Global Supply Chain Management

Learn the Future by

living in the Present

Introduction to Global Supply Chain NetworksPart1

N. Viswanadham
Indian Institute of Science
Bangalore -560 012
n.viswanadham@gmail.com

Global Supply Chain Management

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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Global Supply Chain Management

Introduction to Supply Chain

Networks

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Global Supply Chain Management

What are Supply Chain Networks?

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.
l

E.g. Auto, Pharma, aerospace, electronics,

computer, food, apparel ,etc.

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 .
l

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Integrated Manufacturing & Service

Network

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Global Supply Chain Management

Some Examples

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Industry Supply Chain

Customer
Configured
Order

Order
Processing
System

Website
Estimated
Time of
Delivery

Warehouse

Suppliers

Global Transportation & Logistics

Logistics Service Providers

Assembler

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Global Supply Chain Management

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

China

Manufacturin
g hub

Inventory
hub

China
USA

InBound
Logistics

Eastern
Europe

India

Demand
USA

Outbound
Logistics

Korea

Europe

Suppliers

Europe

Assembly
Distributio
n
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Retail

Global Supply Chain Management

Horizontal & Vertical Globalization

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

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.

Global Supply Chain Management

Disintegration of
Production : Barbie doll
l
l
l
l
l

The plastic and hair sourced from Taiwan & Japan.

The molds & paints for decorating the dolls are from US.
Assembly in low-cost locations Indonesia, Malaysia & China.
China supplies only cotton cloth for dresses and the labor.
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.
The doll sells for $10 in the US: 1$ for Mattel & the rest
covers transport, marketing, wholesale and retailing in U.S.

Global Supply Chain Management

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., 1998.
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Integrated Supply Chain

Networks

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Global Supply Chain Management

Integrated Supply Chain Networks

Information Network
Enterprise System or
Web-site

Supply Network

Demand Network
Manufacturer

Supplier

Distributor

Logistics Network

Logistics Hub

Supplier

Service Network

Retailer

Service
Provider

Financial Network
Banks

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Global Supply Chain Management

Three (Material ,Information &

Financial) Flows
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.
l

Global Supply Chain Management

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

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.
l

Global Supply Chain Management

The Financial Supply Chain

Movement of
Documents & Goods

Supplier

Movement of
Documents & Money

Manufacturer

Retailer /
Distributor

Customer

Goods Supply Chain

Financial Supply Chain

Just-in-time-manufacturing
Demand Forecasting

Just-in-time-cash
Cash Flow Forecasting

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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

Global Supply Chain Management

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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Global Supply Chain Management

1PL, 2 PL and 3 PLs

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.
l

Airports and Seaports as capacity providers are also

categorized as 2PLs

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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Global Supply Chain Management

Best Practices in SCN-1

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
l

Global Supply Chain Management

Best Practices in SCN-2

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
l