1 Chapter Seven IT Strategy in International Supply Chain Management

2 Topics  SCM: Definitions  Trends in SCM and Strategy  The Role of IT in SCM  Global Supply Chains and Culture  Strategic IT Issues

3 Supply Chain Management  Objective  Manage activities associated with the flow of products and services from the beginning of the manufacturing or processing cycle through to the end-user [Handfield and Nichols, 1999]  Internal and External  Includes interfaces, suppliers  Strategic and Operational  Issues involve relationships, products, markets

4 Major Decisions  What to outsource  Where to outsource  Where to locate inventory, how much to store  Which transportation mode to use  How to transfer cash  How to support SCM with IT

5 Porter’s 5 Competitive Forces Traditional Rivalry Among Firms SuppliersBuyers Lock in via switching costs Substitutes New Entrants Lock out via barriers to entry Where does IT contribute? Do things work differently “internationally”? What’s going on?

6 Porter’s 5 Competitive Forces: Through a Supply Chain Lens Traditional Rivalry Among Firms SuppliersBuyers Lock in via switching costs Where does IT contribute? Do things work differently “internationally”? Supply Chain

7 A Closer Look at a Supply Chain Focal Firm Suppliers Each supplier has its own suppliers, in turn It’s like having the neighbors in for dinner…who’s the food?

8 International Supply Chain Management Focal Firm Internal Operations SuppliersBuyers Four Trends: Outsourcing; Worldwide Trade; IT; Interorganizational Alliances Movement towards Integration, Standardization, Offloading

9 Trends  Outsourcing: Range, degree, type  World Wide Trading, including software development outsourcing  Infotech and its role.  Interorganizational Alliances: arms length vs. partnership

10 International Supply Chain Management Focal Firm SuppliersBuyers Integration of operations Standardization through routinization, communication Offloading of effort down the supply chain or to buyers

11 The History of the Technology of Supply Chain Management  Postal System and Fax: Manual, Electric  Traditional EDI: Standards  Internet-based EDI: Transport Level  Open Buying on the Internet (OBI)  Data Warehousing: Learning  Enterprise Resource Planning (ERP): Internal as well as External Integration  Open Standards via the Web: E Commerce

12 Using IT to Optimize SCM  Linking Levels within the Supply Chain  Integration  Compatibility  Desired Degree of Integration  Manufacturer manages suppliers inventory Vendor Managed Inventories (VMI) Point-of-Sale (POS) Terminals  Supplier Relationships affected by IT  Resistance to Change and Cultural Differences Does this make things unnecessarily complex Does this make things unnecessarily brittle? Does this make things unnecessarily uncomfortable?

13 Using IT to Optimize SCM cont’d  Degree of Detail  Buy or Build  Modular Implementation Does this make things unnecessarily expensive? Does this make things unnecessarily risky? Does this make things unnecessarily untimely?

14 So Where Does this Lead???  New Organizational Paradigm  IT Connects and Facilitates SCM  SCM Goal Eludes Many Organizations  Implementation relies on the organization’s willingness and ability to adapt and change Additional Thoughts 

15 Typology for MNCs Multinational Global Transnational International Highly independent subsidiaries Control /CoordinationLow HighLowHigh LowHigh Centralized Decision Making…one world market Parent company transfers knowledge to subsidiaries Adaptation is key; acts globally and locally Which brings us to a discussion of Control and Coordination 

16 Control  Making things happen according to a central plan; achieving goals

17 Coordination  Getting components to work together  Complete control can imply coordination, but they are generally independent

18 Role of IT  IT makes control more precise, can introduce automatic controls  IT reduces coordination costs especially via more effective communication.