International Supply Chain Management

1. International Supply Chain Management Compiled by Rulzion Rattray

2. International Supply Chains • Periodic Economic swings and localised protectionist policies. • International supply chains frequently consist of many autonomous organisations. • Informational & procedural relationships often result in dialogues that seem like arms length negotiations

3. Orders Orders Orders Delivery Delivery Delivery Manufacturer Retailer Capacity Required Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

4. Amplification Effects • Demand upswing produces shortages somewhere in the supply chain, (maybe only shortages in inventory). • Reaction; local protection, orders increase, “growth psychosis effect”. • If there is unreliable or slow delivery local protection can result in local decisions to increase inventory

5. Production Capacity: Real demand Apparent demand Time Perceived Demand Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York. Internal vulnerability • Extend market distance • Production distributions attitudes • Poor information processing • Inventory overhang distortions

6. Vulnerability in the Organisation CapacityRequired: Apparent Real Production Flywheel Effect Shortages Localised Protection effect Over ordering Demand distortion Safety Stock Increase Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York. Unreliable delivery

7. 5% 120 Normal level 80 Actual level with sales drop 40 Normal level for new sales volume 10% 120 80 Evidence of decoupled Inventory planning cycles. A 5% downturn in sales Results in a 40% downturn in Manufacturing requirement 40 20% 120 80 40 40% 120 Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York. 80 40

8. Service Capacity & Inventory • How can amplification effects be dealt with? • Any service level can be achieved through Stock or Production capacity or a combination. • Choice depends on: • Inventory holding costs • Cost of incremental capacity

9. Balancing the Supply Chain • This requires a shift in control policy towards a systems perspective. • Also requires a shift in management to one that spans the traditional boundaries of responsibility. • Tackling blockages in information transfer particularly in international supply chains

10. Time Lags in the Supply Chain Market data Assessed for Production 6 week obsolescence Average inbound data flow 2.5 Weeks 3 Weeks Raw material inventory In process inventory Distribution inventory Selling point inventory Procurement orders Manufact. orders Manufact. orders Factory orders Distribution orders Customer orders Customer orders Suppliers Only place market demand visible Priorities set with no indication of market priorities 17 working days 17 working days 15 working days Distortions due to inventory policies Average outbound goods flow Adapted from: Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York.

11. Conclusions • International supply chains are typified by: • poor flows of information, • Local autonomy • Incompatible operating procedures • Integration of Supply Chains will require: • Management of data capture & flow across functional boundaries without delay • Linked systems & shared ownership of information. • Increased inventory not the only answer!

12. References • Houlihan, J.B. (1998) “Manufacturing Issues”, Booz Allan & Hamilton, New York. • Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman Hall, London. • Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London. • Stacey, R, (1996), Strategic Management & Organisational Dynamics, Pitman, London. • Tayor, D. (1997),“Global Cases in Logistics and Supply Chain Management”, Thomson International Business Press, London.