Ch. 10 Managing the global pipeline

Question 1

Global companies have a dual aim:

Answer 1

• extending into new markets

- cost reduction through economies of scale

Question 2

What are the challenges of globalization?

Answer 2

• world markets aren’t homogenous and require localization

- complex logistics incur higher costs/extend lead times if not coordinated properly

Question 3

What is the risk for global companies when seeking to reduce costs?

Answer 3

Focusing too much on purchasing/manufacturing cost reduction. Failing to understand the service needs of individual markets.

Question 4

Name 3 ways global companies implement their logistics strategies

Answer 4

1. Focused factories
2. Centralized inventories
3. Postponement

Question 5

What is the idea behind focused factories?

Answer 5

To limit the range and mix of products to achieve economies of scale.

Vs. having local-for-local factories

Question 6

What is the idea behind centralized inventories

Answer 6

By holding inventory in fewer locations, can reduce the inventory requirement.

However, greater gains are made by:

1. Locating inventory strategically (close to customer/point of production)
2. Controlling it centrally

Question 7

What is the “square root rule” in centralized inventory?

Answer 7

The square roots of the number of before & after locations gives you a ratio that indicates by how much inventory can be reduced.

E.g. going from 25 locations to 4 = √25 to √4 = 5:2 = 60% reduction

Question 8

Explain what “postponement” is and what the advantages are.

Answer 8

Postponement is delayed configuration of the final product.

Advantages:

1. Inventory is held at a generic level (fewer variants)
2. Greater flexibility to respond to customer preferences
3. Forecasting is easier at the generic level
4. High variety can be offered locally at low cost

Question 9

Global pipelines have a high level of uncertainty related to…

Answer 9

shipping status of inventory in transit.

Managers compensate by over-ordering and building inventory buffers

Question 10

What is supply chain event management?

Answer 10

the process of monitoring the planned sequence of activities and the reporting of any divergence from that plan.