Complexity
Advantages of International SC: 1) Standardized Products: Economies of Scale, 2) Lower Costs: More
potential sources of raw materials, labor, outsourcing, manufacturing options etc., 3) Increased
Access to New Markets: Through increasing the size and scope of the supply chain, 4) Flexibility:
Provide (potentially) the flexibility to cope with the uncertainty of international markets
Risks of international SC: 1) Substantial geographic distances, 2) added forecast difficulties, 3)
infrastructural incompetence (worker skills, lack of local technologies etc.), 4) Exchange rate
uncertainties, 5) Cultural differences: local rules, attitudes to work, 6) political issues, 7) Added
competition “at home”: Focus is offshore
Strategies to lower risks: 1) redundancy, 2) increase velocity in sensing and responding, 3)
adaptive SC
Redundancy (to have backups, εφεδρεία) so you can respond to unforeseen events. Example: a CPG
company: initial 40 decided to reduce them to 23 plants. According to initial analysis, the total
demand would have been satisfied but there were not any plants in major geographic areas
therefore the SC will be compromised for any disruption such as geopolitical problems. Conclusion:
Good analysis of the trade-offs, not always the optimal solution is the best!!
sensing and responding: Speed in sensing and responding can help the firm overcome unexpected
supply problems. Failure to sense could lead to: 1) Failure to respond to changes in the supply
chain and 2) can force a company to exit a specific market. Example: Nokia-Ericson chips fire.
Nokia: Changed product design to source components from alternate suppliers, all done in 5 days.
Ericson: 4-5 weeks delay all supply chips taken by Nokia.
Adaptability: The most difficult risk management method to implement effectively. Requires all
supply chain elements to share the same culture, work towards the same objectives and benefit
from financial gains. Need a community of supply chain partners that morph and reorganize to
better react to sudden crisis. Example: Toyota’s supplier (valves for brake fluid) Aisin fire in the
factory. Conclusions: successful business relationships between Toyota and its suppliers help to
minimize the losses from this event. Also, single sourcing is risky but worthy (due to economies of
scale high quality parts low cost) and Just In Time mode must identify and fix problem quickly
because of the low inventories the production will stop immediately.
Why strategy matters: a small reduction in variable expenses and in inventory can lead to high
increase in return on assets so a lot of money.
ARTICLE 1 TRIPLE A (LEE):
The best supply chains aren’t just fast and cost-effective. They are also agile and adaptable, and
they ensure that all their companies’ interests stay aligned.
Agile: They respond quickly to sudden changes in supply or demand. They handle unexpected
external disruptions smoothly and cost-efficiently. And they recover promptly from shocks such as
natural disasters, epidemics, and computer viruses. How? • Continuously provide supply chain
partners with data on changes in supply and demand so they can respond promptly. • Collaborate
with suppliers and customers to redesign processes, components, and products in ways that give
you a head start over rivals.• Finish products only when you have accurate information on customer
Advantages of International SC: 1) Standardized Products: Economies of Scale, 2) Lower Costs: More
potential sources of raw materials, labor, outsourcing, manufacturing options etc., 3) Increased
Access to New Markets: Through increasing the size and scope of the supply chain, 4) Flexibility:
Provide (potentially) the flexibility to cope with the uncertainty of international markets
Risks of international SC: 1) Substantial geographic distances, 2) added forecast difficulties, 3)
infrastructural incompetence (worker skills, lack of local technologies etc.), 4) Exchange rate
uncertainties, 5) Cultural differences: local rules, attitudes to work, 6) political issues, 7) Added
competition “at home”: Focus is offshore
Strategies to lower risks: 1) redundancy, 2) increase velocity in sensing and responding, 3)
adaptive SC
Redundancy (to have backups, εφεδρεία) so you can respond to unforeseen events. Example: a CPG
company: initial 40 decided to reduce them to 23 plants. According to initial analysis, the total
demand would have been satisfied but there were not any plants in major geographic areas
therefore the SC will be compromised for any disruption such as geopolitical problems. Conclusion:
Good analysis of the trade-offs, not always the optimal solution is the best!!
sensing and responding: Speed in sensing and responding can help the firm overcome unexpected
supply problems. Failure to sense could lead to: 1) Failure to respond to changes in the supply
chain and 2) can force a company to exit a specific market. Example: Nokia-Ericson chips fire.
Nokia: Changed product design to source components from alternate suppliers, all done in 5 days.
Ericson: 4-5 weeks delay all supply chips taken by Nokia.
Adaptability: The most difficult risk management method to implement effectively. Requires all
supply chain elements to share the same culture, work towards the same objectives and benefit
from financial gains. Need a community of supply chain partners that morph and reorganize to
better react to sudden crisis. Example: Toyota’s supplier (valves for brake fluid) Aisin fire in the
factory. Conclusions: successful business relationships between Toyota and its suppliers help to
minimize the losses from this event. Also, single sourcing is risky but worthy (due to economies of
scale high quality parts low cost) and Just In Time mode must identify and fix problem quickly
because of the low inventories the production will stop immediately.
Why strategy matters: a small reduction in variable expenses and in inventory can lead to high
increase in return on assets so a lot of money.
ARTICLE 1 TRIPLE A (LEE):
The best supply chains aren’t just fast and cost-effective. They are also agile and adaptable, and
they ensure that all their companies’ interests stay aligned.
Agile: They respond quickly to sudden changes in supply or demand. They handle unexpected
external disruptions smoothly and cost-efficiently. And they recover promptly from shocks such as
natural disasters, epidemics, and computer viruses. How? • Continuously provide supply chain
partners with data on changes in supply and demand so they can respond promptly. • Collaborate
with suppliers and customers to redesign processes, components, and products in ways that give
you a head start over rivals.• Finish products only when you have accurate information on customer
