8/8/2019 GLM Lecture 3
1/19
Global Dimensions of Supply Chains
Chandana Hewege
8/8/2019 GLM Lecture 3
2/19
Global Sourcing and Supply Chain
> http://www.youtube.com/watch?v=ykYgVz75JGc
http://www.youtube.com/watch?v=ykYgVz75JGchttp://www.youtube.com/watch?v=ykYgVz75JGc8/8/2019 GLM Lecture 3
3/19
Three eras of globalization
The first era was initially driven by countries (14001800) seekingmaterials and goods not available in their own land
The second era of globalization (18002000) was driven bycompanies seeking goods and materials, labor, economies ofscale, and markets.
In the third era of globalization, said to have begun around the
year 2000, the significant characteristic is that it is being poweredby individuals and smaller organizations
Globalisation and Supply Chain
8/8/2019 GLM Lecture 3
4/19
Supply Chains in a Global Economy
Economies and companies could improve their wealth by allowing specialization oftasks.
The advantage is true as long as you can sell the increased volume that is produced. Itis an important role of logistics to help extend the market area of countries orcompanies through improved efficiency to lower the landed cost in new market areas.
Globalisation and Supply Chain
8/8/2019 GLM Lecture 3
5/19
The Scope and Magnitude of Global Business
The ability to connect to individuals and companies across theglobe and to connect computer information systems on a 24/7basis has provided unparalleled opportunity for collaborationhorizontally and vertically in supply chains.
The trade volume with China was 18.2 percent of the total of thetop 10 for 2006, and it increased its trade volume by 20 percent
from 2005 to 2006. In 2000, China was number 4 followingCanada, Mexico, and Japan. Check the latest statistics below
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
https://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.htmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/us.html8/8/2019 GLM Lecture 3
6/19
Global Markets and Strategy
The global business environment has changed significantly and become muchmore conducive to business activity between and among different countries.
Success in the global market place requires developing a cohesive strategy,
including product development, technology, marketing, manufacturing, andsupply chains.
Global markets and strategy have four important characteristics:
standardization reduces complexity
global competition reduces the product life cycle
traditional organizational structures and business models frequentlychange
globalization introduces more volatility
8/8/2019 GLM Lecture 3
7/19
Supply Chain Security: A Balancing Act
Given the importance of global trade to the United States, a delicate balance existsbetween security and the efficient flow of global commerce.
More cargo inspections, much more paperwork, and a longer time to clear U.S. bordersare now a reality.
C-TPAT is a cooperative effort to secure the global supply chain and to facilitatelegitimate cargo and conveyance.
8/8/2019 GLM Lecture 3
8/19
Ports
Ports are a critical part of global supply chains and also a majorfocus for global security.
Americas ports are a vital part of its global commerce. Over $2trillion in trade value per year passes through U.S. ports, and over$18 billion is collected in industry fees and taxes.
8/8/2019 GLM Lecture 3
9/19
North American Free Trade Agreement & Supply ChainPotentials
NAFTA establishes free trade between these three countries and
provides the way the agreement is to be interpreted.
Even though the U.S./Canada Free Trade Agreement has been ineffect for some time, certain trade barriers still remain.
The supply chain constraints will eventually be eliminated asNAFTA experience grows. Refer to the diagram in the next slide.
8/8/2019 GLM Lecture 3
10/19
A Typical Truck Shipment Crossing into Mexico
8/8/2019 GLM Lecture 3
11/19
Global Transportation Options
Ocean
The most pervasive and important global shipment method, accounting fortwo-thirds of all international movements. Major advantages are low ratesand the ability to transport a wide variety of products and shipment size
Three major categories: Liner service (offer scheduled services)
Charter vessels
Private carriers
Air Fast transit times
An advantage in packaging
Disadvantage of air carriage is high rates
8/8/2019 GLM Lecture 3
12/19
Global Transportation Options (cont.)
Motor
Use motor transport when shipping goods to between the United States andMexico or Canada
It is very common in Europe
Motor also plays a large part in intermodal shipments
Rail
International railroad use is also highly similar to domestic rail use Intermodal container shipments by rail are increasing
Maritime bridge concepts
Land bridge
8/8/2019 GLM Lecture 3
13/19
Strategic Channel Intermediaries
Foreign Freight Forwarders
Supplies expertise to international shippers
Consolidate small shipments into more economical sizes
Derives income from fees for service
Non-Vessel-Operating Common Carriers
Consolidates and dispenses containers at inland points
Uses the shipping expertise that NVOCCs possess
Ocean carrier gains from the increased market area
8/8/2019 GLM Lecture 3
14/19
Strategic Channel Intermediaries (cont.)
Export Management Companies
EMCs act as agents for domestic firms in the international arena
Obtain orders, selecting appropriate markets, distribution channels, and promotional
campaigns
Export Trading Companies
ETC exports goods and services to overseas buyers and handles most of the exportarrangement
ETC allows small- to medium-size firms to engage in foreign trade
8/8/2019 GLM Lecture 3
15/19
Strategic Channel Intermediaries (cont.)Customs House Brokers
Oversee the movement of goods through customs and ensure that thedocumentation accompanying a shipment is complete and accurate for entry
into the country
Operate under power of attorney from the shipper to pay all import duties dueon the shipment
The importer is ultimately liable for any unpaid duties
Keeps abreast of the latest import regulations and specific requirements ofindividual products
8/8/2019 GLM Lecture 3
16/19
Storage Facilities and Packaging
Transit sheds provide temporary storage while the goods await the next portion of thejourney
Carrier provided hold-on-dock storage free of charge until the vessels next departuredate
Public warehouses are available for extended storage periods.
Bonded warehouses operate under customs agencys supervision and are used tostore, repack, sort, or clean imported merchandise entered for warehousing withoutpaying import duties while the goods are in storage.
8/8/2019 GLM Lecture 3
17/19
Packaging
Export shipments moving by ocean transportation require morestringent packaging than domestic shipments normally do
The shipper may find settling liability claims for damage to exportgoods very difficult. Usually, the freight handling involves manyfirms, and these firms are located in different countries.
8/8/2019 GLM Lecture 3
18/19
Summary
> Companies competing in global supply chains need to address some importantquestions for their global networks to ensure their efficiency and effectiveness.
> There have been three phases of globalization: the first was driven by countries,the second by large companies, and the third by individuals and smallorganizations.
> Successful global companies have transformed their supply chains on an ongoingbasis to enable them to deliver low cost and high value to the ultimate customer.
> The scope and magnitude of trade flows between the United States and othercountries have grown considerably in the last several decades. One interesting
development has been the growth in importance of trade with China and severalother Asian countries.
> Success in the global marketplace requires developing a cohesive set of strategieswith respect to customer service, product development, business models, andoverall supply chains.
8/8/2019 GLM Lecture 3
19/19
Summary (cont.)
> Supply chain security has taken on increased importance since September 11, 2001.Companies individually, jointly, and in cooperation with the various levels of governmentneed to be actively involved. The federal government, in particular, has expanded the scopeof its regulations and policies for global security.
> U.S. ports play a critical role in global supply chains since over 90 percent of global tradepasses through them. Ports are also an important focus for security.
> Canada and Mexico are ranked number 1 and 3, respectively, on the list of most importanttrading partners with the United States. That relationship is enhanced by the North AmericanFree Trade Agreement ratified by Congress in 1994. While the treaty had lofty goals, it still isexperiencing problems with full implementation of its objectives. Nevertheless, it has
fostered trade in North America.
> Global supply chains have a number of transportation and related service options availableto managers. Each of the options has advantages and disadvantages that need to beanalyzed.