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Chapter 2:
Planning the Global Supply Chain

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 What is Supply Chain Planning ?

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There is need for a mechanism through which the
execution of various business activities along a supply
chain can be planned in an integrated fashion.

The supply chain planning is an effort to achieve the

primary goal of “producing and distributing the
merchandise at the right quantity, to the right
locations, and at the right time with minimum system
wide cost” in the presence of conflicting goals of various
business units
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Supply Chain Planning Processes
Demand Forecasting
Material Requirement Planning Demand Planning

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Component Production
Requirement Plan

Supplier Plant Warehouse Logistics Retailer

Order Management
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 Supply Chain Planning Decisions

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STRATEGIC

TACTICAL

OPERATIONAL
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Procurement Manufacturing Distribution Logistics

 Supply Chain Planning Decisions
• Supplier
•Location, Number,
Selection Capacity of Plants • Mode of

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•Location, Number, Shipment
•Allocation of •What Products to
Size of Warehouses
Suppliers to Produce
•Which Plants to • Port Selection
the Plants Produce them

•Warehouse
Allocation • Customer • Vehicle Routing
• Procurement Allocation
• Inventory Decisions
Policy
• Manufacturing • Distribution Policy • Fleet Size
Policy

• Production
Schedule
• Finished Goods
•Scheduling on • Vehicle Routing
Inventory
Machines
• Workload Balancing 5
 SUPPLY CHAIN PLANNING ELEMENTS
• Supply Chain Design
• Resource Acquisition

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Strategic
• Long Term Planning (1 Year ++)

• Production/ Distribution Planning

• Resource Allocation
Tactical
• Medium Term Planning (Qtrly,Monthly)

• Shipment Scheduling
• Resource Scheduling
Operational
• Short Term Planning (Weekly,Daily)
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 PLANNING THE GLOBAL SUPPLY CHAIN

 Managing of global supply chain system is much

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more complex than that of purely domestics’ networks.
 Managers must properly analyze the international
environment, plan for it, and develop the correct
control procedures to monitor the success or failure of
the global distribution system.
 Prior to its implementation, the following aspects of
supply chain management have to be thoroughly
considered .

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 Supply Chain Topology (Relationship): One of the first
aspects to look upon is the question whether we are dealing with

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a linear sequence of elements or if we are considering a
network structure.
 The term supply chain implies a linear structure, but, as we
discussed the nature and content of the global SCM. For real
planning purposes it is of considerable importance to become
aware of the fact that the linear and complex structure.
 Clearly, real world relations of a company show a network
structure which increases the complexity of supply chain
management by a considerable factor. This complexity is even
magnified when we take the global focus into consideration.

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 Supply chain perspectives: At this point, another fact should
be stressed. When regarding a special product we are focusing

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on one special company as well. We are thus approaching inter
organizational SCM concept through the lenses of one
particular product of one particular company.
 But which is the company we should be focussing on? If we
regard a supplier network it is not apparent which company
should be the one in focus. Every company in this network
might pursue the idea to manage its supplier and customer
network for its own products, a fact that appears
questionable.

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 According to different studies there are two main
perspectives for supply chain management concept:

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 The focal company perspective: Companies intention
to implement the supply chain concept for its products
from its own organizational context points of view.
 The focal company analyzes and judges the
importance of relations and processes according to its
own subjective judgement and takes over control of
subjectively important relations.

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CTD….
A bird's eye perspective: It sometimes promoted in

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the supply networks.
 The bird's eye perspective, can be adopted by an
independent organization or a common steering
committee, that provide opportunity to objectively
analyze a given supply chain and identify
optimization potential regardless of the position or
importance of every single chain member.

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SUPPLY CHAIN PERSPECTIVES

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 PLANNING TASKS
 Membership As we have noted above, the supply chain
is not a mere chain of actors or activities, it is a

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network.
 A shift in complexity arises not only from the elevated
number of actors we have to cope with, but also implies
another question:
 Do we have to manage all relations, that is, all
supplier-customer relations which occur,
 can we neglect certain relations, or

 do we have to approach the management of our

inter-firm relations in a more differentiated manner ?
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 Thus, we have to find an answer for the question: Whom should
we manage?

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 The decision to manage all relations to suppliers, suppliers'
suppliers, etc. as well as distributors and so on would result in a
very complex task, which would, even in the computer age, be
impossible to cope with.
 We therefore state that a selection process has to take place in
order to separate important from less important relations
within our supply network. It is implied that primary members
are those to include in the SCM process, whereas supporting
members may fall out of the managed network.

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 On a first level, Lambert, Cooper and Pagh (1998)

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propose a differentiation in primary and supporting
supply chain members. This differentiation is derived
from Porter's (1985, p. 39) similar differentiation of
activities within a company's value chain.
 It is implied that primary members are those to include
in the SCM process, whereas supporting members may
fall out of the managed network.

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 For the remaining primary supply chain members the authors
propose to distinguish the links, according to their importance

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for the focal company, into four classes: managed, monitored,
not managed and non-member business links (lambert /
cooper / pagh 1998, pp. 7ff.).
 The most important links are titled managed links, as they
should be managed by the focal company itself. These links
represent integrated processes of the focal company and one or
more of its suppliers. Lambert, Cooper and Pagh attribute these
links primarily to the first tier suppliers of the focal company.

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 The second class contains links which appear less
critical to the company's success and should therefore

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only be monitored by the focal company.
 The responsibility for the active management of these
links should be given to the partner. However, these
links are important for the focal company which thus
should ensure that they are managed and integrated
properly. Therefore, a monitoring of these links is
proposed.

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SUPPLY CHAIN NETWORK STRUCTURE

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 The third class of links the authors identify is labeled not-
managed process links.

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 These links are not critical to the focal company's success, it is
not actively involved in these processes. Therefore, no
resources should be spent by the focal company to monitor
or manage these links.
 Other parties will have bigger stakes in this relation and should
thus care for the management of this kind of links.
 It appears reasonable to let these links be managed by other
parties trusted by the focal company.

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 A final class of links contains the non-member links.
 These links describe relations between members of the focal

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company's supply chain and members of other supply chains.
 Lambert, Cooper and Pagh introduce this class of links due to
the influence of environmental factors and organizations
which might as well influence supply chain performance.
 If a supplier does not only sell his products to the focal
company we regard here, but also to a main competitor, order
behavior of this competitor might easily affect deliveries to our
focal company.

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 Logistics Segmentation: After, identifying the members of the
supply chain. One should now turn to the question of how and

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according to which criteria the management tasks for
production and information flows should be allocated among
the supply chain members.
 Logistical segmentation denotes the division of the supply
chain into several integrated segments which are managed and
coordinated according to similar principles under the standard
of material or resources flow orientation.
 The issues of pipeline length, volume and stock time must be
identified and appropriate logistical resources have to be
allocated.

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 Benefit Distribution: As the overall aim of SCM is to gain
competitive advantage for the implementing companies, this
advantage will be reflected by benefits that the companies

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acquire through SCM implementation.
 A general question arising in this context is: How should the
benefits of the common performance of activities be split
among the members?
 Before implementation of SCM every supply chain member had
held a certain amount of stocks and a certain variety of products.
Due to the integrative SCM concept, stocks can be reduced
drastically at every company due to more transparent processes
and improved information flows. Therefore, the planning of the
supply chain implementation has to contain considerations
for the distribution of benefits as well. 22
 NETWORK DESIGN FOR GLOBAL SUPPLY CHAIN
MANAGEMENT
Global supply chains are very complex phenomena as

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they reflect the patterns in the division of labour in
intra- and inter-organizational enterprise networks on a
local, national, supranational (regional) and global
scale.
Therefore, from a logistical or supply chain point of
view the task of designing the network of a global
supply chain has to take into account several specific
dimensions of the logistical network phenomenon.

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 DIMENSIONS OF NETWORK DESIGN
 The institutional/functional dimension takes a look

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at the general institutions of a supply chain and the
generic functions or tasks which have to be
performed.
 As a consequence, its main focus is laid onto the
logistical tasks and their fulfilment through the
institutional as well as functional divisions in the
supply chain by considering at micro and macro
level.

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 On a macro level, the term supply chain describes the four
generic industries of an economy involved in the general

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economical value adding processes of mining / growing raw
materials (extractive industries e.g. lumbering, mining or
agriculture), stepwise transforming the raw materials into parts
and end products (manufacturing industries, e.g. vehicle
manufacturing), selling the products to the end customer
(trading industries, e.g. wholesaling, retailing), and
transferring parts and end products to intermediate and end
customers of the supply chain (service industries, e.g.
logistical service firms), etc

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 The spatial/geographical dimension stresses on another
basic characteristic of logistical networks, namely their

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extension through geographical areas which can reveal
different socio-economical as well as physical and socio-
geographical characteristics.
 Therefore we have to take into account that supply chains
are space bounded phenomena which are characterized
by a spatial spread of institutions and functions.
 Coordination/control emphasizes the way of planning,
triggering/motivating and coordinating logistical tasks
in and between institutions of the supply chain.
Therefore the main interest lies on the coordination and
control of the specific processes of a supply chain. 26
DIMENSIONS OF NETWORK DESIGN

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 .
THE STEPS INVOLVED IN GSC PLANNING

 Step1- Designing the supply chain

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Determine the supply chain network
Identify the levels of service required

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Step 2 - Optimizing the supply chain
 Determine pathways from suppliers to the end
customer

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 Customer markets to Distribution centers
 Distribution centers to production plants
 Raw material sources to production plants
 Identify constraints at vendors, plants and distribution
centers
 Get the big picture
 Plan the procurement, production and distribution of
product groups rather than individual products in large
time periods- quarters or years

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Step 3- Material flow planning

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 Determine the exact flow and timing of
materials
 Arrive at decisions by working back from the
projected demand through the supply chain to
the raw material resources
 Techniques
ERP

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Step 4 - Transaction processing and short term
scheduling
 Customer orders arrive at random

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 This is a day to day accounting system which tracks
and schedules every order to meet customer demand
 Order entry, order fulfillment and physical
replenishment

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 INFORMATION FLOWS IN SUPPLY CHAIN
MANAGEMENT
 Information is overriding element

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 Need for databases
 Master files: Information about customers, products,
materials, suppliers, transportation, production and
distribution data- do not require frequent processing
 Status files- heart of transaction processing- track orders
and infrastructure status- updated daily.
 Essentially using the same information to make all plans
right from structuring the network to processing every day
supply chain tasks.

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 Implementation: Points to keep in mind

 Recognize the difficulty of change.

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 Prepare a blueprint for change that maps linkages
among initiatives.
 Assess the entire supply chain from supplier
relationships to internal operations to the market
place, including customers, competitors and
industry as a whole.

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IS THE SUPPLY CHAIN WORKING?
 Does our manufacturing strategy increase product line
flexibility while continuing to drive down overall

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production costs?
 When was the last time we measured lost sales to end
customers?
 Do we have an efficient system to get POS data from
retailers?
 Are we testing our products with end customers? Do we
use the resulting data to adjust our forecasting and
supply positions?
 Is the ratio of returned orders to sales increasing?
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 REQUIREMENTS FOR GLOBAL STRATEGY
IMPLEMENTATION
 NO company is immediately ready for integrated global supply

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chain management on this scale. So important developments to
set the stage is critical:
 Product development: Design product that can easily modified
for major markets and can be manufactured in various facilities.
 Purchasing: A management team responsible for worldwide
purchasing from many vendors is extremely important.
 Production: Production worldwide must be coordinated based
on effective information sharing so a centralized control may be
appropriate.

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CTD….

 Demand management: How to integrate local

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demand forecasts is a complicated job, which again
heavily depends on effective communication system
and centralized control.
 Order fulfillment: Again effective communication
system and centralized control are critical.

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 ADDITIONAL ISSUES IN GLOBAL SUPPLY CHAIN
PLANNING
 International vs. regional products:

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Automobile designs are often region-specific.
Coca-cola and McDonald are essentially true global.
 Local autonomy vs. central control:

 Regional cultural difference: such as language, beliefs and

customs.
 Regional infrastructure difference:

First world: advanced

Emerging nations: fair and in rapid deployment
Third world: insufficient
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 Regional performance expectation and evaluation:

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First world: standardized

Emerging nations: vary greatly

Third world: insufficient

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 Information system availability:
First world: advanced

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Emerging nations: fair and in rapid deployment
Third world: insufficient
 Human resource

First world: available but expensive

Emerging nations: vary greatly but usually cheap
Third world: insufficient

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THANKS!!

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