3.1 Designing global Networks

Question 1

Intermediate goods

Answer 1

products used as inputs to produce other products

Question 2

Global supply chains

Answer 2

worldwide network of suppliers, manufacturers, distribution centers and retailers through which raw materials are acquired, transformed and delivered to customers

Question 3

Offshoring

Answer 3

the relocation of a business process from one country to another, typically an operational process, such as manufacturing, or supporting processes such as accounting

Question 4

Offshoring vs. outsourcing

Answer 4

offshoring: the work is done overseas
outsourcing: the work is done by someone else

Question 5

Offshoring decision results in

Answer 5

increase in transportation cost
increases the length and duration of information, product, and cash flows

Question 6

Offshoring may result in failure if:

Answer 6

only focused on production unit cost rather than total cost
ignoring critical risk factors

Question 7

consider when evaluating offshoring total cost

Answer 7

• difficult order communication
• poor SC visibility
• material cost differs
• labor/fixed cost decrease, quality decreases
• higher freight costs
• increase/decrease in taxes
• increase lead time
• poorer delivery/ more uncertainty
• larger min order quantity
• increased returns
• increase inventory
• increase working capital
• higher hidden costs
• increase stock-outs

Question 8

Risks in global SC

Answer 8

supply distribution
supply delays
demand fluctuations
price fluctuations
exchange-rate fluctuations

Question 9

SC risks to be considered

Answer 9

• disruptions: environmental, strikes, supplier bankruptcy
• delays
• systems risk: information structure breakdown
• forecast risk: inaccurate forecast
• intellectual property risk: vertical integration of SC
• procurement risk: exchange rate, price of input risks
• receivables risk: number of customers
• inventory risk: holding cost, product value, demand/supply uncertainty
• capacity risk: cost and flexibility of capacity

Question 10

Flexibility to mitigate risk and uncertainty: 3 categories

Answer 10

• new product flexibility
• mix flexibility
• volume flexibility

Question 11

New product flexibility

Answer 11

• firm’s ability to introduce new products at a rapid rate
• competitive environment
• electronics industry

Question 12

Mix flexibility

Answer 12

• ability to produce a variety of products within a short period of time
• low and unpredictable demand
• fashion industry

Question 13

volume felxibility

Answer 13

• ability to operate profitability at different capacity rates
• automotive industry

Question 14

Dedicated network

Answer 14

you feed each market only from a specific manufacturing point
problem: if one fails, the others cannot help

Question 15

Fully flexible network

Answer 15

factories are sending products to all markets
problem: very expensive, difficult to coordinate with demand
adv: each factory can cover for the others

Question 16

Chained network with one long chain

Answer 16

each factory produces for 2 markets
adv: if one fails it can be partially supported by the other
problem: if one fails there’s more pressure on the others

Question 17

Chained network with two short chains

Answer 17

2 factories provide for 2 markets
adv: if one fails the supply should remain functional