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1、1/31International Issues in Supply Chain ManagementDesigning & Managing the Supply ChainChapter 8Yun-Ho Songezeckielpusan.ac.kr2/31OutlineCASE : Wal-Mart Changes Tactics to Meet International Tastes INTRODUCTIONRISK AND ADVANTAGES OF INTERANTIONAL SUPPLY CHAINSISSUES IN INTERATIONAL SUPPLY CHAIN ANA
2、GEMENTREGIONAL DIFFERENCES IN LOGISTICSSUMMARY3/31Wal-Mart Changes Tactics to Meet International TastesWal-Mart Stores is finding out that what plays in Peoria isnt necessarily a hit in suburban Sao PauloTanks of live trout are out; sushi is inAmerican footballs have been replaced by soccer ballsAme
3、rican-style jeans price at $19.99 have been dropped in favor of $9.99 knock-offsAdapting to local tastes may have been the easy partThree years after embarking on a blitz to bring “everyday low price” to the emerging market of Brazil and ArgentinaWal-Mart is finding the going tougher than expectedHo
4、wever Wal-mart produced red inkBrutal competitionDont achieve efficiency through economies of scale Own mistakes4/31DEEP POCKETWal-Mart has revised its merchandising in Brazil and Argentina and made other changes4 newest stores are smaller than the initial outlets in San Paulo and Buenos Aires It lo
5、cated at Mid size cities where competition isnt so force8 stores are planned to open in both Argentina and Brazil next year, doubling the number now in each country Wal-Marts global expansion drive, which is targeting not only South America but also China IndonesiaThe markets of China and Indonesia
6、are promising and pitfallsThe growth is dwindling in America5/31A SMALL OPERATION SO FARThe six-year-old international operation is relatively tinyIt accounted for only 4.8 percent of Wal-Marts 1996 salesMost of the companys international revenue comes from CanadaMr. Glass expects international grow
7、th to account for a 1/3 of War-Marts annual increase in sales and profits within three to five years6/31LOSSES FORECASTSA, expect Wal-Mart to lose $20 million to $30 million in Brazil this year, on top of an estimated $48 million in losses since starting up in South America in 1995Some store in Buen
8、os Aires, a few shoppers are in the store during peak hours one SundayLittle difference between the goods at Wal-Mart and those at near by CarrefourCompetitors chain supermarket supply fresh meat Carrefour drives Hard bargains with its suppliers, can afford to play low-ball because it has the critic
9、al mass that War-Mart lacks hereCarrefour holds down overhead by stocking far-narrow selection of merchandiseEx) Carrefour in La Plata, Argentina, stocks 22,000 items, while the Wal-Mart next door carries 58,000 items7/31DISTRIBUTION PROBLEMSWal-Marts effort to stock such a wide variety of merchandi
10、se is hurting itSqueezing out costs in the supply chain is crucial to its EDL pricing formula Bumper-to-bumper traffic of San PauloThe biggest issue Wal-Mart is shipping product on time and getting on the shelfWal-Mart recently built a warehouse in Argentina and Brazil to reduce distribution problem
11、 8/31VARIOUS MISTAKESWal-Marts troubles in South America stem partly from its own mistakes Some goods are useless in San PauloEx) Live trout, American footballs, Cordless tools Wal-Mart brought in stock-handling equipment that didnt work with standardized local palletsInstalled a computerized bookke
12、eping system that failed to take into account Brazils wildly complicated tax system9/31PROBLEMS CALLED TEMPORARYWal-Marts Mr. Glass characterized the missteps are regarded as temporary problems and inevitable in entering a new market.10/31INTRODUCTIONImportant of Global operation and Supply chain Do
13、rniers statisticsAbout 1/5 of the output of U.S. firms is produced overseas1/4 of U.S. imports are between foreign affiliates and U.S. parent companiesSince the late 1980s, over half of U.S. companies increased the number of countries in which they operate 11/31International distribution systemsManu
14、facturing occur domestically, but distribution and typically some marketing take place overseasInternational suppliersRaw materials and Components furnished by foreign suppliers , but final assembly is performed domestically, in some case, the final product is shipped to foreign marketsOffshore manu
15、facturingProduct is typically sourced and manufactured in a single foreign location, and then shipped back to domestic warehouses for sale and distributionFully integrated global supply chain Products are supplied, manufactured and distributed from factories located throughout the worldINTRODUCTION1
16、2/31Global Market ForcesInvolve the pressures created by foreign competitors as well as the opportunities created by foreign customersAs in the dry breakfast cereal business, dominated by Kellogg Co. in US and Nestle in EuropeThey failed attempts in the past to penetrate each others home markets, co
17、mbined with the threat of retaliation, are enough to maintain the status quoOverflow of information can be one reason of global demandEx) Television, E-mail, Internet 13/31Technological ForcesRelated to the product themselves Various subcomponents and technologies are available in different regions
18、and locations around the worldGlobal location of research-and-development facilities is becoming more commonproduct cycles become shorter and time more important, companies have discovered how useful it is to located research facilities close to manufacturing facilitiesSpecific technical expertise m
19、ay be available in certain areas or regionsEx) Microsoft recently opened a research lab in Cambridge, England to take advantage of the expertise available in Europe14/31Global Cost ForcesGlobal location decisionsIn the past the low cost of unskilled labor was decisive factor in determining factory l
20、ocation Recently, other global cost forces have become more significant Many of the analyses and programs that US consulting firms undertook to address the Year 2000 problem were done in India, where programming skills are much cheaperCapital cost of building a new facility often dominate labor cost
21、15/31Political and Economic ForcesAffect the drive toward globalizationRegional trade agreements drive companies to expand into one of the countries in the regional groupA companys advantage to obtain raw materials from or to manufacture within European, Pacific Rim, or North America trading blockVa
22、rious trade protection mechanisms can affect international supply chain decisions.Tariffs and quotas affect what can be imported, and lead a company to decide to manufacture within the market country or regionEx) Local content16/31RISK AND ADVANTAGES OF INTERANTIONAL SUPPLY CHAINSCost can be lowered
23、 with greater potential raw material, labor, and outsourcing sources and a greater number of potential manufacturing sites.Management understand the different demand characteristics and cost advantages of different regionsThe global supply chain can provide a firm with the flexibility to address the
24、 in international markets Flexibility can ne used to counteract the inherent risks from various factor that are relevant to global companies17/31RisksFluctuating exchange ratesChange relative value of production and profitOperating exposureCustomer reactionsHow a firm adjusts prices in various marke
25、t Competitor reactionsCompetitors relative cost decrease more, a firm can be underpriced in the marketGovernment reactionsIntervene to stabilize currencies or even directly support endangered firms by providing subsidies or tariffs18/31Addressing Global RisksSpeculative StrategiesA company bets on a
26、 single scenario, with often spectacular results if the scenario is realized, and dismal ones if it is notHedge StrategiesA 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 partFlexible Strategies(1/2)Enable a company to ta
27、ke advantage of different scenariosTypically, flexible supply chains are designed with multiple suppliers and excess manufacturing capacity in different countriesFactories are designed to be flexible, so that products can be moved at minimal cost from region to region as economic conditions demand19
28、/31Addressing Global RisksFlexible Strategies(2/2)several approachesIs there enough variability in the system to justify the use of flexible strategies?Do the benefits of spreading production over various facilities justify the cost?Does the company have the appropriate coordination and management m
29、echanisms in place to take rapid advantage of flexible strategies?20/31Addressing Global RisksProduction shifting Flexible factories and excess capacity and suppliers can be used to shift production from region to region to take advantage of current circumstancesInformation sharingInformation can be
30、 used to anticipate market changes and find new opportunitiesGlobal coordinationHaving multiple facilities worldwide provides a firm with a certain amount of market leverage that it might otherwise lack(Ex 8-2 253p)Political leverageThe opportunity to move operations rapidly gives firms a measure of
31、 political leverage in overseas operationsgovernments are lax in enforcing contracts or international law, or present expensive tax alternatives, firms can move their operations21/31Requirements for Global Strategy ImplementationProduct developmentIt is important to design products that can be modif
32、ied easily for major markets, and which can be manufactured in various facilities PurchasingA company will find it useful to have management teams responsible for the purchase of important materials from many vendors around the worldeasier to ensure that the quality and delivery options from various
33、 suppliers are compatible ProductionExcess capacity and plants in several regions are essential if firms are to take full advantage of the global supply chain by shifting production as conditions warrantCentralized management are essential in this case22/31Requirements for Global Strategy Implementa
34、tionDemand management It involves setting marketing and sales plans based on projected demand and available product, is carried out on a regional basisOrder fulfillmentTo successfully implement a truly flexible supply chain management system, a centralized system must be in place so that regional cu
35、stomers can receive deliveries from the global supply chain with the same efficiency as they do from local or regionally based supply chain23/31Following Forces are lead the Globalization Global market forces - opportunityTechnological forces - productGlobal cost forces- location, labor, Y2kPolitica
36、l and economic forces local contentsAddressing global risk Speculative Strategies set one scenarioHedge Strategies one part loss, but other part get incomeFlexible Strategies typically contract many supplier and design the surplus produce capacityProduction shiftingInformation sharingGlobal coordina
37、tion market leverageReview the last part24/31ISSUES IN INTERATIONAL SUPPLY CHAIN MANAGEMENTRegion-specific products Some products have to be designed and manufactured specifically for certain regionsFor example, automobile designs are often Region specificEx) Honda Accord has 2 type of bodyEx 8-3 25
38、5p True global productsThese products are truly global, in the sense that no modification is necessary for global salesEx) Coca-Cola, Levis jeans and McDonalds burgers Consider carefully which of the 2 product type is more appropriate for a particular situation 25/31Local Autonomy versus Central Con
39、trolCentralized control can be important in taking advantage of some of the strategiesBut in many cases it makes sense to allow local autonomy in the supply chainRegional operation have proven to be successfulRegional business depending on the characteristics of the regionJapan, German, U.S Ex 8-4 p
40、 25626/31Miscellaneous DangersExchange rate fluctuationOffshore facilities Cheap laborExpensive training Local collaboration (Ex8-5 202p)Dangers related to foreign governmentsEx) To deal with China and gain access to that countrys huge markets, many companies are handing over critical manufacturing
41、and engineering expertise to the Chinese government or to Chinese partnersprotectionism (Ex8-6 202p)27/31REGIONAL DIFFERENCES IN LOGISTICSCultural DifferencesCultural differences can critically affect the way international subsidiaries interpret the goals and pronouncements of managementLanguage - e
42、xpression, gestures, context Belief - differ widely from culture to culture Customs - differ widely from culture to culture 28/31REGIONAL DIFFERENCES IN LOGISTICSInfrastructureFirst World, relative economic conditions have affected the mix of logistics and supply chain componentsEmerging nations, th
43、e supply chain infrastructure is usually not fully in place. logistics as a necessary expense and not a strategic advantage, so they limit investments in logistics infrastructureThird World, the infrastructure is generally insufficient to support advanced logistics operationsFirst WorldEmergingThird
44、 WorldInfrastructureHighly developedUnder developedInsufficient to support advanced logistics29/31REGIONAL DIFFERENCES IN LOGISTICSPerformance Expectation and Evaluation First World, operating standards are generally uniform and highemerging nations, operating standards typically vary greatlyEx) con
45、tract, appointmentIn the Third World, traditional performance measures have no meaningShortages are commonCustomer service measure have no meaning30/31REGIONAL DIFFERENCES IN LOGISTICSInformation System Availability First World, computer technology has increased at same rate across different nations
46、POS, EDI Emerging nations, Support systems may not be in place to implement efficient information systemsCommunication network incomplete and not reliableThird World, Advanced information technology is simply not available Inefficient communication system31/31REGIONAL DIFFERENCES IN LOGISTICSHuman R
47、esourcesFirst World, technically and managerially competent workers are availableUnskilled labor is relatively expensiveEmerging nations, skilled managerial and technical personnel are frequently not availableThird World, Although it may be possible to find employees that are appropriate to the available technology levelDifficult to find Trained logistics professionals and managers familiar with modern management techniques
