SCM-655: Global Supply Operations Strategy Supply Chain Saves the World Supply Chain Globalization System Check Administrative Stuff Key Concepts Question & Answer 1

Today’s Journey Sustainable Growth vs. Lower Cost Globalization Sustainable Growth vs. Lower Cost Organizing for the Global Enterprise Taking Innovation Global Facing the 5th Dragon – Succeeding in China V3-00

Typical Supply Chain Lead Time Example V3-00

Sustainable Growth is Key Growth is the one goal that all businesses pursue. Shareholder value is created when a business can project sustainable growth into it’s profit stream V3-01

Why do Companies Compete Globally? Gain access to new customers Achieve lower costs; increase competitiveness Exploit core competencies Spread business risk Industry leadership must be global, not just domestic Competing Internationally vs Globally: Competing internationally means entering foreign markets as opportunities arise to increase sales and revenues. Competition in one national market is separate from competition in another. A global competitor regards it’s home market as but one part of the competitive landscape covered by its strategic plan. It is one set of global competitors operating in many different countries. V3-02

Key Opportunities for Global Businesses Developing world demand for consumer products Establishing cost effective infrastructure networks Identifying strategies for sustainability Responding to growing needs for health care Preparing for unknown disasters / risks V3-03

IT in Global Demand Driven Supply Networks Information technology is critical to global demand-driven supply networks. Leaders use information technology to support decisions across all major domains: demand, supply and product management. What technologies are used in today’s Global Environment? V3-04

High Potential Industries for Global Commerce Biotech and Healthcare Clean and Sustainable Consumer Durables Information Technology Products Pure Content Products (i.e. iPod Downloads) What other opportunities do you envision? V3-05

Global Supply Networks Link Demand & Supply Benchmark global companies respond to specialized demand requirements and source across a network of suppliers – not just “chasing low cost”. V3-06

The Business Environment Customer Expectations Competition Government Regulations Access to Resources Economic Systems Economic Conditions Supply & Demand V3-07

Structure Must Follow Strategy – Key Factors Business Vision Model of Future Business Structure Culture, Leadership and Governance Business Process Architecture IT Applications and Information Structure V3-08

Firm / Business Unit Strategy Independent Functional Strategies Firm / Business Unit Strategy R&D Strategy Marketing Strategy Support Function Strategies Production Strategy V3-09

Firm / Business Unit Strategy Integrated Functional Strategies Firm / Business Unit Strategy R&D Strategy Marketing Strategy Support Function Strategies Production Strategy V3-10

Demand Driven Strategy Drives Global Strategy Demand driven supply networks require performance metrics that are interlinked throughout the organization But, there is no one-best approach for all businesses V3-11

Leadership Considerations Create Value Networks Involve Cross-Functional Teams in Joint Ventures Use Global S&OP Implement Improved Demand & Supply Visibility Align IT Infrastructure to Support Strategy V3-12

Business Goals Derive Business Structure Business leaders must look from the customer backward through the supply chain to establish the optimum organization needed V3-13

Corporate Strategy Drives Relationships Level/Type of Communication Degree of Collaboration Length of Relationship Transactional with information sharing Each partner has access to single data source. Generally medium term Shared processes and partnership Partners collaborate in specific processes and share knowledge. Longer term Linked competitive vision and strategic alliance Partners function as a virtual entity, even collaborating on strategy. Long term, possibly decades Backward integration Mergers and acquisitions; complete integration (in theory). Long term (if successful) V3-14

Organizational Model Options Application Example Decentralized Different products in different markets Cargill Centralized Strong centralized leadership process and strong global brand Heineken Hybrid Mix of regional specific and global brands P&G, Unilever Apple Intel Johnson & Johnson Dell PepsiCo V3-15

AMR - Stages of Maturity Apple Intel Johnson & Johnson Demand-driven External integration Dell Multi-tier federation Multi-tier visibility and collaboration 4. Orchestrate PepsiCo Connected Network – external integration, no strategic control Single-tier partnering Data sharing with tier 1 partners 3. Collaborate Connected Enterprise – internal integration, clumsy external links Every company for itself Internal optimization 2. Anticipate Site-to-site traditional supply chain – little integration Every department for itself Slow and sequential planning 1. React Process Maturity Information Maturity V3-16

Evolving Transformation Apple Product Supply Process Profitable Perfect Order Intel Externally Focused Johnson & Johnson Dell 3 4 One Business as Unit of Measure 2 Separate Business Units 1 PepsiCo Internally Focused Cost Focused Revenue Focused V3-17

Business Process Structure Successful companies tend to be more cross-functionally organized across processes – planning globally while executing locally V3-18

Corporate Strategy Model – Key Questions What is our Business Vision What is happening in our Environment? What are our Core Values? What Business are we in (or will be in)? What Value do we bring to the Marketplace Who are our Customers? Who are our Competitors? What are our Strengths and Weaknesses? What do we need to do to be successful? V3-19

Global Innovation Accelerated innovation is the foundation of long-term corporate growth in manufacturing. However, complexity increases dramatically when innovation is global. What are some potential Risks of Global Innovation? V3-20

Global Collaboration Improves Profitability Companies are finding that collaborating with business partners for new product development and introduction is directly linked to superior operating margin growth. V3-21

Global Collaboration Reduces Time-to-Market According to AMR, outsourcing (collaboration) reduces development cost, improves on-time performance and time-to-market and improves quality. What are some potential Risks of Global Outsourcing? V3-22

Impact of Delayed Time-to-Market V3-23

Navigating Barriers to Success in China No clear separation of government & commerce: Invest in counsel on corporate governance and property protection rights. Manufacturing excellence is not balanced with public safety and environmental and health risks: Prepare an answer / solutions to environmental and health concerns. The culture has no concept of protection of intellectual property: Consider the country primarily for development, not R&D and carefully control every step of high value assembly V3-24