Part Six

Managing International Operations

Chapter Seventeen
Global Manufacturing and Supply
Chain Management

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 Chapter Objectives
• To describe different dimensions of global manufacturing
strategy
• To examine the elements of global supply chain
management
• To show how quality affects the global supply chain
• To illustrate how supplier networks function
• To explain how inventory management is a key
dimension of the global supply chain
• To present different alternatives for transporting products
along the supply chain from suppliers to customers

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 Supply Chain Management
• Supply chain - the coordination of
materials, information, and funds from the
initial raw material supplier to the ultimate
customer.

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 Logistics
• Logistics, or materials management, is
that part of the supply chain process that
plans, implements, and controls the
efficient, effective flow and storage of
goods, services, and related information
from the point of origin to the point of
consumption in order to meet customers’
requirements

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Global Manufacturing Strategies
• The success of a global manufacturing
strategy depends on four key factors:
 compatibility
 configuration
 coordination
 control

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 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

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 Manufacturing Configuration
• Three broad categories of manufacturing
configuration are:
 centralized facility
 regional facilities
 multidomestic facilities

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 Coordination and Control
• Coordinating is the linking or integrating of
activities into a unified system.
• Control can be the measuring of
performance so companies can respond
appropriately to changing conditions.

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 Information Technology

• EDI (electronic data interchange)

• ERP (enterprise resource planning)
• MRP (material requirements planning)
• RFID (radio frequency ID)
• E-commerce
• Private technology exchange (PTX)

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 Quality
• Quality is defined as meeting or exceeding
the expectations of customers.
• Quality standards can be:
 general (ISO 9000)
 industry-specific
 company-specific (AQL, zero defects, TQM,
and Six Sigma)

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 Total Quality Management
• Total quality management (TQM) is a
process that stresses:
 customer satisfaction
 employee involvement
 continuous improvements
• The goal of TQM is to eliminate all defects.

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 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
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 Outsourcing
• Major outsourcing configurations:
 Vertical integration.
 Outsourcing through industrial clusters.
 Other outsourcing.

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 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

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 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

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 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.

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 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.

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 Lean Manufacturing and
Just-in-Time Systems
• Lean manufacturing - a productive system
whose focus is on optimizing processes
through the philosophy of continual
improvement.
• JIT - sourcing raw materials and parts just
as they are needed in the manufacturing
process.

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 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.

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