Global factors and supply chain management in operations: global sourcing, economies of scale, scanning and learning, R&D, logistics and e-commerce (HSC Business Studies)
“Operations strategies - global factors - global sourcing, economies of scale, scanning and learning, research and development; supply chain management - logistics, e-commerce, global sourcing”
Global factors are the ways operating across countries changes operations: global sourcing (buying inputs from the best supplier anywhere), economies of scale (lower cost per unit from larger output), scanning and learning (watching the world for better ideas and adopting them) and research and development (creating new products and processes, funded by global sales). Supply chain management coordinates the flow of goods from supplier to customer through logistics (transport, warehousing, distribution), e-commerce (online ordering and fulfilment) and global sourcing. Each factor can lower cost or raise quality, but each adds risk.
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What this dot point is asking
In the syllabus, "global factors: global sourcing, economies of scale, scanning and learning, research and development" is the last operations strategy, and "supply chain management: logistics, e-commerce, global sourcing" is another. The "students learn to" point "examine the impact of globalisation on operations strategy" ties them together. Global factors also connect to influences on operations, where globalisation is one of the influences.
Global sourcing
Global sourcing is obtaining inputs (materials, components, finished goods, services and technology) from suppliers anywhere in the world, choosing the best combination of cost, quality and availability.
Why businesses source globally:
- Lower cost: cheaper labour or larger-scale suppliers overseas.
- Quality and expertise: some countries or firms lead in a particular technology.
- Availability: some inputs are not produced in Australia at all.
- Capacity: global suppliers can meet volumes local suppliers cannot.
- Example: Coles sourcing automation technology
- Rather than develop warehouse technology itself, Coles contracted the German firm Witron to build automated distribution centres (Redbank, Queensland, opened 2023; Kemps Creek, NSW, officially opened August 2024) and the UK technology company Ocado to build automated customer fulfilment centres for online orders at Truganina (Victoria) and Wetherill Park (NSW), which opened in 2024. This is global sourcing of transforming resources: the best available technology, wherever it is developed.
- Example: Cochlear's manufacturing network
- Cochlear, headquartered at Macquarie University in Sydney, manufactures in Australia and overseas, including Kuala Lumpur, where it announced an expansion of more than RM30 million in 2022 to serve demand in Malaysia and more than 180 other countries. Locating production in several countries lowers cost and spreads risk.
- Risks of global sourcing
| Risk | Explanation | Management |
|---|---|---|
| Disruption | Pandemics, disasters, conflict and shipping delays interrupt supply | Multiple suppliers or countries; safety stock |
| Longer lead times | Sea freight from overseas takes weeks | Better forecasting; regional warehouses |
| Exchange rates | Import costs rise when the Australian dollar falls | Hedging (see global financial management) |
| Quality at a distance | Harder to inspect and control suppliers | Quality assurance requirements, audits, certification |
| Ethics and law | Forced or child labour in supply chains | Supplier codes of conduct and audits; reporting under the Modern Slavery Act 2018 (Cth) for entities with consolidated revenue of at least $100 million |
Economies of scale
Economies of scale are the reductions in cost per unit that come from producing on a larger scale. Global operations make scale possible because the business can sell into many markets.
Sources of economies of scale:
- Technical: large, specialised equipment and automation that only pay off at high volume.
- Purchasing: bulk buying earns lower prices from suppliers.
- Financial: large businesses borrow more cheaply.
- Marketing: advertising and brand costs are spread over more sales.
- Managerial: specialist managers and systems spread over a larger operation.
Example: BHP's Western Australia Iron Ore. BHP's Pilbara iron ore operations produced a record 290 million tonnes (100 per cent basis) in FY2025, with improved rail cycle times and port performance. The huge fixed cost of mines, a dedicated railway and port facilities is spread over enormous tonnages, and BHP describes the business as the world's lowest-cost major iron ore producer. Scale is the basis of its cost leadership.
Diseconomies of scale. Beyond a point, cost per unit can rise again: communication and coordination become harder, decisions slow down, and staff can feel disconnected. Large global businesses manage this by giving regional managers authority while keeping scale in purchasing and technology.
Scanning and learning
Scanning is systematically monitoring the global environment for new technologies, competitors, processes, regulations and customer trends. Learning is using what is found: adopting, adapting and improving the best practices in the business's own operations.
How businesses scan and learn: attending international trade fairs and conferences; studying competitors and leaders in other industries (benchmarking); partnerships and joint ventures with overseas firms; research collaborations with universities; employing staff with international experience; and learning from their own operations in other countries.
Example. Coles' decision to adopt automated fulfilment technology that Ocado developed for online grocery in the UK, and warehouse automation from Witron in Germany, shows learning from practices proven overseas. Toyota's production system is another case: its methods (just-in-time, kaizen, jidoka) have been studied and adopted by manufacturers and service businesses around the world.
Research and development
Research and development (R&D) is the investigation and experimentation that leads to new or improved products and processes. Global businesses can spend more on R&D because the cost is recovered across worldwide sales, and they can locate R&D wherever the talent is.
Examples:
- Atlassian spent $2.67 billion (US dollars) on R&D in FY2025, 51 per cent of its revenue of $5.2 billion, an extremely high R&D intensity that reflects a software business whose product is created by engineers.
- Cochlear reported FY2025 sales revenue of $2,356 million and expects to invest around 12 per cent of sales revenue in R&D. Its Nucleus Nexa System, approved by the US FDA in July 2025, has implant firmware that can be updated after surgery, an R&D outcome that differentiates it from competitors.
R&D supports differentiation (new, superior products) and can also support cost leadership through process innovation (cheaper, faster ways of making the same product).
Supply chain management
Supply chain management is coordinating all the activities and organisations involved in getting a product from raw materials to the customer: suppliers, manufacturers, warehouses, transport, retailers and returns. The aim is the right product, in the right quantity, at the right place and time, at the lowest cost.
Logistics
Logistics is the management of the movement and storage of goods: transport mode (sea, air, road, rail), location and design of warehouses and distribution centres, inventory holding and order processing.
Example: Woolworths' Moorebank distribution centres. In June 2020 Woolworths announced a $700 million to $780 million investment in two distribution centres at the Moorebank Logistics Park in south-western Sydney: a fully automated regional distribution centre and a semi-automated national distribution centre, replacing older centres at Minchinbury and Yennora. Locating in a logistics park built around an intermodal rail terminal, and using automation that builds pallets tailored to the aisles of individual stores, are logistics decisions intended to improve availability and reduce manual handling and road transport. Woolworths committed to offer 650 redeployment roles at the new sites, showing the human resources side of a logistics change.
E-commerce
E-commerce is buying and selling over the internet. In supply chains it covers both business-to-business ordering from suppliers and business-to-consumer online sales. It changes supply chains because retailers must:
- pick small individual orders rather than store deliveries, often in dedicated fulfilment centres;
- manage last-mile delivery and click-and-collect;
- give real-time stock availability and order tracking;
- handle more returns (reverse logistics).
Example: Catch and Kmart. In January 2025 Wesfarmers announced that its online marketplace Catch would cease trading as a standalone business in the fourth quarter of FY2025, with its fulfilment centres at Moorebank (NSW) and Truganina (Victoria) transferred to Kmart Group. Wesfarmers expected centralised fulfilment to give faster deliveries at a lower unit cost while relieving pressure on busy stores, and estimated one-off costs of $50 million to $60 million. It is a clear case of a business redesigning its supply chain around e-commerce.
Example: Coles. Coles' Ocado-built customer fulfilment centres at Truganina and Wetherill Park are dedicated to picking online orders, separating online fulfilment from store operations.
Global sourcing as a supply chain activity
Global sourcing must be managed, not just decided. It requires selecting and vetting suppliers (quality systems, financial stability, labour standards), negotiating contracts and service levels, arranging international freight, customs clearance and duties, and monitoring performance (on-time delivery, defect rates, cost).
- Question
- "Evaluate the effectiveness of supply chain management in a business you have studied."
- Business
- Woolworths Group (supermarkets).
- Logistics
- Automated and semi-automated distribution centres at Moorebank (announced 2020, $700 million to $780 million) in a rail-connected logistics park. Effect: improved availability and less manual handling. Cost: very large capital outlay, disruption during changeover, workforce transition (650 redeployment roles offered).
- E-commerce
- Online orders require picking and last-mile delivery; dedicated fulfilment and automation lower the cost per order.
- Global sourcing
- Imported products and equipment add cost and exchange-rate risk, and must be managed for modern slavery risk under the Modern Slavery Act 2018.
- Judgement
- Effective in lowering cost and improving dependability over the long term, but the benefits depend on successful implementation and the large capital cost takes years to recover.
Every global factor has a trade-off: global sourcing lowers cost but adds disruption, currency and ethical risk; scale lowers unit costs but can bring diseconomies. Evaluate both sides.
Logistics (moving and storing goods) is one part of supply chain management, which also includes sourcing, supplier relationships, e-commerce and returns.
It is the global factor students most often skip. Define both parts (monitoring and adopting) and give an example of a business adopting a practice or technology from overseas.
Figures such as market shares and R&D spend change every year. Use a recent, sourced figure and state the year, or explain the concept without a number.
How this dot point appears in the HSC
- Section I: identify which global factor a scenario shows (for example, adopting a Japanese production method is scanning and learning).
- Section II: explain one or two global factors or the role of logistics or e-commerce for a stem business (3 to 5 marks).
- Section III: recommend global sourcing, scale or supply chain strategies for a hypothetical business aiming for cost leadership, a common report task.
- Section IV: evaluate how globalisation has affected operations strategy, using a researched business.
Exam-style questions
Questions in the style of NESA exam questions on this dot point, each with a worked answer. They are written by ExamExplained unless tagged "Past paper"; the year shows the paper a question is modelled on.
Original6 marksExplain how global sourcing, economies of scale and research and development can help a business achieve a competitive advantage.Show worked answer →
Marks guide (Original, modelled on NESA criteria). 5-6 marks: explains how EACH global factor contributes to competitive advantage, with cause and effect and relevant examples. 3-4 marks: describes the factors with some link to advantage. 1-2 marks: some relevant information.
Global sourcing is obtaining inputs from the best supplier anywhere in the world. It gives access to lower-cost or higher-quality inputs, and to technology not available locally, which lowers cost or raises quality. Coles, for example, sourced warehouse automation from Witron in Germany and online fulfilment technology from Ocado in the UK instead of developing its own.
Economies of scale are the cost savings from producing on a larger scale, as fixed costs are spread over more units and bulk purchasing lowers input costs. BHP's Western Australia Iron Ore business produced a record 290 million tonnes (100 per cent basis) in FY2025, spreading the fixed cost of its mines, railways and port over enormous volumes, and BHP describes it as the world's lowest-cost major iron ore producer. Scale supports cost leadership.
Research and development creates new products and processes that competitors cannot easily copy. Atlassian spent 51 per cent of its FY2025 revenue on R&D, and Cochlear expects to invest around 12 per cent of sales revenue in R&D, which produced products such as its upgradeable Nucleus Nexa implant. Global sales allow these large R&D budgets to be recovered across many markets, supporting differentiation.
Together, the factors lower cost (sourcing and scale) or create unique products (R&D), the two routes to competitive advantage.
Original5 marksExplain how e-commerce has changed supply chain management for retailers. Use an example.Show worked answer →
Marks guide (Original, modelled on NESA criteria). 5 marks: explains specific changes to supply chain management caused by e-commerce, with cause and effect and an accurate example. 3-4 marks: describes changes with some example. 1-2 marks: some relevant information.
Model answer. E-commerce means customers order online and expect goods delivered to their door or ready for collection. This changes the supply chain in three ways. First, retailers must pick many small orders for individual customers instead of shipping full pallets to stores, which requires dedicated fulfilment centres or in-store picking. Second, the "last mile" of delivery becomes the retailer's responsibility and a major cost. Third, customers expect real-time stock information and order tracking, so inventory systems must be integrated across warehouses, stores and the website.
Wesfarmers shows the response. In January 2025 it announced that its online marketplace Catch would stop trading as a standalone business and that Catch's fulfilment centres at Moorebank (NSW) and Truganina (Victoria) would transfer to Kmart Group, which expected centralised fulfilment to deliver faster deliveries at a lower unit cost while relieving pressure on its busy stores. The change shows a retailer redesigning its supply chain to handle online orders efficiently.
Original4 marksOutline TWO risks of global sourcing for an Australian business and one way to manage each.Show worked answer →
- Marks guide (Original, modelled on NESA criteria)
- 4 marks: outlines two relevant risks and an appropriate management strategy for each. 2-3 marks: outlines risks with limited strategies. 1 mark: some relevant information.
- Supply disruption
- Long supply chains can be disrupted by pandemics, natural disasters, conflict or shipping delays, leaving the business without inputs. It can manage this by sourcing from more than one supplier or country and holding safety stock of critical items.
- Ethical and legal risk in the supply chain
- Overseas suppliers may use forced or child labour, which damages reputation and, for entities with consolidated revenue of at least $100 million, must be reported on under the Modern Slavery Act 2018 (Cth). The business can manage this through supplier codes of conduct, audits and publishing its supplier list.
Other acceptable risks include exchange-rate movements (managed by hedging) and quality control at a distance (managed by quality assurance requirements and inspections).
Practise this
Sources & how we know this
- Business Studies Stage 6 Syllabus (2010) — NSW Education Standards Authority (2010)
- BHP FY2025 results announcement — BHP (2025)
- Atlassian announces fourth quarter and fiscal year 2025 results — Atlassian (2025)
- Cochlear Limited financial results FY2025 — Cochlear (ASX announcement) (2025)
- Catch wind down and OneDigital update — Wesfarmers (ASX announcement, 21 January 2025) (2025)
- Woolworths to build automated distribution centres in NSW — iTnews (2020)
- Ocado officially launches first CFC in Australia with Coles — Ocado Group (2024)
- Cochlear expands global operations and manufacturing in Malaysia — Malaysian Investment Development Authority (2022)
- Business Studies HSC exam papers — NESA