Post on 09-Mar-2018
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INB 201Global Business TechnologyDr. Lairson
Global Business Revolution and Operations Management
GBR defines how business has changed in the past 50 years
Changes Over Time
Vertically integrated inside home nation
Exporter from Home Nation
Outsourcing
Global Production NetworkFragmentation of Value (Supply) ChainGlobal distribution of production
How Big is Fragmented Production?
Global Trade is about $20 trillion; Global GDP is about $75 trillion (26.7%)Trade in intermediate products and services = 60% of global trade or about $12 trillion (WIR 2013, 122)
Origins of GPNs
Lean and Flexible Manufacturing – Toyota
Application of Computers and Computer Networks
Containerization and ComputersContainerization prices for goods moving from Asia to the US dropped by 65% between 1972 and 1997. Kenney, 2004, 6.
Innovations in Software SystemsERPSCMCRM
Innovation and Knowledge-based management
Disney, Toys and Technology
Consequences of GBR
Business competition linked to technological change from rapid declines in the cost of creating, manipulating and distributing information on a global scale. Best single indicator of future technological change is Moore’s Law.
Information becomes key resource for firms
Accelerating pace and geographical scope of competition, technological change, innovation in products, processes and organization, and application of new knowledge.
New management capabilities:
Global knowledgeTech sophistication in using software Manage global supply chainsData analytics – manage via dashboard
Toyota
Lean and Flexible ManufacturingJust in Time Inventory
Kanban (search for Toyota kanban
Toyota regarded as world’s best car company Success based on creating a new system of production Westerners always misunderstand Toyota: thought Japanese success
related to more than low wages, which largely miss the point:
What are the competitive advantages developed by Toyota?
Close supplier relations – cooperative, long term mutual benefit relations; creation of network capabilities using specialization; compare to supplier relations by US firms
Successful outsourcing Intense cost-cutting attitude – no muda Invest in workers capabilities – operate multiple stations (jidoka -
multitasking) Learn to focus on quality (stop production to fix problem; quality
circles; continuous improvement; quality control measurement) Lean manufacturing – just in time inventory control - kanban Flexible manufacturing – change dies quickly – modular dies Integrated development – real-time links between design and
production in model development Large economies of scope
In sum , Toyota could develop a car faster, bring it to production quicker, build it at a lower cost, in more varieties, and with fewer defects than anyone else. Toyota Production System is the gold standard for all manufacturing of almost any product.
Walmart, Dell, Cisco
How can technology facilitate adoption of the Toyota system and even make it work better?
Logistics and Inventory Costs in US
1980 1995Inventory cost% of GDP 9% 4.3%
Logistics cost% of GDP 17.2% 10.8%
Source: Martin Kenney, “Introduction,” in Martin Kenney and Richard Florida, (eds.) Locating Global Advantage, Stanford: Stanford University Press, 2004, 5.
Result of the adoption of Toyota Manufacturing System, especially for inventory
The Leading Firm in inventory management is Wal-Mart
History of Wal-Mart
Sam Walton – 1918-1992
He purchased a store franchise in Arkansas in 1962Offering significant discounts on prices, he became successful and acquired a second store in 3 years.Focus is operating discount stores in small towns competing against local retailersMassive growth over time
Wal-Mart stores in the US - 2010
Wal-Mart Global Locations
Former locations are shown in red.
Wal-Mart Versus Target/Apple Income Statement
How did this happen?
# 1 reason: efficient Supply Chain Management
Hub and Spoke
Close Supplier Relations
Technology
Inventory: lower costs but always on shelves; quality customer service
Benefits of Wal-Mart Inventory Management
• Quick responsiveness to market changes• Low inventory• Quick replenishment of inventory• Effective human resource system• Efficient distribution system
Customer demand “pulls” product through the supply chain Tracking product movement at individual stores by market traits (e.g., size,
color) Investment in IT ensures timely analysis of sales/customer/market
information and trends
Formal and informal cooperation among stores, distribution centers, and suppliers
Deep information sharing with suppliers builds relationships
1970s and early 1980 Internet
No WWW
Toyota wins by replacing inventory with information
Bar codes and computers instead of cash registers
Electronic Data Interchange (EDI) – links suppliers to stores via information
1983 – Company owned satellite system
Creation of a comprehensive “Point of Sale” (POS) system
Sophisticated company owned logistics and information system – in-store, between store and distribution center, store – distribution center – suppliers
Rapid replenishment – Just in Time
Massive investment and training system to establish a real-time, end – to end information system – Retail Link System
System expands to include collaborative planning, forecasting and replenishment (CPFR).
Shift to web based EDI
RFID as replacement for bar codes
Contemporary Developments
• Inventory Tracking and Management System at distribution centers:
- Identifies every product and its location in the warehouse- Integrated with some 8.5 miles of laser-guided conveyor
belts- Lasers read the bar code on every product box and route
them to appropriate loading dock• Electronic Data Interchange (EDI):
- For electronic transmission of POS data, purchase orders, invoices, advance shipment notice, etc. between Wal-Mart headquarters, suppliers, distribution centers, and individual stores
• Merchandising Artificial Intelligence System:- To adjust vendor merchandise assortments based on the
need of each particular store- State-of-the-art satellite communication network which
supports data, voice, and video
Data Analytics
What does this mean?
How does GPN Operate?
Basic features of GPNs:o Fragmentation of value chaino Increased outsourcing of manufacturing and
serviceso Computer-based interaction for production,
logistics, designo Increased production speedo Expanding geographic of production and enhanced
global integrationo Creation of global supply base
o Production processes that previously were feasible and cost effective only within a single firm (and in a single
physical location) or within a nation and a small number of firms can now be reorganized into a wide array of specialized firms located across the globe in the most advantageous locations and with little regard for distance per se.
o The GPN has a distinct structure of power and control, typically starting from one or more lead MNCs – or global system integrators (GSIs). These firms usually have the greatest knowledge and other resources – marketing, design, management, information, branding, market access – and whose core competency is to organize these resources to structure and integrate the value chain.
o GPNs are the most prominent in firms with significant levels of knowledge intensity in production and/or product and where firms enjoy considerable economies of scale.
o Composed of linkages among TNCs, national and local governments, local firms, research institutes, parastatal institutions, global research labs, universities (science, technology, and business units), consulting firms, government agencies, NGOs, and IOs. These linkages are composed of the exchange of products, strategic alliances, and exchanges of knowledge and technology.
o The network is bound together by the actions of the GSI in relation to geographically dispersed firms and the states where they are located. This is accomplished through the creation of an information and logistics system to bind the network together, through foreign direct investment by the GSI (examples include Cisco Systems and/or contract manufacturers), through the sharing of knowledge and technology, and through support for the creation of institutional capabilities in the various states where nodes of production are located. The various nodes in the network are not all equal because differentiated connections to
global markets and global knowledge networks exist across the network.