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Topic: International Operations Management Team Members:
Ashwin.E Azarudeen.A BALAJI.S Balamurugan.P Dhanwandher.S Durgalakshmi.B
International Operations Management
and so on) into final goods and services. the goal of its international operations managers is to design. International operations management refers to the transformation-related activities of an international firm. labor.Operations Management Operations management is the set of activities an organization uses to transform different kinds of inputs (materials. and distribute goods or services that meet the needs and wants of customers worldwide and to do so profitably´ . create. Explanation: ³Regardless of a firm¶s product.
The International Operations Management Process Strategic context Production Acquisition of resources Location decisions Logistics .
Operations managers typically must decide important and complex issues in three areas: Resources: Managers must decide where and how to obtain the resources the firm needs to produce its products. . and so on.Complexities of International Operations Management Resources Location Logistics The basic complexities inherent in operations management stem from the production problem itself²where and how to produce various goods and services. Key decisions relate to supply chain management and vertical integration. Location: Managers must decide where to build administrative facilities. how to design them. and plants. sales offices. Logistics: Managers must decide on modes of transportation and methods of inventory control.
Forms of Operations Management Service operations management Production management Explanation: Although some similarities exist between creating goods and creating services for international markets. there also are major fundamental differences. Operations management decisions. The following slides focus on production management. . and issues that involve the creation of tangible goods are called production management. service operations management will be addressed later in the presentation. processes. and those involving the creation of intangible services are called service operations management.
most international firms approach supply chain management as a strategic issue to be carefully planned and implemented by top management. and other resources. Supply chain management clearly affects product cost. Because of these impacts.Supply Chain Management Supply chain management is the set of processes and steps a firm uses to acquire the various resources it needs to create its products. . parts. product quality. the first issue an international production manager faces is deciding how to acquire those inputs. Expalnation: Because the production of most manufactured goods requires a variety of raw materials. and internal demands for capital. Other common terms for this activity include sourcing and procuring.
Basic Make-or-Buy Options .
whereas smaller automakers such as Saab or BMW are more likely to buy parts from outside suppliers. because larger firms are better able to benefit from economies of scale in the production of inputs. For example. and technological expertise and by the nature of its product. larger automakers such as GM and Fiat are more likely to make their parts themselves. At other times the make-or-buy decision will depend on existing investments in technology and manufacturing facilities . scope of operations.Influence Factors for the Make-or-Buy Decision Size Technological expertise Scope of operations Nature of product Explanation: The make-or-buy decision can be influenced by a firm¶s size.
Buying from others also reduces a firm¶s training costs and expertise requirements. Buying a component from an external supplier has the advantage of reducing the firm¶s financial and operating risks. Control . A firm that buys rather than makes retains the flexibility to change suppliers as circumstances dictate. a firm can free up capital for other productive uses.Necessary Trade-Offs in the Make-or-Buy Decision Trade-offs Flexibility Risk Making a component has the advantage of increasing the firm¶s control over product quality. This is particularly helpful in cases in which technology is evolving rapidly or delivered costs can change as a result of inflation or exchange rate fluctuations. delivery schedules. By not having to build a new factory or learn a new technology. design changes. Buying from others lowers the firm¶s level of investment. and costs.
Factors Affecting Location Decisions Country-related issues Product-related issues Government policies Organizational issues An international firm that chooses to make rather than buy inputs faces another decision: Where should it locate its production facilities? In reaching a location decision. . government policies. the firm must consider country-related issues. and organizational issues. product-related issues. These issues will be discussed on the following slides.
transportation. . entertainment. countries that enjoy large. More important. access to medical care. adequate housing. Country-of-origin effects also may play a role in locating a facility. electrical. telephone. To build a facility requires construction materials and equipment as well as materials suppliers and construction contractors. Most facilities require at least some minimal level of infrastructural support. low-cost endowments of a factor of production will attract firms needing that factor of production. and other services are necessary to utilize the facility productively. Infrastructure also affects the location of production facilities.Country-Related Issues Resource availability Cost Infrastructure Country-of-origin effects Resource availability and cost constitute a primary determinant of whether an individual country is a suitable location for a facility. As suggested by the classical trade theories and the Heckscher-Ohlin theory. water. Certain countries have ³brand images´ that affect product marketing. education. In addition. and other related services are almost certain to be important for the employees and managers who will work at the facility as well as for their families.
.Country-Related Issues Such issues play key roles in location decisions for manufacturers.
and raw sugar and other agricultural goods. goods with high value-to-weight ratios.Product-Related Issues Value-to-weight ratio Required production technology The product¶s value-to-weight ratio affects the importance of transportation costs in the product¶s delivered price. the firm probably will utilize only one plant. such as microprocessors or diamonds. coal. cement. The production technology used to manufacture the good also may affect facility location. bulk chemicals. If a firm¶s sales are large relative to an efficient-sized facility. A firm must compare its expected product sales with the efficient size of a facility in the industry. Conversely. If its sales are small relative to an efficient-sized facility. . can be produced in a single location or handful of locations without loss of competitiveness. tend to be produced in multiple locations to minimize transportation costs. such as iron ore. the firm is likely to operate many facilities in various locations. Goods with low value-to-weight ratios.
To serve its customers. exchange rates. monetary. . The stability of the political process within a country can clearly affect the desirability of locating a factory there.Government Policies Stability of political process National trade policies Economic development incentives Existence of foreign trade zones (FTZ) Government policies also may play a role in the location decision. A country may establish FTZs near its major ports of entry and/or major production centers. Economic development incentives may influence the location decision. It then allows international firms to import products into those zones duty free for specified purposes. Unforeseen changes in taxation policy. and regulatory policies seemingly on whim and without consulting the business community raises the risk and uncertainty of operating in that country. inflation. An international firm also may choose a site based on the existence of a foreign trade zone (FTZ). An FTZ is a specially designated and controlled geographical area in which imported or exported goods receive preferential tariff treatment. a firm may be forced to locate a facility within a country that has high tariff walls and other trade barriers. A government that alters fiscal. and labor laws are particularly troublesome to international firms. National trade policies also may affect the location decision.
Organizational Issues Business strategy Organizational structure Inventory management policies .
. and the flow of finished products.International Logistics International logistics is the management of the flow of materials. parts. and other resources within and between units of the firm itself. and other resources from suppliers to the firm. supplies. supplies. and goods from the firm to customers. services. the flow of materials. parts.
Factors Distinguishing International and Domestic Logistics Transport distance Number of transport modes Complexity of regulatory content .
Characteristics of International Services Services are intangible Services are not storable Services may require customer participation Services may be tied to the purchase of other products .
Managing Service Operations Capacity planning Location planning Facilities design and layout Operations scheduling .
.Productivity Productivity is an economic measure of efficiency that summarizes the value of outputs relative to the value of the inputs used to create the outputs.
Strategies for Enhancing Productivity Spend more on R&D Improve operations Increase employee involvement .
Essential Components of Total Quality Management Strategic Commitment to Quality Employee High-Quality Up-to-Date Involvement Materials Technology Effective Methods .
specify an acceptable range of deviation. Statistical process control is a family of mathematically based tools for monitoring and controlling quality. . Its basic purposes are to define the target level of quality.Key Components of Total Quality Management Statistical process control Benchmarking Firms using TQM have a variety of tools and techniques from which they can draw. Benchmarking is the process of legally and ethically studying how other firms do something in a high-quality way and then either imitating or improving on their methods. including statistical process control and benchmarking. and then ensure that product quality is hitting the target.