INTRODUCTION

This courseware was created to bridge the gap between

theory and application in supply chain. Most textbooks
focus on the theory of supply chain, providing
mathematical models to optimize production or inventory
levels. However, most supply chain roles require an
understanding of how to apply the answers from the
models, how to quickly estimate what changes need to
happen, and the people skills to work with both upstream
and downstream partners.
 Principles of
Supply chain
Chapter 10:
global supply chain
Learning OBJECTIVES
● Explain the purposes behind taxes, tariffs, and duties
● Describe when a company would use offshore
versus onshore procurement
● Articulate how natural disasters, health crises,
financial crisis, change of government and other
global issues can impact a supply chain
● Apply the five steps for resiliency
● Describe how a global support supply chain differs
from a traditional production supply chain
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Section 1: INTRODUCTION
Though a company may have begun in one country, over time the
company can evolve to procure raw materials from another country
or become a multinational corporation with warehouses, facilities,
and offices in several countries. Companies can be thrust into the
unknown world of international shipping, customs, duties, taxes,
tariffs, and dumping fees. Furthermore, differing labor laws, time
zones, and local, unwritten rules are then put into the spotlight.
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Section 2: Globalized Supply Chains

What to expect when buying, making, or designing overseas and
bringing it back to your company’s home country:
● Taxes
● Tariffs
● Duties
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TAXES
Taxes
● Help pay for government services such as roads,
railways, airports, ports etc. that play a role in the
movement of goods and ability to perform a service
● Amount of tax depends on where the item is purchased;
may be multiple taxes
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TARIFFS
Tariffs
● Imposed on imported items, very rarely on exported items
● Protect a country’s producers through reducing the price
difference between national producers and non-national
producers
● Removes competitive advantage of imported goods
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TARIFFS (CONTINUED)
Tariffs
● Amount of tariff is based on HTS code — there are several
● Can change at any moment
● Increase lead time as items may require review at customs
● Should be considered when using or opening offshore
operations
● Free trade agreements exist
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Duty
● Tax imposed on an item being
brought into a country
● Depends on the item and
amount
● Duty drawback: a refund on
certain taxes paid

Source: Getty Images

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Section 3: Offshore VS. Onshore

When opting to have offshore facilities or purchase offshore
items, the following should be considered:
● Potential tariffs and duties
● Lead times
● Legalities
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Offshore
Offshore benefits stem from how a company is structured and
taxed:
● Leasing a patent
● Partnering
● Full ownership
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LEASING, PARTNERING, AND FULL OWNERSHIP

Leasing a patent: company retains ownership of but provides access
to design
● Nike, Adidas use this

Partnering with a local company: combined ownership of design and

thus revenue, costs, and profit

Full ownership: company retains ownership and access to design

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SIGNIFICANT TRANSFORMATION
Significant Transformation
● Offshore parts arrive and are significantly altered or
changed so they fall under a different HTS code
● Reduces or eliminates tariffs
● VW uses this method
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ONSHORE
When opting to have onshore facilities or purchase onshore
items, the following should be considered:
● Government incentives
● Lead times
● Location of end-user market
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Section 4: Global Uncertainty

Several types of uncertainty can be experienced: global, targeted

They can be caused by many things:

● Natural disasters
● Financial crises
● Change of government
● Health crises
● War
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Natural Disasters
● Can damage infrastructure,
facilities and employee’s lives
and homes
● Production and productivity
decline
● Inability to receive raw materials
Source: Getty Images or send out finished goods
● Lost revenue
 ACTIVITY / ASSIGNMENT 1
Discuss the difference between rainy season disasters and ones like
tsunamis / hurricanes, floods etc.
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Financial Crises
● Reduced available cash flow
● Loss of suppliers
● Loss of customers
● Build up of inventory or people
● Lost revenue

Source: Getty Images

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Section 4: changes to Policies

Changes can have impacts at a global, national, or local level:
● Membership in a large group of countries
● Trade agreements
● Domestic policy on specific items
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changes to Policies
Negative impacts to supply chains through:
● Increased costs due to new tariffs and duties
● Increased lead times due to new tariffs and duties
● Decreased demand
● Higher taxes or stricter regulations
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Health Crises
Health crises can have impacts at a global, national, or local
level. Take Covid -19 for example:
● Countries responded with different restrictions
● Restrictions altered demand patterns nearly instantly
● Some companies ended up with significantly less
demand — airlines, restaurants
● Others saw demand sky rocket — grocery stores,
medical supplies
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War, Invasions, AND Political Violence

War, invasions, and other politically-caused violence disrupt
supply chains through:
● Sanctions from other countries
● Destruction of infrastructure and facilities
● Loss of human capital
● Decreased transportation options
● Significant change to demand patterns
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Section 5: Resilient Supply Chains

How do some companies thrive during times of uncertainty?
● Identify risks through scenario planning
● Create resiliency plan for each scenario
● Follow plan when scenario becomes reality

This is the equivalent to fire drills, earthquake drills, and the like.
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Resilient Plan Factors

Important elements of a resiliency plan:
● Warning period
● Built-in redundancy
● Adaptability
● Preparation
● Recovery
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Warning Period
● Length of time to respond to
impending disaster
● Longer time period allows for
more preparation
● Warning periods should be
estimated for each scenario
Source: Getty Images
● Internal sensing systems
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Built-In Redundancy
Redundancy is a type of duplication and can look like:
● Back-up servers, generators ● All employees can
● Extra fuel, water, food perform multiple
● Alternate list of suppliers jobs if required
● All facilities have ability ● Increased safety
to produce all products stock

Expensive to implement, but if used, will more than pay for itself
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Adaptability
The speed at which a company and its employees can pivot to
handle the sudden changes; it can include:
● Deferment
● Postponed production
● Flexible work arrangements

The speed of the adjustment relates to the impact — faster

adaptability = decreased loss
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Preparation
Ensuring all equipment is properly functioning, that employees
have access to and are well versed in the resiliency plans

Plans include vital information and are sent to pertinent parties

The speed of the adjustment relates to the impact — faster

adaptability = decreased loss
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Preparation (CONTINUED)
Internal sensors can include:
● Fire alarms, carbon monoxide, or other hazardous
chemical off gas
● Alerts on financial status of a supplier or customer
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Recovery
How a company responds once the disaster occurs; it should
provide information on its response to:
● All employees ● All stakeholders
● All suppliers ● All creditors
● All customers

Providing information shows that the company is aware and trying

to mitigate the damages — it is a show of good faith.
 ACTIVITY
Discuss the Three Brothers Bakery. Why were they able to recover?
What else could they do?

ASSIGNMENT
Select a different company than the bakery
and come up with a resiliency plan.
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Resiliency Plan in Action

Toyota: a successful resiliency plan through creating a community:
● Improved supplier relationships
● Improved inventory management through these relationships
● Increased stability through risk sharing

This plan was tested during Covid-19; Toyota was producing at only
10% less than normal production rates while other companies were
producing at 40% less.
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Section 6: Global Support Initiatives

● Humanitarian aid missions
● Mitigate impacts of crises
● Supplies and professionals face
peril during their journey
● Often require cold-chain
transportation
● Focus on demand instead of cost
Source: Getty Images
 ACTIVITY / ASSIGNMENT 2
Discuss the supply chain differences when the focus is on meeting
demand instead of minimizing costs / maximizing revenue.

Compare humanitarian supply chains to for-profit supply chains.

How would you measure success?
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Section 7: Jobs AND Careers

There are few roles in disaster recovery or contingency / resiliency
planning within companies; however, there are companies
dedicated to disaster responses.

Do you enjoy handling crises, working under pressure and want to

help people and countries in a time of need? Try working for the UN,
MSF, NATO, or the Federal Emergency Management Agency
(FEMA).
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Section 8: Summary
● How taxes, tariffs, and duties impact a company’s
decisions and supply chain
● Offshore versus onshore and the resulting supply chain
impacts
● How different types of uncertainty disrupt the supply chain
● Creating a resiliency plan
● Review of humanitarian aid
Thank You