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Chapter 19






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Chapter 19 Chapter 19 Presentation Transcript

  • Global Operations and Supply Chain Management McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. 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
    • Understand the just-in-time (JIT) production system and potential problems with its implementation
  • 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 managing flow of
      • Materials
      • Information
      • Finances
      • Services
  • 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
      • Sequential steps
    • Alternative approach is cross-functional participation
      • May involve customers
  • 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
  • Global Sourcing
    • Considerations
      • Costs
      • Control
      • Expertise
      • Distance
      • Languages
      • Laws and regulations
    • Begin simple
      • Then move to complex
  • 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
      • Wholly owned subsidiary
      • Overseas joint venture
      • In-bond plant contractor
      • Overseas independent contractor
      • Independent overseas manufacturer
  • 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
  • Global Sourcing
    • Problems
      • Unanticipated added costs
        • Currency fluctuations
        • Transportation cost increases
      • E-procurement exposes business systems to wide range of potential security issues
  • 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
    • Reworking of products out of specification
  • Advanced Production Techniques
    • Systems to improve competitiveness
      • Just-in-time supply chains (JIT)
      • Highly synchronized manufacturing systems
      • Mass customization
      • Six Sigma
  • 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
    • Much trial and error are required to put system into effect
  • 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
  • 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
  • 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
    • Manufacturing system:
      • Functionally related group of activities for creating value
      • Factors involved in efficient operation
        • Plant location
        • Plant layout
        • Materials handling
        • Human element
  • 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
  • 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
      • Resistance to lay off workers
  • Supportive Activities
    • Quality control
    • Inventory control
    • Purchasing
      • Must consider costs
      • Develop suppliers
      • Know import procedures and key government officials
      • Monitor foreign exchange
  • 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