Managing Global Supply Chains

Ron Basu

• Editore: Routledge
• Anno: 2016
• ISBN:
  9781317237952
• Edizione: 2
• Argomento: Business
• Categoria: Management

Starting from the concept that "there is no point driving a Ferrari in a traffic jam", Basu and Wright demonstrate the importance of good supply chain management in Managing Global Supply Chains. Building on the successful Total Supply Chain Management and incorporating the new challenges of globalisation, this book demonstrates the practical tools and techniques that add value, deliver cost reduction and improve customer satisfaction.

This new edition has been substantially revised and extended to include a holistic approach, incorporating the upstream suppliers and the downstream customers. Further updates to this edition include:

• New chapters on e-business, emerging markets, sustainability and green issues, global supply chains for services and event management, retail management and major project management

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• A section of brand new case studies

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• A new companion website to support lecturers with their teaching

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This book also provides comprehensive insight into lean and agile supply chains supported by tools, techniques and case examples.

Managing Global Supply Chains is a practical text with excellent coverage and is ideal for post-experience business students or learning professionals in supply chain management.

Part I

Introduction

1 The role of supply chain as a key value driver in the global market

In this chapter, the basic concepts of supply chain management are explained. It is shown that supply chains in some shape or form are required to deliver products and services. Since the earliest recorded times, there has been trading of goods and materials between regions and states resulting from the combined activities of many individuals, governments and the global community. The development of societies, culture and history, and mere chance, led to specific characteristics of countries and regions. The differences in characteristics have become less distinct for a variety of reasons. Since 1945, there have been revolutionary changes in the modes of transport and logistics (containerisation, 100,000-ton bulk carriers now the norm, pipelines between and through nations, long-range air freight, freight consolidation), the means of production (robotics, automation, new materials which are lighter and stronger), communication (the World Wide Web, email, e-Business, social media), integration and the means to foster integration such as Enterprise Resource Planning (ERP) and variants such as System Application Product (SAP) bar coding, Radio Frequency Identification (RFID), free trade and the easing of economic blocs (European Union, free trade agreements between groups of nations such as the proposed Trans Pacific Partnership Arrangement, the emergence of the People’s Republic of China as the second single biggest economy after the United States, the dissolution of the Soviet Union and the fall of the Berlin Wall), social conscience (the green movement, awareness of climate change, human rights and fair trade) – all leading to a truly global marketplace.

Within every market there are exchanges of goods and service; and for each transaction, there is a supplier and a customer; and there are activities, facilities and processes linking the supplier to the customer. Supply chain management is the process of balancing these links to deliver the best value to the customer at the minimum cost and effort for the supplier. Simplistically, each of us experiences and benefits from supply chains several times a day – for example, in running your home; in managing a manufacturing business; in health services, hotels, banks, government, utilities, non-profit organisations, sports clubs, universities, entertainment, retail, professional services, and on and on.

Supply chains vary significantly in complexity and size, but the fundamental principles apply to all operations, whether they be large or small, manufacturing or service, private or public. Supply chain management is not limited to big-name businesses such as Apple Inc., Walmart, Toyota, or Royal Dutch Shell. It is for all businesses and for all operations, and the basic functions of forecasting, capacity management, staffing, inventory management, scheduling quality management and service are present, no matter how small the operation.

Consider at the low end of the scale a hotdog stand at a school fete. You might have asked for mustard and ketchup, and without needing to say that you expect to receive a cooked sausage in a bun at a reasonable price and with good humour from the person serving. If all this is achieved, you will be a satisfied customer. However, if the person serving smiled and told you to have a nice day, and added the mustard and ketchup, but the bun was stale and the sausage undercooked, you would be disappointed. Even in the seemingly simplest transaction, elements of the supply chain are present. The number of elements involved in satisfying a customer at a hotdog stand include the ingredients, the cooker, gas, utensils, cleaning materials; and good-humoured, willing volunteers. The judgement of what is a good hotdog or not such a good hotdog will vary from customer to customer: overcooked, undercooked, soggy bun, stale bun, too spicy, bland taste, not enough mustard, queue too long, ran out of change, etc. Satisfaction is subjective, and often there are no precise measurements.

What is supply chain management?

In a typical supply chain, raw materials are procured (some local and some imported) and items are produced at one or more factories, transported to warehouses for intermediate storage, and then transported locally and internationally to retailers or customers. Production will require energy – gas, petrol, electricity – which will often be provided from global companies. Gone are the days of a country being self-sufficient by mining its own coal for steam-driven factories. In the United Kingdom, a new nuclear power station is to be built with the People’s Republic of China taking a one-third stake in a French-led project. This is more than just providing the finances; China will be involved in the design and in providing technological know-how.

If you asked people involved in business to define the term ‘supply chain’, you would get many different answers. Each definition would reflect the nature of the business and the inputs and outputs produced. For some, supply chain is related to purchasing and procurement; to others, it is warehousing, distribution and transportation. Yet for others, it is the sources of capital and labour.

Melnyk and Swink (2002) see the supply chain ‘as a product cradle-to-grave concept, including all value-added activities required to plan, source, make and deliver products and services that meet customer needs’. This definition in a few short years appears to be very dated … very much last century!

Supply chain management (SCM) as defined in the APICS Dictionary (2013) is the ‘design, planning, execution, control and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally’.

The global nature of a supply chain and the integration provided by information technology cannot be ignored. For example, in New Zealand I had problems connecting my email to a new laptop. I phoned a help desk and realised that the very pleasant and patient person I was talking to did not have a typical New Zealand accent. When asked, she happily informed me she was in the Philippines. After about 20 minutes, my new Filipino friend said she could not solve our problem and connected me to a specialist. The specialist was a man with a very different accent. He took over and talked me through the steps to be taken to solve the problem, which took less than five minutes. I asked where he was and he said California, and he proved it by telling me to have a nice day.

Being cost effective across the whole global supply chain requires a system-wide approach to optimisation. In short, supply chain management must consider every organisation and facility, and every step involved in making the product and the costs involved in doing so.

The objective is to make the entire chain efficient and not just one element, with the final objective being to deliver, at the end of the supply chain, a product or service to the satisfaction of the end user.

To be cost effective across the whole global supply chain, a system-wide approach to optimisation is required.

Supply chain in manufacturing

Supply chain management in a manufacturing and supply organisation considers the demand, supply and inventory needs for each item of production, and in particular looks at how inventory flows through the system to achieve the output to the customer’s specification on time and at the least cost. With supply chain management, customer service is increased through the reduction of lead times, the product is always exactly as specified, and it is always delivered on time. In Chapter 19, we describe this as the delivery of a ‘perfect order’. Costs are reduced through the elimination of any activity that doesn’t add value, and through the reduction of inventories of material and associated holding and handling costs.

Activities and measures based on customer requirements, as explained in Chapter 4, are very important in improving business performance. But externally driven customer-based measures have to be matched by measures of what the company can do (feasibility, capacity, know-how and resources) to consistently meet customer expectations. A high standard of customer performance derives from planning, processes and actions integrated across the whole organisation.

Supply chain management focuses on the critical measures of all elements of the supply chain. Externally, the measures include the suppliers at one end and the customer at the other end of the supply process. These externals, the supplier and the customer, are matched with the internal requirements of the manufacturing process. The focus is two-fold: to satisfy customer needs and to keep costs to a minimum.

In reality, the elements of supply chain management are not new – we have all been managing parts of the supply chain for years (e.g., buying, planning, scheduling, stock control, warehousing, logistics, distribution, etc.) without realising the significance of the whole chain concept. Likewise, the cost of the various elements of supply and distribution has been long recognised. ‘In 50 years between 1870 and 1920 the cost of distributing necessities and luxuries has nearly trebled, while production costs have gone down by one fifth – what we are saving in production we are losing in distribution’’ (Barsodi, 1929).

It is relatively new to view the supply chain as a process that is a single, integrated flow across all the functions of the business. Traditionally, activities within a supply chain were seen as separate and specialist functions, such as purchasing, planning, scheduling, manufacturing and distribution. With supply chain management, the flow of materials and the flow of information across traditional functional boundaries is seen as a single process. These flows are depicted in a simplified model in Figure 1.1.

In the past, information flow was the domain of the commercial division while the conversion process of materials flow was a manufacturing or technical division responsibility. With an integrated supply-chain approach, the responsibility for all elements of supply is now with operations management or supply chain management. In many businesses, the integrated approach is being extended to include all suppliers (including ‘upstream’ first-, second- and third-tier suppliers) through the manufacturing process and ‘downstream’ to each level of customer (including distributors, wholesalers and retailers out to the end user or consumer). This is known as the extended supply chain.

Figure 1.1 Supply chain management (Note: MPS means master production schedule).

Supply chain in services

Thanks to ease of travel, the media and the World Wide Web, customers have never been more informed than they are today. Customers know what they want and know what can be done, and they understand the concept of world-class and continuous improvement. This is especially true in service industries. As a result of the heightened expectations of customers, operations managers in service sectors have been forced to focus their attention on managing the complete value-adding system using the principles of supply chain management.

But how can service industries apply supply chain management? The supply chain of a service organisation contains suppliers, products or services, customers and their demand for products, and service-level agreements. Service inventory can be in the form of information databases, stocks of consumables (as with the hotdog stand), stationery items (including brochures and promotional material), energy and other infrastructure suppliers, and subcontractors (including facility managers, travel agents, caterers, accountants, lawyers and advertising agencies).

Swank (2003) described a successful application of supply chain management and lean production principles in a typical insurance service company in the USA: Jefferson Pilot Financial (JPF). JPF believed that the processing of their almost tangible ‘service product’ was comparable to a car assembly process. Swank explains that

like an automobile on the assembly line, an insurance policy goes through a series of processes, from initial application to underwriting or risk assessment to policy issuance. With each step value is added to the work in progress – just as a car gets doors or a coat of paint.

(Swank, 2003)

Supply chain in not-for-profit organisations

The good practices of supply chain management can be adapted to provide major practical benefit to not-for-profit organisations, such as charity organisations, in meeting their objectives. International disasters have a huge impact on the world’s population, increasing the need for aid organisations to improve their logistics capability and capacity. Perhaps the biggest impact of supply chain management in not-for-profit organisations is responding to unpredictable demands through quick-response supply and distribution.

Since 2005, humanitarian organisations have become more adept at using supply chain optimisation. Lessons were learnt from the Hurricane Katrina disaster in New Orleans. Waller (2005) said that he was not surprised that Walmart, the world’s largest retailer, beat the Federal Emergency Management Agency (FEMA) and the Red Cross to areas devastated by the hurricane. He found that Walmart delivered supplies quickly and efficiently because that’s what it does every day. Walmart is the master of supply chain management, and the company’s expertise in this area worked well during a natural disaster. How Walmart was able to do this is further explained in Chapter 10.

An example of the application of a global supply chain management in a not-for-profit organisation is the National Health Service (NHS) in the United Kingdom. See the mini case study below:

Case study: the NHS and DHL

The NHS in the United Kingdom was spending £15 billion annually on the procurement of goods and services. It was determined that there was enormous potential for NHS organisations to save money through effective purchasing. As a result, the NHS Purchasing and Supply Agency (PASA) was established in 2000 as a part of the government’s...

Indice dei contenuti

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of tables
• Acknowledgements
• About the authors
• Preface
• About this book
• Part I Introduction
• Part II Building blocks of global supply chain
• Part III New demands and trends
• Part IV Integrating supply chain management
• References
• Appendix 1 Bullwhip effect supply chain game
• Appendix 2 ASK 2.0 (Advanced Self-assessment Kit)
• Appendix 3 Glossary
• Index