Logistics Global Supply Chain Management - Case Study Example

«Supply Chain Management and Globalization» 1. Introduction The modern world has allowed man to break all geographical barriers and has given opportunities that were never imagined. The concept of globalization is more common than ever before. Organizations have expanded their businesses into the international markets and increased the competition for the local markets. The customers are now exposed to more choices and brands which raises the need for the local companies to deliver more quality products. If quality services or products are not delivered by the local markets then the customer switches brands to other international brands. This phenomenon also poses some threats to the supply chain management since the manufacturing or assembling operations etc have been widespread in the world. The dispersion of these units causes many issues for the organization due to cultural differences, workplace ethics and norms etc. Another factor that seems to get affected by the cultural and geographical differences of the global supply chain is the creation and transfer of knowledge from one entity to the other. The widespread of supply chains occurs mainly between the Eastern and the Western countries, therefore the challenges that are faced in keeping every entity updated with the relevant knowledge shall be discussed in the report, along with the best practices that have been adopted by organizations. 2. Knowledge Creation and Transfer Schulz (2001) described knowledge as the accumulated data of “know-how and information transferred per unit of time”. He intended to capture all modes of information transfer in this definition by using the word “know-how” for example email, phone, meetings, policy revisions etc. Gupta and Govindarajan (2000) defined a global supply chain as a set of units in different countries that work over a network of capital, product and knowledge transactions. Mindbaeva (2003) described the creation and transfer of information across a global supply chain as the process of identifying useful information (tacit and explicit knowledge both) that is transferred to another unit in the world. The transfer process will continue till it finally reaches the desired destination. Nonaka (1990) termed this process as global knowledge creation. Tacit knowledge is the end product of the information in the minds of the people. Smith (n.d.) stated that it is greatly influenced by the experiences of the individual. This kind of knowledge is very difficult to accumulate since it has to be put in a recordable form first and requires great motivation or incentives to share it with others. The sharing of this knowledge requires a level of trust among the participating entities. Explicit knowledge is the knowledge that can be disseminated and stored easily. Sanchez (2003) explained that information systems store this kind of information as it can be stored in the form of drawings, documents, sheets etc. The creation of both of these types of knowledge takes place at the global supply chains units and needs to be transferred amongst each other effectively. Nonaka (1990) added an important factor in this process which is the capability of the receiver to use the information in the best manner. Davenport and Prusak (1997) agreed with Nonaka (1990) that mere transfer of the information is not enough if it is not absorbed by the receiver and more importantly if it is not acted upon for the betterment of the organization. Kohlbacher & Krähe (2007) stated that the expansion of organizations in the global market creates a daunting need to ensure that the subsidiaries operate with the same efficiency and competence that is desired by the main establishment or headquarters. The regional offices should be able to understand the vision of the company and deliver the same excellence that has been the company’s trademark. To achieve this excellence, it is necessary for every establishment to be equipped with the required knowledge. Creation of knowledge is a continuous process and needs to be updated at all the regional offices and subsidiaries so that every office works in the same direction with the same vision. The distributed nature of a global supply chain makes the creation and transfer of knowledge a necessary process to achieve competitive advantage and success. 3. Cultural Differences and Supply Chain Different researchers have identified different factors that affect the flow of knowledge and thus the learning effectiveness in global supply chains. Bresman (1999) identified some factors that pose a threat to the effectiveness of knowledge creation and transfer in a global setup; absence of personal relationships within peers and absence of trust and support. The third factor that was identified by him was cultural differences between the different units thereby causing resistance and frictions in the transfer of knowledge. Barkema (1999) defined cultural distance as the factor that raised the need for transfer of knowledge and also the traits that serve as an obstruction in the process of knowledge transfer. These obstructions may constitute the difference in language, customs, values or business ethics etc. Monckza (1998) contributed a valuable notion that supply chain performance is not directly affected by the cultural differences. On the contrary, it is only indirectly affected. He explained his idea by stating that cultural differences may cause a lack of trust among the concerned parties, along with minimal communication. Stanley (2003) supported this notion and added that the commitment level between the supply chain partners might not be as strong as witnessed amongst the partners from the same culture. Wilding (2003) proposed traits of effective relationship among the supply chain units- 3Ts of highly effective supply chains. These 3Ts were time, transparency and trust. As stated earlier, cultural differences may cause a lack of trust because of which the relationship between the participating supply chain units may suffer. Effective creation or transfer of knowledge cannot be expected from units that do not have a good and supporting relationship with each other. Figure 1: Factors effecting knowledge transfer (Hauke, 2006) Figure 1 highlights the two main factors that affect the transfer of knowledge in participating units of a supply chain system. Hauke (2006) associated the macro level effect with the cultural differences and micro level effect with the organizational culture. Zhu (2004) contradicted the findings of several researchers who proposed techniques to overcome cultural barriers and stated that there cannot be an effective process of knowledge transfer if there are numerous cultural differences between the participating units. Hofstede (1991) has contributed great literature regarding the cultural differences in global organizations. He defined ‘culture’ as the cumulative programming of one’s mind that separates the individuals from one group with other groups. The cumulative programming of the mind is the resultant of the all the things that have been grasped by the individual from the environment all throughout his life. He identified some dimensions of national culture that have been helpful in understanding why individuals from different countries and environments behave differently: Power Distance: The acceptability level of unequal distribution of power in organizations in a country. For the calculation of this factor, the less powerful individuals in the organization are considered. Uncertainty Avoidance: The level to which individuals belonging to a certain culture feel threatened and therefore feel safer when rules and laws are in place. Individualism: denotes the concept of individuals looking out for themselves only. The relations between such individuals are considered to be loose since they do not have close ties with anyone. Masculinity: refers to the social roles of genders in the society for example males are supposed to be tough who aim for success in the society whereas females are more modest and humble. He explained that these factors affect how individuals feel about their working environments. The first two dimensions govern how individuals think about organizations whereas the last two govern how individuals feel about the people in the organizations. The four dimensions influence the way an individual perceives the culture of another group. They also denote the level of acceptance and openness to new ideas and knowledge. Since these dimensions of national culture affect the way people behave in the organizations and take decisions. They will also influence the way knowledge is created and transferred in the global supply chain. 4. Examples of Cultural Differences in Western and Eastern Countries The value of contracts is different in each part of the world. Brazil faces constant changes in their tariff, laws and working conditions therefore flexibility has to be present in the contracts to maintain good relations with the employee and thus make the business a success. In the Asian countries, contracts do not have as great of a value as personal relationships therefore contracts are merely a formality. In Central America, the people are more superstitious and instances have been witnessed when the workers have demanded the exercise of exorcism in a warehouse if they return to it after a long time (Hudson, 2005). Dan (2010) stated in his article that the Western countries are more focused on the generation of profits. For example America will prioritize its self-interests more than any other things. Whereas an Asian country like China will have individuals prioritizing their networks more than generating profits. There is a famous term used in China- Guanxi. Guanxi can be defined as the relationship between exchange partners who favour each other in doing business and perform mutual obligations (Lee, 2001). This is where the main cultural difference lies between China and the western countries. Chinese do business on the basis of ties and relationships whereas the Western countries prefer to do it through formal contracts. 5. Case Study O’ Dell (1997) discussed a case study in his paper regarding the endeavours of Texas Instruments (TI) to transfer knowledge to their manufacturing units. The findings of his case study concluded that the respective company faced four major cultural barriers in the process; The prevalent financial systems and procedures at their organization had introduced the concept of competition between the different plants that gave way to more cultural hostility and promoted the “We vs. Them” attitude. The management at the plant had no responsibility or inclination towards the notion of sharing knowledge. There was no common language in which they could all communicate effectively. Their direction and working environments were so different that they never had the need for a common purpose. 6. Model of Knowledge Transfer The process of knowledge creation and transfer has been framed into a model by Stanley (2003). She conducted an extensive study on the respective subject and concluded the findings of her work with the following model: Figure 2: Model of Transfer of Knowledge (Stanley, 2003) She denoted the process of transferring knowledge with a journey by an individual. The individual will be influenced by some ‘Influencers’ during his journey, namely; individual factors, organizational factors and external factors. After thorough research on the subject it can be assumed that the influencers included the following factors; Individual factors; are the personal believes and experiences of the individual that will create or modify the knowledge Organizational factors; constitute the commitment level of the organization for the sharing of knowledge with other supply chain units. External factors; are the cultural differences of the environment in which the different units will be located. The ‘Indicators’ (that are shown in figure 2) refer to the factors that will indicate success at different levels due to the effective transfer of knowledge. The knowledge may be modified, customized etc in the process of being transferred if there are many intermediary units in the path of the information flow. 7. Ways to Reduce Cultural Differences for Effective Flow of Information The barriers for effective flow of information have been overcome by companies around the world and have achieved commendable level of transfer of knowledge. Following are some of the recommended ways to reduce the drawbacks that might be prevailing in the global supply chain; Personal relations tend to remove cultural hostilities among the individuals that might be working together from two ends of the world therefore it is advised to give people time and make good relations with each other. This will facilitate the creation as well as the transfer of knowledge since the employees will establish a supporting attitude towards the people in their global supply chain teams. Virtual meetings should be promoted in the company so that face-to-face interaction can be facilitated. Recruiting people who are open to ideas and changes rather than narrow minded people. Develop a non-hierarchal access to knowledge so that all employees can benefit and contribute in it. This will promote the contribution of tacit knowledge which is the most difficult type of knowledge to be stored. 8. Conclusion After an extensive study on the subject, it can be concluded that knowledge creation and transfer have become the need of the modern world for global supply chain management. The continuous update of knowledge is necessary to achieve competitive advantage in the market and also to ensure that all the subsidiaries and participating units work with the same vision and objective. However, the creation and transfer of knowledge is influenced by a major factor; cultural differences among the supply chain units. These differences bring about lack of trust and support, hostility etc among the entities and decrease the spirit of sharing knowledge. The differences in values, customs, business ethics and language also influence the transfer of knowledge and communication among the supply chain units. Efficient measures should be taken by the management to reduce the cultural differences and induce the spirit of unity among the organizational units so that the business can prosper by effective creation and transfer of knowledge. References Barkema, HG, Shenkar, O., Vermeulen, F., & Bell, JHJ, 1997, ‘Working Abroad, Working with Others: How Firms Learn to Operate International Joint Ventures’, Academy of Management Journal, vol. 40(2): 426-442 Bresman, H., Birkinshaw, J., & Nobel, R 1999, ‘Knowledge Transfer in International Acquisitions’, Journal of International Business Studies, vol. 30(3): 439-462 Davenport, TH & De long DW, Beers MC 1997, ‘Building Successful knowledge management projects’, Managing the Knowledge of the Organization, Ernst and Young LLP. 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