BUSI 613
Page 1 of 2
DISCUSSION: CURRENT SCM TOPICS ASSIGNMENT INSTRUCTIONS
From the three current SCM topics found below, select the one you would like to research. This
will be the topic of your Discussion Thread: Current SCM Topic.
THREAD
Put the name of the topic on your title page.
In 500–750 words, address the following items:
o Explain the background of the situation from a broad perspective.
o Explain the potential consequences of the situation as it is explained, along with several
alternative responses to it.
o Present your proposed response to the situation, along with justification for its selection.
o Include the following headings: background of the situation, potential
consequences/alternative responses, proposed response.
o You must reference at least 2 scholarly sources in addition to your textbook. Use peer-
reviewed articles, such as those found in supply chain management journals. In addition
to the 2 scholarly articles and the textbook, you may use newspapers, and magazines
(Fortune, Wall Street Journal, The Economist, etc.) as found in the Liberty University
Online Library.
REPLIES
You must respond to at least 2 of your colleagues’ threads with replies of at least 350 words.
For both replies:
o Reply to threads on the topic which you did not address in your thread.
o Analyze your classmate’s thread, identifying at least one strength and one weakness in
his or her reasoning.
o You must reference at least 1 scholarly source for each reply.
Note about responses: Seek to understand your colleague's approach, rationale, and facts
presented in his or her post. Aim to communicate your own understanding of relevant facts, your
values, and your perspective of the topic.
This is an important assignment that requires significant research efforts; do not wait until
the last minute to complete this assignment.
TOPICS
1. The trend toward distribution center floor robotics has increased the need for workers
skilled in robotics maintenance, but workers trained in such maintenance are in short
supply. As a distribution center manager concerned with cost containment, you realize
the importance of increasing the use of robotics, but are fearful of the problems caused by
lack of skilled repair personnel. How will you respond to this situation?
2. 3-D printing has been growing in popularity in recent years, with firms using it to reduce
cost and facilitate just-in-time production. As a production manager, you understand the
BUSI 613
Page 2 of 2
benefits of such technology, but wonder about cost, maintenance, and impact on present
suppliers, many of whom have been selling to you for decades. You fear that ending such
relationships may mean the end of your preferred customer status for other purchases
made from them. Explain your decision-making process in this situation.
3. A member of the procurement staff at your organization has suggested implementing the
use of social media in your supply chain management activities. If you decide to do this,
how would it be used? What tasks will it assist in performing? Which media will be
used? On what basis would you approve or disapprove of its use?
Chapter
Thirteen
Global
Sourcing
Purchasing
and
Supply
Management,
16th
Edition
Chapter
Fourteen
Global
Supply
Management
Chapter
Outline
Regional
Trading
Agreements
North
American
Free
Trade
A
t
The
Importance
of
Global
Supply
(NAFTA)
EET
NE
reasons
-
oa
Purchasing
‘The
European
Union
(EO)
otentia
roblem
Areas
ASEAN
Selecting
and
Managing
Offshore
Mercosur
Suppliers
Global
Sourcing
Organizations
Andean
Community
China’s
Trade
Agreements
Intermediaries
The
World
Trade
Organization
(WTO)
Information
Sources
for
Locating
and
. :
Emerging
Markets
Evaluating
Offshore
Suppliers
Conclusion
Incoterms
6
sor
Revi
Rules
for
Any
Form
of
Transport
uestions
for
Review
and
Discussion
Rules
for
Sea
and
Inland
Waterway
References
Transport
Only
Cases
Tools
for
Global
Supply
14-1
Trojan
Technologies
Countertrade
14-2
Marc
Biron
Foreign
Trade
Zones
14-3
Sarin
Pharmaceuticals
Ltd.
Bonded
Warehouses
Temporary
Importation
Bond
(TIB)
and
Duty
Drawbacks
401
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
403
were
as
follows:
China
(13.6
percent),
the
United
States
(9.4
percent),
Germany
(8.7
percent),
Japan
(4.2
percent),
and
the
Netherlands
(3.7
percent).
Overall,
the
top
10
countries
accounted
for
53
percent of
the
world’s
total
merchandise
trade
and
developing
economies
had
41
percent
share
in
world
merchandise
trade
in
2016.!
However,
international
trade
is
not
restricted
to
goods
alone.
In
2016,
world
commercial
services
imports,
such
as
transportation,
construction,
communications,
computer
and
information,
insurance,
and
financial
services,
totaled
$4.7
billion.”
Reasons
for
Global
Purchasing
The
reasons
for
sourcing
from
other
countries
are
many
and
vary
with
the
specific
require-
ment.
However,
the
underlying
summary
reason
for
using
an
offshore
supplier
is
that
better
value
is
perceived
to
be
available
from
that
source
than
from
a
domestic
one.
A
suppli-
er’s
ability
to
be
competitive
is
influenced
by
the
overall
competitiveness
of
the
country.
Therefore,
embarking
on
a
global
sourcing
strategy
requires
a
level
of
country
knowledge
and
analysis
beyond
that
for
a
domestic
supplier.
The
specific
factor
that
makes
the
international
buy
look
attractive
will
vary.
Technological
know-how
can
shift
from
one
country
to
another
over
time;
the
ability
and
willingness
to
control
quality
can
change;
and,
from
time
to
time,
a
stronger
U.S.
dollar
makes
the
price
of
offshore
goods
more
attractive.
There
are
at
least
10
specific
reasons
an
offshore
supplier
may
be
selected
as
the
preferred
source.
1.
Unavailability
of
Items
Domestically
The
first
and
oldest
reason
for
international
trade
has
been
that
domestic
sources
were
unavailable.
For
example,
cocoa
and
coffee,
certain
spices
and
fruits,
chrome,
palladium,
and
rare
earth
elements
are
available
only
from
certain
countries.
As
comparative
economic
advantage
shifts,
the
location
of
manufactured
products
shifts.
For
example,
the
United
States
no
longer
manufactures
televisions,
and
99
percent
of
footwear
is
imported,
compared
to
only
2
percent
in
the
1960s.>
The
manufacture
of
electronics
parts,
audio
and
telecommunications
equipment,
and
computer
and
office
equipment
has
moved
from
Japan
and
South
Korea
as
manufacturers
set
up
facilities
in
lower-cost
countries
such
as
China,
India,
and
the
Philippines
or
outsource
to
contract
manufacturers
in
these
countries.
Global
supply
chains
include
numerous
tasks
from
design
to
manufacturing
to
assembly
and
marketing.
Intermediate
unfinished
goods
often
cross
borders
several
times
before
final
assembly.
The
World
Trade
Organization
reports
increasing
trade
in
intermediate
goods.
Consequently,
for
many
organizations,
global
supply
has
become
a
necessity.
2.
Price
and
Total
Cost
Most
studies
show
that
the
ability
of
an
offshore
supplier
to
deliver
product
in
the
United
States or
Canada
at
a
lower
overall
cost
than
domestic
suppliers
is
a
key
reason
to
buy
globally.
While
it
may
seem
surprising
that
an
offshore
supplier
can
produce
and
ship
an
1
World
Trade
Organization
Statistical
Review
2017,
https:/Awwwwto.org/english/res_e/statis_e/wts2017_e/
wts
17_toc_e.him.
24:
Ibid.
3
Statista,
2018,
https://Awww.statista.com/statistics/232244/overview-of-the-us-footwear-industry/.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
405
D.
The
offshore
supplier
may
be
concentrating
on
certain
products,
and
pricing
export
products
at
particularly
attractive
levels
to
gain
volume.
One
practice
is
dumping,
which
occurs
when
a
product
is
sold
in
another
country
for
less
than
either
(a)
the
price
in
the
domestic
market,
or
(b)
the
cost
to
make
the
product.
Dumping
is
illegal
in
some
countries
for
certain
products
because
governments
want
to
protect
the
domestic
pro-
ducers
from
what
is
perceived
as
unfair
competition.
While
there
are
many
attempts
to
prevent
dumping
practices,
control
of
this
is
complex
and
has
never
been
particularly
effective.
Some
countries
and
regions
have
developed
infrastructures
and
supply
net-
works
that
support
the
efficient
production
of
certain
goods,
sometimes
referred
to
as
industry
clusters.
Examples
include
integrated
circuits,
computers,
and
computer
parts
in
Malaysia;
clothes
and
shoes
in
China;
and
wire
and
cable
assemblies
in
Mexico;
and
flowers
in
The
Netherlands.
The
Trojan
Technologies
case
at
the
end
of
this
chapter
illustrates
how
a
company
wants
to
achieve
cost
savings
through
a
low-cost
country
sourcing
plan.
The
challenge
for
Joyce
Guo
in
the
case
is
to
develop
a
global
sourcing
process
and
decide
which
parts
are
best
suited
for
sourcing
in
Asia.
3.
Government
Pressures
and
Trade
Regulations
North
American
firms
produce
many
goods
that
are
sold
(exported)
around
the
world.
In
2016,
the
United
States
exported
$2.2
trillion
in
goods
and
services
while
Canada
exported
$474.3
billion.°
It
makes
sense
to
consider
buying
from
suppliers
in
customer
countries.
Many
executives
accept
the
social
responsibility
to
help
develop
the
economies
of
the
countries
in
which
they
operate.
Additionally,
many
nations
insist
as
a
condition
of
sale
of
a
major
product—for
exam-
ple,
aircraft—to
their
country
that
the
seller
agree
to
buy
a
specified
value
of
goods
or
ser-
vices
in
that
country.
These
types
of
arrangements,
called
offset
agreements,
are
covered
in
more
detail
later
in
this
chapter.
Also,
trade
incentives
or
restrictions
may
influence
decisions
about
source
location.
For
example,
China’s
market
share
of
textiles
increased
rapidly
after
the
United
States
lifted
quotas
on
textile
imports.
Decision
makers
must
consider
various
combinations
of
sourc-
ing
locations
and
destinations
for
inputs
(goods
and
services)
and
products
in
relation
to
bilateral
trade
agreements
to
identify
savings
opportunities.
4.
Quality
While
the
quality
level
of
the
offshore
sources
generally
is
not
higher
than
that
of
domestic
suppliers,
on
some
items
it
is
more
consistent.
This
could
be
a
result
of
several
factors,
such
as
newer
capital
equipment,
access
to
advanced
technologies,
better
qual-
ity
control
systems,
and
the
offshore
supplier’s
success
in
motivating
its
workforce
to
accept
responsibility
for
doing
it
right
the
first
time
(the
zero-defects
concept).
Also,
some
firms
buy
globally
to
round
out
their
product
line,
with
domestic
suppliers
fur-
nishing
“top-of-the-line”
items
and
offshore
suppliers
filling
in
some
of
the
“low-end”
holes,
and
vice
versa.
°
The
World
Bank,
https://data
worldbank.org/indicator/NE.EXP.GNFS.CD.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
407
purchasing
products
and/or
services,
before
trying
to
sell
into
the
market,
provides
several
advantages.
Establishing
supply
in
the
market
can
help
the
organization
understand
local
customs
and
culture,
business
practices,
and
laws
and
regulations.
It
can
also
assist
in
establishing
a
local
presence
and
brand
awareness.
9.
Tie-In
with
Offshore
Subsidiaries
Many
firms
operate
manufacturing,
distribution,
or
natural
resource-based
compa-
nies
in
other
countries.
A
conscious
decision
may
be
made,
particularly
in
the
case
of
emerging
economies,
to
support
the
local
economy
by
purchasing
there
for
export
to
the
home
country.
10.
Competitive
Clout
Competition
can
pressure
domestic
suppliers
to
become
more
efficient,
to
the
long-term
benefit
of
both
the
supplier
and
the
buyer.
Purchasers
may
use
imports
or
the
threat
of
imports
as
a
lever
to
pressure
concessions
from
domestic
suppliers.
Potential
Problem
Areas
While
it
is
not
possible
in
this
chapter
to
give
a
complete
discussion
of
all
the
potential
problem
areas
faced
in
global
sourcing,
and
the
methods
for
minimizing
the
impact
of
each,
the
major
ones
can
be
highlighted.
The
same
principles
of
effective
supply
discussed
throughout
this
book
apply
to
global
supply,
but
some
unique
problems
arise
when
dealing
across
country
boundaries.
Seventeen
potential
problem
areas
are
highlighted.
The
astute
buyer
will
recognize
that
he
or
she
must
consider
the
total
cost
of
ownership,
not
just
the
initial
purchase
price,
when
evaluating
an
offshore
source.
I.
Source
Location
and
Evaluation
The
key
to
effective
supply
is
selecting
responsive
and
responsible
suppliers.
Globally,
this
is
sometimes
difficult
because
obtaining
relevant
evaluation
data
is
both
expensive
and
time
consuming.
However,
the
methods
of
obtaining
data
on
offshore
suppliers
essentially
are
the
same
as
for
domestic
suppliers
(discussed
in
Chapter
12).
In
addition
to
gathering
background
data
(discussed
later
in
this
chapter
under
“Information
Sources
for
Locating
and
Evaluating
Suppliers”),
certainly
the
best
method
of
obtaining
detailed
data
is
an
on-site
supplier
visit.
Because
a
visit
to
a
supplier(s)
in
another
country
is
expensive
and
time
consuming,
it
must
be
well
planned.
If
the
dollars
and
risk
involved
are
great,
the
on-site
visit
is
a
necessity.
Firms
doing
a
great
deal
of
international
buying
will
make
frequent
visits
to
offshore
sources;
for
example,
in
a
firm
buying
millions
of
dollars
of
electronics
equipment,
the
responsible
supply
manager
likely
spends
a
signifi-
cant
percent
of
his
or
her
time
in
the
Far
East
visiting
and
negotiating
with
potential
or
current
suppliers.
There
are
alternatives
to
personal
on-site
visits,
such
as
the
use
of
consultants
and
local
third-party
purchasing
organizations.
The
Internet
has
made
information
on
potential
sources
more
readily
available,
and
email,
text
messaging,
and
Skype
meetings
represent
cost-effective
alternative
methods
of
communication.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
409
The
heightened
risk
of
supply
chain
disruptions
from
terrorist
acts,
counterfeit
goods,
or
unsafe
products
increases
the
time
and
costs
of
offshore
sourcing.
Every
importer
and
exporter
must
have
the
knowledge
and
records
about
its
products,
where
they
were
sourced,
and
how
they
were
transported,
because
governments
continue
to
increase
their
requirements
for
safety
standards
and
compliance
reporting.
A
highly
publicized
work-
place
safety
problem
at
a
supplier
facility,
including
damage
to
the
organization’s
brand,
can
be
significant.
Risk
management
strategies
and
contingency
planning
are
of
even
greater
importance
in
the
global
economy.
The
supply
manager
must
assess
risks,
establish
a
monitoring
sys-
tem,
and
communicate
in
time
to
implement
a
contingency
plan.
5.
Hidden
Costs
When
comparing
an
offshore
source
with
a
domestic
source,
it
is
easy
to
ignore
some
of
the
costs
in
the
offshore
purchase.
The
buyer
must
compare
total
cost
of
ownership
before
opt-
ing
for
an
offshore
supplier.
The
following
checklist
of
cost
factors
provides
some
examples
of
hidden
costs.
e
Currency
exchange
premiums.
¢
Commissions
to
customs
brokers.
¢
Terms
of
payment
costs
and
finance
charges:
letter
of
credit
fees,
translation
costs,
exchange
rate
differentials.
e
Foreign
taxes
imposed.
e
Import
tariffs.
e
Extra
safety
stock/buffer
and
transit
inventory,
plus
inventory
carrying
costs
due
to
lon-
ger
lead
times.
e
Extra
labor
for
special
handling.
e
Obsolescence,
deterioration,
pilferage,
and
spoilage.
e
Additional
administrative
expenses.
e
Packaging
and
container
costs.
e
Business
travel.
e
Fees
for
freight
forwarders,
consultants,
or
inspectors.
e
Marine
insurance
premium.
e
Customs
documentation
charges.
¢
Transportation
costs,
including
from
manufacturer
to
port,
ocean
freight,
from
port
to
company
plant,
freight
forwarder’s
charges,
port
handling
fees,
warehouse
costs.
e
Additional
security
measures.
6.
Currency
Fluctuations
Should
payment
be
made
in
the
buyer’s
currency
or
that
of
the
country
in
which
the
pur-
chase
is
made?
If
payment
is
to
be
made
in
a
short
period
of
time,
the
currency
exchange
rate
may
be
less
of
a
problem.
However,
if
payment
is
not
due
for
several
months
or
if
the
supply
relationship
lasts
for
a
long
time,
the
exchange
rates
could
change
appreciably,
making
the
price
substantially
higher
or
lower
than
at
the
time
the
agreement
was
origi-
nally
signed.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
411
9.
Warranties
and
Claims
In
the
event
of
rejection
for
quality
reasons,
what
are
the
responsibilities
of
both
parties?
Due
to
distances,
return
and
replacement
of
items
is
complex
and
time
consuming.
Are
there
provisions
for
the
buyer
reworking
the
items?
Who
pays
for
rework,
and
how
are
rework
costs
calculated?
These
areas
should
be
agreed
to
in
advance
of
the
purchase.
For
services,
it
may
be
even
more
difficult
to
resolve
differences
over
perceived
quality
levels
with
an
offshore
supplier
than
a
domestic
one.
Clearly
defined
expectations
are
a
critical
success
factor
in
services
contracts.
10.
Tariffs
and
Duties
A
tariff
is
a
schedule
of
duties
(charges)
imposed
on
the
value
of
the
good
imported
(or,
in
some
cases,
exported)
into
a
country.
While,
theoretically,
the
world
is
moving
to
elimi-
nate
tariffs
through
the
various
World
Trade
Organization
agreements,
tariffs
still
exist.
The
buyer
must
know
which
tariff
schedule(s)
applies
and
how
the
duties
are
computed.
Additionally,
the
contract
should
make
it
clear
who
pays
the
duty—buyer
or
seller.
A
Certificate
of
Origin,
issued
by
a
proper
authority
in
the
exporting
country,
is
the
documentused
to
certify
the origin
of
materials
or
labor
in
the
manufacture
of
the
item.
It
is
used
to
obtain
preferential
tariff
rates,
when
available.
For
example,
the
North
American
Free
Trade
Agreement
(NAFTA)
has
rules
relating
to
origin.
The
United
States
has
adopted
the
Harmonized
Tariff
Schedule
to
provide
a
uniform,
updated
international
coding
system
for
goods
moving
in
international
trade.
The
cost
of
noncompliance
with
import
regulations
can
be
staggering.
In
a
case
where
containers
are
marked
with
incorrect
country
of
origin,
the
costs
can
include
delayed
receipt
of
goods,
charges
for
freight
forwarders
or
attorneys
to
get
the
goods
released
from
customs,
remarking,
storage,
and
time
to
fix
the
problem.
For
more
serious
offenses,
fines
may
apply,
legal
action
may
be
required,
and
seizure,
and
possibly
forfeiture,
of
goods
may
occur.
11,
Administration
Costs
Global
supply
requires
additional
documentation,
mainly
for
duty
and
customs,
logistics
activities,
payment,
and
financial
transactions.
Even
with
technological
developments,
such
as
electronic
funds
transfers
and
Internet-based
communications
systems,
the
admin-
istrative
costs
in
global
procurement
pose
a
major
problem.
12.
Legal
Issues
If
potential
legal
problems
are
a
risk
in
domestic
buying,
they
are
several
times
greater
in
international
buying.
If
delivery
time
is
critical,
a
penalty
or
liquidated-damages
clause
for
late
delivery
may
be
advisable.
Also, a
performance
bond
may
be
required
or
a
bank
guar-
anty
to
ensure
payment
in
case
of
specified
nonperformance.
Litigation
is
time
consuming
and
expensive;
therefore,
it
is
increasingly
common
to
agree
to
settle
international
trade
disputes
by
international
arbitration.
The
UN
Convention
on
Contracts
for
the
International
Sale
of
Goods
(CISG)
went
into
effect
January
1,
1988.
The
CISG
applies
only
to
the
sale
of
goods
and
does
not
apply
to
services.
It
has
been
ratified
by
89
countries
that
account
for
a
significant
por-
tion
of
global
trade,
including
Canada,
Mexico,
the
United
States,
China,
Germany,
and
Japan.
The
goal
of
the
CISG
is
to
create
a
uniform
international
law
for
the
sale
of
goods.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
4413
13.
Logistics
and
Transportation
Logistics
presents
some
of
the
biggest
problems
for
buyers
involved
in
international
sourc-
ing.
The
trend
toward
integrated
logistics
on
the
domestic
side
is
mirrored
by
a
similar
move
in
global
supply.
Integrated
logistics refers
to
the
coordination
of
all
the
logistics
functions—the
selection
of
modes
of
transportation
and
carriers,
inventory
management
policies,
customer
service
levels,
and
order
management
policies.
Logistics
companies
that
provide
a
wider
base
of
services,
thereby
allowing
firms
to
coordinate
logistics
functions,
should
enable
more
cost-effective
and
competitive
international
sourcing.
Many
firms
outsource
logistics
activities
to
third-party
logistics
(3PL)
providers.
Deregulation
and
globalization
have
resulted
in
a
series
of
mergers
and
alliances
in
the
third-party
logistics
industry
as
service
providers
attempt
to
provide
a
global
presence
for their
major
customers.
International
freight
forwarders
are
increasingly
diversified,
offering
a
number
of
value-added
services,
such
as
payment
of
freight
charges,
trac-
ing
and
expediting,
making
routing
recommendations,
issuing
export
declarations,
and
preparing
certificates
of
origin.
The
growth
of
one-stop
service
providers
is
likely
to
continue
and
appears
to
be
in
congruence
with
intermodalism
(e.g.,
air-sea,
rather
than
all
air)
and
outsourcing.
14,
Language
Words
mean
different
things
in
different
cultures.
A
word
(legitimate
or
slang)
may
have
different
connotations
in
the
United
States,
Canada,
the
United
Kingdom,
or
in
South
Africa,
even
though
English
is
the
predominant
language
in
all
four
countries.
Consider
then
the
difficulties
of
communicating
with
someone
who
does
not
speak
your
language,
when
everything
must
go
through
translator.
Often,
the
buyer
may
not
even
know
the
connotations
of
the
words
used
by
the
translator.
Because
of
these
language
difficulties,
some
firms
insist
that
a
supply
manager
who
is
going
to
have
repeated
dealings
with
suppliers
whose
native
language
is
different
from
theirs
be
multilingual
or
take
a
language
course.
The
buyer
still
will
have
to
use
an
inter-
preter,
but
may
be
a
bit
more
comfortable.
Language
difficulties
may
be
compounded
by
the
prevalent
use
of
electronic
communications
such
as
email
and
texting.
Writing
in
a
second
or
third
language
may
prove
even
more
difficult
than
face-to-face
communication.
15.
Communications
Many
supply
managers
worldwide
are
used
to
instant
communication
when
dealing
with
their
domestic
supply
network
partners.
Communicating
with
offshore
suppliers
is
easier
than
ever
before,
with
online
video
conferencing,
such
as
GoToMeeting,
Cisco
WebEx,
and
Skype,
which
are
cheap,
easy
to
set
up,
and
accessible
with
most
Internet
connections.
Text
messaging,
instant
messaging,
email,
phone,
and
fax
all
help
make
communication
fast,
inexpensive,
and
reliable.
Texting,
which
is
widely
used
globally
for
personal
com-
munication,
is
increasingly
used
in
business
dealings.
Security,
confidentiality,
reliability,
and
speed
are
critical.
Some
organizations
use
service
level
agreements
(SLAs)
to
define
reliability
and
quality
parameters.
Still,
global
supply
can
involve
problems
with
communication.
These
relate
to
time
zone
differences
and
problems
with
the
communication
network
itself.
When
dealing
with
suppliers
several
time
zones
away,
purchasers
cannot
simply
pick
up
the
phone
and
talk
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14.
Global
Supply
Management
415
As
more
companies
commit
to,
and
report
on,
their
corporate
social
responsibility,
formal
monitoring
and
measurement
are
required
for
global
trade
and
supply
chain
prac-
tices.
Companies
want
to
ensure
that
suppliers
in
their
global
supply
chains
meet
or
exceed
required
sustainability
standards,
both
environmentally
and
socially.
Frequently
these
standards
are
set
through
supplier
codes
of
conduct,
with
conformance
monitored
through
regular
audits.
(See Chapters
6,
12,
and
17.)
SELECTING
AND
MANAGING
OFFSHORE
SUPPLIERS
Selecting
and
managing
offshore
suppliers
requires
an
organizational
infrastructure
that
can
compensate
for
the
challenges
of
offshore
sourcing
and
optimize
the
opportunities
of
a
globally
networked
supply
base.
Decisions
must
be
made
about
(1)
the
structure
of
the
global
sourcing
group,
(2)
the
role
of
third-party
intermediaries,
and
(3)
how
potential
sources
will
be
identified
and
researched.
Global
Sourcing
Organizations
The
structure
of
a
global
supply
organization
is
influenced
by
the
location
of
key
suppli-
ers
and
company
operations
and
the
overall
corporate
organizational
structure.
Companies
with
a
decentralized
organization
structure
give business
unit
and/or
local
supply
staff
responsibility
for
international
supply.
In a
centralized
or
hybrid
structure,
global
supply
activities
can
be
coordinated
through
several
organizational
models,
including
(1)
regional
purchasing
offices,
(2)
a
global
commodity
management
organization,
and
(3)
interna-
tional
purchasing
offices
(IPO).
Regional
Purchasing
Offices
One
approach
is
to
create
regional
purchasing
offices,
such
as
the
approach
taken
by
a
major
information
technology
services
company.
The
global
supply
organization
had
a
chief
purchasing
officer
for
each
of
its
four
regions—the
United
States;
Europe,
the
Middle
East,
and
Africa,
Asia
and
the
Pacific,
and
Latin
America
and
the
Caribbean—each
report-
ing
to
the
corporate
vice
president
of
global
procurement.
Furthermore,
the
structure
in
each
region
is
identical.
The
vice
president
of
global
procurement
believed
that
some
pro-
curement
activities—such
as
customer
sales
support,
process
management,
and
supplies
and
services—required
geographic
proximity.
However,
commodity
management
represented
one
area
where
geographic
location
was
not
always
important.
While
it
was
necessary
to
negotiate
local
and
regional
supply
agree-
ments
for
many
commodities,
responsibility
was
divided
between
the
European
and
U.S.
commodity
purchasing
organizations
for
its
global
suppliers.
Discussions
between
the
cor-
porate
vice
president
of
global
procurement
and
the
commodity
management
directors
for
the
United
States
and
Europe
led
to
consensus
regarding
lead
responsibility
for
global
com-
modities.
Such
decisions
were
based
on
supplier
location,
previous
experience
of
the
United
States
and
European
purchasing
staff
with
the
commodities
in
question,
and
staff
availability.
Global
Commodity
Management
Organization
Another
approach
is
the
creation
of
a
global
commodity
management
organization.
This
makes
sense
when
there
are
a
large
number
of
common
requirements
across
facilities
or
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
417
Seller’s
subsidiary.
Purchasing
from
the
North
American
subsidiary
of
an
offshore
sup-
plier
is
a
common
approach.
The
subsidiaries
provide
the
benefits
of
having
a
better
loca-
tion
(right
time
zone),
conducting
business
in
English,
and
accepting
payments
in
U.S.
dollars.
They
also
may
provide
credit
terms.
Sales
representatives.
Some
companies
hire
sales
agents
to
represent
them
in
various
regions
of
the
world.
Typically,
sales
representatives
handle
low-volume-value
contracts
and
are
paid
a
commission
by
the
supplier
that
is
included
in
the
price
of
the
goods.
Trading
company.
A
trading
company
is
typically
a
large
firm
that
normally
handles
a
wide
spectrum
of
products
from
one
or
a
limited
number
of
countries.
Trading
companies
are
used
extensively
by
Japanese
firms
to
move
products
into
North
America.
The
advan-
tages
to
the
buyer
of
using
a
trading
company
are
(1)
convenience;
(2)
efficiency;
(3)
often
lower
costs,
due
to
volume;
(4)
reduced
lead
times
because
it
often
maintains
inventory
in
North
America;
and
(5)
greater
assurance
of
the
product
meeting
quality
specifications
because
the
trading
company
inspects
in
the
producing
country
before
shipment.
But,
as
with
any
supplier,
the
buyer
should
assess
the
trading
company
carefully.
In
global
sourcing,
the
task
of
locating
and
evaluating
potential
suppliers,
and
selecting
and
managing
chosen
suppliers
is
more
difficult
than
in
domestic
source
selection.
Also,
decisions
must
be
made
about
how
to
organize
the
supply
process/function
for
efficient
and
effective
global
sourcing.
Information
Sources
for
Locating
and
Evaluating
Offshore
Suppliers
Similar
types
of
information
sources
are
available
to
the
global
buyer
as
the
domestic
buyer.
They
are
as
follows:
1.
The
Internet
can
be
used
to
gain
access
to
websites
for
companies
and
government
organizations.
Most
large
and
medium-sized
companies
have
websites
that
describe
their
main
products
and
services.
Many
governments
have
extensive
websites
that
provide
a
variety
of
information,
such
as
trade
statistics
and
assistance
for
importing
and
exporting
goods
and
services.
2.
A
number
of
government
sources
are
available.
The
U.S.
Department
of
Commerce
can
supply
current
lists
of
names
and
addresses
of
offshore
suppliers,
by
general
types
of
products
produced.
The
district
offices,
located
in
most
major
U.S.
cities,
can
be
helpful
in
obtaining
this
information.
Almost
all
countries
of
the
world
maintain
an
embassy
in
Washington,
D.C.
The
major
industrial
nations
(and
many
of
the
lesser
economically
developed
countries)
maintain
trade
consulates
in
the
United
States
and
Canada
(typically
in
Washington,
D.C.,
or
Ottawa,
but
many
also
have
an
office
in
other
major
cities,
such
as
New
York,
Toronto,
Miami,
New
Orleans,
Chicago,
San
Francisco,
or
Los
Angeles).
Their
role
is
to
promote
exports
from
their
country
so
they
will
supply
names
of
suppliers
and
background
information.
3.
The
chambers
of
commerce
located
in
major
cities
in
the
United
States,
Canada,
and
around
the
world
will
help
buyers
locate
sources.
The
International
Chamber
of
Commerce
has
contacts
through
its
country
branches
around
the
world
and
will
supply
leads
to
possible
sources.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
419
and
export
clearance,
and
two
of
the
terms
address
insurance.
Almost
any
international
purchase
or
sale
contains
a
reference
to
Incoterms.
These
rules
were
first
published
in
1936
and
are
modified
periodically.
The
most
current
version
is
Incoterms
2010,
and
current
plans
are
for
a
revision
to
Incoterms
in
2020.
The
latest
revisions
reclassified
the
rules
into
two
classes
(rules
for
any
mode
of
transport
and
rules
for
sea
and
inland
waterway
transport
only),
applied
the
rules
to
domestic
and
international
trade,
developed
two
terms
to
replace
four
from
the
2000
version,
clarified
that
only
the
first
seller
will
be
responsible
for
shipping
the
goods
when
commodities
are
sold
multiple
times
during
transit,
clearly
allocated
terminal
handling
charges
to
avoid
potential
double
exposure
for
the
buyer,
allocated
insurance
responsibility
and
security-related
obligations,
allowed
electronic
communication
in lieu
of
paper
where
agreed
or
customary,
and
reiterated
that
parties
should
refer
to
Incoterms
2010
(or
whichever
version
is
preferred)
expressly
in
their sales
contract.®
The
11
Incoterms
have
been
grouped
into
two
categories:’
Rules
for
Any
Form
of
Transport
1,
EXW:
Ex
Works
(named
place).
The
seller/exporter
makes
the
goods
available
at
his
or
her
premises,
and
the
buyer
assumes
all
costs
and
risks
from
the
seller’s
“named
place”
of
business.
The
seller
does
not
clear
the
goods
for
export
and
does
not
load
the
goods
for
transport.
This
arrangement
places
the
greatest responsibility
on
the
buyer,
who
assumes
all
risks
from
the
time
when
the
seller
has
made
the
goods
available.
2.
FCA:
Free
Carrier
(named
place).
The
seller
clears
the
goods
for
export,
delivers
them
to
the
carrier,
specified
by
the
buyer
at
the
named
location,
where
the
buyer
takes
pos-
session.
The
“named
place”
is
domestic
to
the
seller,
and
the
carrier
can
be
a
shipping
line,
an
airline,
a
trucking
firm,
a
railway,
or
an
individual
or
firm
that
undertakes
to
procure
carriage
by
any
of
these
methods
of
transport,
including
intermodal,
such
as
an
international
freight
forwarder.
The
buyer
assumes
all
risk
of
loss
or
damage
from
the
time
the
goods
have
been
delivered
to
the
carrier.
3.
CIP:
Carriage
and
Insurance
Paid
(named
place
of
destination).
The
seller
clears
the
goods
for
export,
delivers
them
to
the
carrier,
and
is
responsible
for
paying
for
carriage
and
insurance
to
the
named
port
of
destination.
The
seller
is
also
responsible
for
the
costs
of
unloading,
customs
clearance,
duties,
and
other
costs
if
included
in
the
cost
of
carriage,
such
as
in
small
package
delivery.
4.
CPT:
Carriage
Paid
To
(named
place
of
destination).
The
seller
clears
the
goods
for
export,
delivers
them
to
the
carrier,
and
is
responsible
for
paying
carriage
to
the
named
port
of
destination.
The
seller
is
also
responsible
for
the
costs
of
unloading,
customs
clearance
for
import,
and
duties
where
such
costs
are
included
in
the
cost
of
carriage,
such
as
small
package
courier.
The
buyer
is
responsible
for
all
additional
costs,
such
as
procuring
and
paying
for
insurance
coverage.
5.
DDP:
Delivered
Duty
Paid
(named
place
of
destination).
The
seller
clears
the
goods
for
export
and
is
responsible
for
making
them
available
to
the
buyer
at
the
named
place
of
destination,
including
customs
clearance
for
import.
Therefore,
the
seller
assumes
all
Ss.
Shepherd
and
T.
Graham.
New
Incoterms
2010:
A
Summary
of
the
Principal
Changes
to
Incoterms
2000,
www.ince.law.com,
2011.
?
Edward
G.
Hinkelman,
Dictionary
of
International
Trade,
10th
ed.,
Novato,
CA:
World
Trade
Press,
2012.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
421
Incoterms
do
not
(1)
apply
to
contracts
for
services;
(2)
define
contractual
rights
and
obligations
other
than
for
delivery;
(3)
specify
details
of
the
transfer,
transport,
and
deliv-
ery
of
the
goods;
(4)
determine
how
title
of
the
goods
will
be
transferred;
(5)
protect
either
party
from
risk
of
loss;
(6)
cover
the
goods
before
or
after
delivery;
or
(7)
define
the
rem-
edies
for
breach
of
contract.”
In
addition,
packaging
and
insurance
decisions
in
international
supply
are
much
more
complex
than
in
domestic
buying
situations.
Although
it
is
the
responsibility
of
the
seller
to
provide
packaging,
it
is
important
that
the
buyer
and
seller
agree
on
arrangements
for
packaging
in
the
contract.
Although
many
Incoterms
do
not
obligate
either
the
buyer
or
the
seller
to
procure
insurance,
both
parties
should
recognize
the
risks
and
make
arrangements
for
suitable
coverage.
TOOLS
FOR
GLOBAL
SUPPLY
There
are
a
number
of
tools
available
to
the
supply
manager
when
sourcing
globally.
These
include
(1)
countertrade,
(2)
foreign
trade
zones
(FTZ),
(3)
bonded
warehouses,
temporary
importation
bonds
(TIBs),
and
duty
drawbacks.
Countertrade
Countertrade
is
a
fancy
term
for
a
barter
agreement,
but
with
some
twists.
Barter
has
been
around
for
years
and
takes
place
when
payment
between
buyer
and
seller
is
made
by
the
exchange
of
goods
rather
than
cash.
U.S.
firms,
in
times
of
shortage,
often
swap
merchan-
dise;
for
example,
a
utility
trades
fuel
oil
to
another
utility
in
exchange
for
copper
cable,
as
a
matter
of
expediency.
However,
the
complexities
of
international
trade,
particularly
with
developing
countries,
have
brought
some
new
variations,
with
supply
right
in
the
middle
of
the
action.
There
are
five
principal
variations
of
countertrade.
Barter/Swaps
Barter
involves
the
exchange
of
goods
instead
of
cash.
Typically,
barter
takes
place
when
a
country,
which
is
short
of
hard
currency,
agrees
to
exchange
its
product
for
another
country’s
product.
This
normally
is
a
rather
clean
transaction,
for
the
firms
(countries)
are
exchang-
ing
equivalent
dollar
values.
If
goods
of
the
same
kind—for
example,
agricultural
items
or
chemicals—and
are
exchanged
to
save
transportation
costs,
the
arrangement
is
called
a
swap.
In
a mixed
barter,
the
seller
ships
product
of
a
certain
value—for
example,
motors—and
agrees
to
take
payment
in
a
combination
of
cash
and
product—for
example,
wheat.
It
then
is
up
to
supply
to
resell
the
product
for
cash
or
to
barter
it
to
someone
else.
A
commod-
ity
that
changes
hands
twice
is
referred
to
as
a
two-corner
trade.
If
it
changes
hands
three
times,
it
is
a
three-corner
deal.
Supply
often
gets
involved
in
situations
where
working
out
the
particular
barters
or
swaps
is
both
difficult
and
time
consuming.
Offset
Arrangements
Offsets
are
distinguished
by
the
condition
that
one
part
of
the
countertrade
be
used
to
purchase
government
and/or
military-related
exports.
Under
these
agreements,
in
order
to
2
Ibid.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
423
U.S.
firms
also
reported
651
offset
transactions
conducted
to
fulfill
prior
offset
agreement
obligations
with
26
countries,
representing
an
actual
value
of $5.0
billion
and
an
offset
credit
value of
$5.3
billion.!°
Countertrade
is
also
used
in civilian
government
procurement
projects,
such
as
the
sale
of
civilian
aircraft,
telecommunications,
and
technology
systems.
In
the
competitive
global
marketplace,
the
ability
to
meet
countertrade
requirements
in
a
cost-effective
man-
ner
offers
a
competitive
advantage.
Supply
has
a
legitimate
role in
managing
countertrade
arrangements
and
should
be
involved
early
in
the
process.
Supply
can
provide
feedback
on
cost
implications,
the
status
of
the
countertrade
market,
sourcing
information,
and
the
availability
of
suppliers
and
opportunities
for
barter.
Unfortunately,
supply
is
not
always
involved
in
the
decision
to
engage
in
countertrade,
but
supply
becomes
involved
after
the
decision
has
been
made,
at
the
stage
where
potential
counterpurchases
are
being
evaluated.
Given
the
risks
of
countertrade—the
possibility
of
poor-quality
goods and
services,
the
development
of
unprofitable
deals,
and
the
accep-
tance
of
goods
and
services
that
do
not
match
marketing
channels—the
supply
function
should
be
consulted
in
the
proposal
evaluation
stage.
Often,
countertrade
obligations
present
complex
problems
for
supply
managers.
However,
they
may
also
provide
the
opportunity
to
develop
lower-cost
sources
of
supply
in
the
world
marketplace.
Because
countertrade
is
a
“way
of
life”
for
many
supply
professionals,
several
guide-
lines
are
suggested:
1.
Decide
whether
countertrade
is
a
viable
alternative.
If
a
company
does
not
have
the
organization
to
do
the
international
sourcing
required,
it
might
contract
with
a
third-
party
service
provider
to
manage
the
process
or
refuse
to
participate.
Build
the cost
of
countertrade
into
the
selling
price.
Know
the
country—its
government,
politics,
and
regulations.
Know
the
products
involved
and
what
is
available.
AR
wD
.
Know
the
countertrade
negotiation
process—offset
percentage,
penalties,
and
time
period.
The
Global
Offset
and
Countertrade
Association
(G.O.C.A.)
(formerly
the
American
Countertrade
Association—ACA)
includes
more
than
100
globally
based
companies
engaged
in
countertrade
and
offset.
The
purpose
of
G.O.C.A.
is
to
promote
trade
and
com-
merce
between
companies
and
their
foreign
customers
through
a
greater
understanding
of
countertrade
and
offset
(www.globaloffset.org).
Foreign
Trade
Zones
Foreign
trade
zones
(FTZ)
are
special
commercial
and
industrial
areas
in
or
near
ports
of
entry,
designed
to
avoid,
postpone,
or
reduce
duties
on
imported
goods.
Foreign
and
domestic
merchandise,
including
raw
materials,
components,
and
finished
goods,
may
be
brought
in
without
paying
customs
duties.
FTZs
are the
U.S.
version
of
what
are
known
internationally
as free
trade
zones.
Merchandise
brought
into
these
zones
may
be
stored,
Us,
Department
of
Commerce,
Bureau
of Industry
and
Security,
Offsets
in
Defense
Trade,
Sixteenth
Study,
December
2016,
https://www.bis.doc.gov/index.php/documents/pdfs/1620-twenty-first-report-
to-congress-12-16/file.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
425
drawback
of
duties
paid.
Likewise,
when
products
are
transferred
from
bonded
warehouses
to
foreign
trade
zones,
the
bond
is
canceled
and
all
obligations
in
regard
to
duty
payment
and
time
limitations
are
terminated.
Also,
exporters
of
domestic
goods
subject
to
internal
revenue
taxes
receive
a
tax
refund
when
products
move
into
a
foreign
trade
zone.
Exhibition
and
display.
Users
of
a
zone
may
exhibit
and
display
their
wares
to
custom-
ers
without
bond
or
duty
payments.
They
can
quote
firm
prices
(because
they
can
deter-
mine
definite
duty
and
tax
rates in
advance)
and
provide
immediate
delivery.
Duty
and
taxes
apply
only
to
goods
that
enter
the
customs
territory.
If
the
company
has
large
offshore
suppliers
or
is
contemplating
importing
substantial
amounts
of
dutiable
products,
savings
can
be
realized
on
duties
or
drawbacks
and
on
the
cost
of
shipping
both
imported
materials
to
plants
inland
and
manufactured
products
back
to
the
same
port
for
export.
The
functions
actually
performed
in
any
zone
depend
on
the
inherent
nature
of
the
trading
and
commercial
community
and
demands
made
by
users
of
zone
facilities.
Avoiding,
postponing,
or
reducing
duties
on
imported
goods
makes
them
more
com-
petitive
in
the
U.S.
marketplace
and
creates
economic
benefits
for
the
local
community
through
job
creation.
The
potential
disadvantages
of
the
FTZ
are
(1)
the
additional
labor
costs
and
operating
and
handling
costs
associated
with
its
use
and
(2)
the
uncertainty
of
its
long-term use
due
to
changes
in
international
trade
agreements
that
are
reducing
and
eliminating
import
duties.
Maquiladoras
Mexico’s
maquiladoras
are
examples
of
the
foreign
trade
zone
concept
or
industrial
parks.
Non-Mexicans
can
own
the
maquila,
or
plant, in
the
maquiladora
in
order
to
take
advan-
tage
of
low
Mexican
labor
costs.
Maquilas
are
best
suited
to
labor-intensive
assembly.
Parts
and
supplies
enter
Mexico
duty
free,
and
products
exported
to
the
United
States
are
taxed
only
on
the
value
added
in
Mexico.
Maquiladoras
face
competition
other
emerging
countries
with
low-cost
labor,
including
Bangladesh,
Malaysia
and
India,
and
from
special
economic
zones
of
China.
Special
Economic
Zones
of
China
(SEZs)
Special
economic
zones
of
China
(SEZs)
use
tax
and
business
incentives
to
attract
foreign
investment
and
technology
as
a
means
of
supporting
economic
growth.
Located
in
main-
land
China,
foreign
and
domestic
trade
and
investment
are
conducted
in
SEZs
without
the
authorization
of
the
Chinese
central
government.
The
first
four
SEZs
were
opened
in
the
early
1980s.
More
recently,
the
Chinese
government
has
sanctioned
additional
free
trade
zones,
known
as
economic
and
technology
development
zones
(ETDZ),
which
are
smaller
than
SEZs
and
place
a
greater
emphasis
on
specific
industries.
The
country
is
also
experiment-
ing
with
converting
some
SEZs
to
free
trade
zones.
In
2018,
China
had
six
SEZs,
14
open
coastal
cities
and
11
pilot
free
trade
zones.
Bonded
Warehouses
Bonded
warehouses
are
utilized
for
storing
goods
until
duties
are
paid
or
goods
are
otherwise
properly
released.
Ownership
is
approved
by
the
Treasury
Department.
They
are
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
427
United
States,
at
more
than
$630
billion
in
total
imports
and
exports,
Canada
and
Mexico
rank
a
close
second
and
third.
In
2016,
the
United
States
had
almost
$1
trillion
in
total
trade
with
its
NAFTA
partners.’
Buyers
must
adhere
to
NAFTA’s
rules
of
origin
for
products
eligible
for
preferential
reduced
tariff
rates.
Other
goods
are
taxed
as
if
they
were
from
any
other
country.
Filling
out
and
filing
the
certificate
of
origin
is
a
major
problem
for
many
importers
and
a cost
driver
because
of
inconsistent
and
product-specific
rules
and
documentation.
Purchasers
can
file
an
annual
blanket
certificate
if
they
anticipate
buying
the
same
goods
more
than
once
a
year.
Common
external
tariffs
would
enable
the
NAFTA
countries
to
eliminate
the
agreement’s
rules
of
origin.’
On
May
18,
2017,
U.S.
Trade
Representative,
Robert
Lighthizer,
informed
Congress
that
President
Trump
intended
to
renegotiate
the
NAFTA
agreement
with
Canada
and
Mexico.
A
major
objective
of
the
Trump
administration
was
to
improve
U.S.
trade
opportunities
with
Canada
and
Mexico,
including
addressing
growing
trade
deficits,
and
to
modernize
the
agreement.
Major
issues
that
were
being
addressed
in
negotiations
included
the
dispute
settlement
process;
rules
of
origin
for
the
automo-
tive
industry;
agricultural
trade;
regulation
of
the
energy
sector;
and
new
rules
for
e-commerce,
intellectual
property,
and
digital trade,
which
were
largely
ignored
in
the
original
agreement.
The
European
Union
(EU)
Efforts
to
increase
cooperation
economically
and
politically
began
in
Europe
after
World
War
II.
In
1993,
four
freedoms
were
agreed
to:
freedom
of
movement
of
goods,
services,
people,
and
money.
In
2002,
the
euro
became
the
sole
currency of
most
EU
member
states,
allowing
easier
price
comparisons
and
lower
foreign
currency
transaction
costs.
As
of
2018,
the
EU
had
28
member
states
and
a
total
population
of
more
than
510
million
people.
The
EU
had
nominal
GDP
of
$16.477
trillion
in
2016,
representing
approximately
22
percent
of
global
nominal
GDP.'4
ASEAN
The
Association
of
South
East
Asian
Nations
(ASEAN)
was
established
in
1967.
Today
it
includes
10
Southeast
Asian
countries
(Brunei
Darussalam,
Cambodia,
Indonesia,
Lao
PDR,
Malaysia,
Myanmar,
Philippines,
Singapore,
Thailand,
and
Vietnam).
The
ASEAN
Free
Trade
Area
(AFTA)
was
created
in
January
1992
to
eliminate
tariff
barriers.
Its
mem-
bers
have
a
combined
GDP
of
$2.8
trillion.
ASEAN
seeks
to
reduce
or
remove
trade
barri-
ers
within
the
region
with
the objective
to
facilitate
the
free
movement
of
goods,
services,
capital,
and
skilled
labor.
ASEAN
has
five
regional
free
trade
agreements
with
Australia
and
New
Zealand, China,
Japan,
South
Korea,
and
India.°
'2
Statista,
March
23,
2018,
https://www.statista.com/chart/7
749/most-important-trading-partners-of-the-
united-states/.
13
www.ustr.gov/trade-agreements/free-trade-agreements/north-america
n-free-trade-agreement-nafta.
14
www.europa.eu.
15
www.aseansec.org.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
429
government
policies.
China
and
India
represent
the
largest
and
most
commonly
recognized
emerging
economies.
The
MSCI
Emerging
Markets
Index
Fund
is
one
indicator
of
emerg-
ing
economies.
It
consists
of
24
countries
in
the
following
three
regions:
the
Americas
(Brazil,
Chile,
Columbia,
Mexico,
and
Peru);
Europe,
the
Middle
East,
and
Africa
(Czech
Republic,
Egypt,
Greece,
Hungary,
Poland,
Russia,
South
Africa,
Qatar,
Turkey,
and
the
United
Arab
Emirates);
and
Asia
(China,
India,
Indonesia,
Korea,
Malaysia,
Pakistan,
Philippines,
Taiwan,
and
Thailand).”°
These,
and
other
emerging
economies,
can
represent
opportunities
for
supply
through
low-cost
country
sourcing
initiatives.
How
does
a
supply
manager
identify
and
assess
the
risks
and
opportunities
of
any
particular
emerging
market?
What
questions
should
be
asked?
and,
Where
can
the
answers
be
found?
There
are
many
resources
at
the
national
and
international
level
to
assist
supply
professionals
engaged
in
global
trade.
These
include
departments
in
the
United
Nations,
the
World
Bank,
the
International
Monetary
Fund,
and
the
World
Trade
Organization.
Another
good
resource
is
globalEDGE
at
Michigan
State
University
(https://globaledge.msu.edu/).
Three
resources
published
annually
that
provide
a
good
starting
point
for
gaining
a
better
understanding
of
global
opportunities
and
challenges
are
The
Global
Competitiveness
Report,
The
World
Factbook,
and
The
Corruption
Perceptions
Index.
A
fourth
resource,
the
Bribe
Payers
Index,
which
provide
a
measure
of
how
willing
a
nation’s
business
sector
appears
to
engage
in
corrupt
business
prac-
tices,
is
updated
every
few
years.
The
Global
Competitiveness
Report
published
by
the
World
Economic
Forum
defines
competitiveness
as
the
set
of
institutions,
policies,
and
factors
that
determine
the
level
of
productivity
of
a
country.
It
tracks
the
performance
of
137
countries
on
12
pillars
of
com-
petitiveness:
institutions,
infrastructure,
macroeconomic
stability,
health
and
primary
edu-
cation,
higher
education
and
training,
goods
market
efficiency,
labor
market
efficiency,
financial
market
sophistication,
technological
readiness,
market
size,
business
sophistica-
tion,
and
innovation.7!
The
World
Factbook,
produced
by
the
U.S.
Central
Intelligence
Agency,
contains
all
vital
information
and
statistics
for
most
countries
around
the
world,
including
geography,
people,
government,
economy,
communications,
transportation,
transnational
issues,
and
military.
Transparency
International
(www.transparency.org)
produces
numerous
reports
on
global
transparency.
The
annual
Corruption
Perceptions
Index
measures
the
perceived
lev-
els
of
public-sector
corruption
in
180
countries
based
on
expert
opinion.
Countries
are
scored
from
0
(highly
corrupt)
to
100
(very
clean).
The
2017
index
found
that
more
than
two-thirds
of
the
countries
score
below
50,
with
an
average
score
of
43.
Determining
the
risks
and
opportunities
in
a
country
requires
a
level
of
knowledge
and
analysis
beyond
what
is
required
for
domestic
sourcing.
Assessments
in
these
reports
and
surveys
may
aid
supply
decision
makers
in
identifying
opportunities
and
risks in
emerging
economies.
20
https://www.msci.com/emerging-markets.
21
Schwab,
K.,
The
Global
Competitiveness
Report
2017-2018,
Geneva:
World
Economic
Forum,
2013,
http://reports
weforum.org/global-competitiveness-index-2017-2018/
#topic=about.
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
431
Stanczyk,
A.;
Z.
Cataldo;
C.
Blome;
and
C.
Busse.
“The
Dark
Side
of
Global
Sourcing:
A
Systematic
Literature
Review
and
Research
Agenda,”
International
Journal
of
Physical
Distribution
&
Logistics
Management,
vol.
47,
no.
1
(2017),
p.
41-67.
The
World
Factbook.
January
23,
2018,
https://www.cia.gov/library/publications/the-world-
factbook/geos/us.html.
Case
14-1
Trojan
Technologies
As
Joyce
Guo,
senior
buyer
at
Trojan
Technologies
Inc.
in
London,
Ontario,
Canada,
finished
her
presentation,
Randy
Haill,
materials
manager,
made
the
following
com-
ments
to
her:
It
appears
there
is
a
lot
of
opportunity,
and
I
want
to
proceed
to
the
next
step.
Joyce,
I
need
you
to
lay
out
an
implementation
plan
for
low-cost
region
sourcing
that
we
can
take
to
the
president
for
his
approval.
Our
plan
will
have
to
include
the
sourcing
process,
a
schedule
and
timeline
for
implementation,
a budget,
and
the
expected
savings.
We
will
also
have
to
identify
the
risks
and
our
contingency
plans.
Get
to
work
on
this,
and
let’s
meet
Friday
morning
next
week
to
follow
up.
It
was
Thursday,
February
23,
and
as
Joyce
packed
up
her
laptop
and
notes,
she
recognized
that
she
had
a
lot
more
work
to
do
before
her
meeting
with
Randy
the
fol-
lowing
week.
TROJAN
TECHNOLOGIES
Trojan
Technologies
Inc.
(Trojan)
was
a
leading
water
treatment
technology
company
with
the
largest
installed
base
of
ultraviolet
water
treatment
systems
in
operation
around
the
world.
Trojan
specialized
in
the
design,
manu-
facture,
and
sale
of
pressurized
and
open-channel,
ultravio-
let
disinfection
and
water
treatment
systems
for
industrial,
municipal,
commercial,
and
residential
applications.
Trojan’s
head
office
was
in
London,
Ontario,
Canada.
The
company
had
sales
of
$140
million,
employed
approxi-
mately
400
people
in
offices
around
the
world,
and
served
its
customer
base
through
an
extensive
network
of
dealers
and
representatives.
Trojan
was
owned
by
Danaher
Corporation
(Danaher),
a
global
multi-industry
science
and
technology
company
with
sales
of
approximately
$17
billion
and
more
than
62,000
employees.
Management
used
the
Danaher
Business
System
(DBS)
of
continuous
improvement
to
guide
company
cul-
ture
and
business
improvement
activities.
Developed
in
the
mid-1980s,
the
DBS
was
used
to
drive
improvement
in
all
parts
of
the
company
including
manufacturing
operations
and
business
processes,
such
as
new
product
development
and
global
sourcing.
Trojan’s
current
product
line
consisted
of
10
systems
across
its
five
markets:
(1)
residential
water
treatment,
(2)
municipal
drinking
water,
(3)
municipal
wastewater,
(4)
environmental
contaminant
treatment,
and
(5)
indus-
trial
process.
Systems
for
commercial
and
government
cus-
tomers
ranged
from
approximately
$50,000
to
more
than
$1
million.
These
systems,
which
typically
had
a
product
life
cycle
of
7
to
10
years
before
being
replaced
with
a
new
design,
were
designed
and
manufactured
at
the
London
facility,
and
modified
to
meet
individual
customer
require-
ments.
In
a
typical
year,
Trojan
manufactured
500
to
600
sys-
tems
for
its
commercial
and
government
customers.
THE
PURCHASING
ORGANIZATION
Trojan’s
purchasing
organization
had
seven
buyers
respon-
sible
for six
commodity
groups:
Lamps,
quartz
sleeves,
and
ballast.
Electrical
parts
and
panels.
Stainless
steel
fabrication
parts.
Machined
and
plastic
parts.
Hydraulic
parts
and
sensors.
MRO.
AMP
ewer
Purchases
in
the
first
two
commodity
groups
accounted
for
approximately
60
percent
of
Trojan’s
$45
million
spend
IMPLEMENTATION
PLAN
In
preparation
for
her
meeting
with
Randy,
Joyce
wanted
to
prepare
a
thorough
plan
for
implementing
low-cost
region
sourcing.
Joyce
expected
that
if
the
project
went
ahead,
Randy
would
put
her
in
charge
and
she
wanted
to
make
sure
it
would
be
a
success,
As
a
starting
point,
Joyce
wanted
to
create
a
process
that
Trojan
would
use
for
low-cost
region
sourcing.
She
expected
that
people
from
the
engineering
and
qual-
ity
departments
would
be
involved,
and
Joyce
wanted
to
identify
the
specific
steps
that
would
be
used
to
source
each
component.
Joyce
wanted
to
identify
the
approxi-
mate
time
to
complete
each
step
in
order
to
estimate
the
sourcing
cycle
time.
Starting
the
low-cost
region
sourcing
process
would
require
clear
criteria
on
which
to
select
components
and
eval-
uate
their
suitability.
Joyce
wanted
to
establish
guidelines
for
components
that
could
be
used
to
identify
parts
that
provided
the
greatest
opportunity
and
probability
for
success.
A
major
consideration
for
Joyce
was
setting
expecta-
tions
for
cost
reductions
that
Trojan
could
achieve
through
low-cost
region
sourcing.
Based
on
the
information
that
she
collected
so
far,
Joyce
found
that
while
global
Purchasing
and
Supply
Management,
16th
Edition
Chapter
14
Global
Supply
Management
433
sourcing
provided
opportunities
for
substantial
reductions
in
piece
prices,
there
were
also
additional
costs.
For
exam-
ple,
Trojan
would
have
to
pay
8
percent
duties
for
prod-
ucts
imported
from
China.
She
also
learned
that,
based
on
the
experience
of
other
Danaher
businesses,
inventories
could
increase
by
25
percent
and
transportation
premiums
averaged
5
percent.
In
addition,
Joyce
believed
that
there
would
be
other
administrative
and
travel
costs
she
would
need
to
budget.
Not
only
would
Joyce
have
to
provide
an
estimate
to
Randy
concerning
what
Trojan
could
save
each
year
through
low-cost
region
sourcing,
but
also
set
guidelines
regarding
when
piece
price
reductions
justified
the
costs
and
efforts
to
switch
suppliers.
In
preparing
her
cost
sav-
ings
estimate,
Joyce
would
have
to
take
into
account
that
Trojan’s
standard
costs
were
adjusted
each
January
1.
Consequently,
savings
could
only
be
claimed
for
the
year
in
which
purchases
were
made.
A
final
concern
was
risk
management
and
contin-
gency
planning.
Trojan
was
enjoying
strong
sales
growth
and
Joyce
wanted
to
avoid
supply
shortages
or
quality
problems.
Consequently,
Joyce
wanted
to
establish
appro-
priate
policies
that
would
address
low-cost
region
sourc-
ing
supply
risks.
Case
14-2
Marc
Biron
MARC
BIRON
“T
want
you
to
see
how
supply
can
add
value
to
our
global
marketing
spend.
You’ve
got a
couple
of
months
to
come
back
to
me
with
a
plan.”
Marc
Biron,
supply
manager
at
BCI, one
of
the
world’s
largest
financial
institutions,
headquartered
in
Paris,
France,
pondered
the
new
assign-
ment
just
given
to
him
by
Pierre
Jardin,
the
vice
president
of
supply
at
BCI.
BCI
BCI,
started
as
a
small
commercial
bank
over
a
hun-
dred
years
earlier,
had
grown
over
the
years
to
offer
a
large
variety
of
financial
services,
including
commer-
cial
and
retail
banking,
asset
management,
and
retail
and
wholesale
insurance.
Over
the
past
two
decades,
BCI
had
expanded
its
international
presence
significantly
by
acquisition
of
regional
financial
institutions
in
all
major
countries
around
the
world.
With
revenues
in
excess
of
$200
billion
a
year,
BCI
was
considered
a
major
global
giant
in
the
industry.
SUPPLY
AT
BCI
Until
five
years
ago,
supply
at
BCI
had
been
decentral-
ized
with
each
local
or
regional
business
unit
responsible
for
managing
its
own
supply
requirements.
A
review
of
supply
by
a
major
consulting
firm
pointed
out
that
a
cen-
tralized
supply
function
might
be
able
to
achieve
consid-
erable
savings
by
consolidating
world
requirements
and
bringing
professional
supply
expertise
to
the
acquisi-
tion
of
BCI
requirements.
For
example,
the
consultants
pointed
out
that
in
their
estimate
IT
expenditures
with
suppliers
might
exceed
$6
billion
per
year
and
that
major
improvements
in
process
and
spend
should
be
possible.
BCI’s
senior
management
board
followed
the
consultant’s
advice
and
hired
Pierre
Jardin,
who
had
managed
the
sup-
ply
function
at
one
of
BCI’s
competitors,
to
establish
a
central
procurement
organization.
Pierre
had
personally
Purchasing
and
Supply
Management,
16th
Edition
The
Pharmaceutical
Division
accounted
for
approximately
70
percent
of
company
revenues,
while
the
Vaccine,
Consumer
Health,
and
Animal
Health
Divisions
repre-
sented
13
percent,
10
percent,
and
7
percent
of
Sarin’s
revenues
respectively.
The
Pharmaceutical
Division
developed
and
manufactured
medicines
for
the
treatment
of
a
variety
of
serious
and
chronic
diseases,
such
as
can-
cer,
epilepsy,
and
heart
disease.
The
Vaccine
Division
produced
pediatric
and
adult
vaccines
to
prevent
a
range
of
infectious
diseases,
including
hepatitis
A
and
B,
polio,
and
influenza.
The
Consumer
Health
Division
focused
on
a
wide
range
of
consumer
health
products
in
the
areas
of
skin
care,
wellness,
oral
care,
and
nutrition.
The
smallest
division,
Animal
Health,
developed
and
produced
medi-
cines
for
livestock,
poultry,
and
pets.
Sarin
focused
on
its
strategic
mission
of
discovering,
developing,
and
bringing
to
market
health care
products
in
an
effective
manner
that
fulfilled
unmet
medical
needs.
As
a
result,
the
company
had
recently
divested
a
number
of
operations
that
did
not
align
with
the
company’s
strategy.
A
number
of
businesses
that
complemented
Sarin’s
strat-
egy
had
recently
been
acquired,
and
additional
acquisitions
were
expected
to
be
announced
during
the
coming
year.
ANIMAL
HEALTH
DIVISION
The
Animal
Health
Division
was
facing
major
changes.
The
company
recently
purchased
Milway-Kitsch
Animal
Health
(MKAH),
which would
push
Sarin
to
the
number
one
position
in the
world
in
animal
health
products.
Sarin
had
traditionally
held
a leading
position
in
medicines
for
large
animals, plus
a
strong
presence
in
Latin
America
and
Asia.
MKAH,
on
the
other
hand,
had
strong
prod-
uct
lines
in
the
pet
market
in
North
America
and
in
vac-
cines
worldwide.
They
also
had
superior
organizational
strength
in
Europe
and
Australia.
It
was
planned
that
the
merger
of
these
two
firms
would
lead
to
the
creation
of
a
single,
integrated
unit
that
would
place Sarin
in a
position
to
achieve
the
vision
for
the
Animal
Health
Division:
“We
will
be
the
driving
force
in
the
animal
health
industry.”
The
number
of
manufacturing
facilities
for
the
combined
company
numbered 46
in
35
different
countries.
PROCUREMENT
The
manufacturing
process
for
animal
health
products
required
the
acquisition
of
a
wide
variety
of
chemical
com-
pounds,
syringes,
bottles,
packaging
materials,
and
labels.
Most
of
the
products
manufactured
by
Sarin
were
subject
to
stringent
regulatory
requirements,
such
as
content,
scale
for
the
unit
of
measurement,
language,
and
dosage,
which
Chapter
14
Global
Supply
Management
435
varied
by
country.
The
procurement
organization
at
the
Vancouver
plant
was
responsible
for
sourcing
more
than
1,600
raw
material
and
packaging
items
with
a
total
annual
value
of
$22
million
(Canadian).
Each
item
had
to
be
pur-
chased
from
an
approved
Sarin
supplier.
The
approval
pro-
cess
involved
a
series
of
tests
and
reviews
that
could
take
a
year
to
complete
and
involved
the
following
steps:
1.
A
copy
of
the
standard
operating
procedures
for
the
product
had
to
be
provided
and
approved
by
Sarin.
2.
Acertificate
of
analysis
of
a
sample
lot
had
to
be
pro-
vided,
manufactured
according
to
the
process
estab-
lished
in
the
standard
operating
procedure.
3.
Three
random
samples
from
different
lots
were
required
for
testing,
along
with
a
certificate
of
anal-
ysis.
These
samples
were
tested
by
Sarin
and
the
results
compared
to
the
certificate
of
analysis.
4.
The
supplier
processes
and
capabilities
needed
to
meet
acceptable
standards
in
the areas
of
product
development,
quality
control,
and
manufacturing.
5.
A
pilot
batch
would
be
run
at
Sarin,
using
materials
from
the
supplier,
and
tested.
6.
Only
after
the
supplier
had
successfully
passed
steps
1-5
could
the
product
be used
in
production.
The
first
three
lots
shipped
by
the
supplier
were
to
be
tested
by
Sarin.
Only
if all
three
lots
were
approved
would
the
supplier
be
approved.
Future
shipments
would
be
subject
to
periodic
testing.
CLOSURE
OF
THE
FRENCH
PLANT
It
was
announced
in
March
that
Sarin’s
only
Animal
Health
plant
in
France
would
be
closing
by
May
of
the
following
year.
The
eight
products
manufactured
there
would
be
transferred
to
the
Vancouver
plant
on
a
phased
basis
starting in
December
and
commencing
full
pro-
duction
a
year
later.
It
was
planned
that
the
French
plant
would
increase
production
sufficiently
to
provide
inven-
tory
to satisfy
demand
until
the
Vancouver
plant
could
provide
adequate
supply.
The
addition
of
the
eight
prod-
ucts
to
the
Vancouver
portfolio
would
increase
production
by 30
percent
(see
Exhibit
1).
Capacity
was
not
an
issue.
By
late
May,
it
had
become
apparent
that
the
French
plant
would
not
be
able
to
increase
production
for
suf-
ficient
inventory
to
last
for
the
phase-in
period
due
to
low-productivity
rates
and
morale
issues.
Also,
French
regulations
restricted
the
ability
of
the plant
to
run
over-
time.
It
was
clear
that
the
transition
to
the
Vancouver
plant
would
have
to
be
achieved
earlier
than
planned
to
avoid
product
shortages.
1
NOW HIRING
Now Hiring Skilled Robotics Personnel
Mateo
2
NOW HIRING
Now Hiring Skilled Robotics Personnel
Background of the Situation
Economies of the late 20th into the 21st century have pushed for leaner and greener supply
chains, which increasingly rely on automation to achieve these goals (Kinsey, 2000). Supply
chain automation ranges from basic algorithm decision support systems to fully automated
systems such as “lights out facilities” and can include parts of a process or entire processes end-
to-end (Liberty University, 2020). As automation entered the supply chain, robotics began to
play an important role on the factory floor with robots utilized to automate routine processes and
achieved economies in those areas beyond human ability (Hartmann, 2018). This success led to
increasing utilization of robotics well beyond the factory floor into areas as far as marketing,
customer relations management, and is anticipated to continue growing (Smith & Anderson,
2018). As robotics continue to grow and become a mainstream staple of supply chains, the
purchase, maintenance, and repair of these assets will require growing attention from supply
chain managers.
As organizations become dependent on robotic integration in their supply chains, they
inherently become more susceptible to supply chain disruptions stemming from failed or
malfunctioning robotics. Depending on the level of robotic integration this can lead to supply
chain disruptions ranging from minor to catastrophic. Mitigation of robotic associated supply
chain disruptions requires both timely robotic maintenance and repair according to established
manufacturer recommendations (GES Repair, 2020). The entry skills necessary to perform these
tasks are typically acquired during formal associate’s level training or technical school and
currently are only projected to grow at a rate of three percent (U.S. Bureau of Labor Statistics,
2014).
3
NOW HIRING
Potential Consequences/ Alternative Response
Due to the skilled nature of robotic repair and slow growth of robotic engineering, supply
chain managers may be faced with limited access to skilled robotic repair, elevated costs of
maintenance and repair, and or excluded from robotic integration altogether. This has the
potential to eliminate smaller competitors from the market, affecting both the markets the supply
chain manager participates in and procurement sources. Along with robotic integration, the
supply chain manager may experience a shift of human capital to higher level tasks that prohibits
human replacement in the event that a robotic fails while under task. Lastly, given the high entry
cost of robotics and potential for costly repairs, the supply chain manager may have to reimagine
processes to contain cost and thereby increase process uncertainty for a period of time.
Proposed Response
One solution to managing supply chain robotic repairs costs is to employ robotically
trained repair personnel. While employing dedicated repair personnel may not be feasible for
most organizations, I propose that robotic repair be viewed as an enhancement or career growth
opportunity. Combining this with a collaborative education relationship at a technical college
would allow an organization to grow the people it needs from the inside. This in turn can
displace financial compensation as the primary driver of employment and replace it with career
opportunities and organizational loyalty.
For organizations where this proposal is not feasible the only alternatives are to reduce
future uncertainty through planning repair costs in advance or exiting the robotics market. As
automation and the use of robotics are projected to become increasingly integral to supply chain
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NOW HIRING
competitiveness, exiting the robotics market is ill advised. Managing future repair cost than
should be a focus and can be accomplished with contractual robotic maintenance and repair
services as a part of a robotic purchase contract or from a separate vendor using the organizations
established contracting strategies.
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References
Beyond ROI: Determining the True Cost of Robotics. (2020, June 05).
https://www.roboticsbusinessreview.com/business/beyond-roi-determining-the-true-cost-
of-robotics/
GES Repair. (2020). Industrial Robotics Repair and Maintenance Service
https://gesrepair.com/services/repair-and-maintenance-service-industrial-robotics/
Hartmann, F. (2018). Evolving digitisation: chances and risks of robotic process automation and
artificial intelligence for process optimisation within the supply chain.
Kinsey, J. (2000). A faster, leaner, supply chain: new uses of information technology. American
journal of agricultural economics, 82(5), 1123-1129.
Liberty University Custom (2020). Supply chain management (Custom ed.). New York, NY:
Merlino, M., & Sproge, I. (2017). The augmented supply chain. Procedia Engineering, 178, 308-
318.
Smith, A., & Anderson, J. (2020, August 06). AI, Robotics, and the Future of Jobs.
https://www.pewresearch.org/internet/2014/08/06/future-of-jobs/
Sumner, M. (2019). The Time is Now for Robotic Automation. Heating/Piping/Air Conditioning
Engineering, 91(1), BSE9-BSE11.
U.S. Bureau of Labor Statistics. (2014). Occupational Outlook Handbook: Electro-mechanical
Technicians. https://www.bls.gov/ooh/architecture-and-engineering/electro-mechanical-
technicians.htm
Price
Discussion: Current SCM Topic- Robotics
Background
The trend towards distribution center floor robotics has increased over the last
decade. Robotics and other machinery have been integrated into the supply chain from
the very beginning with machinery that could produce products, to now being able to
pack and deliver products to the consumer with the addition of artificial
intelligence (Liberty University, 2020). Robots can typically outperform manual human
labor, and can easily work 24 hours per day, which minimizes the need for standard
warehouse workers (Duong, et al., 2020). These types of robots are particularly
effective in distribution centers where robots can pick orders and reduce warehouse
operation expenses by at least 50% (Ghelichi & Kilaru, 2021). Robots can work in
conditions in which are not suitable for human workers for long periods of time, and
warehouses typically experience high employee turnover due to the hard-working
conditions.
Potential Consequences/Alternative Response
Facilities are having issues with finding skilled employees to work with and on the
robotics systems now. While the robots may replace the typical warehouse or
manufacturing employee, it does not remove the need for employees who run and
program the machines or the workers who are needed to work directly on the machines
for maintenance and repair. Nike’s vice president Bruce Klafter has said “If we don’t
create a workforce with enough skills, we’ll all be scrambling for qualified staff (Wright,
2018).” Managing robots does require special skills and training in which workers can
maintain and run these machines.
While some robotics companies offer their services for maintenance of their machines,
having in house maintenance for everyday care is something a company should prefer
to do, as it will reduce downtime if a problem arises that can be easily fixed, and
preventative maintenance is superior to only fixing problems that arise. Employees can
be upskilled to service and run robots, as well as using outside companies to repair and
maintain these machines and robots. Keeping their current employees, while hiring
skilled labor in combination should allow for successful integration of robotics into their
supply chain.
Proposed Response
Supply chain management should not be fearful of introducing robotics and
artificial intelligence into their companies. Slowly shifting from a manual labor force to a
more technologically advanced system will help companies thrive and keep up with
competition over time. While the need for skilled laborers will increase, companies
should make the capacity to train their current employees that have a desire to learn
new skills to work for hands-on with robotics. There appears to be an overall shortage
of employees at the level of unskilled to skilled workers, so taking the workers you have,
and upskilling them by training will lead to better employee retention as well as a more
profitable company (Wright, 2018). Companies should have backup plans for
manufacturing and distribution as well as starting to rely mostly on their automated
robotics systems. Having in-house maintenance as well as the ability to have
subcontracted labor for complicated repairs will allow backup plans to mitigate
downtime, which will help the company thrive and have contingency plans.
References
Duong, L. N., Al-Fadhli, M., Jagtap, S., Bader, F., Martindale , W., Swainson, M., &
Paoli, A. (2020). A review of robotics and autonomous systems in the food industry:
From the supply chains perspective. Trends in Food Science & Technology, 355-364.
Ghelichi, Z., & Kilaru, S. (2021). Analytical models for collaborative autonomous mobile
robot solutions in fulfillment centers. Applied Mathematical Modeling, 438-457.
Liberty University. (2020). Supply Chain Management. McGraw-Hill Education.
Wright, M. (2018, January 16). Our problem with automation is a labour shortage, not
surplus. Retrieved from Reuters Events:
https://www.reutersevents.com/sustainability/our-problem-automation-labour-shortage-
not-surplus
The use of Social Media in Supply Chain Management
Name
Institution Affiliation
Professor
Date
Background of the Situation
The procurement staff seems to be convinced that the restriction policies that discourage
organizational members from using social media in the workplace are outdated, considering that
through embracing the platform, the company can expand its reach online and with the aim of
tapping new sources of revenue. The procurement staff seem to believe that widespread
adaptation of using social media in the supply chain would never be immediate. Expecting a
slow adoption over time would be the safest thing to do considering that social media would
potentially alter the processes of the industry and for the company to maintain a competitive
edge, it is left with no other alternative than to embrace it (Markova & Petkovska-Mirčevska,
2019). Considering that social media entails developing relationships, it can be incorporated into
the supply chain to grow and build relationships between the company and its trading partners.
Consequently, knowledge and information obtained from the use of social media by supply chain
partners can offer insight into numerous matters of the supply chain, industry and competition.
Social media can also be utilized by the company to determine key indicators such as slow
payment from a shipper or on-time performance of a carrier, as well as to develop relationships
(Liberty University Custom (2020). The company can also decide to use social media as a
platform for soliciting information from their clients to seek recommendations for improvement
from the customers.
Potential Consequences
With the application of social media in the supply chain, the company will be able to
monitor supply chain occurrences as well as transactions. This will keep the company and the
trading partners up-to-date with the present occurrences, including delays in shipping or in case a
carrier fails to pick up a shipment (Orji, Kusi-Sarpong & Gupta, 2020). From customer
engagement to brand awareness and trend monitoring, Twitter offers numerous opportunities to
the organization's supply chain, making it stand out from the crowd. Through microblogging, the
company can extend beyond marketing efforts and, as a result, shape the overall business
strategy. This means that the company can use Twitter to communicate the need for shipment of
a specific type or to alert drivers about any accidents or road closures (Chae, McHaney & Sheu,
2020). It means that the company will have access to insightful and timely information about the
events and risks, which will allow them to take corrective actions as soon as possible and, in the
process, reduce the impact of a supply chain disruption. This way, the company can be able to
plan itself well and avoid delays that can cause the trading partners to think otherwise about the
services offered by the company.
Proposed Response
I would approve the use of Twitter in the supply chain by assessing if it can help in the
identification of new innovations, if it can help in understating commodity and pricing trends and
capturing best practices and if it can make it easier to collaborate with suppliers, peers and
stakeholders. I would also assess its ability to enhance the already existing processes, increase
efficiency and mitigate risk. To fully incorporate social media in the business's supply chain
management process, I will strive to understand and weigh the advantages that could be utilized
versus the implications it could have on the current process (Orji, Kusi-Sarpong & Gupta, 2020).
Questions
1. How can the application of social media in supply chain be introduced to generations
considering that it usually popular only among the millennial?
2. Which mechanisms can be put in place to prevent people with ill intentions from
interfering with the relationship between the company and the trading partners?
3. Dies the use of social media in supply chain promote brand visibility and transparency?
And how can this affect the operations of the business?
References
Markova, S., & Petkovska-Mirčevska, T. (2019). Social media and supply chain. Amfiteatru
Economic Journal, 15(33), 89-102.
Orji, I. J., Kusi-Sarpong, S., & Gupta, H. (2020). The critical success factors of using social
media for supply chain social sustainability in the freight logistics industry. International
Journal of Production Research, 58(5), 1522-1539.
Chae, B. K., McHaney, R., & Sheu, C. (2020). Exploring social media use in B2B supply chain
operations. Business Horizons, 63(1), 73-84.
Liberty University Custom (2020). Supply chain management (Custom ed.). New York, NY:
McGraw-Hill Create.
Fist reply:
Now Hiring Skilled Robotics Personnel
Mateo
Hello,
Strength
Indeed, being that more than 60 percent of executives are faced with the problem of
retaining or replacing more than one-quarter of their workforce in the next coming years
due to advanced robotics and automation, it is important for those organizations to
enhance a carrier opportunity with collaborative education relationship at college level to
minimize the inconsistencies that can be caused by lack of skilled personnel to handle the
robots. By doing this, it will be easy for firms across a multitude of industries and fields like
chemical and mechanical engineering to retain their workers to operate the robots. In line
with what you have mentioned, companies need to retain their workers on handling and
using robots to remain competitive in the market.
Weakness
Even though you have mentioned how companies can undertake this in detail, you
failed to mention how organizations can handle matters related to safety, considering that
in the event one employee is injured, the operations of the company can come to a
standstill. I believe that safety is an essential aspect that cannot be ignored when operating
robots. This is because, according to industry research, the majority of work-associated
accidents and injuries that take place where a robot is involved occurs when an employee is
carrying out maintenance of a robot or adjusting a robot, or even programming it. This
means that L&D professionals, at minimum, should come up with compliance and safety
guidelines and policies for maintaining and operating robots to prevent employees from
being injured while operating robots (Wisskirchen et.al, 2020). It means that employees
should be trained on the best ways of handling all safety barriers, dangers, and hazards. This
phase is usually ignored by the majority of companies, but it should be incorporated under
the continuous learning process activities in organizations as a way of updating employees
on the best ways to handle robots performing different functions. By upskilling employees
working with robots, companies are guaranteed to yield a 20% to 30% improvement in
employees' retention (Wisskirchen et.al, 2020). Contrary to popular belief that robots are
replacing employees, robots require employees to acquire new skills and a different set of
skills, considering that robots, if well operated in the workplace, can create double the jobs
they destroy.
Reference
Wisskirchen, G., Biacabe, B. T., Bormann, U., Muntz, A., Niehaus, G., Soler, G. J., & von
Brauchitsch, B. (2020). Artificial intelligence and robotics and their impact on the
workplace. IBA Global Employment Institute, 11(5), 49-67.
Second Reply
Price
Hello,
Strength
Indeed, in line with what you have mentioned, organizations should come up with a
reasonable best practice that puts into consideration the welfare of employees before any
implementation robotics and automation. Just like you have mentioned, companies should
determine how best to support employees for collaboration with robots. Instituting a
learning plan and rolling it out to employees prior to the incorporation of robotics can help
in reducing the learning curves and enhance the acceptance of automation in employees'
environments.
Lack of skill repair personnel can be contributed by the fact that in the event that
robots take over an overwhelming number of tasks, employees may feel that they are
serving less of a purpose. In this way, it can be concluded that robots may significantly alter
the social dynamics and employees' confidence at work. This means that the variety and
amount of social interactions in the workplace are minimized, and in the process,
employees will lose part of the corresponding meaningfulness benefits. This is because in
the event that employees begin working together with robots instead of their colleagues,
they might have less consultation with one another, be independent in their area of work
and have a diminished sense of shared purposiveness and agency (Lasso-Rodríguez & Gil-
Herrera, 2019). This means that in the event that an employee is sick or has found an
emergency, it can be hard for a different employee from different areas of specialization to
operate the robot. This means that all employees working in a company with robots should
be trained to handle more than one robot to avoid any destructions that might occur in such
events. With this in mind, it can be very expensive for organizations to train employees to
operate more than one robot as well as up-skilling them to remain updated with the
changes that take place as a result of advancements in technology.
Weakness
Even though you strongly emphasized the need to train employees before
implementing automation, you failed to point out the potential challenges that can make
organizations consider this process impractical. As with any alteration in organizations,
challenges and learning curves are inherent. Employees' adaptation and how they use
robots within their current processes and daily workflow are one such changes
organizations should anticipate (Lasso-Rodríguez & Gil-Herrera, 2019). Simply adding
automation is not enough as employees will be required to identify and decide on the
proper implementation of such automation for the company's specific needs.
Reference
Lasso-Rodríguez, G., & Gil-Herrera, R. (2019). Robotic Process Automation Applied to
Education: A New Kind of Robot Teacher?. In ICERI2019: 12th annual International
Conference of Education, Research and Innovation.
