Unit 3 Consumers empowered, Globalization and Deregulation By : Ester Kalipi

1. Faculty of Management Sciences Unit 3 Consumers empowered, Globalization and Deregulation By: Ester Kalipi Date: 27 February 2018

2. Table of contents • Access to External Markets • Empowered consumers • Globalization • Deregulation • Integrated Relationship to the Management Functions of a Firm • Procurement Management Tasks • Planning, Organization, Leading, Co-ordination and Control

3. Objectives of the Lesson • By the end of this unit, students should be able to: • Explain Globalization; • Discuss the advantages and disadvantages of globalization; • List and explain the dimension of the international environment; • Define deregulation and mention the benefits of deregulation; • Explain the value of integrated management functions to an organization; • Explain procurement and its role in an organization.

4. 1. ACCESS EXTERNAL MARKET • Empowered consumers • Excess to information • the internet • Other sources such as catalogues • Product choices • Comparisons of prices • Quality • Services • Differentiated goods or customized goods • Demanding competitive prices • Products are offered with high flexibility and responsiveness • Network of informants • Emerging fashion trends • Innovations • Product developments

5. What is globalization? • Definition: Increasing and deepening interactions between individuals and organizations across the globe. • Processes are ongoing, at varying pace between countries and between sectors. • Globalization of markets, implying growing uniformity, has been partially realized, but local preferences predominate in many sectors. • Involves identification of common norms, value, taste, preference and convenience and slowly enables the cultural shift towards the use of the common products or service. • Formulating different strategies for each market. • Global business compete with each other in different national markets including home markets. • Cater for demand of their products in the foreign markets, increase their profits and achieve company growth. • Globalization of production, implying co-ordination of operations across borders, has transformed manufacturing, but country differences are important. • Factors influencing location of manufacturing facilities may vary from country to country, e.g. availability of high quality raw materials and inputs at low cost in a foreign country. • Locating a factory in a foreign country to reduce transportation costs and exploit the economies of scale.

6. Globalization • Resulting from human innovation and technological progress • Integration of economies around the world • Movement of people and goods beyond international borders • Also referred to “international trade” • Dimensions of globalization • Cultural • Political • Economic • Legal

7. SACU: Facilitate the cross-border movement of goods between the territories of the Member States; Create effective, transparent and democratic institutions which will ensure equitable trade benefits to Member States; Promote conditions of fair competition in the Common Customs Area; Figure 3.1: Dimensions of the international environment

8. Advantages of Globalization • Integration of markets- markets are interlinked- European Union • Much wider variety products for consumers to choose from • Consumers can get products at more competitive prices • Lowers international barriers & companies get access to wider markets • Provides jobs and help develop economies • Prevents market saturation in specific markets – reduces too much competition in one place • Standardisation of products- same product can be seen in various places • Promotes goodwill and understanding between different countries • Wider opportunities to invest

9. Disadvantages of globalisation: • Intense competition • Wide gap between rich and poor countries • Harder for smaller firms to establish themselves • Exploitations of workers • Income generated in host country is not always spent in same country

10. Table 3.1: What does globalization mean for business, society and government? Trade barriers: Tariff barriers: taxes on imports Quotas: a limit on a number of imports Subsidies: offered by the government to give a competitive advantage to a certain firm.

12. Globalbrands & companies now dominate most markets Companies seek to grow business by extending markets AND Reducing costs through economies of scale & focussed manufacturing / assembly

13. Characteristics of International Logistics Distinction between international and domestic logistics: • involves at least one border crossing • higher level of complexity, for example due to: • cultural factors • political factors • climatic factors • technological factors • economic factors

14. GLOBALISATIONandits logistics challenges

15. Some key problems with international logistics operations A longer and more complex logistics structure or supply chain, involving more organisations More complex transport operations • more transport links in the chain • more transport providers in the chain • longer distances and transit times • higher costs of transport • modal choice greater • greater risk of transport problems and delays

16. ….. continued Complex documentation requirements • requires more documentation than domestic logistics • greater problems if documentation is not correct

17. ….. continued The need to work in foreign business environments As much of the logistics pipeline is in foreign countries: • may need considerable local knowledge • may need to integrate foreign operators into the system • cultural and language difficulties are common

18. Deregulation • A core element of deregulation • expansion of world trade • elimination or reduction of trade barriers, such as import tariffs • wider variety of goods at lower prices • trade enhances national competitiveness • Deregulation promotes economic resilience and flexibility • Greater openness can also stimulate foreign relationships

19. Changes in transport due to deregulations • Products are sold and purchased in an competitive environment • Lower prices & better services to users • Carriers/ shippers can now freely charge their customers a competitive rate for shipments • Transportation services became logistic services offering: • order fulfilment, • Inventory Management and • Warehousing.

20. Changes in financial institutions due to deregulations • Companies have opportunities to invest anywhere in the world • Buyers & sellers payment transaction now has bright with the alternative in financial practices made possible by deregulation.

21. Changes in the communication industry due to deregulation • Integration of cables, telephone, computer & wireless access • Email, Cell phones, Electronic data Interchange & Internet impacted businesses and consumer operations. • Led to dramatic effectiveness & efficiency in SC

22. Recap on previous topics! What is Globalization? List four dimensions of international environment. Differentiate between globalization of markets and globalization of production? Mention the advantages of globalization. List the disadvantages of globalization What is deregulation? What are the impacts of deregulation?

23. 2. Integrated Relationships of Management Functions of the Firm • Integration amongst supply chain functions establishes value addition to the entire process, creating value chain relationships. • Ensures continuous flow of goods from raw material suppliers through to the end users • Help silo-type functional barriers to disappear, thereby reducing the reaction time of a business’s supply to any change in demand • Shared information enables cooperative parties in the SC to reach common goals more easily , such as responding quickly to change in demand to ensure lean and flexible supply • Good Supply response. • More importantly, integration implies that information and knowledge is circulated and shared and ideas clear track record of failure is set.

24. Lean Supply Chains • Developing a value stream to eliminate all waste including time, and to enable a level schedule. It requires application of just-in-time (JIT) system. • THE EIGHT TYPES OF WASTE ELIMINATED BY THE LEAN SYSTEMS • Overproduction: Manufacturing an item before it is needed. • Inappropriate Processing: Using expensive high precision equipment when simpler machines would suffice. • Waiting:Wasteful time incurred when product is not being moved or processed. • Transportation: Excessive movement and material handling of product between processes. • Motion: Unnecessary effort related to the ergonomics of bending, stretching, reaching, lifting, and walking. • Inventory: Excess inventory hides problems on the shop floor, consumes space, increases lead times, and inhibits communication. • Defects: Quality defects result in rework and scrap, and add wasteful costs to the system in the form of lost capacity, rescheduling effort, increased inspection, and loss of customer good will. • Underutilization of Employees: Failure of the firm to learn from and capitalize on its employees’ knowledge and creativity impedes long term efforts to eliminate waste.

25. 3. Procurement Management Tasks

26. Do These Words Mean the SAME THING?

27. What is Procurement Management? It is functionresponsible for the interface with the suppliers. PM ensures that business acquires the right quantities of goods & services, at the right time, at the right place, at the right price, to the right quality specifications and from the right sources. It can also include the purchasing activities required to order and receive goods

28. What is purchasing • Refers to the process of ordering and receiving goods and services. • It is a subset of the wider procurement process. • It involves in ordering goods such as: • request, • approval, • creation of a purchase order record (a Purchase Order or P.O.) and • the receipting of goods

29. Nature and Classification of Purchased Categories • Product Variety • Products are divided into goods and services. Goods are grouped according to the stage they have reached in series of processes within the supply chain of the product, extending from primary production to consumption or end-use. • Raw materials: primary outputs of agriculture, forestry, fishing, mining, and water sources. • Semi-finished products: in the process of being transformed from raw materials to finished goods, but not yet in a form of consumption. • Finished goods: are processed into final form required for consumption or use. • Capital goods: machinery and equipment used in the manufacturing or production process. • Services: non-physical or intangible products. They are highly perishable and consumed immediately upon production.

30. Quality of the physical products • Seven dimensions of quality • Performance: how well the product actually performs in comparisons to how it was designed to perform. • Reliability: the likelihood that an item will continually maintain its ability to perform at a given output level. • Durability: longevity of an item and is usually expressed as the actual or expected length of service life in terms of time or volume of output. • Conformance: whether supplier’s product meets the exact design specifications. • Features: number of extra accessories a product possesses in addition to its primary function. • Aesthetics: visual appearance of and types of materials used in , a product often influence customers in the judgment of quality. • Serviceability: ease with which a product malfunction can be repaired or rectified.

31. Service Quality • Determinants of Logistics Services Quality: • Suitability: ability to provide equipment & facilities needed for carriage, handling, and storage of particular product or item. • Accessibility/market area coverage: provision of services between particular facilities throughout the geographical area of business and gain physical access to facilities • Goods security: delivering goods in the same physical condition and quantity as tendered for storage and conveyance. • Transaction / order lead time: total time lapses from when the order is received to when the goods are delivered to the customer. • Reliability: consistency of transaction time, i.e. punctual delivery. • Flexibility: proven ability, readiness and willingness to handle variations in orders.

32. Objectives of Procurement Management • To improve the business competitive position • To provide an uninterrupted flow of goods and services required to support the business operation • To minimize inventory investment and loss of revenue • Maintain and improve quality • To find and develop best-in-class suppliers • To standardize the inputs and associated procurement process • To procure items and services at the lowest total cost of ownership • To achieve corporative productive internal relationships • To accomplish organizational procurement objectives at the lowest possible operating cost and as efficiently as possible.

33. Roles and responsibilities of the Procurement Management • Fostering lasting relationships with existing and newly recruited suppliers to help ensure on going excess to external markets with a view of contributing to long-term revenue enhancement. • Total expenditure over a long term which implies the maintenance of an integrated, interactive relationship with other management functions of the business in order to enhance efficiency and effectiveness in their ongoing business activities.

34. Relationship of Procurement Management with other functions • Procurement is a support function • It support and supplements the activities of the other functions within the business. • All entities within a business need to be equip with capital goods which are purchased, rented or leased through the procurement entity. • Internal entities require movable assets of a non-capital nature and operational consumable to perform the activities also repositioned via procurement entity. • The business may decide to outsourced certain non-core activities to professional service providers through collaboration with the procurement entity. • The entire business requires information. The procurement entity fulfill the role of acquiring the appropriate information system to enable other entities in the business to perform successfully.

35. Relationship of purchasing with other functions (cont’d..) • Ongoing activities of procurement function depend on support and inputs of other functions in the business. • Procurement is informed by marketing of focused the sales volumes of varies products ranges for which input need to be obtained. • The finance entity plays a role in negotiating the financial settlement and payment agreement of input of vendors. • The finance function is involved in determining the size of the procurement budged and whether inputs should be purchased hired or leased. • The human resources is responsible for arranging the stuffing needs of the procurement function.

36. Procurement process/ cycle • Stage one: Recognition of need • Stage two: Defining the specification • Stage three: Make or buy decision • Stage four: Identification of sources of supply • Selection of suppliers • Supplier survey • Supplier investigation and assessment • Supplier choice • Awarding the contract • Expediting • Receipt and payment • Stage five: Establishing relationship with a supplier

37. Procurement cycle

38. Tiers (Levels) of Procurement Management • The strategic role of Planning in Procurement • Planning attempts to answer the questions of what, when, and how to procure and it takes place at three levels or tiers of procurement management • Strategicmanagement or long term planning involves visualization of what the business wishes to achieve in future. It helps the business to: • Ensure availability of inputs needed for produce • Be suitably located to gain easy, efficient access to physical resources • Decide on size & share of organizational structure • Select of new suppliers develop and maintain a long standing and beneficial relationships with them.

39. Tactical Procurement Management • Tacticalis executed at middle level management, involves planning for a medium term. • Conducts logistical analysis to ensure that inventory levels are maintained. • Conduct informant networking about new products, material developments and technological innovations • Advice top management on supplier selection • Receiving and processing intra-organizational requisitions and bill of materials • Developing current and new suppliers

40. Operational Procurement Management • Operational procurement management consists of short term planning, execution monitoring and control of procurement operations. Lower level manager are responsible for: • Conducting inventory analysis and stock taking, • Reduce inventories through scheduling; • Maintain and improve relationships with suppliers; • communicate operation schedules and order on time, • Pay suppler invoices on time, • receive procured inputs on time and return goods that do not meet requirement • Providing technical and administrative support

41. Other roles of Procurement Management • Organising of Procurement • Usually, procurement is organised as a single department to get the benefits of centralised purchasing. These include: • Bundling of orders to get quantity discounts • Coordinating of associated activities to reduce costs of transport, stockholding, and administration • Eliminating duplication efforts and chaotic practices • Be a single point of contact for suppliers for consistent information and service • Improve skills and operations • Concentrate responsibility thus making management control easier

42. Other roles of Procurement Management (Cont’d..) • Leading in Procurement Management • Procurement managers should be able to influence their supply chain, by providing direction and aligning procurement toward their strategy • Coordinating in Procurement Management • Uniformity in procurement procedures • e.g. a requisition should be accompanied by three quotations; • A requisition with the minimum of N$20000.00 must be approved by the procurement committee. • Control in procurement Management • To focus on value creation, Supply chain managers should concentrate on Assessment and ensure quality control & Quality Assurance, Monitoring & Continuous improvement of the operations.

43. Unit Summary Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. Globalization has two facets, namely Globalization of Markets and Globalization of Production. Global brands & companies now dominate most markets because the supply chain seek to grow businesses by extending markets and reducing costs through economies of scale & focused manufacturing / assembly. The elimination or relaxation of trade barriers has contributed to international trade. Integration amongst supply chain functions establishes value addition to the entire process, creating value chain relationships. Procurement management function is serve as an interface with suppliers linking an organization to external markets while maintaining and integrated, interactive relationship with other management functions of the business in order to enhance efficiency and effectiveness in ongoing business activities.

44. References Bowersox, D. J., Closs, D. J., Cooper, M. B. Bowersox, J. C. (2013). Supply Chain Logistics Management (4thed) . New York: McGraw- Hill Pienaar, W. J., & Vogt, J. J. (2009). Business logistics management: A Supply chain perspective (3rd Ed.). Cape Town: Oxford University Press. Savage, C. (2013). Lecture notes: Logistics and Service Management. Polytechnic of Namibia