Global Manufacturing and Supply Chain

Management
 Operations Management
• Operations management is the set of
activities an organization uses to
transform different kinds of inputs
(materials, labor, and so on) into final
goods and services.
• International operations management
refers to the transformation-related
activities of an international firm.
International Operations Management Process
 Complexities of
International Operations Management
Operations managers typically must decide important
and complex issues in three areas:
1. Resources: Managers must decide where and how to
obtain the resources the firm needs to produce its
products. Key decisions relate to supply chain
management and vertical integration.
2. Location: Managers must decide where to build
administrative facilities, sales offices, and plants; how
to design them; and so on.
3. Logistics: Managers must decide on modes of
transportation and methods of inventory control.
 Production Management
• Production management is the
combination of operations management
decisions, processes, and issues that involve
the creation of tangible goods.
• Three important dimensions of
international production management:
1. International supply chain management
2. International facilities location
3. International logistics
 Supply Chain Management
• A supply chain is the connected network of individuals,
organizations, resources, activities, and technologies involved
in the manufacture and sale of a product or service. A supply
chain starts with the delivery of raw materials from a supplier
to a manufacturer and ends with the delivery of the finished
product or service to the end consumer.
• Supply chain management is the management of the flow of
goods and services and includes all processes that transform
raw materials into final products.
• Vertical integration is the extent to which a firm either
provides its own resources or obtains them from other
sources.
 Case:
Apple’s Global Supply Chain
Basic Make-or-Buy Options
 Influence Factors for the
Make-or-Buy Decision
The make-or-buy decision can be
influenced by the following factors:
1. Size of the firm
2. Scope of operations
3. Technological expertise
4. Nature of its product
 Necessary Trade-offs in
Make-or-Buy Decision
1. Cost and Control: Making a component has the advantage
of increasing the firm’s control over product quality,
delivery schedules, design changes, and costs. A firm that
buys from external suppliers may become overly
dependent on those suppliers.
2. Risk: Buying a component from an external supplier has
the advantage of reducing the firm’s financial and
operating risks.
3. Investments in Facilities, Technology, and People: By not
having to build a new factory or learn a new technology, a
firm can free up capital for other productive uses.
4. Flexibility: A firm that buys rather than makes retains the
flexibility to change suppliers as circumstances dictate.
 Factors Affecting Location Decisions
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, the firm must consider:
1. Country-Related Issues
2. Product-Related Issues
3. Government Policies
4. Organizational Issues
 Country-Related Issues
The following features of countries
can influence the decision about
where to locate an international
facility:
1. Resource availability
2. Cost
3. Infrastructure
4. Country-of-origin effects
…Country-Related Issues
 Product-Related Issues
Product-related characteristics also may
influence the location decision. Among the
more important of these are -
1. The product’s value-to-weight ratio: Goods
with low value-to-weight ratios, such as iron,
cement, coal, bulk chemicals, and raw sugar
and other agricultural goods, tend to be
produced in multiple locations to minimize
transportation costs.
2. The required production technology
3. Importance of customer feedback
 Government Policies
Government policies also may play a
role in the location decision. Especially
important are –
1. Stability of political process
2. National trade policies
3. Economic development incentives
4. Existence of foreign trade zones
 Organizational Issues
1. Business strategy
 Differentiation
 Cost leadership
 Focus
2. Organizational structure
 Global area structure
 Global product structure
3. Inventory management policies
 Just-in-time (JIT) inventory management
system
 International Logistics and
Materials Management
• Logistics is about getting the right product, to the right customer,
in the right quantity, in the right condition, at the right place, at
the right time, and at the right cost.
• Logistics 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.
• International logistics management involves
– flow of materials, parts, supplies, and other resource from
suppliers to the firm.
– flow of materials, parts, supplies, and other resources within
and between units of the firm itself.
– flow of finished products, services, goods from the firm to
customers.
Differences in Domestic and International
Materials Management
Three basic factors differentiate
domestic and international materials
management functions:
1. Distance involved in shipping
2. Number of transport modes
3. Complexity of regulatory context
 Productivity
• Productivity is the output-input ratio within a
time period with due consideration for quality.
• Productivity is an economic measure of
efficiency that summarizes the value of outputs
relative to the value of inputs used to create the
outputs. Productivity is important for the
following reasons:
1. Helps to determine firm’s overall success.
2. Contributes to long-term survival.
3. Contributes to overall standard of living.
 Strategies for Enhancing Productivity
Productivity can be improved following two
ways:
1. By improving operations:
 Spending more on research & development
 Reassessing & Revamping transformation
facilities
2. By increasing employee involvement:
 Participation in decision making
 Cross training
 Rewards
 Managing Quality in
International Business
• Quality is the totality of features and characteristics of a
product or service that bear on its ability to satisfy stated
or implied needs. Quality is of vital importance for several
reasons:
1. Many firms today compete on the basis of quality.
2. It is directly linked with productivity.
3. Higher quality helps firms develop and maintain
customer loyalty.
• The International Organization for Standardization (ISO) has
been working to develop and refine an international set of
quality guidelines. These guidelines, called collectively ISO
9000, provide the basis for a quality certification that is
becoming increasingly important in international business.
 Total Quality Management (TQM)
• TQM involves the organization’s long-term
commitment to the continuous improvement of
quality throughout the organization, and with the
active participation of all members at all levels-to
meet and exceed customers’ expectations. Tools and
techniques of TQM:
1. Benchmarking
2. Outsourcing
3. Speed
4. ISO 9000
5. Statistical Quality Control
The Essential Components of TQM
THE END