Industry Studies: Consumer Goods Industry

Topic: Leveraging a Global Supply Chain

Topic Number: 5

2

Overview

Organisations operating within the consumer goods industry are required to source and make products globally in order to take advantage of efficiencies around the world. Despite, the many advantages of global sourcing in can be a complex task for organisations to coordinate and ensure the smooth running of an operation.

In today’s lecture we will explore the dynamics of a global supply chain and how organisations are able to efficiently move materials and products around the world.

We will also explore the latest trends and techniques in this area that enable organisations to get a competitive edge.

3

Learning Outcomes

• Determine and be able to discuss the dynamics of a global supply chain

• Critically evaluate the issues relating to vertical integration of a supply chain

• Evaluate and articulate the changing nature of distribution approaches due to technological advancements

• Identify and describe the advantages and disadvantages of the different distribution methods

Importance of Supply Chains

Supply chains cannot tolerate even 24 hours of disruption. So if you lose your place in the supply chain because of wild

behavior you could lose a lot. It would be like pouring cement down one of your

oil wells. Thomas Friedman

A complex…

What is a global supply chain?

International logistics is the management of the flow of

materials, parts, supplies and other resources from suppliers

to the firm; the flow of materials, parts, supplies and

other resources within and between units of the firm

itself; and the flow of finished products, services, and goods from the firm to customers.

Domestic vs International Logistics

Distance involved in shipping

Number of transport modes

involved

Regulatory context

International Logistics and Materials Management

Finished Products,

Services, and Goods

Suppliers

Firm

Customers

Materials, Parts,

Supplies, and Other

Resources

Materials Management

Physical Distribution

Do you know where an aeroplane is made?

Elements of a global supply chain?

With the supply chain typically accounting for 80 per cent of total business costs and driving working capital performance, it is a common goal to create a more

efficient supply chain to improve profitability.

Source: Deloitte, 2014

Interactive ExceriseGo to the Deloitte website:

http://www.deloitte.com/assets/Dcom-UnitedKingdom/Local%20Assets/Multimedia/Real%20Estate/31570apSupplyChain.swf

Go through each section to understand the elements of the global supply chain

Source: Deloitte, 2014

Supply Chain Survey: Key Findings

Source: PWC, 2014

Strategic Context for International Supply Chains

Superior Value Business Strategy

Production Processes Production Technologies

What is a global supply chain strategy?

Source: Slack & Lewis, 2011

Activity of strategic

importance?

Does company

have special

knowledge?

Is company’s performance

superior?

Is operations performance improvement

likely?

Explore outsourcing

Explore keeping this activity in-house

No No No No

Yes YesYes Yes

Generic Sourcing Strategies

Source: Slack & Lewis, 2011

Con

trib

uti

on

to C

om

peti

tive

Ad

van

tag

e

Relative Capability PositionWeaker Stronger

Not

crit

ical

Cri

tica

l

Invest to perform internally

(if high potential for opportunism)

Outsource(if possible to mitigate risk of

opportunism)

Perform internally to develop

(if high potential for opportunism)

Outsource(if possible to mitigate risk of

opportunism)

Outsource(if possible to mitigate risk of

opportunism)Keep internal

(if lack of capable suppliers and spin-off

not feasible)

Outsource(if possible to mitigate risk of

opportunism)

A re-cap: Complexities of International Operations

Managers must decide where and how to

obtain the resources the firm needs to

produce its products.

Resources Location Logistics

Managers must decide where to build admin facilities, sales

offices and plants; how to design them;

and so on

Managers must decide on modes of transportation and

methods of inventory control.

Benefits of Global Supply ChainConsider the comparative advantage theory

Benefits of Global Supply ChainGain the best supplies at:

Best PricesExcellent Standards

Quickly & Efficiently

Benefits of Global Supply ChainSignificant cost saves

Where would you produce?

Benefits of Global Supply ChainExtremely efficient: Always on

Benefits of Global Supply ChainCompetitive advantage

Ability to source more unique products/offerings: consider VRIN framework

Costs of Global Supply ChainSignificant Investment

Time Money Resources

Costs of Global Supply ChainBottle-necks & Inefficiencies: Bull Whip Effect

Costs of Global Supply ChainMarket Instability

Issues with 3rd party suppliers

Lack of controlLack of

accountabilityLack of

oversight

Price increases

Reputational consequences

Consumer backlash

Issues with 3rd party suppliers

Reputation Damage

End of presentation

© Pearson College 2013