Lecture International business (11/e) - Chapter 19: Global operations and supply chain management

The goals of this chapter are: 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,…

chapter nineteen Global Operations and Supply Chain Management McGraw­Hill/Irwin International Business, 11/e Copyrightâ2008TheMcGrawưHillCompanies,Inc.Allrightsreserved Learning 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 19-3 Chapter 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 19-4 manufacturing systems, productive and supportive, 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 19-5 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 19-6 Global Supply Chain Management • Involves total systems approach to managing flow of – Materials – Information – Finances – Services 19-7 Supply Chain Network: A Hypothetical Example of an American Laptop Computer Company 19-8 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 approach is cross-functional participation – May involve customers 19-9 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 19-10 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 19-22 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 19-23 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 19-24 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 19-25 Impediments to Standardization • Cultural Forces – Developing countries may lack skilled workers – Resources directed to professional vs technical education – Use of specialized machines favored – Absenteeism 19-26 Impediments to Standardization • Political Forces – Country needs new jobs – Government insists on most modern equipment 19-27 Some Design Solutions • Hybrid Design – Hybrid capital-intensive mixed with labor intensive processes when abundant unskilled labor • Intermediate Technology – Production methods between capital- and labor-intensive methods 19-28 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 19-29 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 19-30 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 19-31 Operation of the Manufacturing System • Manufacturing system has two classes of activities – Productive activities – Supportive activities 19-32 Operation of the Manufacturing System Obstacles to Meeting Manufacturing Standards – Low output – Inferior quality – Excessive manufacturing costs 19-33 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 19-34 Supportive Activities • Quality control • Inventory control • Purchasing – Must consider costs – Develop suppliers – Know import procedures and key government officials – Monitor foreign exchange 19-35 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 19-36 .. .chapter nineteen Global Operations and Supply Chain Management McGraw­Hill/Irwin International Business,  11/e Copyright © 2008 The McGraw­Hill Companies, Inc. All rights reserved... Learning Objectives • Understand the concept of supply chain management • Recognize the relationship between design and supply chain management • Describe the five global sourcing arrangements... processes and procedures, and identify impediments to standardization efforts  Know the two general classes of activities in 1 9-4 manufacturing systems, productive and supportive, Supply Chain Management