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  • 1.  
  • 2. 21 Global Operations and Supply Chain Management International Business by Ball, McCulloch, Frantz, Geringer, and Minor McGraw-Hill/Irwin Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
    • This chapter covers:
    • Supply chain management
    • Global sourcing
    • JIT production
    • Synchronous manufacturing
    • Six Sigma
    • Impediments to global standardization
    • Importance of technology
    • Classes of activities in manufacturing
  • 3. Chapter Objectives
    • Understand supply chain management and the relationship with design
    • Describe the five global sourcing arrangements and appreciate the importance of the added costs of global sourcing
    • Understand the increasing role of electronic purchasing for global sourcing
    • Understand the Japanese efforts to improve quality and lower costs
    • Know the just-in-time production system and its problems
    • Understand synchronous manufacturing and customization
    • Understand Six Sigma systems
    • Identify the impediments to global standardization of production processes and procedures
    • Know the two general classes of activities in manufacturing systems
    • 21-2
  • 4. Lower Costs/Improved Products
    • Desired results may be obtained through
      • Improvement within existing operations
      • Opening new operations or finding outside sources for inputs
      • Outsourcing
      • Combination of above
    • Process is referred to as supply chain management
    • 21-3
  • 5. Global Supply Chain Management
    • Supply chain management refers to activities involved in producing a company’s products and services, and how these activities are linked together
    • Involves total systems approach to managing flow of
      • Materials
      • Information
      • Finances
      • Services
    • 21-4
  • 6. Design of Products and Services
    • Design has a 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 traditional approach
      • Sequential steps
    • Alternative approach cross-functional participation
      • Can involve customers
    • 21-5
  • 7. Sourcing Globally
    • Important Reasons for Sourcing Globally
      • Lower price available from foreign sources
      • Availability of foreign products not available locally
      • Firm’s worldwide operation and attitude
      • Advanced technology available from foreign sources
      • Higher-quality products available from foreign sources
  • 8. Outsourcing
    • An increasingly common option
      • Focus on core competencies
      • Leverage skills of other companies
      • Reduce costs
      • Improve flexibility and speed of response
      • Enhance quality
    • 21-7
    • Can outsource in same country or another country
    • Choices increased by
      • Global access to vendors
      • Falling costs of interactions
      • Improved information technology and communication
  • 9. Outsourcing
    • Any part of value chain can be outsourced
      • Product design
      • Input supply
      • Manufacturing or assembly
      • Logistics
      • Distribution
      • Marketing
      • Sales
      • Service
      • Human resources
  • 10. Outsourcing
    • Considerations
      • Costs
      • Control
      • Expertise required
      • Distance
      • Languages
      • Laws and regulations
    • Initially better to outsource simple activities then gradually outsource more complex activities
    • 21-9
    • The Lure of Global Outsourcing
      • Suppliers with improved competitiveness in terms of
        • Cost
        • Quality
        • Timeliness
      • Less developed countries with low-cost labor
        • Attractive for labor-intensive products with low skill requirements
  • 11. 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
    • 21-10
  • 12. Use of Electronic Purchasing for Global Sourcing
    • In recent years, many firms have set up electronic procurement exchanges
      • to identify potential suppliers or customers
      • to facilitate efficient and dynamic interactions among these prospective buyers and suppliers
      • Purchasing is increasingly being viewed as a strategic function
    • 21-11
  • 13. 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 prices and order flows
    • 21-12
    • Benefits
      • Cut costs
      • Improve productivity
      • Cut invoice and ordering errors
      • Reduce trading cycle time
      • Reduce supply base
      • Improve internal purchasing processes
      • Easily compare bids
      • Reduce paper
  • 14. Global Sourcing
    • Problems
      • Firm’s may be surprised that what initially appeared to be a lower price is not really lower
      • An increase in price occurs due to currency fluctuations
      • E-procurement and electronic commerce as a whole cannot be isolated from the company’s overall business system
      • Exposing internal business systems to access via the Internet can expose the firm to a wide range of potential security issues
    • 21-13
  • 15. 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
    • 21-14
  • 16. Advanced Production Techniques
    • Growing international competition requires companies to achieve efficiency and effectiveness in production
    • To improve competitiveness companies have put into place systems such as
      • Just-in-time supply chains (JIT)
      • Highly synchronized manufacturing systems
      • Computer Integrated Manufacturing (CIM)
      • Robots
    • 21-15
  • 17. Japan’s Use of JIT
    • Requirements to operate without inventory
      • Components had to be defect-free
      • Components had to be delivered to each point at the time they were needed
      • Sellers maintained inventory of finished products
      • Process time required reduction
      • Manufacturers had to simplify product lines
      • Suppliers had to cooperate
      • Designers, managers, purchasing people and marketers had to work as a team
    • 21-16
  • 18. Total Quality Management
    • Managing the entire organization so that it excels on all dimensions of product and services that are important to the customer
    • TQM used Quality Circles
      • Small work groups that meet periodically to discuss ways to improve their functional areas and the quality of the product
  • 19. Problems with JIT in the U.S.
    • Failure to realize JIT is a total system which includes TQM
    • Cultural differences in U.S. workers
      • Highly specialized work
      • No company loyalty
    • Failure to train and integrate suppliers
    • JIT is restricted to operations that produce the same parts repeatedly because it is a balanced system
    • 21-18
    • Because JIT is a balanced system, if one operation stops, the entire production line stops
    • Achieving a balanced system is difficult because production capacities differ among the various classes of machines
    • JIT makes no allowances for contingencies.
    • Much trial and error are required to put the system into effect
  • 20. Advanced Production Techniques
    • Synchronous Manufacturing
      • Also called Theory of Constraints (TOC)
      • Scheduling and manufacturing control system
      • Focus on bottlenecks
    • Mass Customization
      • Use of flexible, computer-aided manufacturing systems
      • Can customize for demands of individual customers
    • Six Sigma
      • A business management process that combines analytical tools with infrastructure and leadership to solve problems and optimize processes
    • 21-19
  • 21. Logistics
    • Movement of materials
      • Must interface with sourcing , manufacturing, design, engineering and marketing
      • Packaging and transportation requirements can greatly increase logistics costs
      • Many companies now outsource logistics
    • 21-20
  • 22. Standardization of Global Operations
    • In most countries standards have been developed across product lines and for various functions
      • In Europe, the most-used standard for quality is the ISO 9000
      • The most comprehensive of standards is the ISO 9001
        • This standard applies to industries involved in the design, development, manufacturing, installation, and servicing or products and services
    • 21-21
  • 23. Reasons for Global Standardization of Systems
    • Advantage of synchronous manufacturing and TQM
    • Customers everywhere want quality products at low prices
    • Simplifies the manufacturing organization at HQ
    • Increases effectiveness in keeping production specifications current
    • Guarantees parts manufactured in various plants will be interchangeable
    • 21-22
  • 24. Reasons for Global Standardization of Systems
    • Manufacturing rationalization
      • Division of production among a number of production units thus, enabling each unit to produce only a limited number of components for all of a firm’s assembly plants
    • Purchasing
    • Control
      • Quality control
      • Production and maintenance control
    • 21-23
  • 25. Reasons for Global Standardization of Systems
    • Building new plants will be both simpler and quicker with standardization
      • Design engineers need only to copy the drawings and list of materials that they have in their files
      • Vendors will be requested to furnish equipment that they have supplied previously
      • The technical department can send the current manufacturing specifications without alterations
      • Labor trainers experienced in the operation of the machinery can be sent to the new location without undergoing special training on new equipment
      • Reasonably accurate forecasts of plant erection time and output can be based on experience with existing facilities
    • 21-24
  • 26. Impediments to Standardization
    • Economic Forces
      • Wide range of market sizes
        • capital-intensive
        • labor-intensive process
        • computer-integrated manufacturing
      • Cost of production
        • High-capacity machines
        • Backward vertical integration
  • 27. Impediments to Standardization
    • Cultural Forces
      • Developing countries may lack skilled workers
      • Resources directed to professional vs. technical education
      • Use of specialized machines favored
      • Absenteeism creates further problems
    • 21-26
    • Political Forces
      • Country needs new jobs
      • Government insists on most modern equipment
      • Design solutions include
        • Hybrid designs
        • Intermediate technology
        • Appropriate technology depends on economic, sociocultural and political variables
  • 28. Design of the Manufacturing System
    • A manufacturing system is
      • essentially a functionally related group of activities for creating value
      • Factors involved in the efficient operation of a manufacturing system
        • Plant location
        • Plant layout
        • Materials handling
        • Human element
    • 21-27
  • 29. Design of the Manufacturing System
    • Plant location
      • Effects both production and distribution costs
      • Need labor, raw materials, water and power
      • Must locate in export processing zones
    • Plant layout
      • Arrangement of machinery, personnel and service facilities
    • 21-28
    • Materials Handling
      • Careful planning can save production costs
      • Poor handling can result in excessive inventory, idle machinery, late deliveries and damaged goods
    • Human element
      • Effectiveness depends on people
      • People are affected by the system
  • 30. Operation of the Manufacturing System
    • Once the manufacturing system has been put into operation, two general classes of activities must be performed
      • Productive activities
      • Supportive activities
    • 21-29
  • 31. Operation of the Manufacturing System
    • Manufacturing Activities
      • After the initial trial period management will expect the system to produce at a rate sufficient to satisfy market demand
    • Obstacles to Meeting Manufacturing Standards
      • Low output
      • Inferior quality
      • Excessive manufacturing costs
  • 32. Obstacles to Meeting Manufacturing Standards
    • Low Output
      • Supplier problems
      • Poor coordination of production scheduling
      • Culture differences in attitudes, educational levels, and planning
      • Absenteeism
    • Inferior Product Quality
      • Good quality is relative
      • Lack of maintenance and operating skills
    • 21-31
    • Excessive Manufacturing Costs
      • Low output
      • Budget problems
      • Overoptimistic sales forecast
      • Supplier problems
      • Water or power failures
      • Overstocked inventory
      • Resistance to lay off workers
  • 33. Supportive Activities
    • Quality control
    • Inventory control
    • Purchasing
      • Must consider costs
      • Have to seek out and develop suppliers
      • Must know import procedures and have connections with key government officials
      • Must monitor foreign exchange
  • 34. Supportive Activities
    • Maintenance
      • Goal is to ensure acceptable level of production
      • Two alternatives
        • Preventive
        • Breakdown
    • Technical Function
      • Provides operations with manufacturing specifications
      • Check quality of inputs and finished products
      • Influential in selecting sources of supply
    • 21-33
  • 35.
    • The ISO 9000 family is primarily concerned with "quality management". This means what the organization does to fulfil:
      • - the customer's quality requirements, and - applicable regulatory requirements, while aiming to - enhance customer satisfaction, and - achieve continual improvement of its performance in pursuit of these objectives.
    • The ISO 14000 family is primarily concerned with "environmental management". This means what the organization does to:
      • - minimize harmful effects on the environment caused by its activities, and to - achieve continual improvement of its environmental performance.