This document discusses global supply chain management. It begins with a brief history of global supply chains and how they have evolved with globalization and new technologies. It then defines what a global supply chain is and discusses why global supply chain management is needed. It outlines the key components, factors, objectives, advantages, and disadvantages of global supply chains. It also discusses benefits, processes, challenges, and strategies for managing global supply chains effectively. The document provides a comprehensive overview of global supply chain management.

1. Global Operations and Supply Chain Strategies
International Islamic University, Islamabad, Pakistan
Israr K. Raja

2. Global Supply Chain Management
 HISTORY OF THE GLOBAL SUPPLY CHAIN
 DEFINITIONS OF THE GLOBAL SUPPLY CHAIN
 WHY DO WE NEED GLOBAL SUPPLY CHAIN MANAGEMENT
 GLOBAL SUPPLY CHAIN SYSTEM COMPONENTS
 GLOBAL SUPPLY CHAIN MANAGEMENT FACTORS
 OBJECTIVES OF GLOBAL SUPPLY CHAIN
 ADVANTAGES OF GLOBAL SUPPLY CHAIN
 DISADVANTAGES OF GLOBAL SUPPLY CHAIN
 BENEFITS OF GLOBAL SUPPLY CHAIN
 GLOBAL SUPPLY CHAIN PROCESS
 CHALLENGES OF GLOBAL SUPPLY CHAIN
 MANAGING THE GLOBAL SUPPLY CHAIN

3. HISTORY OF THE GLOBAL SUPPLY CHAIN
 Global supply chain management is directly linked to the rise of globalization.
 Pinpointing an exact date in history as the advent of global supply chain management
isn't possible because its origin varies by company.
 As companies began looking overseas for inexpensive parts and labor, managers were
hired to orchestrate these complex operations.
 Global supply chain management trend is evolving as new technologies emerge.
 Instead of vendors mailing their products and assuring its delivery, companies are now
able to track the product's exact location through GPS tracking devices.
 These devices are imperative for global supply chains.
 The farther the goods are from the final destination, the riskier its arrival.
 Before RFID scans, supply chain managers took inventory weekly or monthly to track
sales and supplies.
 Now, many companies like Wal-Mart track their products with RFID technology.
 The moment a product is purchased; inventory levels are updated to reflect the sale.
 A third trend affecting global supply chain management is the lowered barriers of
economic trade.
 The General Agreement on Tariffs and Trade (GATT) enabled companies to buy products
from other countries for lower costs.

4. Global Supply Chain Management
 Any company that uses parts and services from
another factory overseas faces issues with global
supply chain management.
 The facilities, functions, and activities involved in
producing and delivering a product or service, from
suppliers to customers).
 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.

5. Why do we need GLOBAL SUPPLY
CHAIN MANAGEMENT?
 GLOBAL MARKET FORCES
 TECHNOLOGICAL FORCES
 GLOBAL COST FACTORS
 POLITICAL AND ECONOMIC FACTORS

6. GLOBAL MARKET FORCES
Foreign competition in local markets
Growth in foreign demand
Global presence as a defensive tool
Companies forced to develop and enhance leading-
edge technologies and products

7. TECHNOLOGICAL FORCES
 Knowledge diffusion across national boundaries, hence
need for technology sharing to be competitive
 Global location of R&D facilities
 Close to production (as product cycles get shorter)
 Close to expertise (Indian programmers)

8. GLOBAL COST FACTORS
 Availability of skilled/unskilled labor at lower cost
 Integrated supplier infrastructure (as suppliers become
more involved in design)
 Capital intensive facilities like tax breaks, price breaks
etc.

9. POLITICAL AND ECONOMIC FACTORS
 Trade protection mechanisms:
 Tariffs, Quotas, Voluntary export restrictions, Local
content requirements, Environmental regulations,
Government procurement policies (discount for local)
 Exchange rate fluctuations and operating flexibility

10. 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

11. Global Supply Chain Management
Factors
 Costs
 Local labor rates / International freight tariffs
 Currency exchange rates
 Customs Duty
 Duty rates differ by commodity and level of assembly
 Impact of GATT/WTO: Changes over time
 Export Regulations & Local Content
 Denied parties list / Export licenses
 Local content requirement for government purchases
 Time
 Lead time /Cycle time /Transit time /Customs clearance
 Taxes on Corporate Income
 Tax havens and not havens
 Make vs. buy effect

12. Objectives of Global Supply Chain
 International manufacturing sources—whether
company-owned or external suppliers—have in recent
years been sought out by managers because of reduced
cost, increased revenues, and improved reliability.
 Manufacturers typically set up foreign factories to
benefit from tariff and trade concessions, low cost
direct labor, capital subsidies, and reduced logistics
costs in foreign markets

13. Advantages of GSCM
 The main reason for any business to exist is to increase sales and profits.
 When you go global, then the likelihood of increasing sales goes up as you open
up your market to consumers all over the world.
 This allows businesses to reduce dependence on their local and national
economies.
 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.
 The potential for expansion for businesses increase as they enter into more
markets.
 Diversified business and trading
 Lower supply chain costs
 Reduced cycle time
 Competitive advantage
 Untapped markets
 Enhance speed and efficiency

14. Disadvantage GSCM
 The biggest disadvantage of global supply chain management is the heavy
investment of time, money, and resources needed to implement and overlook
the supply chain.
 The decision to outsource a production facility or call center lowers the cost of
doing business for a company using global supply chain management, but the
decision to outsource or not can lead to consumer backlash.
 Inefficient and undersized transportation and distribution systems
 Market instability
 Integrating the supply chain and choosing the correct suppliers is much more
difficult than one can imagine.
 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.
 Managerial styles, objectives, and goals must have a strategic fit between all
companies involved and power must be evenly distributed throughout the
supply chain or the businesses will not benefit from the advantages of global
supply chain management.

15. Disadvantage GSCM
 When entering the global market, businesses need to be aware that the
gains may not be seen in the short term.
 It may be many years before they start reaping the rewards of their
efforts.
 Another disadvantage is that they have to hire additional staff to help
launch their companies in the global markets they expand into.
 Companies usually have to modify their products and packaging to suit
the local culture, preferences and language of the new market.
 Travel expenses are sure to increase for the administrative staff, as they
will now be expected to travel all over the world to oversee their
business outlets in other countries.
 Also, companies need to know the regulations and tax laws in foreign
countries, which take time and money, and they may need to hire
professionals in those countries to help with legal and financial issues.

16. Benefits of GSCM
 As opposed to a poorly organized supply chain a global supply is
extremely competitive and so you can obtain a really good price for
supplies that will all be produced to excellent standards, without even
having to search widely. Excellent products completed to the highest
standard of quality controls can be sourced quickly and efficiently.
 A global supply chain therefore brings with it benefits in terms of
companies who are involved in a global supply chain being able to
shave their costs right down and therefore ensure the economic
viability of their business. Global supply chains are often one of the
first methods used for supply chain cost reduction activities.
 The global supply chain means that businesses within countries which
traditionally did not operate to high standards have had to ‘up their
game’. Companies that operate within developing countries or those
such as India and China know that if they do not come up with the
goods, there are a myriad of other businesses that will. This means that
there is a real incentive to get things right, first time and all the time!

17. Benefits of GSCM
 If you have sufficient contacts and suppliers internationally, then you
can really reduce the amount of stock that you have to retain, which
means that you will save costs in terms of storage/thefts/transporting
goods etc. These costs can add up, so this certainly helps sharpen the
competitive edge that comes with a global supply chain.
 The global supply chain also makes the securing of almost any item
easy, since somewhere in the world it is probably being produced or
manufactured. Historically any item that was not a standard item, from
a standard range could take ages to produce. Now it can simply be
bought from the country where it has been made.
 The global supply chain really does operate on a 24/7 basis, simply
because of the time differences in different countries. So there is a
sense that the chain never sleeps; it is constantly on the go and people
are working to meet the supply chain requirements on different
continents and at different times

18. Benefits of GSCM
 Operating a global supply chain also brings with it new
opportunities for the markets. If you are sourcing items
from China, then it is feasible that you may wish to look at
other markets that you may be able to tap in to since you
have already established sources in China. It is almost as if
once a company has taken the first step to source supplies
globally, new markets and opportunities follow.
 One of the most interesting factors of the global supply
chain is that we can learn from others! Business is done
differently in different parts of the world and we are able to
learn new ways of doing business, new production
methods and new distribution methods, if we keep an open
mind and have a willingness to learn.

19. Benefits of GSCM
 A global supply chain has to be flexible or it will simply
implode, but given that any supply chain has to be flexible,
with a global supply chain the flexibility is always given a
higher priority and as such, flexibility within the chain is
maximized, allowing for the chain to be as effective as
possible.
 The final benefit of a global supply chain is that if you are
within this kind of framework then you have a chance of
success and being able to even grow during the economic
downturn. If you are not part of it, then your chances of
survival are lower. So being in it is almost not a choice and
the benefit (of survival) is a difficult thorn to grasp, but if
your company is not operating within a global supply chain
framework, you are well behind those who are!

20. Process of GSCM
 Process means a practice, a series of actions, done for a specific
purpose, such as satisfying customers. Customers demand and expect
more from their suppliers; that is a fact regardless your size or industry.
And supply chain management is critical to that customer satisfaction.
 Supply chain process is a flow of activities with the goal of meeting the
requirements of a customer.
 It includes all internal functions, logistics, distribution, sourcing,
customer service, sales, manufacturing and accounting.
 It includes external companies.
 The series flows backward--from delivering each customer order each
order as demanded back through the performance of suppliers to
provide needed finished products, components, parts and assemblies.
 Process has structure.

21. Collaborative processes for the
global supply chain
 In today’s world, more and more companies need to collaborate
globally.
 In the supply chain, this is a result of companies wanting to optimize
their operations and having more suppliers involved in all processes of
their activities. There are many solutions that companies are using for
the GSCM.
 With the current development of online tools, internet, and services,
most of these tools have established online spaces where you can share
and exchange information and transmit messages.
 But there is unhappy feeling about these tools and spaces. The worse is
that most of them create their own eco-system. There will be a
significant improvement if we are able to connect these solutions to
organizational processes. But this is not always possible because
companies today do not share their processes. In most of the cases,
they use different tools to implement business process management in
their organization

23. Global Supply Chain Challenges

24. Global Supply Chain Challenges
 Geopolitical risk, for example:
 Global conflict stimulated by shortage/control of resources (increasingly water
rather than oil)
 National controls in reaction to changing circumstances, e.g. regulatory advice
regarding off-shoring, protectionism
 Creeping climate change related impact upon logistics and sources of
supply
 Impact of increasing energy prices and volatility caused by supply
uncertainty (2005 hurricane season effect on oil prices, Russian control
of natural gas upon which much of Europe depends)
 ‘Good’ business ethics driven by consumers and the Media (responsible
sourcing)
 Increasing dependence upon technology, which is fine until it fails
 Reduction of buffer stock
 Concentration of risk through constant drive to reduce cost and
increase efficiency

26. Managing a Global Supply Chain

27. Managing the Unknown-Unknown
 Invest in redundancy
 Respond to unforeseen events by careful analysis of supply chain trade-offs
 Increase velocity in sensing and responding
 Speed in sensing and responding can help the firm overcome unexpected supply problems
 Failure to sense could lead to:
 Failure to respond to changes in supply chain
 Can force a company to exit a specific market
 Create an adaptive supply chain community
 It is the most difficult risk management method to implement effectively.
 Requires all supply chain elements to share the same culture, work towards the same objectives and
benefit from financial gains.
 Need a community of supply chain partners that reorganize to better react to sudden crisis
 Single sourcing is risky
 Achieves economies of scale
 High quality parts at a low cost
 JIT mode of operation builds a culture of:
 Working with low inventories
 Ability to identify and fix problem quickly
 Entire supply chain was stopped once the fire occurred
 Prompted every company in the chain to react to the challenge

28. Managing Known-Unknown
 Speculative Strategies : A company bets on a single scenario, with often
spectacular results if the scenario is realized, and dismal ones if it is not.
 Hedge Strategies : A company designs the supply chain in such a way that any
losses in part of the supply chain will be offset by gains in another part.
 Multiple plants in different countries, where, Certain plants more profitable at times
than others
 Move production between plants to be successful overall.
 Flexible Strategies
 Requires a flexible supply chain
 multiple suppliers
 flexible facilities
 excess capacity
 various distribution channels
 Can be expensive to implement
 coordination mechanisms
 capital investments
 loss of economies of scale

29. Full Team Ahead
 If you've got the guys working on operations on the
first floor and on the second floor you've got the CFO
and treasurer looking at the books, shocked that they
are paying 'x' million dollars on duty costs, that's a
failure.
 First step is to get these two groups together so that
you are getting the whole picture.
Managing a global supply chain affects not one or two
departments, but the whole company

30. Go to the Experts First
 From the beginning, managing the supply chain requires retaining someone with expertise in the
international locations.
 This means finding local, reputable producers that can consistently deliver for the arrangements.
 "This is by far the biggest challenge. We need a partner that is a master in that market, because it's
very important to have someone that can help further develop the brand. We say no to a lot of deals,
but I'm okay with that. It's about quality.“
 For other small businesses, find a business consultant that specializes in that location, who can help
you navigate everything from cost-saving transit options to taxes.
"Find someone who is very familiar with the location, someone who spends most of their time in that
country, "This person should be well versed in the local business world, know companies and
contractors, and know how to vet them."
 Need more convincing on just how significant a good consultant can be to your company?
"Say you have a factory in China and Poland, and you sell your product in the U.K.How you transfer
the product from Poland to the U.K. could have a 25 percent difference from your bottom line just
because of something like taxes. The right consultant knows how to avoid those extra costs."

31. Timing affects everything
 To successfully manage your supply chain, timing is an all
important element.
A company makes and sells speakers. It sources all the parts and
manufactures the speakers domestically, and U.S customer
orders 1,000 of them, a two-week delivery is within the realm of
possibility.
 "If you switch the sourcing to China, you have no chance of
making that two-week delivery here in the U.S. It would be more
like two months,"
And managing timing goes hand in hand with the next tip...

32. Good Sales Forecasting id Principal
 Because of the timing issue, sales forecasting becomes a huge
part of successfully managing your supply chain and keeping
costs down.
It boils down to this: Because moving the goods will take longer
in an international scale, a company has to have a pretty spot on
idea of how much of that bulk inventory is going to sell—
otherwise, you're stuck with products you can't move.
"For example, take a goods company in San Diego that sources
from China “They have to carry a very large inventory in the U.S.
to meet the delivery times the customers' demand. But for the
owner, there's suddenly a bunch of costs: inventory carrying
costs or maybe you need a bigger warehouse."

33. Don't Assume Too Much
 One of the biggest mistakes seen in small businesses considering
international expansion make is, well, too much guessing.
"Assume that the culture and operations of another culture are
similar to the one here in the U.S. and that is not always the
case,"
Things like electrical power or internet access, which developed
country businesses have easy access to, might not be so easily
accessed in another country.
Organizations actually have to go to the locations where they
have to make sure that their partners can sustain the business.

34. Alternative Production Locations in
a GSC

35. Emerging issues in global supply
chain design
 To aid managers in solving these problems, the research community
has developed numerous global supply chain design models.
 The business environment that surrounds the global supply chain
problem is continually changing, however, as new issues in supply
chain management and globalization surface.
 First, firms are increasingly outsourcing to both domestic and global
locations.
 Second, many firms that had viewed their sourcing problems
myopically as an enterprise-level concern now strive to integrate
decision processes across tiers in the supply chain.
 A third issue is the broadened definition of supply chain performance,
as mission, strategy and objectives can vary considerably based on the
value of the product offered to the customer .

36. Emerging issues in global supply
chain design
 Outsourcing manufacturing to offshore supplier locations
is a practice that has grown in recent years such that
managers find themselves increasingly designing supply
chains that include not only corporate but also supplier
facilities.
 Supplier selection decisions change the global supply chain
design problem in fundamental ways, in part because they
are based on more broadly defined criteria.
 Suppliers are typically selected based on the buyer’s
perception of the supplier’s ability to meet quality,
quantity, delivery, price and service needs of the firm

37. Emerging issues in global supply
chain design
 In some cases, purchasing managers consider an even broader set of criteria as
defined by the total cost of ownership to include the cost of carrying inventory,
repair, training, disposal, etc.
 Ultimately, purchasing managers summarize these factors so that candidate
suppliers may be ranked for selection. Supplier contracts also influence the
design problem structure with additional factors such as minimum order
quantities, restrictions on the number of vendors, geographic preferences, and
limitations on supplier capacities.
 A second emerging issue—the integration of decisions across the supply
chain—also influences global supply chain design. Integrating business
processes is a best practice in supply chain management that involves
coordinating decisions across multiple facilities and tiers. In practice, firms
engaged in Vendor Managed Inventory (VMI) and Collaborative Planning,
Forecasting, and Replenishment (CPFR) integrate replenishment planning
between enterprises by sharing sales and promotion information.

38. Emerging issues in global supply
chain design
 Similarly, firms that implement Advanced Planning
Systems (APS) may integrate production decisions across
the supply chain by including supplier inventory and
capacity constraints into their scheduling function, striving
to avert supply problems before they occur
 These integration practices also affect global supply chain
design. Several authors discuss the value and need for
integration between facilities in the global supply chain.
 An integrated, well-coordinated global supply chain is
difficult to duplicate and so plays an important role in
competitive strategy.