Global Supply Chain Management and Strategic Sourcing
Tema 16 — Supply Chain Management & Global Sourcing
Supply Chain Management: the process of coordinating and integrating the flow of materials, information, finances, and services within and among companies in the value chain from suppliers to the ultimate consumer.
Sourcing Globally
Reasons for sourcing globally:
- Lower prices
- No local availability of certain products
- Competition using better-designed or higher-quality components not available locally
Increasing Use of Electronic Purchasing for Global Sourcing
Electronic purchasing helps to:
- Identify potential suppliers or customers
- Facilitate efficient and dynamic interactions among prospective buyers and suppliers
- Recognize the strategic function of purchasing
Indirect Procurement
Indirect procurement — purchasing goods and services not part of finished goods — can account for 70% of total purchases and is valuable for small and mid-sized companies.
Benefits of Global Electronic Procurement Systems
- Streamline operations
- Cut costs
- Improve productivity in supply chain management and customer response
- Reduce invoice and ordering errors
- Enhance efficiency
- Streamline supply chains
- Reach new markets
Manufacturing Systems
International firms have manufacturing facilities at various levels of development. Different levels affect cost and quality. Manufacturing systems can vary from high to low technology within the same company. The manufacturing system in place affects how the global supply chain is set up and managed.
Logistics
Logistics: managerial functions associated with movement of materials, work in progress, or finished goods. Supply chain management effectiveness is based on the interface of logistics with sourcing, manufacturing, design, engineering, and marketing. Many firms outsource logistics to specialists specifically for international logistics. 3rd-party logistics suppliers also offer warehousing, distribution management, and customs & brokerage services.
Standards
Standards: documented agreements on technical specifications or other precise criteria used consistently as guidelines, rules, or definitions of the characteristics of a product, process, or service.
Benefits of Standardization of Global Operations
Standardization ensures that materials, products, processes, and services are appropriate for their purpose.
Organization and Staffing
Standardized manufacturing systems impact organization and staffing: they are simpler and less costly when standardized. Organizing production into a single logistical supply chain and standardizing processes increases profits.
Impediments to Standardization of Global Operations
Environmental Forces: It is easier for ICs to standardize TQM concepts and synchronous manufacturing overseas than to standardize actual manufacturing facilities because of foreign environmental forces.
Types of Environmental Forces
- Economic forces
- Cultural forces
- Political forces
Economic Forces
The largest barrier to production standardization is wide market size differences.
Choices:
- Capital-intensive process using automated, semi-manual-output machinery
- Labor-intensive process using people and general-purpose equipment with lower production capacity
- Computer-integrated manufacturing (CIM) in industrialized and advanced developing nations — leads to mass customization
Designers must factor in local cost of production.
Backward Vertical Integration
Backward vertical integration: “Facilities are established to manufacture inputs used in the production of a firm’s final products.”
Cultural Forces
A capital-intensive process is used in industrialized nations with large markets and high labor costs; it may be used in developing countries lacking skilled workers by employing specialized machines with attending unskilled labor trained in technical schools. Attitudes of educational administrators often direct resources to professional education rather than trades or vocational education.
Political Forces
Local paradox: A country needs new jobs favoring labor-intensive processes, but the government insists on the most modern equipment because only advanced manufacturing technologies can compete globally. Governments may be reluctant to use “inferior” or untried alternatives. Low-productivity technology will keep a local country dependent on industrialized countries. As a result, developing countries can enact laws banning the import of used machinery.