288 33 Powerpoint Slides Chapter 16 Global Operations Supply Chain Management

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International Business
Rakesh Mohan Joshi Professor & Chairperson, IIFT New Delhi
Copyright @ Oxford University Press International Business R. M. Joshi
Chapter 16: Global Operations and Supply Chain Management
GLOBAL OPERATIONS
AND SUPPLY CHAIN MANAGEMENT
Learning Objectives
To explain the significance of managing global operations and supply chain To elucidate the concept of global operations management To explicate global supply chain management To discuss key concepts and issues of maritime transportation in international trade To elaborate containerisation and multi-modal transportation To examine international organizations associated with international maritime transportation To discuss institutional framework for maritime transport in India
Operations Management
Planning, organizing, and controlling all
resources and activities to provide goods
and
services,
which
applies
equally
to
manufacturing and services.
Globalization of Operations
The forces of globalization have led to expansion of operations on a global scale which include Global sourcing of inputs Global production of goods and services Global transportation of products Global management of entire supply chain
Copyright @ Oxford University Press International Business R. M. Joshi Chapter 16: Global Operations and Supply Chain Management
Off-shoring
Relocation of business processes to a low-cost location by shifting the task overseas. Capital assets may be shifted from high-cost locations (for example, the US or Europe) to low-cost locations,
such as India, China, or Latin America.

Types of off-shoring
Captive off-shoring Third party off-shoring Near Shoring
Strategic Options for

Trans-national Operations
Globally Concentrated Operations

All production is concentrated at a single location and exported world wide.
Host Market Operations

Each production unit produces a range of products to serve the host country markets.
Product Specialization for a Global or Regional Market

Each production unit produces only one product for sale throughout a regional market comprising of several countries.
Trans-national Vertical Integration

Each operations facility located in different countries either perform a separate part of operations in a chain like sequence.
Global Integration (L) vs./ Local Responsiveness (R)
Global integration
The coordination of activities across the country so as to build an efficient operations network and take optimal advantage of internalized synergy at similarities across operational locations.
Local responsiveness
A firms attempt to respond to specific needs within various host countries.
Global Supply Chain Management

Global integration and management of
business processes across the three major
systems
of
supply
chain:
and
materials
physical
management, distribution.
operations
International Logistics
Conceptualization, design, and
implementation of a system to direct flow of

goods and services across national borders. Logistics has two distinct components, i.e., materials distribution.
management
and
physical
Managing Global Supply Chain

Managing a supply chain globally is far more complex due to physical distance, differences in logistics systems and their compatibility, different legal systems, and numerous intermediaries involved.
A seamless and efficient global supply chain consists of major constituents, such as transportation, warehousing, inventory management, packaging and unitization, and information and communication technology,
Warehousing
Goods need to be stored so as to bridge the time gap between the production and meeting the customer demand. The major functions of warehousing include:
Storage of goods Consolidation Breaking bulk
Mixing or assembly
Inventory Management
Maintaining inventories is an integral part of supply chain management. The principal reasons for holding inventories are
To maintain uninterrupted supply
To optimize buying costs

To economies production costs To take advantage of quantity discounts
To cope-up with seasonal fluctuations
Packing and Unitization

Packaging of export cargo is an important
logistics activity as it facilitates safe and

smooth shipment of goods. Besides, packaging facilitates unitization of export
cargo that facilitates cargo-handling during

transit. Containarisatiaon increases the size of unit load and facilitates handling and transportation of cargo.
Transportation Transportation is an important part of international logistics. Various modes of transport used include:
Air Road Rail and Ocean transportation
Third Party Logistics (3PL)
Outsourcing of more sophisticated logistics
and supply chain services, especially on a
global scale.
Maritime Transportation in International Trade

Ocean transport is responsible for carriage of 90 per cent of world trade, making it the largest means of transport in international trade. Since ocean transportation is the oldest mode of international business, a large number of shipping practices are derived by the customs of trade. It is the low-cost availability and efficiency of maritime transport that has made it possible to shift industrial production to low-cost countries.
Types of Ocean Cargo

Bulk
Cargo that is loaded and carried in bulk, without mark or count, in a loose unpackaged form, having homogenous characteristics e.g. coal, iron ore, fertilizers, grains, oil, etc. Break-bulk Packaged cargo that is loaded and unloaded on a piece-by-piece basis, i.e., by number or count. This can be containerized or prepared in groups of packages e.g. coffee, rubber, steel, etc. Neo-bulk Certain types of cargo that are often moved by specialized vessels, e.g., auto, and logs are termed as neo-bulk.
Containerized Cargo loaded at a facility away from the pier or at a warehouse into a metal container usually 20 to 40 feet long, 8 feet high, and 8 feet wide.
Types of Commercial Vessels
On the Basis of Registry Groupings
Oil tankers Bulk carriers General cargo vessels Container ships Other vessels
On the Basis of Type of Cargo

Container ships Tankers Bulk carriers Neo-bulk carriers Combination carriers Other vessels General cargo vessels
Roll-on and roll off (Ro/Ro) vessels LASH (Lighter aboard ships) vessels
On the Basis of Decks
Single deck vessel The tween deck vessel Shelter deck vessel
Specialized cargo vessel
Container vessel
Alternates for Ocean Shipment
Charter Shipping
Often used for shipment of bulk cargo, the charter vessel does not have any fixed sailing schedule and can be hired to ship the firms cargo on charter basis as per the terms and conditions of the charter party. Charter party: The contract made between the charterer and ship-owner that contains details of the ship, routes, methods of cargo handling, port of call, etc.
Forms of Chartering
Voyage charter: Contract of carriage in which a
vessel is hired for transport of a specified cargo from one port to another port
Time charter: Hiring of a ship for a time period
whereby the ship-owner places the ship with crew
and equipment at the disposal of the charterer
Bare boat (demise) charter: Hiring of a ship for a specified period of time during which ship-owner
provides only the ship whereas the charterer has

to provide the crew together with all stores and bunkers and pays for all operating costs.
Back-to-back
charter:
Contract
between
charterer and a sub-charterer, whose terms and conditions are identical to contract (charter) between the charterer and the ship-owner
Trip time charter: A charterer hires the vessel for single voyage or a round trip on terms and conditions similar to time-charter
Contract of affreightment: A long-time agreement to carry a certain amount of cargo between two ports
Contract Terms Used in Vessel Chartering
Gross terms: The ship-owner is responsible for the cost of loading, stowing, trimming, and unloading of the vessel. Net terms: The ship-owner is not responsible for cost of loading and discharge.
Free in and out (FIO): The charterer has to arrange the
stevedores and to load/discharge the cargo on his or her own account Free in and out stowed and trimmed (FIOST): Similar to FIO, but charterer is also responsible and bears the expenses of stowing and trimming
Shared responsibilities: The charterer and the ship owner both have shared responsibilities in the following terms:
Free in liner out (FILO): Ship-owner is not responsible for the cost of loading but is responsible for cost of unloading Liner in free out (LIFO): The ship-owner is responsible for cost of loading but not for vessel unloading
Laytime: This can be expressed in days, hours, tons per day, etc.
Other Terms
SHEX: Sundays and holidays excluded SHINC: Sundays and holiday included FHEX: Fridays and holidays excluded FHINC: Fridays and holidays included The other terms used in charter party are: As fast as the vessel can (FAC): Maximum rate at which a vessel can load / unload Notice of readiness (NOR): Formal advice that the vessel is ready for loading / unloading. Running days: Days that run consecutively after each other Weather permitting: Inclement weather is excluded from laytime Weather working day (WWD): A day or part of a day when weather does not prevent loading/unloading
Liner Shipping
Regular scheduled vessel services between two ports. Liner or Shipping Conferences
Collaboration lanes that between two or more shipping
companies to operate vessel in the same trade legally agree not to compete on price,
and charge the same freight for the same type of

cargo and the same voyage.
Multi-Modal or Inter-Modal Transportation

Transport of goods by at least two different modes of transport, such as rail, road, sea, or air on the basis of a multi-modal
transport contract.
Types of Containers ISO containers: Standard size containers with Width: 8 feet
Heights: 8 feet 6 inches and 9 feet 6

inches; Lengths: 20 feet and 40 feet
Principle Configurations of ISO Containers Dry containers Insulated or thermal containers Refrigerated or reefer containers
Open top containers

Liquid bulk container Dry bulk container Flat racks and platforms
Swap bodies These have many characteristics of intermodal containers but are not standard ISO containers. Strong bottom and a minimal upper body constitute their major characteristics. FCL vs. LCL containers Use of an entire container in FCL whereas partial space in a container is used in LCL
International Organizations
Associated with
International Maritime Transportation
International Maritime Organization (IMO)

A specialized agency of the United Nations
responsible
to
develop
and
maintain
comprehensive regulatory framework for shipping which includes maritime security and safety,
environmental concerns, legal matters, technical cooperation, and the efficiency of shipping.
International Labour Organization (ILO)

Standards of employment and working
conditions for seafarers are established by

ILO were adopted by the Maritime Labour
Convention (MLC) to provide a level playing

field on a global basis with regard to seafarers employment standards.
World Customs Organizations (WCO)

In June 2005, the WCO unanimously adopted the Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) which provides broad outlines and overarching principles
concerning security and facilitating global supply chain, based on two main pillars: customs-to-
customs
cooperation
and
customs-to-business
partnership.
United Nations Conference on Trade and Development (UNCTAD)

It monitors development in the field of transport security and disseminates
informations in form of various reports and its annual Review of Maritime Transport.
International Organization for Standardization (ISO)

In order to enhance supply chain security, consistent with ISPS code, and the WCO Framework of Standards, ISO has developed certain procedures and standards. Although ISO standards are voluntary, they are developed in response to market demand
based on consensus of interested parties.

Institutional Framework for Maritime Transport in India
Ministry of Shipping
It is responsible for monitoring and
development
of
maritime
transport
infrastructure and formulating policies and
programmes
for
development
of
shipbuilding, ship-repair, major ports, and inland water transport.

National Shipping Board
Established
in
1959
it
advises
the
Government on matters related to shipping and its development.
Directorate General of Shipping
Established
in
1949,
it
is
responsible
for
administration of the Indian Merchant Shipping Act, 1958 on all matters related to shipping policy and legislation, implementation of various international conventions promotion of maritime education and training, examination and certification, supervision of subordinate offices, etc.
The Shipping Corporation of India Ltd. (SCI)

Formed on 2 October, 1961 by the amalgamation of
Eastern
Shipping
Corporation
Ltd.
(ESC)
and
Western Shipping Corporation of India Ltd. (WSC),
the SCI has diversified fleet.

Container Corporation (CONCOR) of India

Set up in 1988 aims to develop multi-modal logistics support for Indias international and
domestic containerized cargo and trade. Though rail is the mainstay of CONCORs transportation plan, road services are also provided according to market
demand
and
operational
exigencies.

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Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Copyright @ Oxford University Press International Business R. M. Joshi

resources and activities to provide goods

manufacturing and services.

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

such as India, China, or Latin America.

Captive off-shoring Third party off-shoring Near Shoring

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Strategic Options for

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Globally Concentrated Operations

Host Market Operations

Product Specialization for a Global or Regional Market

Trans-national Vertical Integration

Global Integration (L) vs./ Local Responsiveness (R)

A firms attempt to respond to specific needs within various host countries.

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Global Supply Chain Management

business processes across the three major

Chapter 16: Global Operations and Supply Chain Management

implementation of a system to direct flow of

Managing Global Supply Chain

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

To optimize buying costs

To cope-up with seasonal fluctuations

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Packing and Unitization

logistics activity as it facilitates safe and

cargo that facilitates cargo-handling during

Third Party Logistics (3PL)

Outsourcing of more sophisticated logistics

and supply chain services, especially on a

Maritime Transportation in International Trade

Types of Ocean Cargo

Types of Commercial Vessels

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

On the Basis of Registry Groupings

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

On the Basis of Type of Cargo

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

On the Basis of Decks

Specialized cargo vessel

Alternates for Ocean Shipment

Copyright @ Oxford University Press International Business R. M. Joshi

Chapter 16: Global Operations and Supply Chain Management

Voyage charter: Contract of carriage in which a

Time charter: Hiring of a ship for a time period

whereby the ship-owner places the ship with crew

and equipment at the disposal of the charterer

Copyright @ Oxford University Press International Business R. M. Joshi