Global Manufacturing and Supply Chain Management

1. Global Manufacturing and Supply Chain Management 18-1

2. Strategy, Production, and Logistics • Production is the activities involved in creating a product • Can be both service and manufacturing activities • Logistics is the activity that controls the transmission of physical materials through the value chain • Production and logistics are closely linked since a firm’s ability to perform its production activities efficiently depends on a timely supply of high quality material inputs

3. Strategy, Production, and Logistics • Production and logistics functions have a number of important strategic objectives • Lower costs • Increase product quality by eliminating defective products from both the supply chain and the manufacturing process • These objectives are interrelated • Increasing productivity because time is not wasted producing poor-quality products that cannot be sold, leading to a direct reduction in unit costs • Lowering rework and scrap costs associated with defective products • Reducing the warranty costs and time associated with fixing defective products

4. Reflects overall firm strategy Low-cost leadership Differentiation • Focus Production Strategy Production operations are essential to achieve objectives

5. Capacity Planning Assessing a company’s ability to produce enough output to satisfy market demand • Number of work shifts • Number of employees • Size of facilities • Subcontracting

6. Facilities Location Planning Selecting the location for production facilities Location economies Centralized Decentralized Economic benefits derived from locating production activities in optimal locations (generates more value) Centralized production tends to be well-suited to global strategy Decentralized production tends to be well-suited to multinational strategy

7. Deciding the process that a company will use to create its product Process Planning • Standardization • Suits low-cost leadership • More automated (EOS) • Adaptation • Suits differentiation and focus

8. Reflects business-level strategy • Location’s geography also a factor Facilities Layout Planning Deciding the spatial arrangement of production processes within facilities

9. Supply Chain Terms • Supply chains – the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer • Logistics (materials management) – that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information 18-3

10. Factors Managers Must Consider • Efficiency/cost-reduction of manufacturing costs • Dependability-degree of trust in a company’s products and its delivery and promises • Innovation-ability to develop new products and ideas 18-5

11. Factors ManagersMust Consider, con’t • Quality-performance reliability, service quality, speed of delivery, and maintenance quality of the product • Flexibility-ability of the production process to make different kinds of products and to adjust the volume of output 18-6

12. Manufacturing Configurations • Centralized manufacturing offering a selection of standard, lower-priced products to different markets • Regional manufacturing to serve customers within a specific region • Multi-domestic manufacturing (market expansion) in individual countries as their demand becomes significant so manufacturing is closer to customers and meeting local needs 18-7

13. Supplier Networks – Acquiring Physical Resources • Companies can manufacture parts internally or purchase them from external manufacturers • “make or buy” decision • Outsourcing is the process of a company having inputs supplied to it from outside suppliers for the production process 18-13

14. Reasons to make Lower cost Greater control Decision to Make • Vertical integration • Extend control over inputs (backward integration) • or output (forward integration)

15. Decision to Buy Outsourcing Reasons to buy Buying from another company a good or service that is not central to a company’s competitive advantage Lower risk Greaterflexibility Marketpower Barriers to buying

16. 18-14

17. Global Component Network 18-15

18. Advantages of Global Sourcing • Reduce costs due to less expensive labor • Improve quality • Increase exposure to worldwide technology • Improve delivery of supplies • Strengthen reliability of supply by supplementing domestic with foreign suppliers • Gain access to materials available only abroad • Establish presence in a foreign market • Satisfy offset requirements • React to competitors offshore sourcing problems 18-16

19. Phases of Global Purchasing • Domestic purchasing only • Foreign buying based on need • Foreign buying as part of procurement strategy • Integration of global procurement strategy 18-17

21. Quality • Quality is the ability to meet or exceed the expectations of the customer • Conformance to specifications • Value • Fitness for use • Support provided by the company • Psychological impressions (image) 18-9

22. Quality Improvement Total Quality Management (TQM) ISO 9000 Continuous quality improvement to meet or exceed customer expectations through quality-enhancing processes International Standards Organization 9000 is a certification a firm gets when it meets the highest quality standards in its industry

23. Levels of Quality Standards • General level • ISO 9000 • Malcolm Baldridge National Quality Award • Industry-specific level • Company level 18-11

24. Shipping costs Inventory costs Just-in-time (JIT) manufacturing Other Production Issues

25. Decision to Reinvest or Divest Reinvest Divest • Promising outlook • Growing market • Highest return • Unprofitable outlook • Social unrest

26. Financing Business Operations • Borrowing • Take advantage of interest rates variation across countries • “back-to-back loan” • Issuing equity • Selling stocks to raise capital • Internal funding • Swapping debt or equity • Charging for royalties and licensing fees