perception of order receipt and in the same process manner.

P2: Horizontal market segments exist such that customers with similar organizational characteristics place similar emphasis on the LSQ dimensions of perception of order placement activities and perception of order receipt.

P3: Vertical market segments exist such that the effects of dimensions of LSQ on customers’ satisfaction level response are moderated by national and regional variables.

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Factors influencing customers’ preferences for global logistics services

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Benefits First, costs can be reduced by avoiding redundant or

superfluous logistics service offerings through the customization of logistics offerings for specific segments.

Second, this same customization of logistics models enhances firm revenue through increased customer satisfaction levels, which in turn increase lifetime customer value to the firm.

Third, firms can benchmark externally and internally on specific components of logistics services.

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understanding To benefit from these outcomes, global logistics

providers must understand :

how customer preferences differ across LSQ elements.

how these elements influence satisfaction levels.

how these relationships are moderated by cultural and organizational differences.

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Operations managementdecision model in global supply chain management

Five models are discussed in managing buyer -supplier behavior, sourcing, integrated operations, marketing and logistics in global SCM.

We focus our attention on these models because they address

the upstream and downstream aspects of SCM and illustrate

different modeling approaches.

the models relate to (a) investment implications of innovation-

based competition between buyer and supplier, (b) bidding by

a prospective supplier of a product, (c) bid evaluation and

supplier selection by a buyer dealing in multiple products, (d)

integrated operations in a supply chain, (e) market integrated

distribution.

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Buyer-supplier behavior model The objective functional of supplier S until the buyer

B successfully innovates is given by:

(.) 0( ) [ ( ( )) ] ( )

s

S rts u s s sJ u E e p u t c u t dt

Where

denotes the production rate at time t;

denotes the price function of the buyer firm B;

denotes the unit cost for production of the supplier S.

( )su t

(.)p

sc

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Buyer-supplier behavior model

The objective functional of buyer B is the expected gain from innovation, given by:

(.)

1

0( ) { [ ( ( )) ( ( ))] ( ( )) / }

B

rt rB B u s u B BJ u E e u t c u t dt e p c r

where,

is the net gain in demand for firm B’s product;

denotes the unit production cost of the firm B for achieving

successful innovation;

denotes the cost of the R&D effort of firm B;

denotes the innovation rate by firm B.

( )su

Bc

uc

( )sB

u t

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An institutional analysis of supply chain innovations in global marketing channels

background

What might account for the relative ease of implementing supply chai

n innovations among domestic U.S. partners and for the relative diffi

culty of deploying the same technology among global distribution p

artners?

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A model of supply chain innovation in global marketing channels

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Supply chain innovations Supply chain innovations combine developments in information

and related technologies with new logistics and marketing

procedures to improve operational efficiency and enhance

service effectiveness.

Innovations include ECR (efficient consumer response), CR

(continuous replenishment), automated ordering utilizing

scanner data, and many other technology-enhanced processes

and procedures in the out-bound supply chain.

Point-of-sale (POS), CR system transform a traditional “push”

distribution channel into a demand “pull” system.

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POS

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Institutional arrangements an efficient new IA enables the parties not only to maximize the

economic value from an innovation but also to equitably share the joint profits that are generated.

Effective measurement is critical for contract feasibility since parties must be able to measure costs incurred and value received.

a distributor might own and operate the centralized warehouse while the retail chain might be the most logical owner–investor for a different problematic asset, such as the truck fleet, associated with the joint POS/CR system.

The IA utility of norms such as information sharing (willingness to exchange proprietary information), flexibility (willingness to adapt procedures), and solidarity (desire to maintain relationship)

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Institutional environment Regulative element refers to the demands of governments and regulator

y bodies to comply with laws and other requirements. two basic mechanisms of imposition and inducement such as subsidies, tax, tar

iff, or other concessions.

Normative element refers to a society’s values and norms that direct behavior through social obligations and expectations through the mechanisms of authorizing and acquisition.

Authorizing involves the development of socially appropriate codes of conduct while acquisition refers to mimicking the behaviors of other firms that are deemed legitimate.

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continued Cultural–cognitive element refers to the socially medi

ated construction of a common framework of meaning that provides templates and scripts for action.

two mechanisms, imprinting and bypassing . Imprinting is organizational inertia where past practices are sacr

osanct . bypassing occurs where actors are so highly socialized into their

role expectations that habitualized responses bypass formal organizational controls.

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Global exchange problems The specific characteristics of a global exchange may

require such new investments and activities that the partners will require substantial contract, ownership, and social safeguards before adopting the innovation.

a global channel may suffer from a fragile IE in terms of regulatory, normative, and cultural–cognitive elements that prohibit the parties from developing a new IA.

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Problems Regulatory problems in global channels China underdeveloped infrastructure; government regulations;

regional protectionism; FTZS ;tax

Normative problems in global channels Japan respect traditional practices; strong loyalty

Cognitive-cultural problems in global channels America individualism ;low-power; weak uncertainty avoidance

Japan collectivist; high-power ;strong uncertainty avoidance

China guanxi and personal connection

WTO will make china’s IE become gradually more supportive of supply chain innovations.

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The intersection of research areas

Supply chain management

Strategy management

Marketing management

Institution

E-commerce

any other business and management areas

MANAGEMENT SCIENCE SPECIAL ISSUES

Marketing and Operations Management Interfaces and Coordination April, 2004

E-Business and Management Science

October and November, 2003

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