Transcript Slide 1
This chapter covers:
21
•Supply chain
management
•Global sourcing
•JIT production
Global Operations and
Supply Chain Management
•Synchronous
manufacturing
•Six Sigma
•Impediments to
global standardization
•Importance of
technology
•Classes of activities
in manufacturing
International Business
by Ball, McCulloch, Frantz,
Geringer, and Minor
McGraw-Hill/Irwin
Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Objectives
Understand supply chain management and the relationship with
design
Describe the five global sourcing arrangements and appreciate the
importance of the added costs of global sourcing
Understand the increasing role of electronic purchasing for global
sourcing
Understand the Japanese efforts to improve quality and lower costs
Know the just-in-time production system and its problems
Understand synchronous manufacturing and customization
Understand Six Sigma systems
Identify the impediments to global standardization of production
processes and procedures
Know the two general classes of activities in manufacturing systems
21-2
Lower Costs/Improved Products
Desired results may be
obtained through
Improvement within
existing operations
Opening new operations
or finding outside
sources for inputs
Outsourcing
Combination of above
Process is referred to as
supply chain management
21-3
Global Supply Chain Management
Supply chain management refers to activities
involved in producing a company’s products and
services, and how these activities are linked
together
Involves total systems approach to managing flow
of
Materials
Information
Finances
Services
21-4
Design of Products and Services
Design has a fundamental relationship with type of
inputs required
Important consideration is extent to which products
and services will be standardized or adapted
Over-the-Wall approach traditional approach
Sequential steps
Alternative approach cross-functional participation
21-5
Can involve customers
Sourcing Globally
Important Reasons for Sourcing Globally
Lower price available from foreign sources
Availability of foreign products not available
locally
Firm’s worldwide operation and attitude
Advanced technology available from foreign
sources
Higher-quality products available from foreign
sources
Outsourcing
An increasingly
common option
21-7
Focus on core
competencies
Leverage skills of other
companies
Reduce costs
Improve flexibility and
speed of response
Enhance quality
Can outsource in same
country or another
country
Choices increased by
Global access to vendors
Falling costs of
interactions
Improved information
technology and
communication
Outsourcing
21-8
Any part of value chain can
be outsourced
Product design
Input supply
Manufacturing or
assembly
Logistics
Distribution
Marketing
Sales
Service
Human resources
Outsourcing
Considerations
Costs
Control
Expertise required
Distance
Languages
Laws and regulations
Initially better to outsource
simple activities then
gradually outsource more
complex activities
21-9
The Lure of Global
Outsourcing
Suppliers with improved
competitiveness in terms
of
Cost
Quality
Timeliness
Less developed countries
with low-cost labor
Attractive for laborintensive products with
low skill requirements
Global Sourcing Arrangements
Arrangement that provide a firm with foreign
products.
Wholly owned subsidiary
Overseas joint venture
In-bond plant contractor
Overseas independent contractor
Independent overseas manufacturer
21-10
Use of Electronic
Purchasing for Global Sourcing
In recent years, many firms
have set up electronic
procurement exchanges
to identify potential
suppliers or customers
to facilitate efficient and
dynamic interactions
among these prospective
buyers and suppliers
Purchasing is
increasingly being
viewed as a strategic
function
21-11
Global Electronic Procurement
Electronic Exchange Options
Catalog purchases
Permits buyers and
suppliers to interact
through a standard
bid/quote system
Facilitates obtaining
letters of credit,
contracting for logistics
and distribution, and
monitoring daily prices
and order flows
21-12
Benefits
Cut costs
Improve productivity
Cut invoice and ordering
errors
Reduce trading cycle time
Reduce supply base
Improve internal
purchasing processes
Easily compare bids
Reduce paper
Global Sourcing
Problems
Firm’s may be surprised that what initially
appeared to be a lower price is not really lower
An increase in price occurs due to currency
fluctuations
E-procurement and electronic commerce as a
whole cannot be isolated from the company’s
overall business system
Exposing internal business systems to access via
the Internet can expose the firm to a wide range
of potential security issues
21-13
Added Costs
International freight,
insurance and packing
Import duties
Customhouse broker’s fees
Transit or pipeline inventory
Cost of letter of credit
International travel and
communication costs
Company import specialists
Reworking of products out
of specification
21-14
Advanced Production Techniques
Growing international competition requires
companies to achieve efficiency and effectiveness in
production
To improve competitiveness companies have put
into place systems such as
Just-in-time supply chains (JIT)
Highly synchronized manufacturing systems
Computer Integrated Manufacturing (CIM)
Robots
21-15
Japan’s Use of JIT
Requirements to operate without inventory
Components had to be defect-free
Components had to be delivered to each point at the time
they were needed
Sellers maintained inventory of finished products
Process time required reduction
Manufacturers had to simplify product lines
Suppliers had to cooperate
Designers, managers, purchasing people and marketers had
to work as a team
21-16
Total Quality Management
21-17
Managing the entire
organization so that it excels
on all dimensions of product
and services that are
important to the customer
TQM used Quality Circles
Small work groups that
meet periodically to
discuss ways to improve
their functional areas and
the quality of the product
Problems with JIT in the U.S.
Failure to realize JIT is a
total system which includes
TQM
Cultural differences in U.S.
workers
Highly specialized work
No company loyalty
Failure to train and integrate
suppliers
JIT is restricted to operations
that produce the same parts
repeatedly because it is a
balanced system
21-18
Because JIT is a balanced
system, if one operation
stops, the entire production
line stops
Achieving a balanced system
is difficult because
production capacities differ
among the various classes of
machines
JIT makes no allowances for
contingencies.
Much trial and error are
required to put the system
into effect
Advanced Production Techniques
Synchronous Manufacturing
Also called Theory of Constraints (TOC)
Scheduling and manufacturing control system
Focus on bottlenecks
Mass Customization
Use of flexible, computer-aided manufacturing systems
Can customize for demands of individual customers
Six Sigma
A business management process that combines analytical
tools with infrastructure and leadership to solve problems
and optimize processes
21-19
Logistics
Movement of materials
Must interface with
sourcing , manufacturing,
design, engineering and
marketing
Packaging and
transportation
requirements can greatly
increase logistics costs
Many companies now
outsource logistics
21-20
Standardization of Global Operations
In most countries standards have been developed
across product lines and for various functions
In Europe, the most-used standard for quality is
the ISO 9000
The most comprehensive of standards is the ISO
9001
This standard applies to industries involved in
the design, development, manufacturing,
installation, and servicing or products and
services
21-21
Reasons for Global
Standardization of Systems
Advantage of synchronous manufacturing and
TQM
Customers everywhere want quality products at low
prices
Simplifies the manufacturing organization at HQ
Increases effectiveness in keeping production
specifications current
Guarantees parts manufactured in various plants
will be interchangeable
21-22
Reasons for Global
Standardization of Systems
Manufacturing rationalization
Division of production among a number of
production units thus, enabling each unit to produce
only a limited number of components for all of a
firm’s assembly plants
Purchasing
Control
Quality control
Production and maintenance control
21-23
Reasons for Global
Standardization of Systems
Building new plants will be both simpler and quicker with
standardization
Design engineers need only to copy the drawings and list
of materials that they have in their files
Vendors will be requested to furnish equipment that they
have supplied previously
The technical department can send the current
manufacturing specifications without alterations
Labor trainers experienced in the operation of the
machinery can be sent to the new location without
undergoing special training on new equipment
Reasonably accurate forecasts of plant erection time and
output can be based on experience with existing facilities
21-24
Impediments to Standardization
Economic Forces
Wide range of market
sizes
Cost of production
21-25
capital-intensive
labor-intensive process
computer-integrated
manufacturing
High-capacity machines
Backward vertical
integration
Impediments to Standardization
Cultural Forces
Developing countries
may lack skilled workers
Resources directed to
professional vs. technical
education
Use of specialized
machines favored
Absenteeism creates
further problems
21-26
Political Forces
Country needs new jobs
Government insists on
most modern equipment
Design solutions include
Hybrid designs
Intermediate technology
Appropriate technology
depends on economic,
sociocultural and
political variables
Design of the Manufacturing System
A manufacturing system is
essentially a functionally related group of
activities for creating value
Factors involved in the efficient operation of a
manufacturing system
Plant location
Plant layout
Materials handling
Human element
21-27
Design of the Manufacturing System
Plant location
Effects both production
and distribution costs
Need labor, raw
materials, water and
power
Must locate in export
processing zones
Plant layout
21-28
Arrangement of
machinery, personnel and
service facilities
Materials Handling
Careful planning can
save production costs
Poor handling can result
in excessive inventory,
idle machinery, late
deliveries and damaged
goods
Human element
Effectiveness depends on
people
People are affected by the
system
Operation of the
Manufacturing System
Once the
manufacturing system
has been put into
operation, two general
classes of activities
must be performed
Productive activities
Supportive activities
21-29
Operation of the
Manufacturing System
Manufacturing Activities
After the initial trial period management will
expect the system to produce at a rate sufficient to
satisfy market demand
Obstacles to Meeting Manufacturing Standards
Low
output
Inferior quality
Excessive manufacturing costs
Obstacles to Meeting
Manufacturing Standards
Low Output
Supplier problems
Poor coordination of
production scheduling
Culture differences in
attitudes, educational
levels, and planning
Absenteeism
Inferior Product Quality
Good quality is relative
Lack of maintenance and
operating skills
21-31
Excessive Manufacturing
Costs
Low output
Budget problems
Overoptimistic sales
forecast
Supplier problems
Water or power failures
Overstocked inventory
Resistance to lay off
workers
Supportive Activities
21-32
Quality control
Inventory control
Purchasing
Must consider costs
Have to seek out and
develop suppliers
Must know import
procedures and have
connections with key
government officials
Must monitor foreign
exchange
Supportive Activities
Maintenance
Goal is to ensure acceptable level of production
Two alternatives
Preventive
Breakdown
Technical Function
Provides operations with manufacturing
specifications
Check quality of inputs and finished products
Influential in selecting sources of supply
21-33
The ISO 9000 family is primarily concerned with "quality
management". This means what the organization does to fulfil:
- the customer's quality requirements, and
- applicable regulatory requirements, while aiming to
- enhance customer satisfaction, and
- achieve continual improvement of its performance in
pursuit of these objectives.
The ISO 14000 family is primarily concerned with
"environmental management". This means what the
organization does to:
- minimize harmful effects on the environment caused by
its activities, and to
- achieve continual improvement of its environmental
performance.