NW Management Services & Globalisation - Essay Example

NW Management Services & Globalisation Introduction Globalisation has been a part of the business world long before there were aircrafts or even the existence of the aerospace industry. However, the recent changes which have come to the world of business and finance have created a sharp increase in the speed of globalisation as the world has become a smaller place. In this regard and in particular interest to the aerospace industry is the idea of having international production locations with the related issues of international human resource management and the question of optimising a global supply chain where parts and equipment have to be sourced from locations all over the world. Supply Chain Management Although it is difficult to believe that Supply chain management is a recent concept since even Shakespeare discussed how ships and merchandise at sea can be at risk from various threats, the process of actually managing a supply chain through technology and modern communication tools is certainly a recent innovation. With reference to globalisation, logistics is simply the science of getting the required materials, goods or equipment to the right people at the right time and the development of this field owes a lot to the military history of civilisation which goes all the way back to the Roman era where armies had to be kept in supply even in far flung regions of the empire (Christopher, 2005). In the modern world, when supply chain management and the philosophy of logistics are combined in an efficient manner a company can become richer and more powerful than any emperor of the past. Supply chain management not only allows the right people to have the right things at the right time, it also makes sure that there is no wastage in the process and the overall costs of the business are reduced (Van Hoek, 2005). For the company, it could mean less mistakes in ordering the right part, making sure that production facilities around the world are occupied and that production matches the consumption as well as client requirements. Every business decision and every business choice comes with an associated cost which must be borne by the shareholders or the owners of the business which means that costs need to be reduced to ensure a healthy profit. An efficiently managed global supply chain does exactly that by cutting down costs in several important areas of business (Christopher, 2005). Lummus and Demarie (2006) give the example of supply chain management experts such as Renee Gregoire and James Correll who discussed the importance of supply chain management with reference to globalisation. The future predictions made by them suggested that global competition and heightened customer demands of quality and speed would cause drastic changes in supply chain management. They further suggested that heavy industry (such as the aerospace industry), manufacturing and retail would be primary areas in which the supply chain management process as well as the philosophy of logistics would change in a significant manner. In business terms, the primary motivation for that is the rise in customer expectations that seek individualized products to be delivered to them in record time. Such service is expected to come at the same cost as mass-produced products with low inventory costs for the business and excellent customer service which keeps the client fully informed about their products in transit. Companies are not supposed to simply sell goods and services they are now expected to provide gratification for their clients (Lummus & Demarie, 2006). In relation to the philosophy of logistics, supply chain management also allows manufacturers to be more agile which lets them make what is needed to the exact specifications wanted by the client (Christopher, 2005). Suppliers are located closer to the base of consumption which shortens the time to market and allows more stability for the business. Most importantly, the use of technology in the field of supply chain management allows quick decision making and even allows equipment and supplies to be rerouted as they are in transit. Software is an essential part of this system along with the required hardware tools, digital tags and other equipment which makes the blood and bones of this body. However, without the management skills and the individualized job structures within production facilities or the supply bases add little value to the process of supply chain management (Van Hoek, 2005). It can be expected that the future will have more computer controlled and automated supply chain procedures which will need more white collar workers in the field. In areas such as the aerospace industry, as demands for certain products and machines rises, companies can be expected to compress their supply chain for making faster and faster deliveries. There are several examples described by various writers who show the supply chain time compression leads to several benefits for a company. Despite the numerous advantages, it seems that the primary advantage is the cost benefit which comes from reducing the time to market and the ability to meet supply targets given by the clients (Christopher, 2005). As more products can be brought to the market in a shorter period of time, stock levels might not need to be maintained at the same level as with a longer supply chain. This allows a company to use money which is left in the process of getting inventory towards other projects which might give them higher returns. For example Wal-Mart has $1.2 Trillion in inventory which is going to their various stores around the world. Keeping a track of this inventory and knowing exactly which assets are required at what place by compressing the supply chain is a valuable benefit for the company (McClenahen, 2005). With time compression, the entry of the product and the placement of the product on Wal-Mart shelves is quickened all the way from the supplier to the buyer therefore once the product has been checked by the staff and placed on the shelves for the consumers, billing and accounting processes can be automated. Instead of having to wait for days to get their money, both suppliers and sellers can have their money in hours (Williams, 2004). A perfect example of supply chain time compression comes from the defence contractor Lockheed Martin. Since the aeronautics firm is focused on making specialised products it has to get specialised parts and equipment which may be produced in different locations around the world. Of course the demands of the buyer i.e. the military organisations which are its clients can come with a very short time limit for supply, the company has had to revamp and shorten its supply chain to keep up with maintaining its contracts (Fogarty, 2006). By changing its supply chain, the company was able to win new contracts which had even shorter requirements for supply. Additionally, by making sure that products and parts could be delivered sooner than expected, the company was able to create complex tools such as the Joint Strike Fighter which is the next generation of fighter craft (Fogarty, 2006). Since there is no real way in which such specialised manufacturing can be sped up simply by asking the suppliers to work faster, Lockheed Martin went a different route by looking at sources which could supply them faster and used those parts to build their product. Instead of maintaining a longer supply chain with specialised parts, Lockheed Martin found suppliers who could give them off the shelf parts in a compressed timeline which allowed them to make the deadlines and keep the promises which they had made to the client. Under their previously established production and logistics system, the company had to create new production operations for each of their specialised products (Fogarty, 2006). With a new system using off the shelf parts and suppliers who were located in geographically close terms, the company was able to not only compress its supply chain and reduce costs, it also helped the clients since getting spare parts was made easy for them. Lockheed Martin reduced the need for customisation on their part and created a win-win situation for all concerned parties. Their system has been so successful that the US Department of Defence is looking into revamping its supply chain by basing it on the same model (Fogarty, 2006). International Human Resource Management As companies become more diversified and things like outsourcing and off shore operations become the norm rather than the exception, a global corporate culture could develop with time. However, such a state is still far off in the future since societal norms and personal cultural backgrounds still have a greater influence than HR policies established by an organisation (Laurent, 1986). A simple comparison between China and the UK shows that even on the organisational level, China has only recently developed a culture of increased importance to the HR functions of a company. On the other hand, countries like the UK have been focused on the value of Human Resources for many years. With the development of a global culture, the differences may not remain that important but as long as they are present they have to be taken into account. Hall and David (2001) place the firm at the centre of economic activity in both China and the UK where essentially different systems based on capitalistic theories are used. HR and Business related activities like training and education of labour, bargaining with unions, capital and asset acquisitions, even interactions with other companies are connected with the nature of capitalism used in the economy. Naturally, the human resource management in the country would tend to move towards a type which has inherent support from the national institutions and the government. Over a long period of time, the business processes and the HR policies would become similar to the methods used by the political and social institutions of the country. In the context of globalisation, when the term ‘capitalism’ is used, the majority of the time it is used to describe the economic systems present in England or America. There is also evidence presented by Block (1999) to show that America is often the guiding force behind the creation of liberalised free markets as per the pressure it has levied on other smaller economies. These economies will resist this pressure simply because by being in a different variety of capitalism, they gain competitive advantages that make their country more attractive for investors. In certain cases, it may be better for companies located in America or the UK to have off shore operations in such nations. This is an automatic and natural organisation process which changes depending on the needs of the country (Hall & David, 2001). Clearly, with all the factors that put countries into economic conflict with each other, it is easy to see why international HRM has become important for the companies of the world today. Companies need to operate in several different countries and possibly have different setups for different countries where production or development is most economically feasible. However, since the cultures and economic systems of these countries may be on conflicting terms, HR managers have to ensure that different cultures and national influences can work together. The primary method for a company to control cultural conflict between the home office and other locations is the establishment of proper HR policies which take into account these differences and are sensitive to them. The effective positioning of IHRM policies is a difficult thing to manage and a company can choose to take several different paths depending on its present situation. For example, GE is one such company which went all the way and summarily dismissed all individuals from service who were seen to have a cultural mismatch with the company (Welch, 2005). While that is one way to handle cultural differences, a company may not be in the position or have the ability to fire a significant number of workers at once. To make a single HR policy to manage all departments in all locations of a company would be more or less impossible. Managers who are situated in the company head office can not effectively translate their HR management policies for global locations without understanding and appreciating local cultures and customs. Strategic HR decisions should not be made in isolation since it would be difficult to implement these decisions with offices abroad (Edwards & Kuruvilla, 2005). In effect, the cultural differences between nations create a cultural need for international HRM which makes a company run better. International human resource management can only go so far in countering the issues generated by the process of globalisation and helping a company create an organisational culture which transcends the local cultures. In the present day and age, there are significant cultural differences which exist for managers to understand and appreciate (Beardwell & Holden, 2004) but it is also true that these differences are not necessarily bad because they can be used for the benefit and advantage of the company rather than to create problems between home and branch offices. Other than the national culture, there is also the concept of an organisational culture which has a definite impact on how things are run within a company. Laurent (1986) suggests that the organisational culture which is created within a company will take several cues from the national culture since the majority of individuals working for the company would be residents of the same location. For a brief time or in times of stress, the culture of the organization can be more powerful that the national culture but Laurent believes that the effect will be temporary and can be detrimental to the enforcement of HR policies. The management of human resources within multinational organisations is often a comparison between the cultures of the home office as opposed to the culture of the host nation itself. It is for these reasons that the company has to accept that off shore locations where production and development of our products is taking place will require a different approach to management as per the culture and the economic system of the host nation. As globalisation forces us to have suppliers and producers across the world to gain cost advantages, the factors that can negatively or positively influence the cost advantage have to be understood and addressed. Conclusion While there are hundreds of other topics which can contribute to the development of a company’s strategy when it comes to handling the issues related with globalisation, I feel that the management of the company’s supply chain and the handling of cultural issues in offshore operations are the two foundation stones of a global management strategy. If our company can appreciate the problems associated with these aspects of business and use them to the advantage of the company then globalisation is not a threat for the company since it would then be seen as an opportunity. Works Cited Beardwell, I. and Holden, L. 2004, Human Resource Management: a contemporary approach 4th edition, FT Prentice Hall. Block, F. 1999, ‘New Thinking About Capitalism’, Dollars & Sense, vol. 12, no. 226, pp 19-25. Christopher, M. 2005, Logistics and Supply Chain Management, FT Press. Edwards, T. and Kuruvilla, S. 2005, ‘International HRM: national business systems, organizational politics and the international division of labour in MNCs’, International Journal of Human Resource Management, vol. 16, no. 1, pp1-21. Fogarty, K. 2006, ‘How Lockheed Martin revamped its supply chain.Authors’, eWeek, 23(22), p. 32-33. Hall, P. and David, S. 2001, Varieties of capitalism: The Institutional Foundations of Comparative Advantage, Oxford University Press. Laurent, A. 1986, ‘The Cross-Cultural Puzzle of International Human Resource Management’, Human Resource Management, vol. 25, no. 1, pp 91-102. Lummus, R and Demarie, S. 2006, ‘Evolutionary chain’, Industrial Engineer, 38(6), p. 38-42. McClenahen, J. 2005, ‘Wal-Mart’s big gamble’, Industry Week, 254(4), p. 42-49. Van Hoek, H. 2005, Logistics Management and Strategy, FT Press. Welch, J. 2005, Winning, HarperCollins. Williams, D. 2004, ‘The Strategic Implications of Wal-Marts RFID Mandate’, Directions Magazine, [Online] Available at: http://www.directionsmag.com/article.php?article_id=629&trv=1 Read More