In this chapter, the following content will be discussed: Growth of world trade, reasons to globalize, improve the supply chain, attract and retain global talent, cultural and ethical issues, developing mission and strategies, strategic for competitive advantage, global operation strategy options.
LECTURE LSM 733Production Operations Management OSMAN BIN SAIF © 2014 Pearson Education 2-1 Summary of last Session • Definition of Production Operations Management (OM) • Organizational Functions • Why Study POM? • A brief history of operations management • The future of the discipline • Goods Versus Services • Measuring productivity ã Career opportunities in operations management â 2014 Pearson Education 2-2 Agenda of this Session ▶ The Global Environment and Operations Strategy ▶ Growth of World Trade ▶ Reasons ▶ Improve ▶ Attract to Globalize the supply chain and Retain Global Talent ▶ Cultural and Ethical Issues ▶ Developing ▶ Strategic ▶ Global © 2014 Pearson Education Mission and Strategies for Competitive Advantage Operation Strategy Options 2-3 The Global Environment and Operations Strategy Section 1, Chapter © 2014 Pearson Education 2-4 Growth of World Trade 60 – 55 – 50 – Percent 45 – 40 – 35 – 30 – 25 – 20 – 15 – | | | | | | | | | 10 – 1970 1975 1980 1985 1990 1995 2000 2005 2010 Year © 2014 Pearson Education Figure 2.1 2-5 Reasons to Globalize Improve the supply chain Reduce costs (labor, taxes, tariffs, etc.) Improve operations Understand markets Improve products Attract and retain global talent © 2014 Pearson Education 2-6 Improve the Supply Chain ▶ Locating facilities closer to unique resources ▶ Auto design to California ▶ Athletic shoe production to China ▶ Perfume manufacturing in France © 2014 Pearson Education 2-7 Reduce Costs ▶ ▶ Foreign locations with lower wage rates can lower direct and indirect costs Trade agreements can lower tariffs ▶ Maquiladoras ▶ World Trade Organization (WTO) ▶ North American Free Trade Agreement (NAFTA) ▶ APEC, SEATO, MERCOSUR, CAFTA ▶ European Union (EU) © 2014 Pearson Education 2-8 Improve Operations ▶ ▶ Understand differences between how business is handled in other countries ▶ Japanese – inventory management ▶ Scandinavians – ergonomics International operations can improve response time and customer service © 2014 Pearson Education 2-9 Understand Markets ▶ Interacting with foreign customers, suppliers, competition can lead to new opportunities ▶ Cell phone design moved from Europe to Japan ▶ Extend the product life cycle © 2014 Pearson Education - 10 Competing on Response ▶ Flexibility is matching market changes in design innovation and volumes ▶ ▶ Reliability is meeting schedules ▶ ▶ A way of life at Hewlett-Packard German machine industry Timeliness is quickness in design, production, and delivery ▶ Johnson Electric, Pizza Hut, Motorola © 2014 Pearson Education - 28 OM’s Contribution to Strategy 10 Operations Decisions Strategy Product DIFFERENTIATION: Innovative design Quality Broad product line Process Location After-sales service Experience Layout Human resource Supply chain COST LEADERSHIP: Low overhead Effective capacity use Inventory Scheduling Inventory management Maintenance © 2014 Pearson Education RESPONSE: Example Competitive Advantage Safeskin’s innovative gloves Fidelity Security’s mutual funds Caterpillar’s heavy equipment service Hard Rock Café’s dining experience Franz-Colruyt’s warehousetype stores Southwest Airline’s Differentiation (better) Response (faster) Cost leadership (cheaper) aircraft utilization Walmart’s sophisticated distribution system Figure 2.4 - 29 SWOT Analysis Mission Internal Strengths External Opportunities Analysis Internal Weaknesses External Threats Strategy © 2014 Pearson Education - 30 Strategy Development and Implementation ▶ ▶ ▶ Identify key success factors Integrate OM with other activities Build and staff the organization The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity © 2014 Pearson Education - 31 Key Success Factors Support a Core Competence and Implement Strategy by Identifying and Executing the Key Success Factors in the Functional Areas Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) 10 OM Decisions Product Quality Process Location Layout Human resource Supply chain Inventory Schedule Maintenance © 2014 Pearson Education Finance/Accounting Production/Operations Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Sample Options Customized, or standardized; sustainability Define customer expectations and how to achieve them Facility size, technology, capacity, automation Near supplier or near customer Work cells or assembly line Specialized or enriched jobs Single or multiple suppliers When to reorder, how much to keep on hand Stable or fluctuating production rate Repair as required or preventive maintenance Figure 2.72 - 32 Global Operations Strategy Options Cost Reduction High Low Low © 2014 Pearson Education Figure 2.9 International strategy (eg, Harley-Davidson U.S Steel) • Import/export or license existing Local Responsiveness product (Quick Response and/or Differentiation) High - 33 Global Operations Strategy Options High Cost Reduction Figure 2.9 International strategy (eg, Harley-Davidson U.S Steel) Low Low • Import/export or license existingLocal Responsiveness product © 2014 Pearson Education High (Quick Response and/or Differentiation) - 34 Global Operations Strategy Options Cost Reduction High Low Low © 2014 Pearson Education Figure 2.9 Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) International strategy • Standardize product (eg, Harley-Davidson Steel) • U.S Economies of scale • Import/export or • Cross-cultural license existingLocal Responsiveness product (Quick Response and/or Differentiation) learning High - 35 Global Operations Strategy Options Cost Reduction High Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) Figure 2.9 • Standardize product • Economies of scale • Cross-cultural learning International strategy (eg, Harley-Davidson U.S Steel) Low Low • Import/export or license existingLocal Responsiveness product © 2014 Pearson Education High (Quick Response and/or Differentiation) - 36 Global Operations Strategy Options Cost Reduction High Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) Multidomestic strategy Standardize product (eg, Heinz, McDonald’s Economies of scale Cross-cultural learning The Body Shop Hard Rock Cafe) • • • Use existing domestic model globally Franchise, joint Import/export or ventures, subsidiaries license existing Figure 2.9 • International strategy (eg, Harley-Davidson • U.S Steel) Low Low • product © 2014 Pearson Education Local Responsiveness High (Quick Response and/or Differentiation) - 37 Global Operations Strategy Options Cost Reduction High Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) Figure 2.9 • Standardize product • Economies of scale • Cross-cultural learning Multidomestic strategy (eg, Heinz, McDonald’s The Body Shop Hard Rock Cafe) Low • Use existing domestic Low • Import/export or license existingLocal Responsiveness model globally product • Franchise, joint (Quick Response and/or Differentiation) ventures, subsidiaries International strategy (eg, Harley-Davidson U.S Steel) © 2014 Pearson Education High - 38 Global Operations Strategy Options High Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) Figure 2.9 Cost Reduction Transnational strategy • (eg, Standardize product Coca-Cola, Nestlé) • Economies of scale • Cross-cultural learning • Move material, people, ideas across Multidomestic International national boundaries strategy strategy (eg, Heinz, McDonald’s • (eg, Harley-Davidson Economies of scale The Body Shop U.S Steel) Hard Rock Cafe) Low • Cross-cultural Use existing domestic Low • Import/export or license existingLocal Responsiveness model globally product learning Franchise, joint (Quick Response and/or Differentiation) ã High ã ventures, subsidiaries â 2014 Pearson Education - 39 Global Operations Strategy Options Cost Reduction High Global strategy (eg, Caterpillar Texas Instruments Otis Elevator) • Standardize product • Economies of scale • Cross-cultural learning Transnational strategy (eg, Coca-Cola, Nestlé) • Move material, people, ideas across national boundaries • Economies of scale • Cross-cultural learning Multidomestic strategy (eg, Heinz, McDonald’s The Body Shop Hard Rock Cafe) Low • Use existing domestic Low • Import/export or license existingLocal Responsiveness model globally product • Franchise, joint (Quick Response and/or Differentiation) ventures, subsidiaries Figure 2.9 International strategy (eg, Harley-Davidson U.S Steel) © 2014 Pearson Education High - 40 Summary of this Session ▶ The Global Environment and Operations Strategy ▶ Growth of World Trade ▶ Reasons ▶ Improve ▶ Attract to Globalize the supply chain and Retain Global Talent ▶ Cultural and Ethical Issues ▶ Developing ▶ Strategic ▶ Global © 2014 Pearson Education Mission and Strategies for Competitive Advantage Operation Strategy Options - 41 THANK YOU © 2014 Pearson Education - 42 ... Strategy Options 2 -3 The Global Environment and Operations Strategy Section 1, Chapter © 2014 Pearson Education 2-4 Growth of World Trade 60 – 55 – 50 – Percent 45 – 40 – 35 – 30 – 25 – 20 – 15... expectations Sample Operations Management Mission To produce products consistent with the company’s mission as the worldwide low-cost manufacturer Figure 2 .3 © 2014 Pearson Education - 23 Strategy ►... International strategy (eg, Harley-Davidson U.S Steel) • Import/export or license existing Local Responsiveness product (Quick Response and/or Differentiation) High - 33 Global Operations Strategy Options