ARSI UNIVERSITY

03/27/2023
DEPARTMENT OF LOGISTICS AND SUPPLY CHAIN
MANAGEMENT

GSCM 2020 Arsi University

1
COURSE OBJECTIVES :
 Upon successful completion of this course, students
will be able to:

03/27/2023
 Identify the elements of a Global supply chain

GSCM 2020 Arsi University

 Identify stages of a global supply chain management.

 Develop a well-planned global supply chain

management strategy
 Understand planning and network design for global
supply chains.

2
 CTD…
 Understand way to manage production, inventory, delivery and
returns efficiently to meet international demands and to reduce

03/27/2023
company’s risk.
 Understand the more relevant issues and risks related to

GSCM 2020 Arsi University

operations transferability to different international environment
 Understand the strategic questions related to designing
international logistics networks involving factories, flows and
inventory / cross docking;
 Understand issues related to the uncertainty and risk
management of global supply chains;
 Understand the effects and remedies of demand volatility in
global supply chains.
3
 COURSE CONTENTS
 Chapter 1: Introduction to Global Supply Chain
Management

03/27/2023
 Chapter 2: Planning the Global Supply Chains

 Chapter 3: The Role of Logistics in Global Supply

GSCM 2020 Arsi University

Chain Management
 Chapter 4: Managing Global Sourcing and
Procurement
 Chapter 5: Global Supply Chain Management
Issues and Intermediaries

4
 OVERVIEW
 Over the past twenty years, the business environment has

03/27/2023
been continuously responding to the pressures of

GSCM 2020 Arsi University

globalization.
 In every industry, networks of suppliers, manufacturers,
trade intermediaries and customers have spread around
the globe as companies strive to lower their costs,
increase their profits and improve productivity in a
highly competitive global marketplace.
5
 CTD…
A paradigm shift has occurred in which companies
that once built domestically to sell internationally now

03/27/2023
look globally for raw materials, services and finished
goods to sell into a defined marketplace.

GSCM 2020 Arsi University

 This shift is happening because of reduced barriers to
trade and investment, lower transportation costs,
ease of information flows, new enabling technologies
and the emergence of economies such as China and
India.

6
 CTD…
 In today’s global competitive environment, individual
companies no longer compete as autonomous entities

03/27/2023
but as supply-chain networks.
 Instead of brand versus brand or company versus

GSCM 2020 Arsi University

company, it is increasingly suppliers-brand company
versus suppliers-brand-company.
 In this new competitive world, the success of a single
business increasingly depends on management’s
ability to integrate the company’s intricate network
of business relationships.

7
CTD..
 Supply-chain management (SCM) offers the

03/27/2023
opportunity to capture the synergy of intra and

GSCM 2020 Arsi University

inter-company integration and management.
 SCM deals with total business-process excellence and
represents a new way of managing business and
relationships with other members of the supply chain.

8
 CTD…
 Supply chain management aims to manage the flow of
goods, information and finances among these

03/27/2023
business networks in the most efficient manner.
 Companies have discovered that effective supply chain

GSCM 2020 Arsi University

management cuts costs, reduces waste, prevents over-
production and helps ensure that customers are
more satisfied with product, price and service. This
means it is an essential tool for competitiveness in a
global marketplace.

9
 CTD…
 The demands of globalization and competitive
pressures arising have imposed the deployment of new

03/27/2023
strategies based primarily on spatial fragmentation
processes.

GSCM 2020 Arsi University

 International fragmentation of production resulting
in cross-border networks inter-firm and intra-firm led
to the development of International Supply Chains.
 While globalization is changing the global economic
landscape,International Supply Chain Management is
the most appropriate medium for a large share of firms.

10
CHAPTER 1: INTRODUCTION TO GLOBAL
SUPPLY CHAIN MANAGEMENT

03/27/2023
 What Is a Global Supply Chain?
 Global supply chains are networks that can span across
multiple continents and countries for the purpose of sourcing

GSCM 2020 Arsi University

and supplying goods and services.
 Global supply chains involve the flow of information,
processes and resources across the globe.
 Dispersed over a larger geographical area

 Offers many more opportunities than just the domestic supply

chain
 Risk factors are also present

11
 GSC is concerned with the efficient integration of
Global suppliers, factories, warehouses and stores

03/27/2023
so that products are distributed to customers in the
right quantity and at the right time.

GSCM 2020 Arsi University

 One of the primary objectives of SC management is
to minimize the total supply chain cost subject to
various service requirements. This also applies to
GSC.

12
CTD…
 According to Tiwari & Jain,(2013) “global supply

03/27/2023
chain management” refers to "design, planning,
implementation, control, and monitoring of supply

GSCM 2020 Arsi University

chain activities with the objective of creating net
value, creating a competitive infrastructure,
influencing worldwide logistics, coordinating
supply with demand and measuring performance
globally”.
13
CTD…

Global Supply Chain Management: is a global flow

management, an inclusive philosophy of the members of the

03/27/2023
international supply chain, where:

GSCM 2020 Arsi University

 The competitive arena is bigger, not only geographically but
in terms of number of customers, suppliers and potential
competitors.
 Complex challenges, differences in regulators, multiple legal
systems, cultural differences, and the multiplicity of regimes
income tax.
14
CTD…

 We consider Global supply chains as a form of more

03/27/2023
complex organization, which differs from supply

GSCM 2020 Arsi University

chains domestic, regional, or continental given the
challenges mentioned above, and also differ from
international supply chains traditional in their
degree of integration and interdependence between
partners.
15
 TAXONOMY OF GLOBAL SUPPLY CHAINS
 International distribution systems
Manufacturing still occurs domestically, but

03/27/2023
distribution and typically some marketing take
place overseas.

GSCM 2020 Arsi University

 International suppliers
Raw materials and components are furnished by
foreign suppliers
Final assembly is performed domestically.
In some cases, the final product is then shipped to
foreign markets.

16
 CTD..
 Offshore manufacturing

03/27/2023
Product is typically sourced and manufactured in a
single foreign location
Shipped back to domestic warehouses for sale and

GSCM 2020 Arsi University

distribution
 Fully integrated global supply chain
Products are supplied, manufactured, and distributed
from various facilities located throughout the
world.

17
 GOALS OF GLOBAL SCM
Develop and maintain strategic and operational

03/27/2023
aspects of global supply chains
Identify and leverage industry globalization

GSCM 2020 Arsi University

drivers that affect global supply chains
Have knowledge of and leverage the worldwide
infrastructure for global supply chains
Manage coordination and integration of global
supply chains

18
CTD…

03/27/2023
 But most importantly:
Identify leverage points for:

GSCM 2020 Arsi University

Global logistics in global supply chains
Global purchasing in global supply chains
Global operations in global supply chains
Global market channels in global supply
chains
19
 03/27/2023
KEY QUESTIONS
How global is the industry?

GSCM 2020 Arsi University

How global should the firm’s strategy
be?
How global should the supply chains
be?

20
 COMPETENCIES NEEDED FOR EFFICIENT
GLOBAL SCM

Positioning The selection of strategic and

structural approaches to guide global
operations
Integration The establishment of what to do and
how to do it creatively
Agility The achievement and retention of
global competitiveness and global
customer success
Measurement The internal and external monitoring
of global operations

03/27/2023 GSCM 2020 Arsi University 21

 FACTORS AFFECTING GLOBAL SCM
 Costs

03/27/2023
 Local labor rates
 International freight tariffs

GSCM 2020 Arsi University

 Currency exchange rates

 Customs Duty
 Dutyrates differ by commodity and level of assembly
 Impact of GATT/WTO: Changes over time

22 1999
Source: Global Supply Chain Associates (GSCA)
 CTD…

03/27/2023
 Export Regulations
 Denied parties list

GSCM 2020 Arsi University

 Export licenses

 Time
 Lead time
 Cycle time
 Transit time
 Export license approval cycle
 Customs clearance
23
 CTD

 Taxes on Corporate Income

03/27/2023
 Different markups by country
 Tax havens and not havens
 Make vs. buy effect

GSCM 2020 Arsi University

 Offset Trade and Local Content
 Local content requirement for government
purchases
 Content for preferential duty rates

24
 FORCES TOWARD GLOBALIZATION

 Global market forces.

03/27/2023
 Technological forces.

GSCM 2020 Arsi University

 Global cost forces.

 Political and economic forces.

25
GLOBAL COST FORCES
 Often dictate global location decisions

03/27/2023
 Costs of cheaper unskilled labor more than offset by
the increase in other costs associated with operating
facilities in remote locations.

GSCM 2020 Arsi University

 In some cases cheaper labor is sufficient justification
for overseas manufacturing.
 Other global cost forces have become more
significant
Cheaper skilled labor is drawing an increasing
number of companies overseas.

26
POLITICAL AND ECONOMIC FORCES
 Exchange rate fluctuation
 Regional trade agreements

03/27/2023
 Tariff system
 Trade protection mechanisms

GSCM 2020 Arsi University

 More subtle regulations
Local content requirements
Voluntary export restrictions
Government procurement policies

27
 QUESTIONS TO ANSWER

03/27/2023
 Manufacturing Strategy:
How many plants do I need?

GSCM 2020 Arsi University

Where should each plant be located?
What products should each make?
What process technologies should each have and
how much of each process is needed?
What part of the world should each plant serve?

28
Source: Global Supply Chain Associates (GSCA) 1999
 CTD…
 New Product Pipeline Design:

03/27/2023
 What should the supply chain look like for a new
product?

GSCM 2020 Arsi University

 How should I fit the new product into my current
supply chain?
 Should I single or double source this product?
 How much do my fixed costs affect this decision?
 What is the cross-over point to open up a second
and third source of supply?

29
 RISKS IN GLOBAL SUPPLY CHAINS
 Supply Risks. Impacts inbound supply, implying that a
supply chain is unable to meet the demand in terms of

03/27/2023
quantity and quality of parts and finished goods. The
outcome is labeled as a supply disruption.

GSCM 2020 Arsi University

 Demand Risks. Impacts elements of the outbound supply
chain where the extent or the fluctuation of the demand is
unexpected. This is labeled as demand disruption.
 Operational Risks. Impacts elements within a supply
chain, impairing its ability to supply services, parts, or
finished goods within the standard requirements of time,
cost, and quality. Transportation is one of the most
salient operational risks.
30
 FACTORS IMPACTING GSCM RISKS
 Environmental. Considered to be that factors that
have among the highest probability of occurrence and

03/27/2023
that can be the least effectively mitigated since they
tend to be uncontrollable.

GSCM 2020 Arsi University

 Natural disasters (e.g. earthquakes) and extreme
weather are within this category, including potential
sea level rises. Pandemics are low probability events,
but once they occur, they become high impact
events.

31
 CTD…
 Geopolitical. Several geopolitical factors tend to have a
high probability, namely conflicts and trade

03/27/2023
restrictions, but supply chain actors have a level of
influence on the outcome by electing locations that are

GSCM 2020 Arsi University

less prone to these risks and by influencing policy.
 Technological. Transport infrastructure failures are fairly
rare, so the most salient technological concern involves
ICT disruptions. As supply chain management
increasingly relies on information technologies for its
management and operations, any information system
failure has important ramifications.
32
 CTD…
 Economic. The most significant economic factors
relate to demand shocks, often associated with

03/27/2023
sudden political or economic changes.
 Price volatility is also a concern since it has an

GSCM 2020 Arsi University

important impact on input costs. Like geopolitical
factors, supply chain actors have a level of influence
on the outcome.
 For instance, trade restrictions arbitrarily imposed
by governments can have important impacts. Still, the
industry is able to either comply or to put pressures to
have these restrictions changed if they are judged to
be unacceptable. 33
 CULTURAL DIFFERENCES
 Language
Expressions, gestures, and context

03/27/2023
 Beliefs, or specific values about something
Can differ widely from culture to culture

GSCM 2020 Arsi University

 Customs
Vary greatly from country to country
Important for the businessperson to adhere to local
customs to avoid offending anyone.
Example: the practice of gift giving varies greatly

34
 METHODS FOR ADDRESSING GSCM RISKS
 Speculative strategies: Company bet on a single

03/27/2023
scenario, with often spectacular results if the scenario
is realized, and dismal one if it Is not.

GSCM 2020 Arsi University

 For example, in the late 1970s and 1980s, the
Japanese automakers won the bet on
manufacturing in Japan because they believe
rising domestic labor costs can be offset by
exchange rate benefits.

35
 CTD…

03/27/2023
 However, this did not last long because the US
government intervenes to force the Japanese government

GSCM 2020 Arsi University

to raise the value of Japanese Yen (similar thing is
happening now between US and China).

 Hedge strategies: A SC is designed in such a way that

any losses in part of the chain will be offset by gains in
another part.
 For example, Volkswagen are operating plants in US,
Brazil, Mexico, and Germany.
36
 CTD…
 Flexible strategies: A SC is designed with multiple
suppliers and excess manufacturing capacity in

03/27/2023
different countries so that products can be moved at
minimal cost from region to region as economic conditions
demand.

GSCM 2020 Arsi University

 First we need to consider whether it is possible to
implement such a strategy:
1)Is there enough variability in the system to justify the use?
2)Do the benefits of spreading production over various
facilities justify the costs?
3)Does the company have the appropriate coordination and
management mechanisms in place?
37
CTD…
 If the answer to the questions is yes, and a SC is
appropriately designed, then several approaches can

03/27/2023
be utilized to implement a flexible strategies
effectively.

GSCM 2020 Arsi University

 Product shifting: As exchange rates, labor cost and
so on change, manufacturing can be relocated.
 Information sharing: Availability of information
increases with presence over many regions and
markets, which in turn can be used to create new
opportunities.

38
 CTD…
 Global coordination: Having multiple facilities

03/27/2023
worldwide provides a firm with some market leverage
that it might otherwise lack.

GSCM 2020 Arsi University

 For example, if one firm attacks one of your markets,
you can attack back.
 Political leverage: The implicit threat of movement is
sufficient to prevent local politicians from taking
unfavorable actions.

39
 CHARACTERISTICS OF GLOBAL SUPPLY
CHAINS

03/27/2023
 Substantial Geographic Distances

GSCM 2020 Arsi University

 Forecasting Difficulties and Inaccuracies
 Exchange Rates and other Macroeconomic
Uncertainties
 Infrastructural Inadequacies

40
ADVANTAGES OF GLOBAL SUPPLY CHAIN
 Reduced total costs
 Inventory reduction

03/27/2023
 Improved fulfillment cycle time
 Reduce cycle time

GSCM 2020 Arsi University

 Increased forecast accuracy
 Productivity increase
 Improved capacity
 Expand international connections
 Increase intellectual assets
 Delivery improvement
 Diversified business and trading
 Competitive advantage
 Untapped markets
41
 Enhanced speed and efficiency
 POTENTIAL GLOBAL SUPPLY CHAIN
OBSTACLES
 Member nations VS. Non member nations
 Inefficient transportation and distribution systems

03/27/2023
 Market instability
 Different languages

GSCM 2020 Arsi University

 Differences in Currencies
 Differences in Measurement Systems (metric versus decimal)
 Different Customs, beliefs and cultures
 Political turmoil
 Trade imbalances
 Export surges and recessions
 Greater distance
 Tax Policies
 Operational Threats
 Strategic Challenges
42
 Technological capabilities
 COMBATING OBSTACLES
 Duty specialists and trade specialists
 Join nation groups

03/27/2023
 Banding together

 Form consortiums

GSCM 2020 Arsi University

 Vertically integrate

 Be innovative & Be flexible

 Research

 New technology

 Infrastructure improvements

 Reduce the number of “stops” in the chain

43
 RECENT CHANGES AFFECTING THE
GLOBAL SUPPLY CHAIN

03/27/2023
Internet and technological change

GSCM 2020 Arsi University

Proliferation of trade agreements
Falling Trade Barriers
Increase in international trade groups
New Markets
44
03/27/2023 GSCM 2020 Arsi University
45
END!!