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Block 2, Session 3
International Operations (Additional Notes (Technology…
Block 2, Session 3
International Operations
Overview
General trend due to:
- Improved comms and IT
- Economic growth in developing countries - infrastructure
- Trade and political agreements
Need for international operations strategy - where to sourced, made and where to locate facilities
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Implications
Sustainability issues: excessive transport, needs to work faster, international sourcing for cost saving.
'input-process-output' model highlights challenges:
- Greater choice and flexibility from suppliers
- Issues about low cost labour, working conditions etc.
- Outputs cannot always be standardized across all markets
Planning complexities, different currencies, hidden waste in extended supply chains
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Particular problems
• The main attraction of offshoring is lower labor costs, but those savings tend to be short term rather than long term.
• Companies too often fail to calculate the total supply chain cost of offshoring, which includes total landed cost, inventory holding cost, and the cost of product obsolescence.
• When it comes to setting up your global supply chain, the ultimate best practice is to go the countries and look for yourself.
- Next best practice: “get there before everyone else does.”
- Third best practice: “know what you’re getting into before you go there.”
• Nearshoring—bringing the key supply chain tasks back closer to home—is the fastest-growing globalization trend.
Additional Notes
Technology has increased the speed and pace of commerce - companies of all sizes now think in terms of global supply chains (container shipping influenced)
Dramatically lower labor costs and generally lower logistics costs, outsourcing work to other countries— better known as offshoring—has become a veritable no-brainer for entire industry sectors
No single set of best practices for globalization since every country has its own cultural and supply chain requirements
The biggest mistake a company can make regarding China, observes globalization expert Thomas Friedman, is to assume that China is winning strictly due to cheap labor, and not by improving quality and productivity
The Need for Supply Chain Visibility - you cant outsource responsibility for monitoring the supply chain
International services - Service operations probably have a slightly different set of challenges when developing operations abroad. Large multi-site services would find it easier if they can replicate the same type of service outlet worldwide – in Block 1 you saw how Aldi and Lidl have standard designs for their shops to maximise efficiency. However, it is not always possible to standardise services globally due to different local requirements.
Global approach
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Develop global vision
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deploy resources to ensure that suppliers’ capabilities are aligned with their competitive and manufacturing strategies
Friendly nations - the World Bank and the Finland-based Turku School of Economics compiled an index that weighs the logistics performance of 150 different countries in seven areas:
Efficiency of the Customs clearance process
Quality of transportation and information technology infrastructure for logistics
Ease and affordability of arranging international shipments
Competence of local logistics providers
Capability to track and trace international shipments
Cost of domestic logistics
On-time delivery performance
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Summary
• Globalisation has created extended international supply chains where goods and information travel considerable distances.
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• Operations can have specific roles based around local markets and other factors such as local productivity or managerial capabilities.
• Offshoring can be used to achieve significant benefits in terms of cost and flexibility, but many companies have decided to re-shore when the expected advantages do not materialise.
• The advantages of offshoring can be more transient than first thought due to increases in local labour and land costs.