CHALLENGE OF CONTINUOUS

GLOBAL NETWORK OPTIMIZATION

D R . YA S E R I F T I K H A R
OPTIMIZATION PARADOX

• Corporations are willing to expand globally

• But such moves introduce inefficiencies into the value chain of global manufacturers
• Shortening product life cycle gives lesser time to collaborate and manage transition in each
product cycle
• Companies expect large share of revenue from new product introduction
• Companies realize they can benefit from value chain optimization
• Most of the companies lack capabilities to do so
• Companies are globalizing everything but most of the optimization still remain local. It is called
“global optimization paradox”
• Companies may jeopardize their investment because of wrong estimation of strain on global
network.
• Example:
– Wrong calculation of custom
– Wrong calculation of tax and import duty
WHY ARE COMPANIES FALLING BEHIND IN
OPTIMIZING THEIR GLOBAL NETWORKS
• Average time of brining new products to market is shrinking
• Increasing outsourcing result in difficulty to monitor and assess total network cost
• Role of mergers and acquisition without optimization
• Complex economic and political environment
• Responding to such complex compliance demands is challenging
• There is internal and external resistance to changes for optimization
• And risk associated with wrong optimization is significant
PROFITING FROM CONTINUOUS
NETWORK OPTIMIZATION
• Optimization is not a trivial task
• Few organizations manage global optimization and leave competitors behind, and we can call
them “complexity masters”
• complexity masters have
– Higher asset returns
– Faster growth
– Up to 50% higher profit level then competitors
PRACTICES OF COMPLEXITY
MASTERS
• Taking Holistic View
• Designing global network
– The role of competitive drivers
– Factoring compliance drivers into the network design
– Optimization infrastructure- people, process and technology
TAKING A HOLISTIC VIEW
DESIGNING GLOBAL NETWORK

• Competitive drivers
• Compliance drivers
• Optimization infrastructure
ROLE OF COMPETITIVE DRIVERS

• Demand chain (marketing, sales and services): Optimizing Marketing, Sales, and Service from
a Global Perspective.
• Supply chain (sourcing manufacturing and logistics):The Global Pursuit of Lower
Manufacturing and Supply Costs.
• Innovation and product life cycle management (R&D, design, engineering, development and
launch)
COMPLIANCE DRIVERS

• Product traceability
• End of life recycling and disposal
• Labelling
• Product liability
• Food safety
• Subsidies
• Labor laws
• Corporate governance
• Financial reporting
• Tax and customs
– Direct tax
– Corporate tax
– Indirect tax
• Import duties
• Antidumping levies
• Excise/ consumption tax
• GST
• VAT
• Agricultural levies
• Stamp taxes

• Transfer pricing
• Levels of regulations
– Regional
– National
– International
OPTIMIZATION INFRASTRUCTURE

• Optimization infrastructure comprise of :

– People (Organizational Structure)
– Process (Business Process)
– Technology (Information System)
• Most companies do not have the global infrastructure to support the design, implementation,
and management of an optimized network.