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Spina Global Scm April 14 2008
 

Spina Global Scm April 14 2008

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Fashion, apparel, textile, merchandising, garments

Fashion, apparel, textile, merchandising, garments

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Spina Global Scm April 14 2008 Spina Global Scm April 14 2008 Presentation Transcript

  • Global Supply Chains April 14, 2008 Gianluca Spina – MIP, Politecnico di Milano [email_address]
  • SCM: why and what
    • Extreme industry fragmentation ( outsourcing and offshoring )
    • Internationalization and market globalization
    • Explosion of variety and volatility in customer requirements
    • New products and process technologies
    • Request for faster processes
    • Optimizing internal processes is no longer enough,
    • Need to manage processes going beyond the boundaries of the company
  • Scenarios
    • Managing global SC is more complex and risky
    • Different standards and regulations
    • Additional costs
    • Higher risks (logistic, financial; currency exchange)
    • Diversity
    • Higher managerial skills and organizational capabilities
    • Different models of global SCM (5 archetypes)
    • Growing relevance of global sourcing
  • “ Pain Points” in global SC Survey in 10 top global manufacturers (Handfield e Steininger, 2006) Participants: over 100 SC senior executives (VPs and Directors) Fragmentation due to outsourcing and offshoring (LCC) 31% Lack of project mgmt and resources ( do more with less ) 12% Poor internal coordination among functions, depts, subsidiaries etc.. 10% Price fluctuations of commodities 10% LCC competition 10% Competence shortage 7% Power shift to retailers 7% Regulations & Security (post 9-11) 7% Information systems integration 5% Protection of intellectual property 2%
  • Local processes and global processes Local processes Global processes Sourcing markets Final markets Sourcing Prod/Ass Distrib. Sourcing Prod/Ass Distrib.
  • Configurations 5 configurations International growth
    • 2 characterized by (mainly) local sourcing
    • 3 characterized by international or global sourcing
  • 1 – “Cloners”
    • Replications of multi-country operations
    • Short reach, enough scale even at a local theatre
    • E.g.: cement, beverages, metalworking, etc.
    • Supply Chain: low complexity, lean thinking
    • Critical issue: knowledge transfer and best practice implementation
    Sourcing Prod/Ass Distrib. Sourcing Prod/Ass Distrib. Sourcing Prod/Ass Distrib.
    • Strong global brands from strong local roots
    • Competitive advantage of local sourcing and manufacturing (districts, valleys)
    • Industries:
      • International districts (high-end textile-apparel);
      • luxury goods (watch industry);
      • OEM and capital equipment
      • EU Automotive (top brand: Ferrari; Porsche; BMW till mid 90’s)
    • Difficult to maintain as delivery and cost pressures increase (e.g Hitachi)
    2 - “Barons” Distrib. Sourcing Prod/Ass
  • Globalization strategy in the automotive industry
  • Porsche and BMW: both compete globally
  • … but through different manufacturing and supply strategies
    • Etching equipment to make semiconductors
    • Global market dominated by giants (Intel, NEC, Motorola, STM …)
    • Hitachi’s production concentrated in one single Japanese plant close to R&D; local supply base
    • Spare parts logistics as a major competitive issue (increasing in importance)
    • New central customer care in Texas
    • Stock of parts and subsystems and quick assembly on demand of spare sub-systems
    Hitachi High-Technologies
    • Challenges and responses
    • Increasing pressure on global services from 8 days to 4 hrs
    • 60-180 days lead time of Japanese suppliers
    • Crisis of the “baron model” for such a sophisticated equipment because of the service operations
    • Opportunities of global scouting from Texas CCC: new potential suppliers in US and Europe
    • Resistance to unravel consolidated relationships with first-tier Japanese supplier
    • HQ allowed to switch to new suppliers only when alternative compensative businesses were found for the Japanese suppliers
    Hitachi High-Technologies
  • 3 – “Shoppers”
    • Shopping around the world, downstream operations at the local theatre
    • Global commodity markets or global concentration of part suppliers
    • E.g.: papermills, sugar, transplants, high–end fashion, EMS (Electronic Manufacturing Service)
    • Supply Chain: Complex inbound
    Prod/Ass Distrib. Sourcing Prod/Ass Distrib. Prod/Ass Distrib.
  • Dell Supply Chain Global suppliers Logistic centres End customers Dell plants Local suppliers Supplier-controlled 3PL Dell-controlled Suppliers of peripherals
  • 4 – Outreachers
    • Global brands, huge R&D investments paid back on a global scale only
    • International markets for sophisticated technologies and parts
    • E.g.: Aerospace, Supercomputing, Semiconductors, Integrated textile-apparel chains (Zara, etc..)
    • Sometimes evolution of the “barons”
    Sourcing Distrib. Prod/Ass
  • 5 - Full players
    • Large scale producers, global branding, large scale suppliers
    • E.G.: Consumer electronics, Chemical, Food (partially), Pharma (partially)
    • Complex SCM, cross-country flows
    Sourcing Distrib. Prod/Ass
  • International vs. Global Sourcing
    • Purchasing locally
    • (2 types)
    Purchasing abroad (3 types) International or Global?
    • Sourcing abroad in LCC does not equal global sourcing
    • Global sourcing entails structures, processes and technologies deployed on a global basis
    • Trade off benefits and costs
    • Global sourcing vs. International sourcing:
    • evidence and trade-offs
  • International Sourcing
    • Knowledge of the international supply markets
    • Competencies
      • Commercial
      • Logistics
      • Regulations
      • Negotiation
      • Local cultures
    • Sourcing from a hub or even through a network but deploying independent strategies and processes
  • Global Sourcing
    • Corporate-driven strategic process
      • Top Management Commitment: cross-functional leaders; steering committee
      • Dedicated financial resources and staff
      • Project management
    • Organization and business processes
      • HQ-subsidiary coordination
      • Rigorous and well-defined processes with clear distinction between strategic sourcing and operational reordering
      • Lessons learnt approach and knowledge sharing
      • Supportive organizational design and ability to reconfigure
    • Integration through information technology
      • Global data warehouses
      • Companywide intranet to provide access to documents, templates, guidelines
    • Methodologies for measuring savings
      • Metrics and validation (involvement of financial staff)
      • Cross-country benchmarking
  • International vs. Global Sourcing
    • Research on a sample of 169 large US MNCs (Trent e Monczka, 2005)
    Domestic purchasing only 13,4% International purchasing only as needed 21,3% International purchasing as a part of a sourcing strategy 31,0% Global Sourcing strategies integrated across worlwide locations 18,1% Global Sourcing strategies integrated across worlwide locations and functions (multy country and cross-functional teams) 16,1% Only 1/3 goes global 2/3 stay international / domestic
  • Global sourcing in broader context
    • International sourcing
      • tactical
      • functional
    • Global sourcing
      • strategic
      • linked to long-term make or buy decisions (outsourcing)
      • linked to off-shoring (re-location)
    Global Sourcing Outsourcing Off-shoring
  • Sourcing in LCC
    • Total cost of ownership revisited
    • Static
      • Price ex works
      • Transportation cost (standard)
      • Customs and duty
    • Dynamic
      • Increasing pipeline stock
      • Increasing safety stock due to demand and supply uncertainty
      • Obsolescence costs
      • Quality costs (warranty, inspection)
      • Expediting shipments (air freight etc..)
      • Currency fluctuations
      • Lost sales and stockouts
    • Hidden
      • Underestimated overhead remaining at the HQ
      • Adaptation and responsibility
      • Loss of Intellectual Property
      • Geopolitical instability
  • Case: Enel – Power generation (*) Financial, Insurance Total Cost of Ownership: additional task to manage: travel, translation, consulting, expats, additional inspections 20 3 40 40 10 6 30 8 Current price Price from global sourcing Labor Materials Variable costs Overhead + Margin 100 57 Transport Customs Inventory Others* 5 2 1 2 67 Totale cost from global sourcing Real Saving o: 33 ? Hidden costs?
  • Global sourcing in China
    • Three-step process of increasing investment and commitment
    • International sourcing
      • Minimum Direct Investment
      • Cultural barriers, poor knowledge, risk and difficulties
    • Global sourcing and local operations
      • Significant DI, sometimes customer-driven
      • Limited benefits in moving established automated lines from EU or US
      • Turning point in exploiting the potential benefits
      • Increasing availability of local managers and engineers
    • Market penetration
      • Further DI in R&D and integrated cross-functional management at the local theatre
      • From Western customers in China to Chinese customers
      • Growing role of the local managers, necessity of adaptation
      • Local R&D to develop the local supply base
      • Critical issue: IP protection (the J antecedent)
  • Case: ABB in China
    • For ABB, China ranks behind the United States and Germany in terms of sales. CEO said he believes China will be the company’s number one market in five years.
    • “ The ABB Group has a clear, well-defined five-point strategy to help us meet our ambitious targets here”.
    • Organic growth . ABB has historically achieved double-digit growth rates in China, and expects to grow 20 percent per year until at least 2008
    • New investments . More than $600 million in China. Plans to invest at least $100 million starting new product lines and factories in China in the run-up to 2008 in all major businesses
    • Cost migration . Special team to buy materials locally. ABB strategy is to build complete product lines, rather than importing certain components from Europe as it has often done in the past.
    • New research and development center in Beijing. Will drive local innovation levels higher and allow ABB to better meet Chinese customer needs.
    • Developing local talent . An important part in ABB’s five-point plan, it involves hiring an additional 5,000 employees – highly talented and well educated – in the run-up to 2008.