Transcript Learning Objectives Welcome to class of International Operations Management Dr. Satyendra Singh

Learning Objectives
Welcome to class of
International Operations Management
Dr. Satyendra Singh
University of Winnipeg
Learning
Objectives
Objectives…
• Understand the concept of supply chain management
• Recognize the relationship between design and
supply chain management
• Describe the five global sourcing arrangements
• Appreciate the importance of added costs of global
sourcing
• Understand the increasing role of electronic
purchasing for global sourcing
• Understand the just-in-time (JIT) production system
and potential problems with its implementation
Objectives
 Understand synchronous manufacturing and
customization
 Comprehend the concept of Six Sigma systems and
their application
 Explain the potential of global standardization of
production processes and procedures, and identify
impediments to standardization efforts
 Know the two general classes of activities in
manufacturing systems, productive and supportive,
that must be performed in all manufacturing systems
Supply Chain Management
• Process of coordinating and integrating
the flow of materials, information,
finances, and services within and
among companies in the value chain
from suppliers to the ultimate consumer
Global Supply Chain Management
• Involves total systems approach to managing
flow of
–
–
–
–
Materials
Information
Finances
Services
Our goal:
Lower Costs/Improved Products
• Desired results may be obtained through
– Improvement within existing operations
– Opening new operations
– finding outside sources for inputs
• Outsourcing
– Hiring others to perform some of the noncore activities and
decision making in a company’s value chain, rather than
having the company and its employees continue to perform
those activities
– Combination of above
Developing Core Competency
Strategies based on variety and volume
Design of Products and Services
• Design has 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 is traditional approach
– Sequential steps
• Alternative
participation
approach
– May involve customers
– Market Orientation
– Concurrent steps
is
cross-functional
Over-the-Wall Design Process
- takes too long and too costly
PLC, Strategy and Operations
International Operations management
Make
•
Outsourcing (Core vs. Peripheral)
– Make
• Yourself
• Partnership
– Controlled
– uncontrolled
– Buy
• Short-term supplier relationship
• Long-term supplier relationship
– Strategic Vulnerability vs. Potential Competitive Advantage (PCA)
PCA
Contract
Buy
Strategic vulnerability
–
•
•
•
•
Problems with Outsourcing
• International freight, insurance, packaging (10%)
• Import duty (0-50%)
• Cost of letter of credit (1%)
• International travel and communications (2-10%)
• Reworking on product specification (0-15%)
JIT vs. JIC
Standardization vs. Customization
ISO 9000 vs. ISO 14001
3BL  Financial. Environmental and Social
Outsourcing
• Increasingly common option
– Relocating some or all of a business’s activities or processes
outside of the company
• 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
• Offshoring: a foreign location
– Choices increased by
• Global access to vendors
• Falling costs of interactions
• Improved information technology and communication
Production Costs
Make or Buy Decision
1
2
Make
3
Buy
Market Orientation
Technology Cycle and S-Curve
Application of S-Curve on Phone
Supply Chain Network: A Hypothetical
Example of an American Laptop
Computer Company
Global Sourcing…
• Considerations
–
–
–
–
–
–
Costs
Control
Expertise
Distance
Languages
Laws and regulations
• Begin simple
– Then move to complex
Global Sourcing
• The Lure of Global Sourcing
– Suppliers with improved competitiveness
• Cost
• Quality
• Timeliness
– Suppliers in less developed countries with lowcost labor
• Attractive for labor-intensive 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
Use of Electronic
Purchasing for Global Sourcing
• Growth of electronic procurement
exchanges
– Identify potential suppliers or customers
– Facilitate efficient and dynamic interactions
among prospective buyers and suppliers
– Recognize strategic function of purchasing
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
• Benefits
– Cut costs and invoice and ordering errors
– Improve productivity and internal purchasing
processes
– Reduce trading cycle time, paper
– Compare bids
Global Sourcing
• Problems
– Unanticipated added costs
• Currency fluctuations
• Transportation cost increases
– E-procurement exposes business systems to wide
range of potential security issues
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
Advanced Production Techniques
• Systems to improve competitiveness
–
–
–
–
Just-in-time supply chains (JIT)
Highly synchronized manufacturing systems
Mass customization
Six Sigma
Japan’s Use of JIT
• Requirements to operate without
inventory
– Components defect-free
– Components delivered to each point at specified
time
– Sellers maintain inventory of finished products
– Process time reduced
– Manufacturers simplified product lines
– Suppliers cooperate
– Designers, managers, purchasing people and
marketers work as a team
Total Quality Management
• System in which organization is managed so
that it excels on all dimensions of product and
service that are important to the customer
• TQM uses Quality Circles
– Small work groups meet to discuss ways to improve
functional areas and product quality
Problems with JIT in U.S./Canada
• Failure to realize JIT is a total system, includes TQM
• Cultural differences in U.S./Canada workers
– Highly specialized work
– No company loyalty
• Failure to train and integrate suppliers
• JIT restricted to operations that produce same parts
repeatedly
• If one operation stops, entire production line stops
• Achieving a balanced system difficult: production capacities
differ among machines
• No allowances for contingencies
• Much trial and error are required to put system into effect
Advanced Production Techniques
• Synchronous Manufacturing
– Manufacturing system with unbalanced operations
that emphasizes total system performance
• Mass Customization
– Flexible manufacturing system to produce
customized products and services
• Six Sigma
– Business management process for reducing
defects and eliminating variation
Logistics
• Movement of materials
– Must interface with sourcing , manufacturing,
design, engineering and marketing
– Packaging and transportation requirements can
greatly increase logistics costs
– Many companies outsource logistics
Standards for Global Operations
• Standards
– Documented
agreements
on
technical
specifications or other precise criteria used
consistently as guidelines, rules, or definitions of
the characteristics of a product, process, or
service
• ISO 9000 (International Organization for Standards)
most used in Europe, for quality
• ISO 9001 most comprehensive standard
Impediments to Standardization
• Economic Forces
– Wide range of market sizes
– Cost of production
– Backward vertical Integration
• Arrangement in which facilities are established to
manufacture inputs used in the production of firm’s final
products
Impediments to Standardization
• Cultural Forces
– Developing countries may lack skilled workers
– Resources directed to professional vs. technical
education
– Use of specialized machines favored
– Absenteeism
Impediments to Standardization
• Political Forces
– Country needs new jobs
– Government insists on most modern equipment
Some Design Solutions
• Hybrid Design
– Hybrid capital-intensive mixed with labor intensive
processes when abundant unskilled labor
• Intermediate Technology
– Production methods between capital- and laborintensive methods
Local Manufacturing System
• Commonly scaled-down version of that found
in the parent company
• Horizontal/Vertical integration
– Vertical more traditional
– Horizontal less prevalent in foreign subsidiaries
Design of the Manufacturing System…
• Manufacturing system
– Functionally related group of activities for
creating value
– Factors involved in efficient operation
•
•
•
•
Plant location
Plant layout
Materials handling
Human element
Design of the Manufacturing System
• Plant location
– Affects both production and distribution costs
– Needs labor, raw materials, water and power
– Must locate in export processing zones
• Plant layout
– Arrangement of machinery, personnel and service facilities
• Materials Handling
– Careful planning can save production costs
– Poor handling leads to 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…
• Manufacturing system has two classes
of activities
– Productive activities
– Supportive activities
Operation of the
Manufacturing System
Obstacles to Meeting Manufacturing
Standards
– Low output
– Inferior quality
– Excessive manufacturing costs
Obstacles to Meeting Manufacturing Standards
• Low Output
– Supplier problems, absenteeism
– Poor coordination of production scheduling
– Culture differences,attitudes, educational levels, planning
• Inferior Product Quality
– Good quality is relative
– Lack of maintenance and operating skills
• Excessive Manufacturing Costs
–
–
–
–
–
–
Low output
Budget problems
Overoptimistic sales forecast
Supply problems, supplier, water/power
Overstocked inventory
Resistance to lay off workers
Supportive Activities…
• Quality control
• Inventory control
• Purchasing
– Must consider costs
– Develop suppliers
– Know import procedures and key government
officials
– Monitor foreign exchange
Supportive Activities
• Maintenance
– Goal to ensure acceptable level of production
– Two alternatives
• Preventive
• Breakdown
• Technical Function
– Provides operations with manufacturing
specifications
– Checks quality of inputs and finished products
– Influential in selecting sources of supply