LSCM Strategies

Complexity at Global Level

February 2011 Logistics Planning & 11

Strategy
International SC Issues

Introduction
Types of International Operations
Forces that drive globalization
Risk and Advantages of ISC
Key Success Factors in ISC
Issues in ISC
Regional differences in logistics
February 2011 Logistics Planning & 22
Strategy
Types of International
Operations
International distribution operations
International suppliers
Off-shore manufacturing operations
Fully-integrated global supply chains

February 2011 Logistics Planning & 33

Strategy
Types of International SC

Type of
International Inbound Outbound
Process
SC Logistics Logistics
International
DS Domestic Domestic International
International Domestic/
Suppliers International Domestic
international
Offshore
Manufacturing International International Domestic

Fully
Integrated Domestic/ Domestic/ Domestic/
GSC international international international

February 2011 Logistics Planning & 44

Strategy
Drivers of Globalization

Global market forces

Technological forces
Global cost forces
Global political / economic forces

February 2011 Logistics Planning & 55

Strategy
Global Market Forces

Foreign competition and

opportunities
“Offence is the best defense”
strategy
Saturation of domestic (U.S.) market
while huge potential in international
markets (mainly due to growth of IT)

February 2011 Logistics Planning & 66

Strategy
Technological Forces

Related to product and process

Need to locate R&D, technology
Advantages of having R&D close to
the manufacturing facilities
(shortened life cycle)

February 2011 Logistics Planning & 77

Strategy
Global Cost Forces

Shift from inexpensive unskilled

labor to inexpensive skilled labor
Taxes and other incentives provided
by foreign governments
Tight integration of SC may
necessitate closeness of links

February 2011 Logistics Planning & 88

Strategy
Political & Economic
Forces
Exchange rate issues
Tariffs and quotas
Other international and local
requirements and agreements
(Environment, political, etc.)

February 2011 Logistics Planning & 99

Strategy
Risks and Advantages of
ISC
Importance of flexibility
Must understand demand characteristics
and cost advantages
“Operating Exposure” and exchange rate
Exchange rates does not necessarily
reflect relative inflation rates.

February 2011 Logistics Planning & 1010

Strategy
Factors Affecting Operating
Exposure

Customer reaction
Competitive reaction
Supplier reaction
Government reaction

February 2011 Logistics Planning & 1111

Strategy
Responses to Global Risk

Speculative strategy
Hedging strategy
Flexible strategy
Supplier capacity
Manufacturing capabilities
● Production shifting
● Information sharing
● Global coordination
● Political leverage

February 2011 Logistics Planning & 1212

Strategy
Key Success Factors in IS

Product development – Flexible, modular

design
Purchasing
Production (excess capacity, IT, Centralized
management)
Solid demand management and forecasting
(solid and reliable information systems)
Rapid order fulfillment capability

February 2011 Logistics Planning & 1313

Strategy
Issues in ISCM

International versus regional

products:
Region-specific products
True global products
Centralized versus local control

February 2011 Logistics Planning & 1414

Strategy
Regional Differences in
Logistics
Categories of region:
First World (Triad): U.S., Japan, Western Europe
Emerging Nations: Thailand, Taiwan, Brazil, Argentina
Third-World: Middle-East, African Countries

Cultural differences (language, beliefs, customs)

Infrastructure
Performance expectation and evaluation
Information Technology
Skilled and managerial human resources

February 2011 Logistics Planning & 1515

Strategy