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EBU6609 Logistics and Supply Chain Management
TOPIC 8: ENVIRONMENTAL SCANNING AND GLOBAL SUPPLY CHAIN DESIGN
MS. BING HAN
Week 7 – Timetable

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Wednesday 13rd 15th
Topic 8 (Recorded)
Tutorial 4 (Live)
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Learning Objectives
1. Discuss the emergence of SCM as a strategic response to a changing competitive environment.
2. Explain the transition from ownership (vertical) to relationship (virtual) integration strategies.
3. Discuss how managers can use scanning and planning processes to define the rules of competition.
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Learning Objectives
Describe the forces driving change in today’s market and their effect on decision-making.
Identify the issues driving globalisation. Explain how globalisation has changed the rules of competition.
Discuss the critical issues involved in designing a global supply chain network.
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As the economy changes, as competition becomes more global, it’s no longer company versus company but supply chain versus supply chain.
– , Boston Consulting Group
EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
SCM – A Strategic Weapon
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EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
SCM enables winning business models by helping companies to:
◦ Meet the demanding needs of customers worldwide
◦ Build unique competencies to fend off fierce rivals
◦ Acquire the best resources globally
◦ Do it efficiently

SCM – A Strategic Weapon
EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Vertical integration
To deliver unsurpassed customer value, companies must develop unique competencies, relying increasingly on capable supply chain partners.
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No integration
Different firms for each stage
Distribution
Components
Raw materials
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Vertical integration
Backwards integration
Company B takes over the role of Company A
Distribution
Components
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Vertical integration
Distribution
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Raw materials
Raw materials
Forwards integration
Company B takes over
the role of Company C
Distribution
Distribution
Components
Components
Raw materials
Raw materials
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Vertical integration
Full integration
Company B takes over the role of Companies A & C
Distribution
Distribution Product
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Vertical Integration
EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
viewed the vertically integrated organisation as the ideal business model.
Acquired critical production resources
Hayes and Wheelwright identify the following rationale:
Desire to reduce cost Desire to increase control

Decline of Ownership Integration
EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT
􏰀The theoretical benefits of vertical integration almost never emerged.
􏰀Retailing, distribution, manufacturing, and design are all distinct activities that require specialised knowledge.
􏰀Lack of focus actually contributed to decreased competitiveness
Relationship Integration
􏰀Kieretsu (系列, conglomerates) provided Japanese companies with a competitive advantage
􏰀Toyota and Honda rely on suppliers for approximately 80% of a car’s value
􏰀Compared with 30% for American manufacturers
􏰀Japanese model resulted in superior quality and a $2,000 per vehicle cost advantage
􏰀Relationship (virtual) integration via collaboration
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EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT ”
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A Changing SC World
All advantage is temporary. No capability is unassailable, no lead is uncatchable, no kingdom is unbreachable. Indeed, the faster the clockspeed, the shorter the reign. Sustainable advantage is a slow-clockspeed concept; temporary advantage is a fast- clockspeed concept. And, clockspeeds are increasing almost everywhere.
– , Professor at MIT
Environmental Scan
Proactive companies use insight gained from internal and external scanning to avoid surprises, identify opportunities and threats, and improve both tactical and strategic decision-making.
Identifies a firm’s strengths and weaknesses vis-à-vis competitor capabilities and customer expectations.
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EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Scanning attempts to:
1.Detect important cultural, economic, legal, political, social, and technological events and trends.→ PESTEL
2.Help managers accurately and objectively understand the company’s strengths and weaknesses.
3.Identify and define potential opportunities and threats implied by identified events and trends.
4.Provide a common and correct perception for tactical and strategic planning.
5.Promote an adaptable, forward-looking mind- set among managers and employees.
The Scanning Process
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SWOT Analysis f r
Environmental Scanning – Failures
Manager should seek to avoid the following common pitfalls of environmental scanning:
1. 2. 3. 4.
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Failure to involve people who can act on the insight
Failure to incorporate diverse sources of information
Failure to use multiple methods of gathering information
Failure to look at information from diverse viewpoints
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Environmental Scanning – Failures
5. Failure to consider both internal and external issues and perspectives
6. Failure to understand interaction among environmental trends
7. Superficial analysis
8. Study to narrowly focused
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Forces of Change
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Many industry-specific forces affect companies; however, ten generic forces are helping to shape how business is now conducted.
Competitive Pressure
Corporate Social Responsibility
Customer Expectations Role Shifting Financial Pressure
Global Capacity
Globalisation
Mergers and Acquisitions
Technology Innovation Time Compression
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Forces of Change
Competitive Pressure
Corporate Social Responsibility
Customer Expectations Role Shifting
Competitive Imperatives
Must reduce costs relentlessly
Must seek innovation and non-imitable products/processes Must create switching costs via relationships
Must understand how customers define “good” or ethical business practice Must understand global social norms and track working conditions in SC Must develop, implement, and communicate company codes of conduct
Must get into the mind of downstream customers
Must realise that the best way to adapt to the future is to create it
Must build learning organisation that thrives on continuous improvement
Must establish valued core competency to avoid dis-intermediation Must make supply chain visible
Must actively & formally evaluate role-shifting opportunities
Must recognise that stock markets are not always right
Must establish viable long-term strategy & stick to it
Must create incentives that will not lead to short-term decision making
Financial Pressure
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Forces of Change
Global Capacity
Globalisation
Mergers & Acquisitions
Technological Innovation
Time Compression
Competitive Imperatives
Must reduce costs relentlessly
Must seek innovation and non-imitable products/processes
Must establish global reach—physically & via alliances Must establish seamless outstanding performance
Must compete in rivals home country/region
Must realise that mergers & acquisitions are hard to do successfully
Must formally evaluate soft issues—culture, processes, policies, people
Must monitor technological developments closely Must establish technology policy to guide adoption
Must enhance internal & inter-organisational cooperation Must measure time explicitly
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Globalisation of Markets
Technology has overcome much of the distance created by geography and culture.
The pace of globalisation depends on:
1. Advances in information and communication technology
2. Availability of reliable transportation
3. Reduction of protectionist trade policies
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Globalisation’s Implications
Business knows no national boundaries. Capital and work – your work! – can go anywhere on earth. The consequence of all this is painfully simple: If the world operates as one big market, every employee will compete with every person in the world who is capable of doing the same job. There are a lot of them, and many of them are very hungry.
– , former CEO at Intel
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-Implication of a Global Market
Globalisation is a term that has been used to explain how organisations can view the world as a single market.
This has caused the global business market place to be considerably more complex.
Organisations that sell into a single global market place are generally selling the same product but designed to fit the local markets worldwide.
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Global Business is Different
Managers must consider four differences
between global and domestic operations.
Politics –political stability and undercurrents that might jeopardise global business strategies.
Legalities – requires competent legal counsel
Finance – exchange rate risk and hedging; taxation issues
Culture –must adapt to local views on time, personal space, worker/manager relations, individual accountability, etc.
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Drivers for a Global Supply Chain
Faster delivery and continuity of supply
Better technical service
Technology
Marketing tool
Tie-in with offshore subsidiaries
Competitive clout
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Price/cost
labour costs, exchange rates, equipment and processes, product and pricing focus
Government/ marketing pressures
Six Globalisation Imperatives
Six imperatives are shaping the global competitive landscape:
1. Depletion of fossil fuels and rising energy costs – need for renewable energy
2. Utilised Beachheads – use operations in industrialised countries as bridges into emerging markets
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Unavailability of items domestically

Six Globalisation Imperatives
3. Achieve Seamless Performance Across Markets – deliver the same high quality product with the same excellent service everywhere
4. Extend Reach Through Alliances – alliance partners can provide market knowledge, technological expertise, operational know-how, and/or financial resources.
Six Globalisation Imperatives
Compete in Competitors Home Market – competition prevents cross profit subsidisation
Coordinate Global Activities – cross- pollination of ideas creates synergy while reducing redundancy
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Designing-a Global Network
To ensure access to customers and worldwide resources, companies are increasingly creating worldwide supply chain networks.
Resources within the supply chain need not be owned by a single entity.
Trade-offs in Global Logistics
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EBU6609 LOGISTICS AND SUPPLY CHAIN MANAGEMENT

Implication:
The trend towards global organisation of both manufacturing and marketing is highlighting the critical importance of logistics and SCM as the keys to profitability.
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Think Global, Act Local
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Designing a Global Network
To insure supply chains are properly designed four criteria should be considered:
Compatibility – need to align network design decisions with company’s overall strategy
Configuration – need to identify and consider issues that will affect network performance when deciding where to locate value added activities
Coordination – need to direct and integrate geographically dispersed activities
Control – need for consistent and proper day- to-day decision-making at local value added facilities
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Paradigm shift? COVID 19 and Supply Chain Management
– Shifts, from offline to online to cloud to blockchain – From globalisation to localisation
– How resilient is your supply chain?
– Risk management
– New needs, new opportunities
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􏰀Leenders, Chapter 14
􏰀Christopher, Chapter 9
􏰀Sheffi, Yossi, (2007) The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage (The MIT Press)
􏰀Coronavirus will change the world permanently https://www.politico.com/news/magazine/2020/03 /19/coronavirus-effect-economy-life-society-analysis- covid-135579
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