MLCP: The Business of Tomorrow

MODULE 2 – GLOBALIZATION

Glo·bal·i·za·tion (Noun)Glo·bal·i·za·tion (Noun)

Taken here to mean ‘The forces of change that we face in our trading and manufacturing economy’

MLCP: The Business of Tomorrow

MODULE 2 – GLOBALIZATION

Desired Outcomes for this Module:

Sharpen understanding of the forces of globalization that are at work in the the Canadian economy;

Work with the other participants to assess the direct impact of these forces on our businesses;

Explore such opportunities as may exist to turn these powerful forces to our business advantage.

MLCP: The Business of Tomorrow

MODULE 2 – GLOBALIZATION

- Today a forefront consideration- Today a forefront consideration

Manufacturers in the developed world have been chasing – and finding –sources of low-cost, high quality production offshore.

Globalization is being fuelled by unprecedented advances in technology and techniques, communications, science, and transportation across the whole spectrum of endeavour.

- Termed by economists in the early 1980s- Termed by economists in the early 1980s- Not widely considered until the mid-1990s- Not widely considered until the mid-1990s

- Thomas L Friedman

“Today, Globalization goes…. ….ever Further, Faster, Cheaper and Deeper”

MLCP: The Business of Tomorrow

MODULE 2 – GLOBALIZATION

Key Areas of Impact:

Inventory and Supply Chain Management

Outsourcing

Global Trade Rules

Quality Standards

Internet and the Information Revolution

Global Transportation Network

INVENTORY & SUPPLY CHAIN MANAGEMENT

Firms with outstanding inventory performance invariably also excel in customer service, productivity, and delivery, reflecting strength in the core disciplines of Lean Mfg.

Inventory:

Inventory is expensive, typically 20 – 40% of its value/year

Inventory is an ‘effect’, as obesity is a symptom of poor diet and/or lack of sufficient exercise.

- Devours capital- Takes up space- More mat’ls handling- Tracking & Control

INVENTORY & SUPPLY CHAIN MANAGEMENT

Quantum leaps in SCM efficiency in the past 10 – 15 years have come from:

SCM more important than ever before:Consequences are more immediate, placing ever-greater focus on contingency planning.

Supply Chain Management (SCM):

SCM spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-use.

- Global sourcing;

- Just-in-time delivery.- Transportation advances;- Supplier base rationalization;

INVENTORY & SUPPLY CHAIN MANAGEMENT

A Quick Look at Wal-Mart:Wal-Mart’s prices are 15% lower than equivalent items bought elsewhere.

Differentiators:

- Distribution Centres, not Warehouses!

- Information Technology: - Bar-coding and Electronic Data

Interchange with suppliers

- Global procurement and Continuous Improvement mandate

- Approach to Human Capital

Viewed by Many as:

“The epitomy of arrogant corporate power”

AND “The wave of the future!”

INVENTORY & SUPPLY CHAIN MANAGEMENT

Integrated Supply Chain Management Model

OUTSOURCING

Outsourcing / Offshoring:The practice of sub-contracting non-core goods / services to outside sources.

Justifying Reasons:

- Take advantage of Specialist capabilities;- Simpler than ‘in-housing’;

- Cost-attractive;

Risks:- Vulnerability to sub-vendor problems;- Creating competitors.

Features:- ‘Tier One’ clusters around Client hub;- JIT delivery.

OUTSOURCING

Outsourcing:

Nothing new: - even Henry Ford did it.

A success story in riding the wave of change:

- Small, localized unit plants

- Product specialization

- Easily ‘roll with the punches’

OUTSOURCING

Outsourcing: Considerations:

If I build trucks, do I – unlike Ford – build my own tire plant?

If I lack specialized skills in certain areas, can I be sure those parts of my operation are effective?

If I get competitive bids, I learn about the going pricing, and can select best cost-benefit.

If I outsource what others are good at, I can concentrate more on what I’m good at.

CANADA: A Trading Nation- One of over 140 WTO member nations;

- A NAFTA participant, with US & Mexico.

Benefits:- As consumers, we have wider range available to us at globally-competitive pricing;

- For retail and distribution chains, the world is now the marketplace;

Challenges:- For manufacturers, competition is truly global;

- Means competing with others who have vastly different circumstances;

- Can no longer rely on tariff protection, and must use own assets to navigate exchange rates, etc.

Responding to the Challenges:

Know who the competition is, and what their advantages are;

Determine what can be done to stay ahead, and act accordingly;

Differentiate ourselves successfully in our regular market arenas;

Pursue new market opportunities;

Be prepared to adopt offensive as well as defensive strategies

Everyone needs to be aware of the ‘real world’ situation, and be prepared to be part of the solution!

Growth in international quality standards has played a significant part in changing global trade conditions.

ISO 9000/2000 has changed the way we look at quality in the workplace.

Standards for environmental management (ISO 14000) are expanding rapidly.

The Auto sector created its own QS 9000 series of standards.

The Food Industry introduced HACCPand conform to GMP.

The ‘Six Sigma’ system, developed by GE, has been widely adopted by others

Quality Standards

A key change to the ISO standards has been the inclusion of Continuous Improvement as a requirement. Now when you recertify every 3 years, you must show proof.

Quality Standards

An original aim with ISO was to provide a non-tariff filter, requiring entrants to have a quality mgmt infrastructure, an educated workforce, and a willingness to comply with regulated standards.

- This means your global competitors are doing it - You must, too!

Quality is an honest-to-goodness money-maker in so many ways:

- Now the world subscribes!

- Pursue it, and embrace it!

Quality Standards

‘Lean / Six Sigma’ (DMAIC) Integration

Quality Standards

Continuous productivity improvement is today a ‘fact-of-life’ pursuit.

Much of the MLCP is focused on this.

Here’s a ‘sneak preview’ of one model:

The Internet and the Information Revolution

Information technology (IT) has changed manufacturing control radically in recent years.

Manufacturing systems can now be remote-coordinated on-line in real-time;

Shipments, in and out, can be tracked through every step of the journey;

Physical inventorying is now avoidable through inventory information systems automation and SPC verification;

Customers can log in and direct-enter orders into the production system;

Suppliers can monitor inventories and ship parts / materials on a JIT basis

The Internet and the Information Revolution

All of these capabilities are available to our every competitor. To remain globally competitive, we need to use the IT tools at our disposal…

All aspects of globalization have been accelerated by the IT revolution;

IT has changed the way we manage processes, and more readily allows employee input and influence;

By continuously tracking key process variables, cost performance can be monitored dynamically;

- All should; Many don’t.

Global Transportation Network

The single most important global transportation contributor, along with…

Ships large enough for economy and fast enough to be reliably JIT

Automated terminals with the IT to manage the distribution process Upgraded road & rail systems to deliver predictably

Freight forwarders who are expert at optimizing transportation costs

Transportation infrastructure is today so advanced that a single barcode can carry all of the digital information for an entire shipment

Containerization:Containerization:

Global Transportation Network

Challenge your process internally and your suppliers externally to ensure your methods and routes are the best for your business

- although your current market is also accessible to the world!

- Although the gap is already small – and closing!

A Least-Case Necessity:

If you’re competitive in your market, there are other more distant markets you could explore: The world is now your marketplace….

If your markets are local, you may still have a freight cost advantage.

The ‘Wal-Mart China Express’ - The ‘Emma Maersk’ (L. 2007)

- Dimensions: 1302 ft LWL x 207 ft Beam (Note: Too wide for Panama Canal)

- Capacity: 15,000 Containers (48’ & 53’) (Net 123,000 Tons carrying capacity)

- Speed: 31 Nautical mph (vs. current typically 18 – 20 nmph)

- Crew Complement: Thirteen (13) total!

Panoramic View: Containers at Singapore Port

Global Transportation Network

Global Transportation Network

. . . AND FOR THE STATE-OF-THE-ARTIN AIR TRANSPORTATION . . .

Extract from CME’s 2007-08 Management Issues Survey

“There are few issues more important for manufacturers and exporters across Canada today than those involved in competing and winning in global markets.

Intense competition from all over the world, and the rise of the Canadian dollar are coupled with concerns over rising commodity, energy and other business costs - plus the effects of a slowdown in the United States economy.”

Workshop #1: Inventory is a Four-Letter Word

Workshop #2: Outsourcing – A Mgmt Cop-out

Workshop #3: The Exchange Rate: Our Problem

Workshop #4: You Just Bought New Software

Workshop #5: The Auditors Are Coming!

Workshop #6: You Just Switched Suppliers