288 33 Powerpoint Slides Chapter 16 Global Operations Supply Chain Management

7/23/2019 288 33 Powerpoint Slides Chapter 16 Global Operations Supply Chain Management

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Copyright @ Oxford University PressInternational Business R. M. Joshi Chapter 16: Global Operations andSupply Chain Management

International BusinessRakesh Mohan Joshi

Professor & Chairperson, IIFT New Delhi

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GLOBAL OPERATIONS

AND SUPPLY CHAIN

MANAGEMENT


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Learn ing Ob ject ives

To explain the significance of managing global operationsand supply chain

To elucidate the concept of global operations management

To explicate global supply chain management To discuss key concepts and issues of maritime

transportation in international trade

To elaborate containerisation and multi-modaltransportation

To examine international organizations associated withinternational maritime transportation

To discuss institutional framework for maritime transport inIndia


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Operat ions Management

Planning, organizing, and controlling all

resources and activities to provide goods

and services, which applies equally to

manufacturing and services.


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Global izat ion o f Operat ions

The forces of globalization have led toexpansion of operations on a global scalewhich include

Global sourcing of inputsGlobal production of goods andservices

Global transportation of productsGlobal management of entire supplychain


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Off-shor ingRelocation of business processes to a low-cost

location by shifting the task overseas. Capital

assets may be shifted from high-cost locations (for

example, the US or Europe) to low-cost locations,

such as India, China, or Latin America.


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Types of off -shor ing

Captive off-shoring

Third party off-shoring

Near Shoring


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Strategic Opt ions for

Trans-nat ional Operat ions


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Globally ConcentratedOperations

All production is concentrated at a singlelocation and exported world wide.

Host Market Operations

Each production unit produces a range ofproducts to serve the host countrymarkets.


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Product Specialization for a

Global or Regional MarketEach production unit produces only one

product for sale throughout a regional

market comprising of several countries.

Trans-national VerticalIntegration

Each operations facility located in

different countries either perform aseparate part of operations in a chain

like sequence.


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Global In tegrat ion (L ) vs./ Local

Responsiveness (R)Global integration

The coordination of activities across the country so as to build

an efficient operations network and take optimal advantage of

internalized synergy at similarities across operationallocations.

Local responsiveness

A firms attempt to respond to specific needs within varioushost countries.


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Global Supply Chain ManagementGlobal integration and management of

business processes across the three major

systems of supply chain: materials

management, operations and physical

distribution.


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Copyright @ Oxford University PressInternational Business R. M. Joshi

Chapter 16: Global Operations andSupply Chain Management

In ternat ional Log ist ics

Conceptualization, design, and

implementation of a system to direct flow of

goods and services across national borders.

Logistics has two distinct components, i.e.,

materials management and physical

distribution.


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Managing Global Supply ChainManaging a supply chain globally is far

more complex due to physical distance,differences in logistics systems and theircompatibility, different legal systems, andnumerous intermediaries involved.

A seamless and efficient global supplychain consists of major constituents, suchas transportation, warehousing, inventory

management, packaging and unitization,and information and communicationtechnology,


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Warehousing

Goods need to be stored so as to bridge thetime gap between the production andmeeting the customer demand.

The major functions of warehousing include: Storage of goods

Consolidation

Breaking bulk

Mixing or assembly


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Invento ry ManagementMaintaining inventories is an integral part ofsupply chain management. The principalreasons for holding inventories are

To maintain uninterrupted supply To optimize buying costs

To economies production costs

To take advantage of quantity discounts To cope-up with seasonal fluctuations


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Pack ing and Unit izat ionPackaging of export cargo is an importantlogistics activity as it facilitates safe and

smooth shipment of goods. Besides,

packaging facilitates unitization of export

cargo that facilitates cargo-handling during

transit. Containarisatiaon increases the size

of unit load and facilitates handling and

transportation of cargo.


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Transportat ion

Transportation is an important part ofinternational logistics. Various modesof transport used include:

Air

Road

Rail and

Ocean transportation


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Third Party Log ist ics(3PL)

Outsourcing of more sophisticated logistics

and supply chain services, especially on a

global scale.


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Mari t ime Transportat ion in In ternat ional

TradeOcean transport is responsible forcarriage of 90 per cent of world trade,making it the largest means of transportin international trade.

Since ocean transportation is the oldestmode of international business, a largenumber of shipping practices are derivedby the customs of trade.It is the low-cost availability and

efficiency of maritime transport that hasmade it possible to shift industrialproduction to low-cost countries.


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Types o f Ocean CargoBulk

Cargo that is loaded and carried in bulk, withoutmark or count, in a loose unpackaged form,having homogenous characteristics e.g. coal,iron ore, fertilizers, grains, oil, etc.

Break-bulkPackaged cargo that is loaded and unloaded on apiece-by-piece basis, i.e., by number or count.This can be containerized or prepared in groupsof packages e.g. coffee, rubber, steel, etc.

Neo-bulkCertain types of cargo that are often moved byspecialized vessels, e.g., auto, and logs aretermed as neo-bulk.


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Containerized

Cargo loaded at a facility away from the pier

or at a warehouse into a metal container

usually 20 to 40 feet long, 8 feet high, and 8

feet wide.


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Types of Commercial Vessels


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On the Basis of Regis t ry Group ings

Oil tankers

Bulk carriers

General cargo vessels

Container ships

Other vessels


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On the Basis o f Type of Cargo Container ships

Tankers

Bulk carriers

Neo-bulk carriers Combination carriers

Other vessels

General cargo vessels

Roll-on and roll off (Ro/Ro) vessels LASH (Lighter aboard ships) vessels


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On the Basis o f Decks

Single deck vessel

The tween deck vessel

Shelter deck vessel

Specialized cargo vessel

Container vessel


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A lternates fo r Ocean Shipment


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Charter ShippingOften used for shipment of bulk cargo,the charter vessel does not have anyfixed sailing schedule and can be hired toship the firms cargo on charter basis as

per the terms and conditions of thecharter party.

Charter party: The contract madebetween the charterer and ship-owner

that contains details of the ship, routes,methods of cargo handling, port of call,etc.


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Chapter 16: Global Operations and

Supply Chain Management

Forms of Charter ing

Voyage charter: Contract of carriage in which a

vessel is hired for transport of a specified cargo

from one port to another port

Time charter: Hiring of a ship for a time period

whereby the ship-owner places the ship with crew

and equipment at the disposal of the charterer


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Bare boat (demise) charter: Hiring of a ship for a

specified period of time during which ship-owner

provides only the ship whereas the charterer has

to provide the crew together with all stores and

bunkers and pays for all operating costs.

Back-to-back charter: Contract between a

charterer and a sub-charterer, whose terms and

conditions are identical to contract (charter)

between the charterer and the ship-owner


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Copyright @ Oxford University Press

International Business R. M. Joshi



Trip time charter: A charterer hires the vessel forsingle voyage or a round trip on terms andconditions similar to time-charter

Contract of affreightment: A long-time agreementto carry a certain amount of cargo between twoports


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Contract Terms Used in Vessel Charter ing Gross terms: The ship-owner is responsible for the cost

of loading, stowing, trimming, and unloading of the

vessel. Net terms: The ship-owner is not responsible for cost of

loading and discharge.

Free in and out (FIO): The charterer has to arrange thestevedores and to load/discharge the cargo on his or her

own account Free in and out stowed and trimmed (FIOST): Similar toFIO, but charterer is also responsible and bears theexpenses of stowing and trimming

Shared responsibilities: The charterer and the shipowner both have shared responsibilities in the following

terms: Free in liner out (FILO): Ship-owner is not responsible for the cost

of loading but is responsible for cost of unloading

Liner in free out (LIFO): The ship-owner is responsible for cost ofloading but not for vessel unloading


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Laytime: This can be expressed in days, hours,tons per day, etc.


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Other Terms

SHEX: Sundays and holidays excluded

SHINC: Sundays and holiday included

FHEX: Fridays and holidays excluded

FHINC: Fridays and holidays included

The other terms used in charter party are:

As fast as the vessel can (FAC): Maximum rate at

which a vessel can load / unload

Notice of readiness (NOR): Formal advice that thevessel is ready for loading / unloading.

Running days: Days that run consecutively aftereach other

Weather permitting: Inclement weather is excludedfrom laytime

Weather working day (WWD): A day or part of a daywhen weather does not prevent loading/unloading


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Liner Shipp ing

Regular scheduled vessel services betweentwo ports.

Liner or Shipping Conferences

Collaboration between two or more shipping

companies to operate vessel in the same trade

lanes that legally agree not to compete on price,and charge the same freight for the same type of

cargo and the same voyage.


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Multi-Modal or Inter-Modal TransportationTransport of goods by at least two different

modes of transport, such as rail, road, sea,

or air on the basis of a multi-modal

transport contract.


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Types o f Containers

ISO containers: Standard size containers

with

Width: 8 feet Heights: 8 feet 6 inches and 9 feet 6

inches;

Lengths: 20 feet and 40 feet


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Princip le Con figu rat ions o f ISO Con tainers

Dry containers

Insulated or thermal containers

Refrigerated or reefer containers

Open top containers

Liquid bulk container

Dry bulk container

Flat racks and platforms


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Swap bodies

These have many characteristics of inter-modal containers but are not standard ISOcontainers. Strong bottom and a minimalupper body constitute their major

characteristics.FCL vs. LCL containers

Use of an entire container in FCL whereas

partial space in a container is used in LCL


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International Organizations

Associated with

International Maritime

Transportation


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In ternational Marit ime Organ ization (IMO)

A specialized agency of the United Nations

responsible to develop and maintain a

comprehensive regulatory framework for shipping

which includes maritime security and safety,

environmental concerns, legal matters, technical

cooperation, and the efficiency of shipping.


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In ternat ional Labour Organ ization (ILO)Standards of employment and working

conditions for seafarers are established by

ILO were adopted by the Maritime Labour

Convention (MLC) to provide a level playing

field on a global basis with regard to

seafarersemployment standards.


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World Customs Organizat ions (WCO)In June 2005, the WCO unanimously adopted theFramework of Standards to Secure and Facilitate

Global Trade (SAFE Framework) which provides

broad outlines and overarching principles

concerning security and facilitating global supply

chain, based on two main pillars: customs-to-

customs cooperation and customs-to-business

partnership.

United Nations Con ference on Trade and


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United Nations Con ference on Trade and

Development (UNCTAD)

It monitors development in the field of

transport security and disseminates

informations in form of various reports and

its annualReview of Maritime Transport.

In ternat ional Organization for


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In ternat ional Organization for

Standardization (ISO)In order to enhance supply chain security,consistent with ISPS code, and the WCO

Framework of Standards, ISO has developed

certain procedures and standards. Although

ISO standards are voluntary, they are

developed in response to market demandbased on consensus of interested parties.


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Institutional Framework for

Maritime Transport in India


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Minist ry of Shipp ingIt is responsible for monitoring and

development of maritime transport

infrastructure and formulating policies and

programmes for development of

shipbuilding, ship-repair, major ports, and

inland water transport.


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National Shipp ing Board

Established in 1959 it advises the

Government on matters related to shipping

and its development.


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Directo rate General o f Shipp ing

Established in 1949, it is responsible for

administration of the Indian Merchant Shipping Act,

1958 on all matters related to shipping policy and

legislation, implementation of various international

conventions promotion of maritime education and

training, examination and certification, supervisionof subordinate offices, etc.


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The Shipping Corpo rat ion o f Ind ia Ltd.

(SCI)Formed on 2 October, 1961 by the amalgamation of

Eastern Shipping Corporation Ltd. (ESC) and

Western Shipping Corporation of India Ltd. (WSC),

the SCI has diversified fleet.

Con tainer Corporat ion (CONCOR) of


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Copyright @ Oxford University Press Chapter 16: Global Operations and

Con tainer Corporat ion (CONCOR) of

IndiaSet up in 1988 aims to develop multi-modal

logistics support for Indias international and

domestic containerized cargo and trade. Though rail

is the mainstay of CONCORs transportation plan,

road services are also provided according to market

demand and operational exigencies.

288 33 Powerpoint Slides Chapter 16 Global Operations Supply Chain Management

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