21 Global Operations and Supply Chain Management International Business by Ball, McCulloch, Frantz,  Geringer, and Minor  ...
Chapter Objectives <ul><li>Understand supply chain management and the relationship with design </li></ul><ul><li>Describe ...
Lower Costs/Improved Products <ul><li>Desired results may be obtained through </li></ul><ul><ul><li>Improvement within exi...
Global Supply Chain Management <ul><li>Supply chain management refers to activities involved in producing a company’s prod...
Design of Products and Services <ul><li>Design has a fundamental relationship with type of inputs required </li></ul><ul><...
Sourcing Globally <ul><li>Important Reasons for Sourcing Globally </li></ul><ul><ul><li>Lower price available from foreign...
Outsourcing <ul><li>An increasingly common option </li></ul><ul><ul><li>Focus on core competencies </li></ul></ul><ul><ul>...
Outsourcing <ul><li>Any part of value chain can be outsourced </li></ul><ul><ul><li>Product design </li></ul></ul><ul><ul>...
Outsourcing <ul><li>Considerations </li></ul><ul><ul><li>Costs </li></ul></ul><ul><ul><li>Control </li></ul></ul><ul><ul><...
Global Sourcing Arrangements <ul><li>Arrangement that provide a firm with foreign products. </li></ul><ul><ul><li>Wholly o...
Use of Electronic Purchasing for Global Sourcing <ul><li>In recent years, many firms have set up electronic procurement ex...
Global Electronic Procurement <ul><li>Electronic Exchange Options </li></ul><ul><ul><li>Catalog purchases </li></ul></ul><...
Global Sourcing <ul><li>Problems </li></ul><ul><ul><li>Firm’s may be surprised that what initially appeared to be a lower ...
Added Costs <ul><li>International freight, insurance and packing </li></ul><ul><li>Import duties </li></ul><ul><li>Customh...
Advanced Production Techniques <ul><li>Growing international competition requires companies to achieve efficiency and effe...
Japan’s Use of JIT <ul><li>Requirements to operate without inventory </li></ul><ul><ul><li>Components had to be defect-fre...
Total Quality Management <ul><li>Managing the entire organization so that it excels on all dimensions of product and servi...
Problems with JIT in the U.S. <ul><li>Failure to realize JIT is a total system which includes TQM </li></ul><ul><li>Cultur...
Advanced Production Techniques <ul><li>Synchronous Manufacturing </li></ul><ul><ul><li>Also called Theory of Constraints (...
Logistics <ul><li>Movement of materials </li></ul><ul><ul><li>Must interface with sourcing , manufacturing, design, engine...
Standardization of Global Operations <ul><li>In most countries standards have been developed across product lines and for ...
Reasons for Global Standardization of Systems <ul><li>Advantage of synchronous manufacturing and TQM </li></ul><ul><li>Cus...
Reasons for Global Standardization of Systems <ul><li>Manufacturing rationalization </li></ul><ul><ul><li>Division of prod...
Reasons for Global Standardization of Systems <ul><li>Building new plants will be both simpler and quicker with standardiz...
Impediments to Standardization <ul><li>Economic Forces </li></ul><ul><ul><li>Wide range of market sizes </li></ul></ul><ul...
Impediments to Standardization <ul><li>Cultural Forces </li></ul><ul><ul><li>Developing countries may lack skilled workers...
Design of the Manufacturing System <ul><li>A manufacturing system is </li></ul><ul><ul><li>essentially a functionally rela...
Design of the Manufacturing System <ul><li>Plant location </li></ul><ul><ul><li>Effects both production and distribution c...
Operation of the  Manufacturing System <ul><li>Once the manufacturing system has been put into operation, two general clas...
Operation of the  Manufacturing System <ul><li>Manufacturing Activities </li></ul><ul><ul><li>After the initial trial peri...
Obstacles to Meeting Manufacturing Standards <ul><li>Low Output </li></ul><ul><ul><li>Supplier problems </li></ul></ul><ul...
Supportive Activities <ul><li>Quality control </li></ul><ul><li>Inventory control </li></ul><ul><li>Purchasing </li></ul><...
Supportive Activities <ul><li>Maintenance </li></ul><ul><ul><li>Goal is to ensure acceptable level of production </li></ul...
<ul><li>The ISO 9000 family is primarily concerned with &quot;quality management&quot;. This means what the organization d...
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Chapter 21 Powerpoint Slides

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

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