INB 201Global Business TechnologyDr. Lairson

Global Business Revolution and Operations Management

GBR defines how business has changed in the past 50 years

Changes Over Time

Vertically integrated inside home nation

Exporter from Home Nation

Outsourcing

Global Production NetworkFragmentation of Value (Supply) ChainGlobal distribution of production

How Big is Fragmented Production?

Global Trade is about $20 trillion; Global GDP is about $75 trillion (26.7%)Trade in intermediate products and services = 60% of global trade or about $12 trillion (WIR 2013, 122)

Origins of GPNs

Lean and Flexible Manufacturing – Toyota

Application of Computers and Computer Networks

Containerization and ComputersContainerization prices for goods moving from Asia to the US dropped by 65% between 1972 and 1997. Kenney, 2004, 6.

Innovations in Software SystemsERPSCMCRM

Innovation and Knowledge-based management

Disney, Toys and Technology

Consequences of GBR

Business competition linked to technological change from rapid declines in the cost of creating, manipulating and distributing information on a global scale. Best single indicator of future technological change is Moore’s Law.

Information becomes key resource for firms

Accelerating pace and geographical scope of competition, technological change, innovation in products, processes and organization, and application of new knowledge.

New management capabilities:

Global knowledgeTech sophistication in using software Manage global supply chainsData analytics – manage via dashboard

Toyota

Lean and Flexible ManufacturingJust in Time Inventory

Kanban (search for Toyota kanban

Toyota regarded as world’s best car company Success based on creating a new system of production Westerners always misunderstand Toyota: thought Japanese success

related to more than low wages, which largely miss the point:

What are the competitive advantages developed by Toyota?

Close supplier relations – cooperative, long term mutual benefit relations; creation of network capabilities using specialization; compare to supplier relations by US firms

Successful outsourcing Intense cost-cutting attitude – no muda Invest in workers capabilities – operate multiple stations (jidoka -

multitasking) Learn to focus on quality (stop production to fix problem; quality

circles; continuous improvement; quality control measurement) Lean manufacturing – just in time inventory control - kanban Flexible manufacturing – change dies quickly – modular dies Integrated development – real-time links between design and

production in model development Large economies of scope

In sum , Toyota could develop a car faster, bring it to production quicker, build it at a lower cost, in more varieties, and with fewer defects than anyone else. Toyota Production System is the gold standard for all manufacturing of almost any product.

Walmart, Dell, Cisco

How can technology facilitate adoption of the Toyota system and even make it work better?

Logistics and Inventory Costs in US

1980 1995Inventory cost% of GDP 9% 4.3%

Logistics cost% of GDP 17.2% 10.8%

Source: Martin Kenney, “Introduction,” in Martin Kenney and Richard Florida, (eds.) Locating Global Advantage, Stanford: Stanford University Press, 2004, 5.

Result of the adoption of Toyota Manufacturing System, especially for inventory

The Leading Firm in inventory management is Wal-Mart

History of Wal-Mart

Sam Walton – 1918-1992

He purchased a store franchise in Arkansas in 1962Offering significant discounts on prices, he became successful and acquired a second store in 3 years.Focus is operating discount stores in small towns competing against local retailersMassive growth over time

Wal-Mart stores in the US - 2010

Wal-Mart Global Locations

Former locations are shown in red.

Wal-Mart Versus Target/Apple Income Statement

How did this happen?

# 1 reason: efficient Supply Chain Management

Hub and Spoke

Close Supplier Relations

Technology

Inventory: lower costs but always on shelves; quality customer service

Benefits of Wal-Mart Inventory Management

• Quick responsiveness to market changes• Low inventory• Quick replenishment of inventory• Effective human resource system• Efficient distribution system

Customer demand “pulls” product through the supply chain Tracking product movement at individual stores by market traits (e.g., size,

color) Investment in IT ensures timely analysis of sales/customer/market

information and trends

Formal and informal cooperation among stores, distribution centers, and suppliers

Deep information sharing with suppliers builds relationships

1970s and early 1980 Internet

No WWW

Toyota wins by replacing inventory with information

Bar codes and computers instead of cash registers

Electronic Data Interchange (EDI) – links suppliers to stores via information

1983 – Company owned satellite system

Creation of a comprehensive “Point of Sale” (POS) system

Sophisticated company owned logistics and information system – in-store, between store and distribution center, store – distribution center – suppliers

Rapid replenishment – Just in Time

Massive investment and training system to establish a real-time, end – to end information system – Retail Link System

System expands to include collaborative planning, forecasting and replenishment (CPFR).

Shift to web based EDI

RFID as replacement for bar codes

Contemporary Developments

• Inventory Tracking and Management System at distribution centers:

- Identifies every product and its location in the warehouse- Integrated with some 8.5 miles of laser-guided conveyor

belts- Lasers read the bar code on every product box and route

them to appropriate loading dock• Electronic Data Interchange (EDI):

- For electronic transmission of POS data, purchase orders, invoices, advance shipment notice, etc. between Wal-Mart headquarters, suppliers, distribution centers, and individual stores

• Merchandising Artificial Intelligence System:- To adjust vendor merchandise assortments based on the

need of each particular store- State-of-the-art satellite communication network which

supports data, voice, and video

Data Analytics

What does this mean?

How does GPN Operate?

Basic features of GPNs:o Fragmentation of value chaino Increased outsourcing of manufacturing and

serviceso Computer-based interaction for production,

logistics, designo Increased production speedo Expanding geographic of production and enhanced

global integrationo Creation of global supply base

o Production processes that previously were feasible and cost effective only within a single firm (and in a single

physical location) or within a nation and a small number of firms can now be reorganized into a wide array of specialized firms located across the globe in the most advantageous locations and with little regard for distance per se.

o The GPN has a distinct structure of power and control, typically starting from one or more lead MNCs – or global system integrators (GSIs). These firms usually have the greatest knowledge and other resources – marketing, design, management, information, branding, market access – and whose core competency is to organize these resources to structure and integrate the value chain.

o GPNs are the most prominent in firms with significant levels of knowledge intensity in production and/or product and where firms enjoy considerable economies of scale.

o Composed of linkages among TNCs, national and local governments, local firms, research institutes, parastatal institutions, global research labs, universities (science, technology, and business units), consulting firms, government agencies, NGOs, and IOs. These linkages are composed of the exchange of products, strategic alliances, and exchanges of knowledge and technology.

o The network is bound together by the actions of the GSI in relation to geographically dispersed firms and the states where they are located. This is accomplished through the creation of an information and logistics system to bind the network together, through foreign direct investment by the GSI (examples include Cisco Systems and/or contract manufacturers), through the sharing of knowledge and technology, and through support for the creation of institutional capabilities in the various states where nodes of production are located. The various nodes in the network are not all equal because differentiated connections to

global markets and global knowledge networks exist across the network.