Global Supply Chain Operations

September 2015
Global Supply Chain
• Supply Chain Management
• Global Supply Chain Operations
• Strategic Challenges
• How Global Supply Chains Responded
• Current Trends in Global SCM
Supply Chain Management
 Global Supply Chain Operations
• Global Business environment
– trend to global market convergence-the tendency that
indigenous markets start converge on a set of similar
product services across the world
• Global growth through media
– internet, TVs, Radios, news papers and movies – world
become small
• Emerging economic power by BRIC
– Brazil, Russia, India and China (improve living condition)
• Logic of Global - seeking growth opportunities
– Expanding to more potential profit making
– Cheaper resource to reduce costs
– Collaboration in technology
 Global Supply Chain Operations
• Growth of global supply chain is stronger than
a local supply chain –
– advantage of international labor, able to yield
higher economic value and drives for more
specialized activities.
• Shift of economic and political powers
worldwide become dynamic and increases
participation into global supply chain network.
• Bringing in the influence from many emerging
economies worldwide to a changed
competitive landscape.
 Global Supply Chain Operations
• Some key characteristic that global supply chains
must recognize;
– Borderless – Countries no longer limit to their own
boundaries. A strong development such as brands,
services, technological collaboration and financing
from trade agreement e.g., WTO, WB, GATT, OECD etc.
– Cyber-connected – businesses are now inter-
connected through technology allowing large data to
be transferred quickly and reliable.
– Deregulated- Trade barrier around the world has been
simplified to remove the rules to encourage trade and
stimulate economic growth e.g., NAFTA, EU, ASEAN,
etc.
Global Supply Chain Operations
– Environmental Consciousness- Global movement
towards green and eco system drives corporation
to see that the supply chain development helps in
sustaining the environment. Lawmakers and NGO
e.g., Environment Protection Agency (EPA), green
peace promotes and formalize more legislation
upon firms.
– Social Responsibility- Fair trade and business ethics
are increasingly measured as are key element for
firms. Ethical standard and social responsibility are
more likely to influence a firms brand in the eyes of
the consumer.
 Strategic Challenges
• Challenging business in a changing global
environment, five key long term strategic
challenges can impact the architecture and
the management process of the global
supply chain.
• Those challenges varies from industry to
industry, time to time and tend to be
interrelated.
 Strategic Challenges
• Market dimension
– Demand fluctuate from consumer in the market in time.
– The unpredictable global market as dictates by Geo-
political instability globally contributes to the market
volatility.
– Technological development and product innovation
constantly often moves faster than supply chain.
– Emerging economies globally always churning out product
and services that rival the incumbent supply chain in terms
of quality, price which lead to change of market sentiment.
– The development of internet base distribution has made it
easier for consumers enabling to shop for the lowest price.
 Strategic Challenges
• Technology dimension
– Applying technology for competitive advantage in the supply
chain at global stage
– Development of lead-time innovative ideas shortened the time
from testing to manufacturing
– Consumer may not find new technology product attractive hence
firm may loose money from their investment
– Supply chain network involving contractor may have issues with
implementing their own ideas or technology to the whole supply
chain network. The cost and profit structure in the value network
may limit the attractiveness of an innovation.
– The development of new technology takes over other products
and those products no longer attractive to the market e.g., smart
phones takes over many other gadgets prior to its existence.
 Strategic Challenges
• Resource dimension (financial, workforce, intellectual,
natural materials, infrastructure, assets etc.,)
– Global supply chain development is constantly looking for
new resource and make better use of existing resource to
yield economic outputs.
– Stretching supply chain worldwide enables internal
resource be used in much wider/bigger market in term of
volume, variety, quality and functions.
– Internal based advantages can evaporate anytime when
global business environment subjects fundamental changes
– Stretching resourcing globally to acquire scarce resource at
a much lowered cost. MNC source for much reduced
operating cost to stay competitive.
 Strategic Challenges
• Time dimension
– The difference on time could make or break a supply chain
where everything else is equal
– Competitions in the electronic environment is critical for
new electronic product into the market
– Internally, cost and core competence usually measured
against time. If materials does not move quickly, supply
chain responsiveness is influenced by the lead-time and
throughput-time
– Developing and implementing an agile supply chain strategy
to “balance” the cost to service.
– A supply chain strategist must have a sound understanding
the intricate relationship in all factors of the whole supply
chain.
 How Global Supply Chains Responded
There is no “one size fits all” solution for supply
chain management to survive the challenges.
– Collaboration: define a working together to achieve a
common goal.
• Sharing resources: to avoid duplicate resources e.g.,
equipments, maintenance facilities, networks, knowledge
etc.,
• Achieve synergy: creating additional business value that
neither achieve individually
• Risk sharing: Through investment and marketing, the
negative impact of supply chain risk is shared by parties
concerned.
• Innovation: sharing technology (R&D) is the most effective
way to advance as competitive advantage.
 How Global Supply Chains Responded
• Supply Chain Integration
– Close internal and eternal coordination across the
supply chain operations and processes under shared
vision and value amongst participating members.
– Exhibits high visibility, low inventory, high capacity
utilization, short lead-time, and high product
quality(low defects)
– There is no supply chain which is 100% integrated or
otherwise. It is about how much the supply chain is
integrated from a focal company’s point of view.
– A wider arc represents a higher degree of integration
which covers larger extend of the supply chain
How Global Supply Chains Responded
Arc of integration
Narrow Arc of Integration

Broad Arc of Integration

Extensive No Extensive
Integration Integration Integration

Suppliers Manufacturer Customers

 How Global Supply Chains Responded
• Divergent product portfolio
– In the global market, supply chain has two
characteristics : volatility and diversity
– Divergent demand for wider rage of product or
business sector to cater for the market needs
– Mitigate the market risk that brought by nature of
global market volatility.
– Supply chain can still be stabilized by other product
if one of which is not doing well
– Divergent portfolio works like a shock absorber and
risk mitigating tool.
 How Global Supply Chains Responded
• Develop the “blue ocean strategy”
– Much more effective approach is to create a new
market place which makes the market place
irrelevant.
– Firm competes in “red ocean” unlikely to create
profitable growth in the future.
– Study shows of 150 strategic moves globally active
in supply chain the last 30 years already proved as
an effective response to the global change
– In the future, supply chains will not battle
competition but by creating uncontested market
place that has potential growth.
 How Global Supply Chains Responded
• Pursing world class excellences
– World class excellence: The highest business performance at
a global level that stand the test of time
– Very few firm deserve the title but it is the fitness status that
determine the winner over losers
– To be a winner, firm need to excel in 4 dimensions of
excellence.
• Operational excellence
• Strategic fit
• Capability to adapt
• The unique voice (unique practice)
In other words, what you can excel you can prevail, and the
secret of success is doing the common things uncommonly well!
That’s the excellence
 Current Trends in Global SCM
Trend 1
Supply Chain volatility and market uncertainty
– Survey shows that continued demand volatility in the global
markets is a major concern to executive of supply chains
– Demand volatility and poor forecasting accuracy is the major
challenge (74%)
– Lack of flexibility to cope with demand change is increasing
– Fast development of cyber market and mobile media has given
rise to the market visibility leading to high level of market
transparency.
– B2B consumers found it easier to shop alternative lower price or
better value.
– Switching cost is diminishing fast same as customer loyalty
– Best performance companies tends to improve supply chain
responsiveness.
 Current Trends in Global SCM
Trend 2
• Market growth depends increasingly on global
customers/suppliers
– Positive International growth in customer and suppliers
in the International locations
– Supply chain will have to product higher number of
product variants to fulfill demands
– Pattern of supply chain is going to be more complex due
to market diversity, product variants, customer location
and demand volatility
– Decline of in-house manufacturing and replaced more of
outside contractors (OEM) to achieve closer integrated
supply chain for higher collaboration value adding.
 Current Trends in Global SCM
Trend 3
• Towards more cost-optimized supply chain configuration
– Survey respondents is positive to deliver higher margin
improvement next few years due to cost reduction from end to
end supply chain
– Firm taking advantage of lower cost in emerging market and
increasing flexibility of their own supply chain
– Greatest increase in outsourcing are product development, supply
chain planning and shared services
– Globalization does not reduce process and management cost and
if not careful may be a hidden cost
– Many firm has embraced supply chain cost engineering to
calculate and manage the total cost across all supply chain
functions
– Rigorous cost optimization across end to end is critical for success.
 Current Trends in Global SCM
Trend 4
• Risk Management involves end to end supply chain
– New demand from customer have played key role in
development of risk across supply chain
– Supply chain risk can be mitigated through end to end
supply chain approach through advanced inventory
management, joint production and materials resource
planning, improve delivery etc.,
– Firm managing risk at each noted of supply chain to keep it
as lean as possible through demand planning
– Firm mitigate inventory related risk by shifting
responsibilities for holding inventory to their suppliers and
ship out product immediately after production
 Current Trends in Global SCM
Trend 5
• More emphasis on supply chain integration and
empowerment
– Empower management across all functions throughout the
supply chain
– Survey shows many firms is unable to make concerted actions
and coordination planning to respond to external challenges
– Many firms fail to allow their management to take leading
roles in business transformation
– Steps have already taken to integrate and empower their
supply chain as a single source under a joint responsibility to
ensure a string end to end integrated supply chain both
upstream and downstream