SCM-655: Global Supply Operations Strategy
Supply Chain Saves the World
Supply Chain Globalization
1.
2.
3.
4.
References: Supply Chain Saves the World. Boston, MA: AMR Research (2006)
System Check
Administrative Stuff
Key Concepts
Question & Answer
Today’s Journey
•
•
•
•
Globalization
Sustainable Growth vs. Lower Cost
Organizing for the Global Enterprise
Taking Innovation Global
Facing the 5th Dragon – Succeeding in China
V3-00
Typical Supply Chain Lead Time Example
V3-00
Sustainable Growth is Key
• Growth is the one goal that all businesses
pursue. Shareholder value is created when a
business can project sustainable growth into it’s
profit stream
V3-01
Why do Companies Compete Globally?
•
•
•
•
•
Gain access to new customers
Achieve lower costs; increase competitiveness
Exploit core competencies
Spread business risk
Industry leadership must be global, not just
domestic
V3-02
Key Opportunities for Global Businesses
•
•
•
•
•
Developing world demand for consumer products
Establishing cost effective infrastructure networks
Identifying strategies for sustainability
Responding to growing needs for health care
Preparing for unknown disasters / risks
V3-03
IT in Global Demand Driven Supply Networks
• Information technology is critical to global
demand-driven supply networks. Leaders use
information technology to support decisions
across all major domains: demand, supply and
product management.
What technologies are used
in today’s Global Environment?
V3-04
High Potential Industries for Global Commerce
•
•
•
•
Biotech and Healthcare
Clean and Sustainable Consumer Durables
Information Technology Products
Pure Content Products (i.e. iPod Downloads)
What other opportunities
do you envision?
V3-05
Global Supply Networks Link Demand & Supply
• Benchmark global companies respond to
specialized demand requirements and source
across a network of suppliers – not just “chasing
low cost”.
V3-06
The Business Environment
Customer
Expectations
Competition
Government
Regulations
Access to
Resources
Economic
Systems
Supply
& Demand
Economic
Conditions
V3-07
Structure Must Follow Strategy – Key Factors
•
•
•
•
•
Business Vision
Model of Future Business Structure
Culture, Leadership and Governance
Business Process Architecture
IT Applications and Information Structure
V3-08
Independent Functional Strategies
Firm / Business Unit Strategy
R&D
Strategy
Marketing
Strategy
Support
Function
Strategies
Production
Strategy
V3-09
Integrated Functional Strategies
Firm / Business Unit Strategy
R&D
Strategy
Support
Production
Marketing
Function
Strategy
Strategy
Strategies
V3-10
Demand Driven Strategy Drives Global Strategy
• Demand driven supply networks require
performance metrics that are interlinked
throughout the organization
• But, there is no one-best approach for all
businesses
V3-11
Leadership Considerations
•
•
•
•
•
Create Value Networks
Involve Cross-Functional Teams in Joint Ventures
Use Global S&OP
Implement Improved Demand & Supply Visibility
Align IT Infrastructure to Support Strategy
V3-12
Business Goals Derive Business Structure
• Business leaders must look from the customer
backward through the supply chain to establish
the optimum organization needed
V3-13
Corporate Strategy Drives Relationships
Level/Type of
Communication
Degree of
Collaboration
Length of
Relationship
Transactional with
information sharing
Each partner has access
to single data source.
Generally medium term
Shared processes and
partnership
Partners collaborate in
specific processes and
share knowledge.
Longer term
Linked competitive vision Partners function as a
Long term, possibly
and strategic alliance
virtual entity, even
decades
collaborating on strategy.
Backward integration
Mergers and
acquisitions; complete
integration (in theory).
Long term (if successful)
V3-14
Organizational Model Options
Model
Application
Decentralized Different products in different
markets
Centralized
Hybrid
Strong centralized leadership
process and strong global brand
Mix of regional specific and
global brands
Example
Cargill
Heineken
P&G, Unilever
Apple
Intel
Johnson & Johnson
Dell
PepsiCo
V3-15
AMR - Stages of Maturity
Apple
Intel
Johnson & Johnson
Demand-driven External integration
4. Orchestrate
Multi-tier federation
Multi-tier visibility
and collaboration
Dell
PepsiCo
Connected Network – external integration, no strategic control
3. Collaborate
Single-tier partnering
Data sharing with tier 1 partners
Connected Enterprise – internal integration, clumsy external links
2. Anticipate
Every company for itself
Internal optimization
Site-to-site traditional supply chain – little integration
1. React
Every department for itself
Slow and sequential planning
Process Maturity
Information Maturity
V3-16
Evolving Transformation
Apple
Externally
Focused
Product
Supply
Process
Profitable
Perfect
Order
One
Business as
Unit of
Measure
Cost
Focused
Johnson & Johnson
Dell
3 4
2 1
Internally
Focused
Intel
PepsiCo
Separate
Business
Units
Revenue
Focused
V3-17
Business Process Structure
• Successful companies tend to be more crossfunctionally organized across processes –
planning globally while executing locally
V3-18
Corporate Strategy Model – Key Questions
•
•
•
•
•
•
•
•
•
What is our Business Vision
What is happening in our Environment?
What are our Core Values?
What Business are we in (or will be in)?
What Value do we bring to the Marketplace
Who are our Customers?
Who are our Competitors?
What are our Strengths and Weaknesses?
What do we need to do to be successful?
V3-19
Global Innovation
• Accelerated innovation is the foundation of longterm corporate growth in manufacturing.
However, complexity increases dramatically
when innovation is global.
What are some potential
Risks of Global Innovation?
V3-20
Global Collaboration Improves Profitability
• Companies are finding that collaborating with
business partners for new product development
and introduction is directly linked to superior
operating margin growth.
V3-21
Global Collaboration Reduces Time-to-Market
• According to AMR, outsourcing (collaboration)
reduces development cost, improves on-time
performance and time-to-market and improves
quality.
What are some potential
Risks of Global Outsourcing?
V3-22
Impact of Delayed Time-to-Market
$50
Case 1, On Time; $190
Million Revenue
$45
Quarterly Revenue (Millions)
$40
Case 2, Late By One Qtr.;
$143 Million Revenue
$35
$30
$25
$20
$15
$10
$5
$0
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
V3-23
Navigating Barriers to Success in China
• No clear separation of government & commerce:
Invest in counsel on corporate governance and property
protection rights.
• Manufacturing excellence is not balanced with
public safety and environmental and health risks:
Prepare an answer / solutions to environmental and
health concerns.
• The culture has no concept of protection of
intellectual property:
Consider the country primarily for development, not R&D
and carefully control every step of high value assembly
V3-24