Introduction to Global Supply Chain TEI, Larissa 2012

1. Introduction toGlobal Supply ChainTEI, Larissa 2012

2. Global Supply Chain Decision framework

3. Outsourcing

4. Outsourcing What is Outsourcing? Why Outsourcing? • Because there are others who can do it: • cheaper • faster • better • have the resources we don’t have

5. Outsourcing • Outsourcing initiatives have evolved from short term projects focused on cost savings to executive level business strategies that enable companies to gain revenues and profits in the competitive global marketplace. • Outsourcing has been bantered around as the big revolution, the new management buzzword. • When people talk about outsourcing they are normally NOT talking about the same “outsourcing”.

6. Outsourcing Components of outsourcing Project is the actual work being outsourced. Project Organization that would like to outsource. Outsourcing Supplier is the service provider. Organization Supplier

7. Outsourcing Access to Resources and knowledge Internal Focus on core competencies Rise of global knowledge workforce Factors driving the need to outsource Factors driving the need to outsource Increased sophistication of IT Cost savings Global diffusion of knowledge External

8. Outsourcing Metamorphosis of Enterprise Stages Fragmentation Release Consolidation Enlarging Emergence Convergence Idea

9. Outsourcing When outsource? Product lifecycle ? ? ? ?

10. Where to outsource

11. Where to outsource • Location • On-site • Vendor in house • Off-site • Onshore • Near shore • Offshore • Depth • Individual - specific position • Functional - cost center • Competency - activities TPL • Work • Process - standard • Project - development Types of outsourcing:

12. Where to outsource High On-shore – same country as client with mix of in-house and external service provision. Low risk but minimal cost savings. Used to gain access to improved process, technology or to solve an internal problem. Near-shore – nearby location with common/similar language, culture and business environment provides convenience of access to compensate for lower cost savings. Control Off-shore – a foreign location with low cost base and access to skills supported by technology providing equal or improved quality of service at lower cost. Low Cost High

13. Where to outsource Off-shore Clients place Onshore Near-shore

14. Drivers and logistics implication of internationalisation

15. Drivers and logistics implication of internationalisation Enablers of globalization • Transport technology: • Transport cost have continued to decline over time as a relative cost item • Speed is available through different transport modes • Information and Communication Technology: • Eliminate barriers related to geographical distance so a networked company can be well coordinated • Allow real time response to market change which reduces delivery time

16. Drivers and logistics implication of internationalisation Company level drivers of globalization • Search for low-factor and supply costs (land, labour, materials) • Need to follow customers internationally in order to be able to supply locally and fast • Search for new geographical market areas • Search for learning opportunities and exposure to knowledge. (Silicon Valley)

17. Drivers and logistics implication of internationalisation Consequences:-InventoryInventory holding costs high and low value products-Handling Implementing best practice-Transport Cope with differences in infrastructure across countries

18. Drivers and logistics implication of internationalisation Dimensions of different internationalism strategies

19. Drivers and logistics implication of internationalisation • The time aspect: • Managing time to market

20. Drivers and logistics implication of internationalisation The global consolidations • Trends • Sourcing from low-wage economies especially commodities • Selected suppliers despite location • Sourcing in low-wage countries • Western Europe to Eastern Europe and Far East • Concentration at specific sites • Bulk transportation / Consolidating transportation

21. Drivers and logistics implication of internationalisation The global consolidations • Risks • Geopolitical • Political risks • Wars - Boycotts • Diseases • Birds Influenza – SARS – etc. • Transportation breakdowns • Strikes • Natural disasters

22. The tendency towards internationalisation

23. The tendency towards internationalisation Focused factories

24. The tendency towards internationalisation Focused factories

25. The tendency towards internationalisation Focused factories Inventory centralisation against logistics costs and service dimensions

26. The tendency towards internationalisation Delivery strategies in a global network

27. The tendency towards internationalisation

28. The challenges of international logistics and location

29. The challenges of international logistics and location • What to take in consideration: • Extended lead time of supply • Extended and unreliable transit times • Multiple consolidation and break points • Multiple freight modes and cost options

30. Organising for international logistics

31. Organising for international logistics • The three last elements in organizing the international logistics: • Layering and tiering • OEM plant services global • The evolving role of plants • Postponement • Third part logistics • Reconfiguration process

32. Organising for international logistics • Layering and tiering • OEM plant services global • Information strategy

33. Organising for international logistics Paint are mixed at the shop Production - postponement Shop Production Distribution Flow of goods Customer order

34. Organising for international logistics The evolving role of plants • Third party logistics: • Long-term cooperation agreement between two companies that consider each other partners with the purpose of meeting the requirements of the transport buyer • Earlier the focus was on the transport costs • Today several links of the supply chain can be included: • storage, labelling, packing, mounting…..

35. Reverse logistics

36. Reverse logistics • Reverse logistics deals with the flow of goods going back up the supply chain for a number of reasons: • Product returns • Repairs • Maintenance • End-of-life (recycling)

37. Reverse logistics How to solve this problem! When you build up the supply chain, think at the reverse logistics at that time, and make sure that the chain can handle the reverse logistics It has something to do with customer service!!

38. The role of time in competitive advantage

39. The role of time in competitive advantage A working definition of competing on time is: The timely response to customer needs

40. The role of time in competitive advantage The quality approach demonstrated that good quality reduces costs! The trade-off between cost and quality can be altered by PREVENTING defects from happening • Costs reduction: • Design the process so that defects cannot occur. • Deign products so that they are easy to make and distribute. • Training personal so that they understand the process and its limitations.

41. The role of time in competitive advantage Total quality costs= (prevention + detection + failure) • Costs do not have to increase in order to improve quality, they can reduce. • Costs do not have increase when lead times are reduced. It may possible to reduce both in some processes. • Costs do not have to go up as product variety increases and time reduce, they can also reduce

42. The role of time in competitive advantage Time-based opportunities to add value: • Increased responsiveness to customer needs • how long time it takes to deliver the product • Managing increased variety • reducing the over all lead time • Increased product innovation • meet customers need by using short development time • Improved return on new products • short developing time earlier on the marked • Reducing risk by relying less on forecast • wrong ones and lucky ones

43. Lead time 95%5% Input Wait for Wait to Move Wait in queue Setup Run Output inspection be moved time for operator time time The role of time in competitive advantage Lead time:

44. The role of time in competitive advantage Improve return on new products

45. Managing timeliness in the logistics pipelines

46. Managing timeliness in the logistics pipelines • Strategies for managing timeliness in the logistics pipeline: • Make to Stock: • Products for customers are available from stock of finished goods • Assemble to order: • By shifting the decoupling point upstream it is possible to reduce risk of holding inventories of finished goods. • The design must be flexibly, because the end product are made from a combination of basic components

47. Managing timeliness in the logistics pipelines • Strategies for managing timeliness in the logistics pipeline: • Make to order: • The customer order decoupling point is moved to the product design. • Many different end items are made from a small group of components • Engineered to order: • The product is specially designed and produced to that actual order.

48. Delivery service

49. Delivery service Definition: The part of the company's customer service that concerns the ability to deliver goods and services to the company's customers

50. Delivery service Delivery time include: • Technical order handling • Administrative order handling • Purchase delivery time • Production delivery time • Distribution delivery time Technical Purchase Production Distribution Administrative