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Introduction to Global Supply Chain Networks-Part1

N. Viswanadham Indian Institute of Science

Bangalore -560 012 n.viswanadham@gmail.com

Learn the Future by living in the Present

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Contents

l  Introduction to Supply Chain Networks l Some examples l  Integrated Supply Chain Networks l Best practices In supply Chain Networks

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Introduction to Supply Chain Networks

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What are Supply Chain Networks? l  Behind Every Product there is a Supply Chain l  Earlier, the network is fully owned by one

company (Ford) l  Currently, it is a network of companies, located

in different countries, involved in product design, manufacture & delivery to customers. –  E.g. Auto, Pharma, aerospace, electronics,

computer, food, apparel ,etc. l  Components may be sourced from several

countries, assembled in another country, and distributed to the customers all over the world.

l  Network coordination is important .

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Integrated Manufacturing & Service Network

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Some Examples

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Website

Assembler

Estimated Time of Delivery

Order Processing

System

Customer Configured

Order

Suppliers

Logistics Service Providers

Warehouse

Global Transportation & Logistics

Industry Supply Chain

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The Plough-Plate Food Supply Chain

Currently no one orchestrate the relationship among the supply chain actors.

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Global Supply Chain Network

USA

Distribution

Inventory hub

Europe

Retail

USA

Europe

Demand

China

India

Suppliers

InBound Logistics

Assembly

China

Korea

Manufacturing hub

Outbound Logistics

Eastern Europe

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Horizontal & Vertical Globalization

l  In Horizontal FDI, MNCs duplicate the same activities in multiple countries.

l  In vertical FDI, firms locate different stages of production in different countries.

l The basic difference between the two is –  Horizontal integration always occurs at the

same stage on the supply chain –  Vertical integration always occurs at different

stages of the supply chain.

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Disintegration of

Production : Barbie doll

l  The plastic and hair sourced from Taiwan & Japan. l  The molds & paints for decorating the dolls are from US. l  Assembly in low-cost locations Indonesia, Malaysia & China. l  China supplies only cotton cloth for dresses and the labor. l  The export value of the dolls at Hong Kong is $2 . 35 cents of

Chinese labor, 65 cents of materials & rest for transport, overheads & profits.

l  The doll sells for $10 in the US: 1$ for Mattel & the rest covers transport, marketing, wholesale and retailing in U.S.

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Multi Tier Supply Chain Network

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Source: National Research Council Staff (2000). Surviving supply chain integration: strategies for small manufacturers. Washington, DC: National Academies Press. Adapted from Lambert et al., 1998.

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Integrated Supply Chain Networks

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Integrated Supply Chain Networks

Supplier Distributor

Supplier Retailer

Manufacturer

Service Provider

Information Network

Enterprise System or Web-site

Logistics Network

Logistics Hub

Financial Network

Banks

Supply Network

Service Network

Demand Network

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Three (Material ,Information &

Financial) Flows

l  Logistics network provides a streamlined material flow between all partners, reducing lead time and cost.

l  Communications network provides information integration between companies of supply chain network

l  Financial network connects all institutions providing Funds, letters of credit and Insurance.

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Three Sub Networks

•  Demand sub-network: consists of manufacturing, distribution, retailing , logistics and finance. Perfect delivery is important .

l  Supply sub-network : B2B network consisting of suppliers, manufacturers, inbound logistics, Financial Institutions and Freight forwarders.

l  Service sub-network: connects consumer with suppliers & manufacturers after sales service centers.

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The Three Business Processes l  Procurement: Sourcing raw materials and

components from the suppliers : Vendor & logistics provider selection, Delivery scheduling & Inventory management.

l  Manufacturing: Could be in a single location or geographically distributed.

l  Distribution & Retail: consists of packaging, transportation and warehousing. Options include direct shipping or outsourcing to third parties.

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The Financial Supply Chain

Supplier Manufacturer Retailer /

Distributor Customer

Financial Supply Chain

Just-in-time-cash Cash Flow Forecasting

Movement of Documents & Money

Goods Supply Chain

Just-in-time-manufacturing Demand Forecasting

Movement of Documents & Goods

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The Six Dominant Players

l Suppliers l Logistics Players: B2B and B2C l Contract manufacturers l Original Equipment Manufacturers l Distributors l Retailers They are independent companies globally

distributed & highly connected

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Life-cycle-based Logistics l  Logistics depends on the product life cycle

–  Movement of Semi finished items from one machine shop to another (Manufacturing logistics)

–  Movement of Finished products from end of the production line to the consumer (Outbound logistics)

–  Movement of Raw materials from source of supply to the beginning of the production line. (Inbound logistics)

–  Movement of Spare parts from manufacturers to the customers via dealers (Spare part logistics)

–  Movement of Used goods from consumer to the manufacturers (Reverse logistics)

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1PL, 2 PL and 3 PLs l  Most manufacturers handle all logistics functions

including trucking and warehousing (1PL). l  2PLs are basic transportation and storage

providers such as truckers, warehouses and container lines and have high levels of asset intensity but low barriers to entry. –  Airports and Seaports as capacity providers are also

categorized as 2PLs l  3PLs provide total value added logistic solutions

–  Own some assets such as distribution centers and rent assets available 2PLs.

–  Freight management &Contract logistics

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Best Practices in SCN

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Best Practices in SCN-1

l  Supply hubs: Third Party maintains inventory for the suppliers at the manufacturer site.

l  Modularization: Design of component modules that can be used in multiple products

l  Standardization: specifying common parts for use in multiple products and models.

l  Cross docks: Transshipment facilities where goods are sorted, consolidated and loaded onto outbound trucks

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Best Practices in SCN-2

l  Postponement: Final assembly done adding customer specific features such as labeling garments, packaging with customized manuals based on the customer order

l  Merge-in-transit: Components shipped from different production units & warehouses are assembled during transit

l  Collaborative Planning, Forecasting & Replenishment combines the collaborative intelligence of multiple trading partners in planning and fulfillment of customer demand