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Offshoring & Globalisation - Coggle Diagram
Offshoring & Globalisation
General Rationale
Pros
Cost reductions
Proximity to local or new markets
Domestic labor market constraints
Operational hedge
Foreign trade barriers
Cons
Risks
Quality including health, environmental and CSR
less regulation in some countries
Currency, IP, political, competitive
Domestic trade barriers
Lead times
Global operations' complexity & social implications
Transportation costs
Possible shifts (Real world)
manufacturing costs rose in most of the top 25 exporting countries
some usually thought of as cheap places to produce goods like Russia, Taiwan, and China, now have costs pretty close to the United States
although labor costs are relatively low in china, other costs like price of raw materials & electricity have made it more expensive to produce there
US manufacturing job flow to and from offshore has gone from net losses to net gain
after decades of sendinf work across the world, companies are rethinking their offshoring strategies
but the overall trend has not changed much
Savings on freight & duties make near shoring cheaper on a TLC basis
Asset Location
- Globalisation & Operations
Globalisation Process
Market Demand Factors
Foreign competition
Competitive threat/priorities
Foreign demand growth
State-of-art markets
Supply Factors
Capital investments & economies of scale
Taxes & incentives
Direct labor vs. total costs
Macroecnomic & Non-Market Factors
Trade & global institutional agreements
Exchange rates
Tariffs, quotas and other protectionism
Political stablility
Technological Factors
Infrastructure
IT: Network planning & coordination
Access to knowledge & skills
Asset Location
Network Analysis
Understanding the value of integration
Dedicated central capacities
Ship in advance
Dedicated central capacities
Postpone allocation & transport
Flexible central capacity
Postpone allocation & transport
Dedicated local capacities
Auxiliary flexible central capacity
with postpone allocation & transport
Leveraging the value of integration
value in network integration
allocation of capacities is contingent on the evolution of exchanfge rates & demands
(observe demand & exchange rates then maximise profits)
integration becomes more valuable when demands & exchange rates become more volatile
network integration consist of
contingent allocation of capacity to markets
and transhipments as needed
flexible capacity (to produce for multiple markets)
best global network configuration can be determined by optimising the amounts & types of capacity at different locations
this operational flexibility is designed to capture more of the upsides & decrease the exposure to the downsides
to exploit flexibility, excess capacity is needed
capacity levels are optimised by maximising expected NPV under optimal allocation & transshipment for different scenarios
excess capacity becomes more valuable when product margins are high compared to capacity costs
optimisation must incorporate demand & exchange rate risks in addition to costs