Global Supply Chain Management PDF

CHAPTER 12: SUPPLY CHAIN MANAGEMENT: AMELIA ABERNATHY GLOBAL SUPPLY CHAIN MANAGEMENT World Economic Forum https://www.weforum.org/agenda/2022/09/5-challenges-global-supply-chains-trade  Market potential Factors Geographic diversification Influencing a Company’s...

CHAPTER 12: SUPPLY CHAIN MANAGEMENT: AMELIA ABERNATHY GLOBAL SUPPLY CHAIN MANAGEMENT World Economic Forum https://www.weforum.org/agenda/2022/09/5-challenges-global-supply-chains-trade  Market potential Factors Geographic diversification Influencing a Company’s Excess production capacity Decision to Advantage of a low-cost position due to experience-curve economies and economies of scale Enter Products near the end of their life cycle in the domestic International market Markets Source of new products and ideas Foreign competition in the domestic market Population = Labor 2050 Expected 2000 Population 2010 Population 2019 Population Totals Population (in thousands) (in thousands) (in thousands) (in thousands) TOP TEN Countries 3,598,744 4,011,898 4,358,102 5,070,409 Top Ten Percentage of World Population 59% 58% 58% 53% TOTAL World Population 6,086,149 6,872,671 7,560,290 9,488,153 International Market Entry Strategies Exporting—the most common method of international involvement Licensing—agreement between two firms that allows a firm in one country to use the proprietary assets of another company located in another country Joint ventures—combination of any two or more firms that create a new entity in a foreign market Ownership—financial control of a foreign firm through acquisition or expansion  Advantages Disadvantages Greater flexibility Competitive difficulties Advantages and Less risk Currency exchange rates Disadvantages Gain experience Domestic firm has little control over the of Exporting Test a market for its viability marketing mix in the foreign market Product is produced in the domestic market Knowledge of regulations required Compliance issues US Major Exports  Advantages and Disadvantages of Licensing Advantages Disadvantages Does not require capital Licensing agreements usually outlays cannot be terminated quickly Risk levels are reduced Licensee can become a future Increased flexibility competitor Good option when foreign Risk of licensee bankruptcy or markets have high tariff acquisition by another barriers or import quotas company Advantages and Disadvantages of Joint Ventures Advantages Disadvantages Domestic firm can provide Risks are higher significant management input Flexibility is lower into the channel and supply chain strategies of the partner Greater knowledge of the company international market is Good strategy when wholly required by the domestic owned subsidiaries are firm prohibited by foreign governments Advantages and Disadvantages of Ownership Advantages Disadvantages Highest potential reward of all Most risky of all international international market entry strategies market entry strategies High degree of control of supply chain Requires the most knowledge strategies and tactics of the international market Minimizes start-up costs when Company is totally acquisition of an existing company is responsible for all marketing used and supply chain Company can compete more activities/processes effectively on price Potential of government nationalization of industry Importing and Global Sourcing Involves the procurement of goods and services from foreign sources Organizations of all sizes and types can be involved in importing Government regulations can be significant issues Locating suppliers and vendors close to the domestic company (referred to as nearshoring) US Major Imports  https://usafacts.org/articles/who-are-the-uss-top-trade-partners/ Import vs. Export Documentation International documentation is more complex than domestic documentation Absolute accuracy is required, otherwise additional costs and/or delays can occur Some of the more widely used documents include: certificate of origin; commercial invoice; inspection certificate; letter of credit; bill of lading; shipper’s export declaration Proper classification of imported/exported products is important Incoterms Terms of trade Terms of shipment are more important in international shipping because of the uncertainties and control problems that accompany foreign traffic movements The most common terms of shipment include: Ex Origin; F.O.B. (free on board); C & F (cost and freight); and CIF (cost, insurance and freight)  Sometimes referred to as foreign trade zones (FTZs) FTZs are areas where companies may ship products to postpone or Free Trade Zones reduce customs duties or taxes and where value-added activities can occur FTZs are typically located at ports or industrial parks Most FTZs are underutilized and facilities, services offered, and quality of the FTZs vary widely Regional Trade Agreements Efforts to eliminate trade barriers result in bilateral, regional, and global trade agreements Implications for supply managers Know the major trading partners with their countries Know what trade agreements are in place Know what opportunities exist in emerging markets Examples of Regional Trade Agreements United States–Mexico–Canada Agreement (USMCA) Canada, United States, and Mexico The European Union (EU) Includes 27 member states Association of Southeast Asian Nations (ASEAN) 10 South East Asian countries Mercosur (El Mercado Común del Sur) Argentina, Brazil, Paraguay, and Uruguay, plus associate members China has 16 trade agreements, including ASEAN, Australia, South Korea, and New Zealand Macroenvironmental Influences Macroenvironmental influences refer to the uncontrollable forces and conditions facing an organization and include cultural, demographic, economic, natural, political, and technological factors  Political restrictions on international trade can take a variety of forms Tariffs – to protect local business Nontariff barriers – restrictions other than tariffs that are placed Political on imported products Import quota Factors Limits the amount or product (either in units or by value) that may be imported from any one country during a period of time “for the health and safety of the population” Embargoes The prohibition of trade between particular countries Political Factors Examples Economic Factors Currency fluctuations Tradeoff between import and export volumes Market size Population size vs. Income GDP per capita China 1.3 billion population with approximately $14,300 GDP per capita India 1.3 billion population with approximately $6,300 GDP per capita Infrastructure 10,000-foot airport runway Labor-intensive warehousing management Culture Factors Language Use symbols rather than writing National holidays Time orientation Means of doing business Cultural norms  A Package Marked for Export Source: © Pearson Education. Bribery and Global Commerce Questions?