GLOBAL SUPPLY CHAIN MANAGEMENT & LEARNING PROPENSITY MODEL Global SCM Strategy & LPM: Global SCM

M is about managing business activities in the Value chain or the supply chain which is configured and coordinated on a global scale. The Learning propensity model or LPM creates an effective and efficient framework that helps managers to plan their global supply chain strategy more systematically. The Dynamic Research Framework (DRF) for global SCM contains key decision factors related to the scale &/or scope in a dynamic time sequence. Globalization is a dynamic process through which firms implement, experience and update their operations strategy in the Global market.

Supply Chain Structural Dimensions: Configuration. Connection. Inventory Logistics

Operations Management New Product Development Total Quality Management Technology Management Outsourcing. Manufacturing Process Analysis.

Supply Chain Infrastructural Dimensions : Coordination Collaboration .

Supply Chain Configuration: Operational Performance. Financial Performance. Customer Satisfaction Value Creation.

INTEGRATIVE PROSPECTIVE OF SCM : Coordination is a key factor for the successful SCM. Coordination is a joint learning process involving more than one organization participating in the SCM. SCM is a dynamic process. To improve SCM performance, the decision makers in the SCM system should be able to establish the Cause and Effect relationship between various forces and factors in supply chain operations among the participants of the SCM. Coordination between Supply Chain partners with well defined Strategic direction for effective and efficient supply chain is forged with mutual learning between the partners leveraging on each others competencies is vital to the world class SCM. The Whole is always greater than all the parts put together individually is the crux of SCM principle. This mutual learning along with structured external input leads to a continual up gradation of the SCM systems and Technology .

Extensive

Limited

Global SCM Supply Networks

Individual Supply Chain

Individual Process Analysis (OM)

Impetus for Global SCM : Achieving Economics of Scale and low cost manufacturing by creation of low cost Manufacturing facility abroad. Bringing down the cost of production and final products by global sourcing of the parts and components. To derive competitive advantage by above strategies in highly competitive domestic and global market. E.g. Daewoo Motors. Procuring advance technology and R&D facilities from advanced countries. Gaining a leadership position by expanding the market globally. Globalization motivation decides Global strategy for the firm. Globalization strategy of the firm decides which market to concentrate on and which particular Value Chain activity to globalize. Globalization strategy decides how fast the firm should expand in the global market based on the resources at its disposal and its capability. The periodic evaluation of the firms selected strategy of global operations and its effectiveness has to ascertained and strengthened to derive competitive advantage and customer satisfaction on an ongoing basis.

Globalization dynamics is the speed and flexibility blended together with the cost effectiveness in terms of accurate measuring segment wise global market demand and aligning the global sourcing and supply chain to satisfy this demand effectively efficiently and on a continual basis by continuous permutation and combination of resources of self and strategic alliances partners.

Limited Firm level Firm level

Global Market

Extensive Firm level

Individual Process

Industry Level Level

Supply Chain coverage or Scope.

Timing Pre - entry

Decision factors (Scale/scope of global operation. Globalization motivation: Market saturation or attractiveness. Efficiency. Competitive reaction, risk diversification. Learning, Innovation. Resource Commitment, Profitability potential. Target country Market, Cultural Difference Value Chain configuration and coordination.

Entry

Post-entry Going Concern

Growth or Expansion Strategy : 3S Scale, Scope and Speed. Vertical versus Horizontal. Industry Life Cycle. New market Opportunity. Strategic trade-off. Resource opportunity Cost

Exit

Four Stages of Global Strategy Formulation : Global Conceptualization

Deals with the strategic issues a global company must take into account before entering into the Global market. Global Initiation

These are the Strategic factors of a global company at entry point. Global Operations

Focuses on the implementation issues at post entry level. Global restructuring

It provides useful guides and insights for the firm when it faces Mature or Declining Market, Product or Technology. It consists of Strategic considerations at the point of transition such as regeneration, sustaining or exit. BASIC STRUCTURE OF DRF :

Globalization Process Global Conceptualization. Pre-entry

Generic Strategic Factors for Globalization : Globalization History. Globalization Motivation. Country capability & organizing Principles. Administrative Heritage.

Global Initiation. Entry Global Operations. Post-entry Global Restructuring Transition

Entry Mode Cultural, Economic, Political, Social & Distances. Global Expansion Strategy Globalization speed.

Transition Strategy Remaining, Regeneration , exit.

Global Conceptualization. Pre-entry

Defining, designing, Configuration and Coordination.

Global Initiation. Entry

Forming Strategic alliances like Joint venture, green field, acquisition.

Global Operations. Post-entry

Managing Strategic alliance including subsidiaries.

Global Conceptualization. Pre-entry

Defining, designing G-SCM.

Global Initiation. Entry

Implementing G-SCM.

Global Operations. Post-entry

Managing and improving G-SCM in terms of Flexibility, Technology management, Postponement, Risk based Production planning.

Overarching Theoretical Foundations for Dynamic Research Framework : Is Learning Propensity Model consisting of Dynamic Learning. Market Based Learning. Risk Containment analysis.

Learning Propensity Model : Learning in Supply Chain Operations is a Process thro which the Manufacturing system identifies, analyzes and internalizes complex Cause-and-effect relationship among key operations and enhance its performance by elimination of the root causes of the various problems in operations. In Single loop learning the organization tries to improve performance by fixing the problems thro corrective measures. In Double loop learning the organization tries to improve performance by fixing the problems thro corrective measures and eliminating the symptoms thro preventive steps. of chaebols Daewoo and Hyundai Daewoo Hyundai

Comparison Attributes

Market share in the Korean car market (in 1993) Time (year) to enter the automobile industry Total asset business group as a whole (as of 1996) Business portfolio (sales ratio) business group as a whole (as of 1997)

About 20% 1978 $39.1 billion Automobile: 17% Construction: 10% Electronics: 16% Heavy Industry: 10% Petrochemical: Textile/Trade: 42% Logistics/Shipping: 0%

About 50% 1967 $54.6 billion Automobile: 33% Construction: 14% Electronics: 6% Heavy machinery: 15% Petrochemical: 9% Textile/Trade: 9% Logistics/Shipping: 5%

- Financial/Services: 5%

- Financial/Services: 9%

Daewoo Motor Co. Ltd. Daewoo acquired Shinjin Motor Co. in 1978 & renamed as Saehan Motor Co. from Korean Development Bank. It was a joint venture with General Motors till 1992. Daewoos Globalization proceeded in three stages- Domestic, Export and Globalization. At domestic stage Daewoo struggled to become a viable motor co. with market share of 20% against Hyundais well established market share of 50%. Daewoo started export in 1986. By 1993, it had 42% of car export as against Hyundais 58%. In 1994 onwards it started globalization of SCM in earnest mainly to gain competitive advantage in domestic market. In 1994 it acquired FSL and FSO in Poland successively and Rodae Automobile S.A. in Romania. By 2000 Daewoo globalized into nine countries where it was managing 11 Manufacturing and 30 Marketing subsidiaries. Daewoos globalization speed was very fast. It has its manufacturing facility in India, Philippines, China, Indonesia, Vietnam and Iran in Asia, in Uzbekistan, Poland, Czechoslovakia, Romania and

Ukraine in East Europe and at Morocco in Africa. Daewoos heavy emphasis on manufacturing and marketing in East European countries is obvious. These locations were taking care of both marketing and manufacturing as well as sourcing simultaneously having an integrated supply chain network. Daewoo had three R &D centers at UK, Germany and Poland and technology alliance with France. Daewoos additional marketing network is established in Australia, Myanmar, Thailand, UK, Italy, Spain, Austria, Benelux, France, Switzerland, Kazakhstan, Bulgaria, Azerbaijan,

Hungary, Peru, Chile, Colombia, Venezuela, Ecuador and Algeria. Hyundai Motor Co. Hyundai Motor was established in Dec.,1967 in technical collaboration with Ford motor Co. In 1972, Hyundai broke collaboration with Ford as apart of its strategy to gain technological independence and development of its own car models. In 1976, Hyundai developed compact car Phony and commanded 43.6% of Korean Car Market and exported its first export to Ecuador. In 1983 Hyundai entered north American market by setting up its sales subsidiary at Canada. In 1985, it developed its second model Excel which was big success internationally as well as in Korean domestic market. In 1986 Hyundai opened its R & D center in USA and in 1988 it put up its first manufacturing subsidiary in Canada which was closed in 1993. Hyundai Motors has its manufacturing plant in India, China, Malaysia, Thailand, Romania and Turkey where as it has sourcing under technical agreement at Netherlands, Czechoslovakia, Philippines, Indonesia, Pakistan, Taiwan, Venezuela, Botswana, Egypt and Zimbabwe. Hyundai has marketing subsidiary at all these places. Hyundai has three R & D center in USA, one in Germany and one in Japan. Hyundais compounded rate of capacity increase between 1988 to 1997 was 10% i.e. from 6,40,000 to 1,500,000 cars p.a. where as Daewoos compounded annual rate of growth was 32% Between 1988 (1,80.000 cars p.a) and 1997 (2,200,000 cars p.a.). Between 1989 to 1996 Daewoos foreign car production capacity increased from zero to 1.2 million cars where as Hyundai remained almost unchanged at 1,00,000 cars p.a.. Hyundai concentrated more on increasing Domestic car production whereas Daewoo focused both on domestic as well as global manufacturing.

Global learning propensity dynamics

DEVELOPMENT STAGES OF SCM

Customization

Volume

Make-toorder

Make-toOrder