International Operations Management

1. International Operations Management MGMT 6367 Fall 2013 Instructor: Yan Qin

2. Outline • Course Overview • Learning objectives • Topics to cover • Course assessment • Contact information • Introduction to International Operations/Logistics • What is Operations Management • International Vs. Domestic • Global Operations Strategy • Supplement: Goods Vs. Services

3. Learning Objectives • As a result of this course, students will be able to • Understand the key strategic and operational aspects of international operations management to help in the design, planning, and execution of a firm's international operations; • Comprehend how effective global operations can lower costs and improve responsiveness to customer requirements to provide a firm with competitive advantages; • Apply theory and case examples on global supply chain management to help in the coordination of globally dispersed supply-chain activities; • Apply theory and case examples on decision-making frameworks for global outsourcing and location of production facilities to help in the development of effective international operations strategies.

4. Topics to cover • Global Operations Strategy • Global Sourcing • Make or Buy • Vendor Selection • Supply Chain Coordination • Facility Layout • Transportation Management • Distribution network design • Facility Location • Risk Management in the global context • Information Systems

5. Grading scale • Your letter grade is determined using the grade distribution that follows. You can calculate your percentage grade at any time in the semester by dividing the points you have accrued by the total points available up to that point. This percentage is then matched to a letter grade. A 90% or higher B 80 to 89% C 70 to 79% D 60 to 69% F Less than 60%

6. Course Assessment • Grade breakdown • Class Participation 20% • Individual Case Analysis 20% • Individual Assignments 20% • Two Exams 40% * Please refer to the tentative class schedule for all the post and due dates of the four individual assignments.

7. Individual Case Analysis • The purpose of this assignment is to identify and apply IOM (International Operations Management) concepts/tools to solve problems in managing international operations. To this purpose, you should find an interesting IOM problem from the real business world and think about how you can apply the IOM concepts/tools that you learned in this course to solve the problem. • Detailed instructions can be found in the document titled “Individual project instructions”.

8. Assignments & Exams • Individual Assignments • There will be four individual assignments in total. Each assignment may consist of problem-solving questions, case-related discussion questions, or essay questions about specific issues in managing international operations. Each assignment accounts for 5% of the final grade. • Two Exams • There will be two non-cumulative exams in total. Both will be counted in the final grade. Each accounts for 20% of the final grade. The exams will be individual, timed, and open-book/notes. Only multiple-choice questions will be given on the exams.

9. Contact information • Course Website: http://www2.uhv.edu/qiny • Class meeting time: Monday, 7 pm – 9:45 pm, except holiday • Email: qiny@uhv.edu • Office: Room 338, Brazos Hall, UHSSL • Office Hours: Every Monday, 6 pm – 7 pm, Or by appointment • Contact number: 281-275-8821

10. Operations Management • Production is the creation of goods and services. • Operations include all the activities that relate to the creation of good and services through the transformation of inputs to outputs. • Operations Management(OM) refers to the management of Operations activities to ensure the efficient utilization of all kinds of resources in meeting customer expectations.

11. Example: Operations activities in a Commercial Bank Commercial Bank Marketing: Loans Commercial Industrial Financial Personal Mortgage Finance: Investment Securities Real estate Operations: Teller scheduling Check Clearing Collection Transaction Processing Facility Layout/design Vault Operations Maintenance Security Accounting Auditing Trust Department Source: “Operations Management” by Heizer and Rander.

12. Example: Operation activities in a manufacturing organization Manufacturing Marketing: Sales promotion Advertising Sales Market research Finance: Disbursements/credits Accounts receivable Accounts payable Funds Management Capital requirements Stock issue Bond issue and recall Operations: Facilities Construction; Maintenance Production and Inventory Control Quality assurance and control Supply Chain Management Product Design Industrial Engineering Efficient use of machine, space Process analysis Source: “Operations Management” by Heizer and Rander.

13. OM’s Transformation Role Source: Raid and Sanders 2005

14. The 10 major OM decisions

15. Operations Strategy • Mission: the purpose or rationale for an organization’s existence. • Ford Motor: “We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world.” • Operations Strategy is a long-term plan of actions designed to achieve a firm’s operational objectives, which are consistent with the mission.

16. Four competitive Priorities • Cost • Low cost strategy --- Low cost does not mean low value or quality. Wal-Mart provides low cost through its efficient management of transportation, inventory, and warehousing. • Quality (2 dimensions) • Design Quality --- The features, styling, and other product attributes that enhance fitness for use. • Conformance Quality --- Product conformance to set production standards.

17. Four competitive Priorities • Service (2 dimensions) • Delivery Speed --- Ability to produce and deliver the product quickly. • Delivery Reliability --- Ability to produce and deliver according to contractually specified time intervals. • Flexibility (3 categories) • New-Product Flexibility --- Ability to introduce new products quickly and effectively.

18. Four competitive Priorities • Flexibility (Cont.) • Product Mix Flexibility --- Ability to efficiently and effectively adjust the production mix in response to market demand. • Production Ramp-up/down Flexibility --- Ability to rapidly expand/shrink the production process to accommodate changes in demand. • It is very difficult for a company to excel in all aspects simultaneously due to limited resources. Each company must carefully identify the areas that may provide competitive advantages.

19. Questions: Competitive priorities • What are the competitive priorities of the following companies based on the descriptions? (1) HP demonstrates great flexibility in both design and volume changes in the business of personal computers. (2) SafeskinCorporation is number one in latex exam gloves because it has differentiated itself and its products. It did so by providing gloves that were designed to prevent allergic reactions. When other companies caught up, it developed hypoallergenic gloves. Then it added texture. Then it developed a synthetic disposable glove for those allergic to latex.

20. Qualifying and Winning Criteria • Qualifying criteria The basic criteria that permit the firm’s products to be considered as candidates for purchase by customers. • Winning criteria The criteria that differentiate the products or services of one firm from another.

21. New trends in OM • Global focus • Decline in communication and transportation costs has made markets global; • Resources such as personnel and capital are available globally; • Operations managers are responding with innovations that generate and move ideas, production, and finished good rapidly.

22. New trends in OM • Just-In-Time performance • How to free assets from inventory and improve responsiveness • Supply Chain partnering • Operations managers are outsourcing and building long-term relationship with its suppliers all over the world. • Rapid product development • Requires rapid responses in operations especially in high-tech industries

23. New trends in OM • Mass Customization • Mass customization aims at supplying customized products and services to each customer in a responsive and cost effective way. • Broadening product variety gives a company a distinctive competitive advantage in quickly responding to ever-changing market environments and customer tastes. • Challenges in cost control and responsiveness.

24. New trends in OM • Empowered employees • Operations managers are moving more decision making to the individual worker as more competence is now required at workplace. • Environmentally sensitive production • Concerned with designing products and processes that are environmentally friendly. • Ethics • Continuing challenge to enhance ethical behavior

25. Operations: Global Vs. Domestic • Riskier and more complex • More risk factors to consider • Transportation becomes more complex and costly. • Product proliferation due to localization and mass customization.

26. Sources of Risk in the global environment

27. Operations: Global Vs. Domestic • Attention paid to cultural, political, and economic factors • More difficult interpersonal management task: • International business partners • Officials in central and local governments • Inventory cost gets higher. • Longer and slower pipeline leads to more pipeline inventory • Uncertainty in politics and production leads to more safety stock.

28. International Operations Management • Now what is International Operations Management (IOM)? • IOM is just Operations Management in the global context. • Why do we need to study Operations Management in the global context? • Similarities and differences in the economic, cultural, legal, and political aspects in different countries bring about both opportunities and risks in the business world. IOM, as compared to OM, focuses on the use of operational strategies to take advantage of the unique opportunities that appear during the globalization process without being exposed to an unacceptable level of risk.

29. Supplement: Goods Vs. Service

30. The output from most operations is a mixture of goods and services

31. Similarities between service providers and manufacturers • Both use technology • Both have quality, productivity, & response issues • Both must forecast demand • Each will have capacity, layout, and location issues • Both have customers and suppliers • Both have scheduling and staffing issues

32. The Week after Labor Day • Global Sourcing • Concepts in Sourcing • Key decisions in Outsourcing • What should be outsourced? • Which vendors/providers are most suitable partners? • What forms of relationship with partners should be used?