Transcript International Business

Global Manufacturing and
Supply Chain Management
18-1
Strategy, Production,
and Logistics
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Production is the activities involved in creating a
product
• Can be both service and manufacturing activities
Logistics is the activity that controls the
transmission of physical materials through the
value chain
Production and logistics are closely linked since a
firm’s ability to perform its production activities
efficiently depends on a timely supply of high
quality material inputs
Strategy, Production,
and Logistics
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Production and logistics functions have a
number of important strategic objectives
• Lower costs
• Increase product quality by eliminating defective products
from both the supply chain and the manufacturing process
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These objectives are interrelated
• Increasing productivity because time is not wasted
producing poor-quality products that cannot be sold,
leading to a direct reduction in unit costs
• Lowering rework and scrap costs associated with defective
products
• Reducing the warranty costs and time associated with
fixing defective products
Low-cost leadership
Differentiation
Focus
Production Strategy
Production operations are
essential to achieve objectives
Reflects overall firm strategy
Low-cost leadership
Differentiation
Focus
Capacity Planning
Assessing a company’s ability to produce
enough output to satisfy market demand
•
Number of work shifts
•
Number of employees
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Size of facilities
•
Subcontracting
Facilities Location Planning
Selecting the location for production facilities
Location
economies
Centralized
Decentralized
derived from locating
Centralized production
Decentralized production
production activities
tends to be well-suited
tends to be well-suited
in optimal locations
to global strategy
to multinational strategy
Economic benefits
(generates more value)
Process Planning
Deciding the process that a company will
use to create its product
Standardization
• Suits low-cost leadership
• More automated (EOS)
Adaptation
• Suits differentiation and focus
Facilities Layout Planning
Deciding the spatial
arrangement of production
processes within facilities
• Reflects business-level strategy
• Location’s geography also a factor
Supply Chain Terms
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Supply chains – the coordination of
materials, information, and funds from the
initial raw material supplier to the ultimate
customer
Logistics (materials management) – that
part of the supply chain process that
plans, implements, and controls the
efficient, effective flow and storage of
goods, services, and related information
18-3
Factors Managers Must
Consider
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Efficiency/cost-reduction of
manufacturing costs
Dependability-degree of trust in a
company’s products and its delivery
and promises
Innovation-ability to develop new
products and ideas
18-5
Factors Managers
Must Consider, con’t
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Quality-performance reliability,
service quality, speed of delivery,
and maintenance quality of the
product
Flexibility-ability of the production
process to make different kinds of
products and to adjust the volume of
output
18-6
Manufacturing Configurations
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Centralized manufacturing offering a
selection of standard, lower-priced
products to different markets
Regional manufacturing to serve
customers within a specific region
Multi-domestic manufacturing (market
expansion) in individual countries as their
demand becomes significant so
manufacturing is closer to customers and
meeting local needs
18-7
Supplier Networks – Acquiring
Physical Resources
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Companies can manufacture parts
internally or purchase them from
external manufacturers
“make or buy” decision
Outsourcing is the process of a
company having inputs supplied to it
from outside suppliers for the
production process
18-13
Decision to Make
Vertical integration
Extend control over inputs (backward integration)
or output (forward integration)
Reasons to make
Lower cost
Greater control
Decision to Buy
Outsourcing
Reasons to buy
Lower risk
Buying from another
company a good or
service that is not
central to a company’s
competitive advantage
Greater flexibility
Market power
Barriers to buying
18-14
Global Component Network
18-15
Advantages of Global Sourcing
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Reduce costs due to less expensive labor
Improve quality
Increase exposure to worldwide technology
Improve delivery of supplies
Strengthen reliability of supply by supplementing
domestic with foreign suppliers
Gain access to materials available only abroad
Establish presence in a foreign market
Satisfy offset requirements
React to competitors offshore sourcing problems
18-16
Phases of Global Purchasing
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Domestic purchasing only
Foreign buying based on need
Foreign buying as part of
procurement strategy
Integration of global procurement
strategy
18-17
Quality
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Quality is the ability to meet
or exceed the expectations of
the customer
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Conformance to specifications
Value
Fitness for use
Support provided by the
company
• Psychological impressions
(image)
18-9
Quality Improvement
Total Quality
Management (TQM)
ISO 9000
Continuous quality improvement
to meet or exceed customer
expectations through
quality-enhancing processes
International Standards
Organization 9000 is a
certification a firm gets when
it meets the highest quality
standards in its industry
Levels of Quality Standards
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General level
• ISO 9000
• Malcolm Baldridge National Quality
Award
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Industry-specific level
Company level
18-11
Other Production Issues
Shipping
costs
Inventory
costs
Just-in-time
(JIT)
manufacturing
Decision to Reinvest or Divest
Reinvest
• Promising outlook
• Growing market
• Highest return
Divest
• Unprofitable outlook
• Social unrest
Financing Business Operations
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Borrowing
• Take advantage of interest rates
variation across countries
• “back-to-back loan”
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Issuing equity
• Selling stocks to raise capital
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Internal funding
• Swapping debt or equity
• Charging for royalties and licensing fees