Managing the Global Pipeline

Compiled by Rulzion Rattray

The Globalisation of Markets.

Levitt, T. (1983).

Advances in Technology Driving the

world to a converging commonality.
Proletarianisation of:
Communication, transport, travel

Global corporations which operate with

resolute consistency at low relative cost
using the entire world as a single
market.
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Trade Offs in Global Logistics

Transport
Source to User

Costs

Inventory
Material
Production
Localised

Global

Important to recognise trade offs.

Key to recognise the service needs of
the market
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Globalisation in Supply Chains

Liberalisation effect of WTO, etc.
No longer have to set up in target country, instead
can concentrate on developing economies of scale.
Emergence of new manufacturing economies has
resulted in increased competition and oversupply.
Companies will have to find new ways of
remaining competitive by lowering costs in other
ways.

Supply chain efficiency will become even

more important
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The Myth of Globalisation.

Susan Douglas & Yoram Wind.

Attacks Levitt's view of global standardisation as naive and

over simplistic. Homogenisation not a clear & universal trend.

Contra Evidence of
homogenisation:
Food firms adapt to national
characteristics.
Growth of intra-country
segmentation:
growing demand for
differentiated products.

The myth of economies of

scale:
Technical developments
lowering scale requirements.
cost of production often
only small part of total costs.

Global Manufacture & Supply

Focussed factories:
Economies of scale, one factory for the world?
May overlook crucial logistics trade offs:
Transport costs & delivery times.
Requirement for local packaging

Centralised Inventories:
Centralising Inventory = less total inventory.
Square root rule

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to

5:2 i.e. 60% reduction

Christopher, M., (1998),

However may overlook benefit of local to customer

Postponement & Localisation

Localisation:
Even in relatively homogeneous markets like
Europe their can be considerable variety of
local taste. This may be better catered for in a
local assembly operation.

Postponement:
Design products using simple common
platforms, using common components.
Assembly does not take place until required.
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Customer Service Explosion

Increasing perception that there is little
technical difference between products.
Service crucial source of differentiation and
competitive advantage.
Requirements:
Closely integrated marketing, manufacturing and
supply strategies

Logistics of service delivery crucial!

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Strategic Lead time Management

Product and technology life cycles getting
shorter.
Requirements for success:
Ability to innovate.
Ability to bring new products to market.

Logistical Lead time becomes crucial.

Time from sourcing and procurement though to
recovery of investment by selling
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Organisational Integration
Recognition of the importance of taking a systems
view of business.
Difficulty of achieving integration in functionally fixated
organisations.

Move towards a requirement for generalists

Integration of all the different aspects of the organisation.
Philosophy of integration beyond the confines of the
organisation.

Supply Chain Management.

Requires that all the players in the value system work
together.
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Throughput Management
The process of linking manufacturing and
procurement to the needs of the market.
Requirement for reducing the length of the
supply chain pipeline!
Target:
Lower cost, higher quality, greater variety,
more flexibility, faster response times.
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Globalisation
Move to commodity markets and component
specialisation:
firms shop freely amongst the nations of the world
Singer Sewing machines: Shells from US, motors from
Brazil, drive shafts from Italy, machine assembled in
Taiwan

Increasing need for local customisation

Washing machines: Germans want fast spin & Italians
slow, British front loaders, French top loaders, etc

Challenge how to achieve benefit of standardisation

at the same time?
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References
Christopher, M., (1998), Logistics and Supply
Chain Management. Strategies for Reducing Cost
and Improving Service, Financial Times Pitman
Publishing, London
Levitt, T. (1983), The Globalisation of Markets,
Harvard Business Review May/Jun.
Douglas, S., & Wind, Y., (1987), The Myth of
Globalisation, Columbia Journal of World
Business, Winter.
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