Global Supply Chain

Management
Global Supply Chain Overview
Insurance& Others
Certifications etc.
Risk Mgmt
Funds
P&S Transfer System
Delivery System

Contract
Exporter (Products Importer
&Services)

Global Business Framework

(Economic, Cultural, Political & Legal)
 Stages to Global Supply
Management
1-International Purchasing-Focus on volume, price,
inventory; entry phase to global arena

2-Global Sourcing-Focus on global opportunity, supplier quality,

strategic production support, customer support- already offshored for some
time

3-Global Supply Management-Focus on optimizing

supply network, capacity management worldwide

4-Tansnational Corporation-Next stage of evolution;

Instant communication and funds transfer capability; real time operations of
buying, selling, tracking etc
Reasons For Global Sourcing
• Superior Quality
• Lower Cost
• Broader Supply Base
• Expanded customer base- sell in that country
• Better timeliness- lesser lead time than local sources
Potential Risks and Problems
• Cultural Issues- Hong Kong example of four
• Long lead time
• Additional inventories
• Lower quality
• Social and labor problems-Nike Sweat Shop
• Higher cost of doing business
• Opacity risk- Global opacity index
 X Questions before going global
• Does it qualify as high-volume in your industry?
• Does it have a long life (2-3 years)?
• Does it lend itself to repetitive manufacturing?
• Is demand of the product fairly stable?
• Are specifications and drawings clear and well
defined?
• Is technology not available domestically at
competitive prices?
• Will there be adequate warrantees and back up
support?
 Global Supply Channels
• Import merchants-Import and sell goods themselves
• Commission houses- Source for you from exporter abroad, no commission
by you, goods billed & shipped to you directly, do handle docs.

• Agents or representatives- Represent sellers, do handle socs

• Import brokers- Bring buyer-seller together, both pay commission.
• Trading houses- Far more organized, handle all aspects of transaction
• Subsidiary company- Fully owned by parent co., levy service charge
• International Procurement office- Office in foreign country
• Directly from Supplier/manufacturer- No intermediary
Some Useful websites
 Locating a Direct Supplier
• Start with intermediary source
• Trade Directories
• Trade fairs
• Goggle Search
• Initial contacts
• Personal meeting
• Negotiations
• Trial order
• Bulk order
 Transportation and delivery
issues
• Which mode of transport to be used-
Sea, Air, Surface, multimodal
• Full container of part container (20 ft,
40ft)
• Liner or chartered vessels
• Break-bulk carriers
• INCOTERMS
Currency and payment issues
• Exchange rates
• Methods and terms of payment-L/C,
direct and others
• Hedging and currency risk
management
• Insurance and in-transit risk
management
• Inspections and quality assurance
management
 Counter Trade
• What is Counter trade- Part of full payment by goods
instead of money

• Barter- Goods exchanged for goods, no money involved

• Offset – Swiss buy F-16, sell Elevators to USA
• Counterpurchase- Russian example
• Buy –back/compensation-Seller agrees to accept part
of payment by buying products

• Advantages of CT: circumvent currency controls, restricted

currency areas
Political and Economic Alliances
• EU- European Union
• NAFTA- North American Free Trade Agreement
• Mercosur- Argentina, Brazil., Paraguay, Uruguay
• ASEAN- Association of South Asian Nations
Brunei, Indonesia, Laos, Malaysia, the Philippines, Myanmar,
Singapore, Thailand and Vietnam
• APEC- (Asia Pacific Economic Cooperation)-large area, 50% of world GDP;
China, Russia, Canada, USA, Australia
• SAARC- South Asian Association for Regional Cooperation-created
in1985; India, Pakistan, Bangladesh, Shri Lanka, Nepal, Bhutan and
Maldives
• SAFTA - South Asian Free trade agreement(2013)
• OPEC (Organization of Petroleum Exporting Countries) Role in 1970’s-
Fixing prices & production quotas-Crude prices $3/ to $12: now $60 per barrel
 Reading References
• World Class Supply Chain by Burt,Dobler
&starling- Chapter 16