Chapter 9: International issuesinSCM9-1
9-1 Chapter 9: International issues in SCM
9.1 IntroductionAboutone-fifthof theoutput of U.S.firmsisproducedoverseasOne-quarterof U.S.importsarebetweenforeignaffiliates and U.S.parentcompanies.Sincethelate1980s,overhalfofU.Scompaniesincreasedthenumberofcountries in which they operate9-2
9-2 9.1 Introduction ⚫ About one-fifth of the output of U.S. firms is produced overseas. ⚫ One-quarter of U.S. imports are between foreign affiliates and U.S. parent companies. ⚫ Since the late 1980s, over half of U.S. companies increased the number of countries in which they operate
International Supply ChainManagementDispersedoveralargergeographicalareaOffersmanymore opportunities than justthedomesticsupplychainRiskfactorsarealsopresent9-3
9-3 International Supply Chain Management ⚫ Dispersed over a larger geographical area ⚫ Offers many more opportunities than just the domestic supply chain ⚫ Risk factors are also present
International SupplyChainsInternational distributionsystemsManufacturingstilloccursdomestically,butdistributionandtypicallysomemarketingtakeplaceoverseasInternationalsuppliersRaw materials and components are furnished by foreignsuppliersFinalassemblyisperformeddomesticallyInsomecases,thefinalproductisthenshippedtoforeignmarketsOffshore manufacturingProduct is typically sourcedand manufactured in a singleforeignlocationShippedbacktodomesticwarehousesforsaleanddistributionFullyintegratedglobal supplychainProductsare supplied,manufactured,anddistributedfromvarious facilities locatedthroughoutthe world.9-4
9-4 International Supply Chains ⚫ International distribution systems ⚫ Manufacturing still occurs domestically, but distribution and typically some marketing take place overseas. ⚫ 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. ⚫ Offshore manufacturing ⚫ Product is typically sourced and manufactured in a single foreign location ⚫ Shipped back to domestic warehouses for sale and distribution ⚫ Fully integrated global supply chain ⚫ Products are supplied, manufactured, and distributed from various facilities located throughout the world
Forces toward GlobalizationGlobalmarketforcesTechnologicalforcesGlobalcostforcesPoliticalandeconomicforces9-5
9-5 Forces toward Globalization ⚫ Global market forces. ⚫ Technological forces. ⚫ Global cost forces. ⚫ Political and economic forces
GlobalMarketForcesPressures created byforeign competitors,aswell as the opportunities created by foreigncustomersPresence of foreign competitors in homemarkets can affect their business significantlyMuchof thedemand growth available tocompanies is inforeign and emerging marketsIncreasing demand forproductsthroughout theworld throughthe global proliferation ofinformation9-6
9-6 Global Market Forces ⚫ Pressures created by foreign competitors, as well as the opportunities created by foreign customers. ⚫ Presence of foreign competitors in home markets can affect their business significantly. ⚫ Much of the demand growth available to companies is in foreign and emerging markets. ⚫ Increasing demand for products throughout the world through the global proliferation of information
GlobalMarketForcesParticularmarketsoftenservetodrivetechnologicaladvancesinsomeareasCompaniesforcedtodevelopandenhanceleading-edgetechnologiesandproductsSuchproductscanbeusedtoincreaseormaintainmarketpositionin otherareas orregions where the markets are not ascompetitive9-7
9-7 Global Market Forces ⚫ Particular markets often serve to drive technological advances in some areas. ⚫ Companies forced to develop and enhance leading-edge technologies and products. ⚫ Such products can be used to increase or maintain market position in other areas or regions where the markets are not as competitive
Technological ForcesRelated to the productsVarioussubcomponentsandtechnologiesavailable in different regions and locationsSuccessful firms need to use these resourcesquicklyandeffectivelyLocateresearch,design,andproductionfacilities close to these regions:Freguently collaborate,resultinginthelocationofjointfacilities closeto one ofthepartnersGlobal location ofresearch-and-developmentfacilities driven by two mainreasons:Asproduct cyclesshrink,locateresearchfacilitiesclose to manufacturingfacilitiesSpecifictechnical expertise maybeavailableincertain areas orregions9-8
9-8 Technological Forces ⚫ Related to the products ⚫ Various subcomponents and technologies available in different regions and locations ⚫ Successful firms need to use these resources quickly and effectively. ⚫ Locate research, design, and production facilities close to these regions. ⚫ Frequently collaborate, resulting in the location of joint facilities close to one of the partners. ⚫ Global location of research-and-development facilities driven by two main reasons: ⚫ As product cycles shrink, locate research facilities close to manufacturing facilities. ⚫ Specific technical expertise may be available in certain areas or regions
Global CostForcesOften dictate global location decisionsCostsofcheaperunskilled labormorethanoffset bytheincrease inothercostsassociatedwith operatingfacilities inremotelocationsInsomecases cheaperlabor issufficientjustification for overseas manufacturingOtherglobal costforceshave becomemoresignificantCheaperskilledlaborisdrawinganincreasingnumberof companiesoverseas9-9
9-9 Global Cost Forces ⚫ Often dictate global location decisions ⚫ Costs of cheaper unskilled labor more than offset by the increase in other costs associated with operating facilities in remote locations. ⚫ 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
Political and Economic ForcesExchangerate fluctuationRegional trade agreementsTariffsystemTradeprotectionmechanismsMore subtleregulationsLocal contentrequirementsVoluntary exportrestrictionsGovernment procurement policies9-10
9-10 Political and Economic Forces ⚫ Exchange rate fluctuation ⚫ Regional trade agreements ⚫ Tariff system ⚫ Trade protection mechanisms ⚫ More subtle regulations ⚫ Local content requirements ⚫ Voluntary export restrictions ⚫ Government procurement policies