Introduction to Global Supply Chain Networks- Part1

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1 Learn the Future by living in the Present Introduction to Global Supply Chain Networks- Part1 N. Viswanadham Indian Institute of Science Bangalore

2 Contents l Introduction to Supply Chain Networks l Some examples l Integrated Supply Chain Networks l Best practices In supply Chain Networks N.Viswanadham 2

3 Introduction to Supply Chain Networks N. Viswanadham

4 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.

5 Integrated Manufacturing & Service Network N.Viswanadham

6 Some Examples

7 Industry Supply Chain Customer Configured Order Estimated Time of Delivery Warehouse Website Global Transportation & Logistics Order Processing System Assembler Suppliers Logistics Service Providers N.Viswanadham

8 The Plough-Plate Food Supply Chain Currently no one orchestrate the relationship among the supply chain actors.

9 China India Suppliers Global Supply Chain Network InBound Logistics Manufacturin g hub China Eastern Europe Korea Assembly Outbound Logistics Inventory hub USA Europe Distributio n Demand USA Europe Retail N.Viswanadham

10 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.

11 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.

12 Multi Tier Supply Chain Network Source: National Research Council Staff (2000). Surviving supply chain integration: strategies for small manufacturers. Washington, DC: National Academies Press. Adapted from Lambert et al., N.Viswanadham

13 Integrated Supply Chain Networks N. Viswanadham

14 Integrated Supply Chain Networks Supply Network Supplier Supplier Service Network Information Network Manufacturer Logistics Network Logistics Hub Service Provider Enterprise System or Web-site Banks Demand Network Distributor Retailer Financial Network N.Viswanadham 14

15 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.

16 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.

17 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.

18 The Financial Supply Chain Movement of Documents & Goods Supplier Manufacturer Goods Supply Chain Just-in-time-manufacturing Demand Forecasting Movement of Documents & Money Retailer / Distributor Customer Financial Supply Chain Just-in-time-cash Cash Flow Forecasting N.Viswanadham

19 l Suppliers The Six Dominant Players 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

20 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) N.Viswanadham

21 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 N.Viswanadham

22 Best Practices in SCN N.Viswanadham

23 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

24 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

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