1 Managing the Global Pipeline Compiled by Rulzion Rattray

2 The Globalisation of Markets. Levitt, T. (1983). Advances in Technology Driving the world to a converging commonality. –Proletarianisation of: Communication, transport, travel Global corporations which operate with resolute consistency at low relative cost using the entire world as a single market.

3 Global Costs Localised Inventory Material Production Transport Source to User Trade Offs in Global Logistics Important to recognise trade offs. Key to recognise the service needs of the market

4 Globalisation in Supply Chains Liberalisation effect of WTO, etc. –No longer have to set up in target country, instead can concentrate on developing economies of scale. –Emergence of new manufacturing economies has resulted in increased competition and oversupply. –Companies will have to find new ways of remaining competitive by lowering costs in other ways. Supply chain efficiency will become even more important

5 The Myth of Globalisation. Susan Douglas & Yoram Wind. Attacks Levitt's view of global standardisation as naive and over simplistic. Homogenisation not a clear & universal trend. Contra Evidence of homogenisation: –Food firms adapt to national characteristics. –Growth of intra-country segmentation: –growing demand for differentiated products. The myth of economies of scale: –Technical developments lowering scale requirements. –cost of production often only small part of total costs.

6 Focussed factories: –Economies of scale, one factory for the world? –May overlook crucial logistics trade offs: Transport costs & delivery times. Requirement for local packaging Centralised Inventories: –Centralising Inventory = less total inventory. Global Manufacture & Supply 25to45:2 i.e. 60% reduction Square root rule –However may overlook benefit of local to customer Christopher, M., (1998),

7 Postponement & Localisation Localisation: –Even in relatively homogeneous markets like Europe their can be considerable variety of local taste. This may be better catered for in a local assembly operation. Postponement: –Design products using simple common platforms, using common components. Assembly does not take place until required.

8 Customer Service Explosion Increasing perception that there is little technical difference between products. Service crucial source of differentiation and competitive advantage. –Requirements: Closely integrated marketing, manufacturing and supply strategies Logistics of service delivery crucial!

9 Strategic Lead time Management Product and technology life cycles getting shorter. Requirements for success: –Ability to innovate. –Ability to bring new products to market. Logistical Lead time becomes crucial. –Time from sourcing and procurement though to recovery of investment by selling

10 Organisational Integration Recognition of the importance of taking a systems view of business. –Difficulty of achieving integration in functionally fixated organisations. Move towards a requirement for generalists –Integration of all the different aspects of the organisation. –Philosophy of integration beyond the confines of the organisation. Supply Chain Management. –Requires that all the players in the value system work together.

11 Throughput Management The process of linking manufacturing and procurement to the needs of the market. Requirement for reducing the length of the supply chain pipeline! Target: –Lower cost, higher quality, greater variety, more flexibility, faster response times.

12 Globalisation Move to commodity markets and component specialisation: – firms shop freely amongst the nations of the world Singer Sewing machines: Shells from US, motors from Brazil, drive shafts from Italy, machine assembled in Taiwan –Increasing need for local customisation Washing machines: Germans want fast spin & Italians slow, British front loaders, French top loaders, etc –Challenge how to achieve benefit of standardisation at the same time?

13 References Christopher, M., (1998), “Logistics and Supply Chain Management. Strategies for Reducing Cost and Improving Service”, Financial Times Pitman Publishing, London Levitt, T. (1983), “The Globalisation of Markets”, Harvard Business Review May/Jun. Douglas, S., & Wind, Y., (1987), “The Myth of Globalisation”, Columbia Journal of World Business, Winter.