International bussiness the challenge of global competition 11e chapter 19

Global Operations and Supply Chain Management chapter nineteen... Learning Objectives• Understand the concept of supply chain management • Recognize the relationship between design and

Global Operations and Supply

Chain Management

chapter nineteen

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

•

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 manufacturing

systems, productive and supportive, that must be performed in all manufacturing systems

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

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

Global Supply Chain Management

• Involves total systems approach to

Supply Chain Network: A Hypothetical

Example of an American Laptop Computer

Company

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

• 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

Global Sourcing

• The Lure of Global Sourcing

– Suppliers with improved competitiveness

• Cost

• Quality

• Timeliness– Suppliers in less developed countries with low-

cost labor

• Attractive for labor-intensive products with low

skill requirements

Global Sourcing Arrangements

• Arrangement that provide a firm with foreign

products

Use of Electronic Purchasing for Global Sourcing

• Growth of electronic procurement exchanges

– Identify potential suppliers or customers

– Facilitate efficient and dynamic interactions

among prospective buyers and suppliers

– Recognize strategic function of purchasing

Global Electronic Procurement

• Electronic Exchange Options

– Catalog purchases

– Permits buyers and suppliers to interact through a

standard bid/quote system

– Facilitates obtaining letters of credit, contracting for

logistics and distribution, and monitoring daily

• Benefits

– Cut costs and invoice and ordering errors

– Improve productivity and internal purchasing processes– Reduce trading cycle time, paper

– Compare bids

Added Costs

• International freight, insurance and packing

• Import duties

• Customhouse broker’s fees

• Transit or pipeline inventory

• Cost of letter of credit

• International travel and communication

costs

• Company import specialists

Advanced Production Techniques

• Systems to improve competitiveness

systems

Japan’s Use of JIT

• Requirements to operate without inventory

– Components defect-free

– Components delivered to each point at specified

time

– Sellers maintain inventory of finished products

– Process time reduced

– Manufacturers simplified product lines

– Suppliers cooperate

– Designers, managers, purchasing people and

marketers work as a team

Total Quality Management

• System in which organization is managed so

that it excels on all dimensions of product

and service that are important to the

customer

• TQM uses Quality Circles

– Small work groups meet to discuss ways to

improve functional areas and product quality

Problems with JIT in U.S.

• Failure to realize JIT is a total system, includes TQM

• Cultural differences in U.S workers

– Highly specialized work

– No company loyalty

• Failure to train and integrate suppliers

• JIT restricted to operations that produce same parts

repeatedly

• If one operation stops, entire production line stops

• Achieving a balanced system difficult: production

capacities differ among machines

• No allowances for contingencies

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

• 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

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

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

Impediments to Standardization

• Cultural Forces

– Developing countries may lack skilled workers

– Resources directed to professional vs technical

education

– Use of specialized machines favored

– Absenteeism

Impediments to Standardization

• Political Forces

– Country needs new jobs

– Government insists on most modern equipment

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

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

Design of the Manufacturing System

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

–

Operation of the Manufacturing System

• Manufacturing system has two classes of

activities

– Productive activities

– Supportive activities

Operation of the Manufacturing System

Obstacles to Meeting Manufacturing Standards

– Low output

– Inferior quality

– Excessive manufacturing costs

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

– Checks quality of inputs and finished products

– Influential in selecting sources of supply