15-going Global- Strategic Planning-240209

Global Business- Strategic Planning (Import, Export & Manufacturing)

Global Supply Chain Overview Insurance& Risk Mgmt

Others Certifications etc.

Funds Transfer System

P&S Delivery System

Contract

Exporter

(Products &Services)

Importer

Global Business Framework (Logistics, Economic, Cultural, Political & Legal)

Why should you go global? • • • • •

Increasing Globalization markets Increase Globalization of production Increasing Globalization resources World is becoming a large global village Going Global has become essential to maintain competitive edge in domestic as well as world market

Six Reasons For Global Sourcing 1- Superior Quality 2-Better timeliness- lesser lead time than local sources 3- Lower Cost 4- Broader Supply Base 5-More advanced Technology 6- Expanded customer base- sell in that country

Global Supply Channels • Import merchants- import and sell goods themselves • Commission houses- Source for you from exporter abroad, no commission by you, goods billed & shipped to you directly, do handle docs.

• Agents or representatives- Represent sellers, do handle documents

• Import brokers- Bring buyer-seller together, both pay commission.

• Trading houses- Far more organized, handle all aspects of transaction

• Subsidiary company- Fully owned by parent co., levy service charge

• International Procurement office- Office in foreign country

• Directly from Supplier/manufacturer- No intermediary

Growth Stages to Global Supply Management 1-International Purchasing- Focus on volume, minimize price, manage inventory costs; entry phase to global arena

2-Global Sourcing- Focus on global opportunity, supplier capability, strategic production support, customer service supports,already off shored for some time

3-Global Supply Management- Focus on optimizing supply network, effective logistics and capacity management worldwide; technological leadership

4-Tansnational Corporation- Next stage of evolution; Instant communication and funds transfer capability; real time operations of buying, selling, tracking etc

Potential Risks and Problems • • • • • • •

Cultural Issues- Hong Kong example of four Long lead time Additional inventories Lower quality Social and labor problems-Nike Sweat Shop Higher cost of doing business Opacity risk- Global opacity index

Questions before going global • • • • •

Does it qualify as high-volume in your industry? Does it have a long life (2-3 years)? Does it lend itself to repetitive manufacturing? Is demand of the product fairly stable? Are specifications and drawings clear and well defined? • Is technology not available domestically at competitive prices? • Will there be adequate warrantees and back up support?

If answer to these questions is yes, evaluate support network with in your firm

Evaluating internal support network • Engineering support to facilitate change? • Will there be enough time to phase out existing pipeline inventory? • Will supply source provide required education and training • Are you prepared to make financial commitments? • Is your firm fully aware other factors effecting source of supply?

Direct Supply Sourcing • • • • • • • • •

Start with intermediary source Trade Directories & Embassies Trade fairs Goggle Search Initial contacts-by e-mail, letters and telephone Personal meeting- Prepare; commercial,technical, cultural Negotiations- prepare; price and other areas of interest Samples and trial order Bulk order

Major Issues in Global Supply Management • • • • •

Shipping, warehousing and delivery issues Methods of Payment Currency exchange related risks Documentation related issues Inspections and quality assurance management • Counter Trade • Regional Trade alliances

Transportation and delivery issues • Which mode of transport to be usedSea, Air, Surface, multimodal • Full container of part container (20 ft, 40ft) • Temporary/ in transit storage • Liner or chartered vessels • Break-bulk carriers • INCOTERMS

Currency and payment issues • Currency and Exchange rates • Methods and terms of payment-L/C, direct and others • Hedging and currency risk management- forward & option currency contacts • Insurance and in-transit risk management-Clause A,B & C

Counter Trade • What is Counter trade- Part of full payment by goods instead of money

• Barter- Goods exchanged for goods, no money involved • Offset –Cash/Goods Swiss buy F-16, sell Elevators to USA • Counter purchase- Buy & sell products in local currency Russian example

• Buy back/compensation- Seller of Capital goods accepts part of payment by products manufactured by their machines

• Advantages of CT: circumvent currency controls, restricted currency areas, Cash short countries

• Disadvantages of CT: ???

Political and Economic Alliances • • • •

EU- European Union , Euro Currency NAFTA- North American Free Trade Agreement Mercosur- Argentina, Brazil., Paraguay, Uruguay; Chile, Bolvia ASEAN- Association of South Asian Nations Indonesia, Malaysia, the Philippines, Myanmar, Brunei, Laos, Burma, Cambodia and Vietnam

Singapore, Thailand

• APEC- 21 Countries (Asia Pacific Economic Cooperation)-large area, 45% of world GDP; China, Russia, Canada, USA, Australia

• SAARC- South Asian Association for Regional Cooperation-created in1985; India, Pakistan, Bangladesh, Shri Lanka, Nepal, Bhutan and Maldives

• SAFTA - South Asian Free trade agreement(2013) • OPEC (Organization of Petroleum Exporting Countries) Role in 1970’sFixing prices & production quotas-Crude prices $3/ to $12: now $60 per barrel

Methods of Entry in Foreign Export Markets • Indirect Exporting – Export Trading Company – Export Management Corporation – Piggy- Backing

• Active Exporting – – – – –

Agents Distributor Marketing Subsidiary Coordinating Direct Export Strategy Foreign Sales Corporation

Entering in Production Abroad • • • • •

Contract Manufacturing Licensing Franchising Joint Venture Subsidiary

Some Useful websites

Reading References • World Class Supply Chain by Burt, Dobler & Starling- Chapter 16 • Global Supply Chain Management by Douglas Long Chapters 10,11 &12