GLOBAL LOGISTICS MANAGEMENT

Supply chains are linkages of partially discrete, yet interdependent entities that collectively transform raw
materials into finished products.
Supply chains connect the functions of inbound activities (such as purchasing) with outbound activities (such as
logistics and “place” activities).
A global supply chain is made up of the interrelated organizations, resources, and processes that create and
deliver products and services to end customers. In the instance of global supply chains, it is extended around the
world
Any company that uses parts and services from another factory overseas faces issues with global supply chain
management.
Forces Driving Globalization
1. Global Market Forces
Foreign competition in local markets
Growth in foreign demand – Domestic consumption from 40% to <30% of world consumption since 1970 –
Foreign sales fuel growth
Global presence as a defensive tool – Nestle’s and Kellogg’s
PRESENCE IN STATE-OF-THE-ART MARKETS
Japan -- consumer electronics Germany -- machine tools US: Sport Utility Vehicle’s
2. Technological Forces
Diffusion of knowledge – Many high tech components developed overseas – Need close relationships with
foreign suppliers – For example, Canon has 80% of laser engines
Technology sharing/collaborations – Access to technology/markets
GLOBAL LOCATION OF R&D FACILITIES
Close to production (as cycles get shorter) Close to expertise (Indian programmers?)
3. Global Cost Forces
Low labor cost – Diminishing importance (Costs underestimated, benefits overestimated)
OTHER COST PRIORITIES
Integrated supplier infrastructure (as suppliers become more involved in design) Skilled labor
Capital intensive facilities
tax breaks joint ventures price breaks cost sharing
4. Political and Economic Forces
Exchange rate fluctuations and operating flexibility
REGIONAL TRADE AGREEMENTS (EUROPE, NORTH AMERICA, PACIFIC RIM)
Value of being in a country in one of these regions
Implications for supply network design
Reevaluation of foreign facilities (Production processes designed to avoid tariffs)
TRADE PROTECTION MECHANISMS
Tariffs Quotas Voluntary export restrictions
Japanese automakers in US – Local content requirements
TI/Intel factories in Europe
Japanese automakers in the EU – Health/environmental regulations
Japanese refused to import US skis for many years (different snow) – Government procurement policies
Up to 50% advantage for American companies on US Defense contracts
GLOBAL SUPPLY CHAIN SYSTEM COMPONENTS
• International distribution systems: – Manufacturing(domestically), Distribution (overseas)
• International suppliers: – Raw materials and Components (foreign suppliers), Final assembly/
Manufacturing (domestically)
• Offshore manufacturing: – Product is sourced & manufactured in a single foreign location,
- Shipped back to domestic warehouses for sale and distribution.
• Fully integrated global supply chain: – Products are supplied, manufactured and distributed from
factories located throughout the world
In a truly global supply chain, it may appear that the supply chain was designed without regard to national
boundaries.
The true value of a global supply chain is realized by taking advantage of THESE NATIONAL BOUNDARIES.
1. Substantial geographical distances
2. Forecasting problems/difficulties in foreign markets
3. Fluctuations in exchange rates for different currencies
4. Demand for great variety of products
5. Inadequate infrastructures such as
a. labor skills, d. Lack of local process equipment and
b. availability of supply technologies
c. Supplier quality e. Inadequate transportation facilities
f. Inadequate telecommunication facilities
Inadequate telecommunication facilities: Areas to be considered while moving from domestic to International
supply chain
Advantages
1. The main reason for any business to exist is to increase sales and profits.
2. When you go global, then the likelihood of increasing sales goes up as you open up your market to
consumers all over the world.
3. This allows businesses to reduce dependence on their local and national economies.
4. With the number of Internet users on the rise, global businesses are able to do business at all hours of the day
with consumers from every point on the globe.
5. The potential for expansion for businesses increase as they enter into more markets.
6. Lower supply chain costs, reduced cycle time & Enhance speed and efficiency
7. Competitive advantage 8. Untapped markets
Disadvantages
1. Heavy investment of time, money, and resources needed to implement and overlook the supply chain.
2. Inefficient and undersized transportation and distribution systems
3. Market instability
4. Integrating the supply chain and choosing the correct suppliers is much more difficult than one can
imagine.
5. Not only do companies have to strongly consider price and quality, but they also have to make sure that all the
organizations are willing to cooperate to benefit the group.
6. Managerial styles, objectives, and goals must have a strategic fit between all companies involved and power
must be evenly distributed throughout the supply chain.
7. When entering the global market, businesses need to be aware that the gains may not be seen in the short
term.
8. It may be many years before they start reaping the rewards of their efforts.
9. Hire additional staff to help launch their companies in the global markets they expand into.
10. Companies usually have to modify their products and packaging to suit the local culture, preferences and
language of the new market.
11. Travel expenses are sure to increase for the administrative staff, as (travel all over the world to oversee their
business outlets)
Global SCM Example : Large Computer Company
GOALS Source: Global Supply Chain Associates (GSCA) 1999
1. Reduce cost 2. Improve ROA 3. Simplify the worldwide supply chain
OBJECTIVES
1. Redesign the entire worldwide supply chain
2. Determine how many plants and where they should be located
3. Determine what process technologies should be in each plant
4. Specify the loading on each plant and the service area
Global Supply Chain Structure Before Reorganization Source: Global Supply Chain Associates (GSCA)
1999
1. Redesigned Global Supply Chain
2. Recommended plant closings and re-tooling
3. Reduced number of facilities from 33 plants to 12 plants
4. Created three relatively self-contained customer-oriented supply zones: Americas, Europe, Pacific
Rim
5. Estimated benefits:
a. Reduced manufacturing / logistics cost by $375 Mil. annually
b. Improved Corporate ROA by 3.2 points
Global Supply Chain Structure After Reorganization Source: Global Supply Chain Associates (GSCA)
1999
10 FAMOUS SHIPPING CANALS OF THE WORLD
Shipping canals are waterways specifically built along major seawater routes to enable the passage of vessels.
Most of the time, these canals are constructed to connect to waterbodies including seas, lakes, and rivers,
offering an alternative route to the vessels, particularly cargo vessels. Such canals are of vital importance in the
maritime industry as they offer shorter transportation routes across major seawater networks and also help to
regulate maritime traffic internally within countries.
1. BEIJING-HANGZHOU GRAND CANAL
Popularly known as Grand Canal, the Beijing–Hangzhou Grand Canal is the longest and the oldest canal in the
world. Connecting China’s the Yellow River and Yangtze River, the canal goes through several provinces in the
country as well as connects with several other rivers.  While the canal covers a length of 1,776 km (1,104 mi), its
greatest height reaches at a summit of 42 m in the mountains of Shandong. Linking the northern and southern
China, the canal contributes heavily to the country’s economy as it holds a great role in the transportation of
cargo. Originally built in 468 BC, the Grand Canal is currently a UNESCO World Heritage Site.
2. SUEZ CANAL
Opened in November 1869, the 193.30 km (120 miles)-long Suez Canal is an artificial sea-level waterway located
in Egypt. Linking the Mediterranean Sea with the Gulf of Suez, the Suez Canal is an extremely crucial shipping
canal in the world maritime sector as it is one of the most heavily used shipping routes in the world.
The canal, which separates Asia from the African continent, provides a shortest maritime route between
Europe and the regions which share a border with the Indian Ocean and the Western Pacific Ocean. The Suez
Canal has been recognized as a maritime route to be open at all times, to shipping vessels of all countries in order
to facilitate continuity in maritime trade operations irrespective of global conflicts.
3. PANAMA CANAL
One of the most crucial maritime gateways in the western region, the Panama Canal provides connectivity
between the Pacific and the Atlantic Ocean through the Panama isthmus- a narrow strip that separates the
Caribbean Sea from the Pacific Ocean. Since the oceans that the canal connects with are not at the same level, the
canal uses Lock Gates on either side to lift the vessel to the higher level and similarly to drop down to the sea
level. Opened in the year 1914, the canal helps vessels transiting between the east and west coasts of the US to
shorten their journey by 15,000 km. The 82 km (51 mi)-long waterway offers its service to 29 major liner services,
mostly on the US East Coast to Asia trade route. In 2017, the Panama Canal witnessed the arrival of a total of
13,548 vessels and received 403.8 million tons of cargo.
4. CORINTH CANAL
Connecting the Gulf of Corinth and the Saronic Gulf in the Aegean Sea, the Corinth Canal goes through the
narrow Isthmus of Corinth and divides the Peloponnese from the Greek mainland. With the 6.4-kilometre
length and 8 meters (26 ft) depth, the Corinth Canal is considered to be the deepest canal in the world. The canal
holds its importance as it helps seafarers avoid the dangers of sailing around the Peloponnese’s treacherous
southern capes while moving between the Gulf of Corinth and the Saronic Gulf.  Though its economic
importance has reduced due to the incapability to accommodate modern ships, the canal still serves around
15,000 ships from at least 50 countries.
5. THE WHITE SEA-BALTIC SEA CANAL
The White Sea-Baltic Sea Canal, also called White Sea Canal, is an important waterway that regularizes traffic
internally along the Russian waterways starting from the White Sea in the north and extending to the Baltic
Sea down south. Constructed in the year 1933, the shipping canal passes through various smaller water bodies,
including the Arctic Ocean and Lake Onega, before finally emerging into the Baltic Sea. Although an important
navigation conduct, the 227 km-long canals, however, witnesses only light traffic since it isn’t suitable for
merchant ships vessels with larger dimensions and specifications. It is estimated that a total of 193 million tons
of cargo had been transited through the canal over the first 75 years of its operation since 1993.
6. RHINE-MAIN-DANUBE CANAL
Linking three important rivers in the heart of Western Europe, the Rhine-Main-Danube Canal or the Europa
Canal was originally built as early as the 1938s. The Europa Canal is a major marine transportation gateway
linking the North Sea to the Black Sea, via the Atlantic Ocean. Over the years there have been several
constructional extensions that have been made to the canal, the last one being carried out in the early 1990s. An
important shipping gateway within Europe, the 171 kilometres (106 mi) long Rhine-Main-Danube Canal is
capable of accommodating barges with a capacity of up to 2,425 tons of bulk cargo.
7. VOLGA-DON CANAL
The Volga-Don ship canal interlinks the Russian rivers Volga and Don, providing an important water passage
through the Azoff Sea (a bay of the Black Sea) and the Caspian Sea to the major oceanic networks. The
original construction work on the canal, at the closest point of the rivers, was started as early as the 16th century
and the route was considered important because of the fact that it provided a much passage to connect the Eastern
European shipping networks with their Western counterparts. Opened in 1952, the 101 km-long waterway
passes through three reservoirs including Karpovka, Bereslavka, and Varvarovka. The canal features nine one-
chamber canal locks on the Volga slope to raise ships and four locks on the Don slope to lower vessels.
8. KIEL CANAL
Connecting the Baltic Sea with the North Sea, the Kiel Canal passes through the German province of Schleswig-
Holstein. Opened in 1895, the 98 km-long Kiel Canal helps vessels to bypass the longer route that passes via
Denmark (peninsula of Jutland), which is regarded as quite unstable maritime route, saving an average of 250
nautical miles. With this artificial waterway, vessels en route to east through the North Sea enter the canal at
Brunsbüttel and complete the journey at Kiel-Holtenau to enter into the Baltic. The constructional aspect of the
water route dates back to the 1700s, though the construction of the present-day Kiel water conduit began only during
late 1887. More than 9,000 workers spent eight years to complete the construction of the present day canal.
9. HOUSTON SHIP CANAL
Offering a conduit for vessels between Houston, Texas, and the Gulf of Mexico, the 50-mile Houston Ship
Channel is a vital waterway in the United States. Opened in 1914 and enhanced later, the canal makes Texas
home to one of the US’s busiest seaports. With a number of terminals as well as berthing locations, the Houston
Ship Channel witnesses a significant volume of inland barge traffic. Naturally developed by the dredging works
in Buffalo Bayou and Galveston Bay, the shipping canal has been broadened and deepened later in order to
ensure its continued viability.
10. DANUBE-BLACK SEA CANAL
The Danube-Black Sea conduit is yet another important passage in the western European region. In addition to
connecting the Danube River to the Black Sea, this shipping canal also in a way interlinks the Black Sea to the
North Sea through the Danube-Main-Rhine channel, offering a maritime passage to Eastern Europe by way of
the Volga-Don canal. The Danube-Black Sea enables vessels to bypass the difficult deltaic region of Danube,
providing continuity in maritime operations in the region. While the 64.4 km-long main branch of the canal was
constructed between in the year 1976 and 1984, the 31.2 km-long north branch was built during a period between
1983 and 1987. At the same time, the Danube-Black Sea has a historical relevance as tens and thousands of
political prisoners were brought in for the excavation of the waterway.