Part Six Managing International Operations: Chapter Seventeen Global Manufacturing and Supply Chain Management

Part Six
Managing International Operations
Chapter Seventeen
Global Manufacturing and Supply
Chain Management
17-1
Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall
Supply Chain
• The coordination of materials, information,
and funds from the initial raw material
supplier to the ultimate customer.
17-2
Global Manufacturing Strategies
• The success of a global manufacturing
strategy depends on four key factors:
 compatibility
 configuration
 coordination
 control
17-3
Compatibility
• The degree of consistency between FDI
decisions and a company‟s competitive strategy.
• Some company strategies that managers must
consider:
 Efficiency/cost
 Dependability
 Quality
 Innovation
 Flexibility
17-4
Manufacturing Configuration
• Three broad categories of manufacturing
configuration are:
 centralized facility
 regional facilities
 multidomestic facilities
17-5
Information Technology
• EDI (electronic data interchange)

• ERP (enterprise resource planning)
• MRP (material requirements planning)
• RFID (radio frequency ID)
• E-commerce
• Private technology exchange (PTX)
17-6
Quality
17-7
Quality
• Quality is defined as meeting or exceeding
the expectations of customers.
• It is
 conformance to specifications,
 value,
 fitness for use,
 support (provided by the company)
 and psychological impression (image).
17-8
Some of the Quality terms
17-9
Zero Defects Vs. Acceptable
Quality Level (AQL)
• Zero Defects- Refusal to tolerate defects
of any kind.
• AQL- A tolerable level of defects that can
be corrected through repair and service
warranties.
17-10
Total Quality Management (TQM)
• Three principles of TQM are:

 Customer satisfaction,
 Continuous improvement,
 Employee involvement
17-11
Total Quality Management (TQM)
• Goal of TQM is to eliminate defects.

• The quality of TQM means a product is „so
good‟ that the customer wouldn‟t think of
buying from anyone else.
17-12
Six Sigma
• A process improvement method.
• Relies on customer feedback and fact-
based data gathering and analysis
techniques.
• Refers to a process that generates no more
than 3.4 defects per million cases.
• Sometimes associated with the term zero
defects.
Exhibit
Six Sigma 1-8
The Six Sigma DMAIC Framework

Stage Goals
Define ● Establish the scope and purpose of the project.
● Diagram the flow of the current process.
● Establish the customer's requirements for the
process.
Measure ● Gather baseline performance data related to
the existing process.
● Narrow the scope of the project to the most
important problems.
Analyze ● Identify the root cause(s) of the problems
identified in the Measure stage.
Improve ● Develop, evaluate, and implement solutions
to the problems.
Control ● Ensure that problems remain fixed.
● Seek to improve the new methods over time.
Quality Standards
• Quality standards can be:
 general (ISO 9000 and ISO14000)
• ISO 9000 is a global set of quality standard of
every level of an organization.
• ISO 14000 is focused on environmental
management.
 industry-specific (QS9000)
 company-specific (AQL, zero defects, TQM,
and Six Sigma)
17-15
Inventory Management
17-16
Inventory Management
• Distance, time and uncertainty in foreign

environment cause foreign sourcing to
complicate inventory management.
• Two issues of Inventory management
discussed:
 Lean Manufacturing
 JIT
17-17
Lean Manufacturing
• Lean manufacturing focuses on:
 Waste reduction,
 Optimizing processes.
17-18
Traditional “Push”
Manufacturing Company
Forecast Sales Order components Store Inventory
Make Sales from

Finished Goods Store Produce goods in
Inventory Inventory Anticipation of Sales
Traditional “Push”
Manufacturing Company
Traditional “push” Large
manufacturing inventories
Raw Work in Finished

materials process goods
Materials waiting Completed products

to be processed. awaiting sale.
Partially completed products

requiring more work before
they are ready for sale.
Exhibit
1-6
Lean Production
 Identify value  Identify the
in specific business process
products/services. that delivers value.
The lean thinking  Organize work

arrangements around
model is a five
the flow of the
step approach. business process.
 Continuously pursue  Create a pull

perfection in the system that responds
business process. to customer orders.
Lean Production
The five step process results in a “pull” manufacturing system
that reduces inventories, decreases defects, reduces
wasted effort, and shortens customer response times.
Customer Places Create Production Generate Component

an Order Order Requirements
Goods Delivered Production Begins Components

when needed as Parts Arrive are Ordered
Lean Production
Lean thinking may be used to improve business processes that link companies
together.
The term supply chain management refers to the coordination of business

processes across companies to better serve end consumers.
JIT
• Sourcing the raw materials and parts just
as they are needed in the manufacturing
process.
• Reduces the cost of capital for materials
holding.
• Needs efficiency in the production planning
and execution process.
• Difficult to implement in country like
Bangladesh where uncertainty is a
common phenomenon.
17-24
Supplier Networks
17-25
Supplier Networks
• Sourcing: the process of a firm having inputs
supplied to it from outside suppliers (both
domestic and foreign) for the production
process.
• Domestic sourcing allows the company to avoid
problems related to:
 language
 culture
 currency
 tariffs, and so forth
• Foreign sourcing allows the company to reduce
costs and improve quality, among other things
17-26
Outsourcing
• Major outsourcing configurations:
 Vertical integration.
 Outsourcing through industrial clusters.
 Other outsourcing.
17-27
Make or Buy Decision
• Under the make or buy decision,
companies have to decide if they will make
their own parts or buy them from an
independent company
• Companies go through different
purchasing phases as they become more
committed to global sourcing
17-28
Supplier Relations
• When a company sources parts from
suppliers around the world, distance, time,
and the uncertainty of the international
political and economic environment can
make it difficult for managers to manage
inventory flows accurately
17-29
The Purchasing Function
• Global progression in the purchasing
function:
 Domestic purchasing only.
 Foreign buying based on need.
 Foreign buying as part of a procurement
strategy.
 Integration of global procurement strategy.
17-30
Major Sourcing Strategies
• Assign domestic buyers for foreign purchasing.
• Use foreign subsidiaries or business agents.
• Establish international purchasing offices.
• Assign the responsibility for global sourcing to a
specific business unit or units.
• Integrate and coordinate worldwide sourcing.
17-31
Transportation Networks
• The transportation system links together
suppliers, companies and customers
• Foreign trade zones (FTZs) - special
locations for storing domestic and
imported inventory in order to avoid paying
duties until the inventory is used in
production or sold.
17-32

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Part Six

Managing International Operations

• EDI (electronic data interchange)

• Three principles of TQM are:

• Goal of TQM is to eliminate defects.

The Six Sigma DMAIC Framework

• Distance, time and uncertainty in foreign

Forecast Sales Order components Store Inventory

Make Sales from

Raw Work in Finished

Materials waiting Completed products

Partially completed products

The lean thinking  Organize work

 Continuously pursue  Create a pull

Customer Places Create Production Generate Component

Goods Delivered Production Begins Components

The term supply chain management refers to the coordination of business

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