Chapter 3 Global Dimensions of Supply Chains

Chapter 3 Global Dimensions of Supply Chains
Learning Objectives
After reading this chapter, you should be able to do the following:
Describe the scope of a global companys supply chain network and

understand what questions are appropriate for the network to function on a
competitive basis.
Understand the three major phases of globalization.
Appreciate the complexity and magnitude of the operations of some

successful global companies and why global expansion is important to their
growth.
Explain how technology and service specialists can help companies,

especially small- to medium-size firms, penetrate the global marketplace.
Learning Objectives (cont.)
After reading this chapter, you should be able to do the following:
Appreciate the importance and magnitude of the trading partner countries of

the United States.
Understand the nature of global markets and competitive strategy.
Explain the rationale for global security measures and the balance
necessary to ensure that such security measures do not impede trade.
Discuss global transportation options and strategic intermediaries.
Three eras of globalization

The
first era was initially driven by countries (1400

1800) seeking materials and goods not available in
their own land
The
second era of globalization (18002000) was

driven by companies seeking goods and materials,
labor, economies of scale, and markets.
In
the third era of globalization, said to have begun

around the year 2000, the significant characteristic is
that it is being powered by individuals and smaller
organizations
Supply Chains in a Global Economy
Economies and companies could improve their wealth by allowing

specialization of tasks.
The advantage is true as long as you can sell the increased volume that
is produced. It is an important role of logistics to help extend the market
area of countries or companies through improved efficiency to lower the
landed cost in new market areas.
The Scope and Magnitude of Global Business

The
ability to connect to individuals and companies

across the globe and to connect computer information
systems on a 24/7 basis has provided unparalleled
opportunity for collaboration horizontally and vertically in
supply chains.
The
trade volume with China was 18.2 percent of the

total of the top 10 for 2006, and it increased its trade
volume by 20 percent from 2005 to 2006. In 2000, China
was number 4 following Canada, Mexico, and Japan.
Global Markets and Strategy
The global business environment has changed significantly and

become much more conducive to business activity between and
among different countries.
Success in the global market place requires developing a cohesive

strategy, including product development, technology, marketing,
manufacturing, and supply chains.
Global markets and strategy have four important characteristics:

standardization reduces complexity
global competition reduces the product life cycle
traditional organizational structures and business models
frequently change
globalization introduces more volatility
Supply Chain Security: A Balancing Act
Given the importance of global trade to the United States, a delicate

balance exists between security and the efficient flow of global
commerce.
More cargo inspections, much more paperwork, and a longer time to

clear U.S. borders are now a reality.
C-TPAT is a cooperative effort to secure the global supply chain and to

facilitate legitimate cargo and conveyance.
Ports
Ports are a critical part of global supply chains and also a major focus
for global security.
Americas ports are a vital part of its global commerce. Over $2 trillion in
trade value per year passes through U.S. ports, and over $18 billion is
collected in industry fees and taxes.
North American Free Trade Agreement
NAFTA establishes free trade between these three countries and

provides the way the agreement is to be interpreted.
Even though the U.S./Canada Free Trade Agreement has been in effect
for some time, certain trade barriers still remain.
The supply chain constraints will eventually be eliminated as NAFTA

experience grows.
A Typical Truck Shipment Crossing into Mexico
Global Transportation Options

Ocean
The most pervasive and important global shipment method,

accounting for two-thirds of all international movements.
Major advantages are low rates and the ability to transport a
wide variety of products and shipment size
Three major categories:
Liner service
Charter vessels
Private carriers
Air
Fast transit times

An advantage in packaging
Disadvantage of air carriage is high rates
Global Transportation Options (cont.)

Motor
Use motor transport when shipping goods to between the United

States and Mexico or Canada
It is very common in Europe
Motor also plays a large part in intermodal shipments
Rail
International railroad use is also highly similar to domestic rail

use
Intermodal container shipments by rail are increasing
Maritime bridge concepts
Land bridge
Strategic Channel Intermediaries

Foreign Freight Forwarders
Supplies expertise to international shippers

Consolidate small shipments into more economical sizes
Derives income from fees for service
Non-Vessel-Operating Common Carriers
Consolidates and dispenses containers at inland points

Uses the shipping expertise that NVOCCs possess
Ocean carrier gains from the increased market area
Strategic Channel Intermediaries (cont.)

Export Management Companies
EMCs act as agents for domestic firms in the international arena
Obtain orders, selecting appropriate markets, distribution channels, and
promotional campaigns
Export Trading Companies

ETC exports goods and services to overseas buyers and handles most
of the export arrangement
ETC allows small- to medium-size firms to engage in foreign trade
Strategic Channel Intermediaries (cont.)

Customs House Brokers
Oversee the movement of goods through customs and ensure

that the documentation accompanying a shipment is complete
and accurate for entry into the country
Operate under power of attorney from the shipper to pay all

import duties due on the shipment
The importer is ultimately liable for any unpaid duties
Keeps abreast of the latest import regulations and specific

requirements of individual products
Storage Facilities and Packaging
Transit sheds provide temporary storage while the goods await the next
portion of the journey
Carrier provided hold-on-dock storage free of charge until the vessels

next departure date
Public warehouses are available for extended storage periods.
Bonded warehouses operate under customs agencys supervision and

are used to store, repack, sort, or clean imported merchandise entered
for warehousing without paying import duties while the goods are in
storage.
Packaging
Export shipments moving by ocean transportation require more stringent

packaging than domestic shipments normally do
The shipper may find settling liability claims for damage to export goods
very difficult. Usually, the freight handling involves many firms, and
these firms are located in different countries.
Summary
Companies competing in global supply chains need to address some
important questions for their global networks to ensure their
efficiency and effectiveness.
There have been three phases of globalization: the first was driven
by countries, the second by large companies, and the third by
individuals and small organizations.
Successful global companies have transformed their supply chains

on an ongoing basis to enable them to deliver low cost and high
value to the ultimate customer.
The scope and magnitude of trade flows between the United States
and other countries have grown considerably in the last several
decades. One interesting development has been the growth in
importance of trade with China and several other Asian countries.
Success in the global marketplace requires developing a cohesive

set of strategies with respect to customer service, product
development, business models, and overall supply chains.
Summary (cont.)
Supply chain security has taken on increased importance since September 11,
2001. Companies individually, jointly, and in cooperation with the various levels
of government need to be actively involved. The federal government, in
particular, has expanded the scope of its regulations and policies for global
security.
U.S. ports play a critical role in global supply chains since over 90 percent of
global trade passes through them. Ports are also an important focus for security.
Canada and Mexico are ranked number 1 and 3, respectively, on the list of most
important trading partners with the United States. That relationship is enhanced
by the North American Free Trade Agreement ratified by Congress in 1994.
While the treaty had lofty goals, it still is experiencing problems with full
implementation of its objectives. Nevertheless, it has fostered trade in North
America.
Global supply chains have a number of transportation and related service

options available to managers. Each of the options has advantages and
disadvantages that need to be analyzed.

Chapter 3 Global Dimensions of Supply Chains

Uploaded by

Copyright:

Available Formats

Chapter 3 Global Dimensions of Supply Chains

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 3 Global Dimensions of Supply Chains

Uploaded by

Copyright:

Available Formats

Chapter 3 Global Dimensions of Supply Chains

After reading this chapter, you should be able to do the following:

Describe the scope of a global companys supply chain network and

Understand the three major phases of globalization.

Appreciate the complexity and magnitude of the operations of some

Explain how technology and service specialists can help companies,

Learning Objectives (cont.)

After reading this chapter, you should be able to do the following:

Appreciate the importance and magnitude of the trading partner countries of

Understand the nature of global markets and competitive strategy.

Discuss global transportation options and strategic intermediaries.

Three eras of globalization

first era was initially driven by countries (1400

second era of globalization (18002000) was

the third era of globalization, said to have begun

Supply Chains in a Global Economy

Economies and companies could improve their wealth by allowing

The Scope and Magnitude of Global Business

ability to connect to individuals and companies

trade volume with China was 18.2 percent of the

Global Markets and Strategy

The global business environment has changed significantly and

Success in the global market place requires developing a cohesive

Global markets and strategy have four important characteristics:

Supply Chain Security: A Balancing Act

Given the importance of global trade to the United States, a delicate

More cargo inspections, much more paperwork, and a longer time to

C-TPAT is a cooperative effort to secure the global supply chain and to

North American Free Trade Agreement

NAFTA establishes free trade between these three countries and

The supply chain constraints will eventually be eliminated as NAFTA

A Typical Truck Shipment Crossing into Mexico

Global Transportation Options

The most pervasive and important global shipment method,

Fast transit times

Global Transportation Options (cont.)

Use motor transport when shipping goods to between the United

International railroad use is also highly similar to domestic rail

Strategic Channel Intermediaries

Supplies expertise to international shippers

Non-Vessel-Operating Common Carriers

Consolidates and dispenses containers at inland points

Strategic Channel Intermediaries (cont.)

Export Trading Companies

Strategic Channel Intermediaries (cont.)

Oversee the movement of goods through customs and ensure

Operate under power of attorney from the shipper to pay all

The importer is ultimately liable for any unpaid duties

Keeps abreast of the latest import regulations and specific

Storage Facilities and Packaging

Carrier provided hold-on-dock storage free of charge until the vessels

Public warehouses are available for extended storage periods.

Bonded warehouses operate under customs agencys supervision and

Export shipments moving by ocean transportation require more stringent

Successful global companies have transformed their supply chains

Success in the global marketplace requires developing a cohesive

Global supply chains have a number of transportation and related service

You might also like