Global Logistics and Risk Management Flashcards
what are the four levels in the Taxonomy of International Supply Chains?
– International distribution
– International suppliers
– Off-shore manufacturing
– Fully integrated global supply chain
What Forces collectively drive globalization ?
– Global Market Forces
– TechnologicalForces
– Global Cost Forces
– Political and Economic Forces
How does Global Market forces drive globalisation?
- – Foreign competition in local markets drives companies to go overseas (defensive tool)
- • Global presence as a defensive tool
Explain Technological Forces
- Diffusion of knowledge (related to production)
- Many high tech components developed overseas
- Need close relationships with foreign suppliers
- Global location of R&D facilities
- Close to production (as cycles get shorter)
- Close to expertise (Indian programmers?)
explain global cost forces
- Low labour cost
- Diminishing importance (Costs underestimated, benefits overestimated)
- Other cost priorities
- Integrated supplier infrastructure (as suppliers become more involved in design)
- When Samsung electronics opened its plant in the UK in 1995, more than 30 of its suppliers started their UK operation as well
- Capital intensive facilities
- taxbreaks
Explain Political and Economic Forces
- Exchange rate fluctuations and operating flexibility
- Regional trade agreements (Europe, North America, Pacific Rim), NAFTA, EU
- Value of being in a country in one of these regions
- Implications for supply network design
- Reevaluation of foreign facilities (Production processes designed to avoid tariffs)
What are some of the risks of international supply chains - explain by the Pizza Hut example
- Difficulties
- Communication was difficult
- Different concepts of restaurants
- Hygiene days vs. routine hygiene
- Construction difficult due to lack of supplies
- Even nuts and bolts needed to be imported
- Difficult to get suppliers
- 70% USSR sourcing desired to ensure long-term viability
- Difficulty with winter shortages
- Mozzarella unavailable
- Couldn’t be made due to poor quality cows
- Quality, reliability unavailable from meat plants
- Refrigerated trucks unavailable
What are the two classifications of risks?
known-unknown
unknown-unknown
Shortly describe known-unknown and unknown-unknown
- Known-unknown:
- Consequences: perhaps known
- Probability of occurrence: perhaps known
- Unknown-unknown:
- Consequences: unknown
- Probability of occurrence unknown
Focusing on the known-unknown. What are the types/examples?
- Exchange rate uncertainties
-
Operating exposure
- Results of exchange rate uncertainties
- Changes a firm’s competitive position and future cash flows
- Regional operations become relatively more or less expensive
- Factors affect the impact of operating exposure
- Customer reactions
- Competitor reactions
- Supplier reactions
- Government reaction
- Substantial geographic distances
- Added forecasting difficulties
-
Infrastructural inadequacies
- Worker skill, performance expectations
- Supplier availability, reliability
- Lack of local technologies
- Inadequacies in transportation, communications infrastructure
-
Others
- Cultural difference
- Different partnerships => Japanese automotive companies
- Value of punctuality => “Korean time”
- Added competition “at home”
- Cultural difference
What are the two examples of unknown-unknown risks?
Philips (Nokia vs. Ericsson) and Toyota (help from Aisin Seiki)
Explain the Philips example
Philips semi-conductor plant in the US
- Provided radio frequency chips to Nokia and Ericsson
- Lightning struck the plant and fire destroyed almost all the silicon stocks (17/03/2000)
- Two different tales
- Nokia:
- Sensing: immediate dispatch of its own engineers to the plant to assess the damage
- Responding: 1) changing product designs to use chips from other suppliers and 2) convincing Philips to supply the core chip from its Chinese and Dutch factories
- Nokia:
- Ericsson
- Sensing: 1) only five weeks after, it started to react
- Responding: not much. Why? Suppliers and capacity was already taken by Nokia
- Annual earnings dropped by USD 445million and eventually USD 2.3 billion loss.
- Sensing: 1) only five weeks after, it started to react
Explain the Toyota example
Toyota and Aisin Seiki (1997)
- Sole supplier of brake valves (P-valve) to Toyota
- P-valves are cheap but essential in assembly of any car
- Again fire! Two weeks of full stop and six months for complete recovery.
- Problem: Just in Time system. Only a few days of P-valve inventory
- Swift response by utilising its loyal suppliers
- Distribution of the P-valve blueprint among all Toyota suppliers
- Companies without experience of manufacturing P-valves started to manufacture parts
- Full production was recovered in less than 10 days
What are the three ways of managing SC risks (unknown-unknown)?
- Invest in redundancy capacity
- Sensing and Responding
- Adaptive supply chain community
Explain Adaptive supply chain community
Adaptive supply chain community
- The most difficult to achieve
- It requires all supply chain partners to share:
- The same culture
- The same objectives
- Benefits from financial gain
–> Toyota and Aisin Seiki
