Logistics and Supply Chain Management, 4th Edition

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Global brands and companies now dominate most markets. Over the last two

decades there has been a steady trend towards the worldwide marketing of prod-

ucts under a common brand umbrella – whether it be Coca-Cola or Marlborough,

IBM or Toyota. At the same time the global company has revised its previously

localised focus, manufacturing and marketing its products in individual countries,

and now instead will typically source on a worldwide basis for global production

and distribution.

The logic of the global company is clear: it seeks to grow its business by

extending its markets whilst at the same time seeking cost reduction through scale

economies in purchasing and production and through focused manufacturing

and/or assembly operations.

However, whilst the logic of globalisation is strong, we must recognise that it

also presents certain challenges. Firstly, world markets are not homogeneous,

there is still a requirement for local variation in many product categories. Secondly,

unless there is a high level of co-ordination the complex logistics of managing

global supply chains may result in higher costs and extended lead times.

These two challenges are related: on the one hand, how to offer local mar-

kets the variety they seek whilst still gaining the advantage of standardised global

production and, on the other, how to manage the links in the global chain from

sources of supply through to end user. There is a danger that some global compa-

nies in their search for cost advantage may take too narrow a view of cost and only

see the purchasing or manufacturing cost reduction that may be achieved through

Managing the

global pipeline

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The trend towards globalisation in the supply chain

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Gaining visibility in the global pipeline

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Organising for global logistics

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Thinking global, acting local

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The future of global sourcing

using low-cost supply sources. In reality it is a total cost trade-off where the costs

of longer supply pipelines may outweigh the production cost saving. Figure 9.1

illustrates some of the potential cost trade-offs to be considered in establishing the

extent to which a global strategy for logistics will be cost-justified. Clearly a key

component of the decision to go global must be the service needs of the market-

place. There is a danger that companies might run the risk of sacrificing service on

the altar of cost reduction through a failure to fully understand the service needs of

individual markets.

The trend towards global organisation of both manufacturing and marketing is

highlighting the critical importance of logistics and supply chain management

as the keys to profitability. The complexity of the logistics task appears to be

increasing exponentially, influenced by such factors as the increasing range of

products, shorter product life cycles, marketplace growth and the number of

supply/market channels.

There is no doubting that the globalisation of industrial activity has become a

major issue in business. Articles in the business press, seminars and academic

symposia have all focused upon the emerging global trend. The competitive pres-

sures and challenges that have led to this upsurge of interest have been well

documented. What are less well understood are the implications of globalisation

for operations management in general and specifically for logistics management.

LOGISTIC S & SUPPLY CHAIN MANAGEMENT

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Transport

(source to user)

Inventory

Materials

Production

GlobalLocalised

Degree of globalisation

(production/sourcing/marketing)

Costs

Figure 9.1 Trade-offs in global logistics

The trend towards global organisation of both manufacturing and marketing

is highlighting the critical importance of logistics and supply chain

management as the keys to profitability.