INTERNATIONAL PRODUCTIONS &OPERATIONS MANAGEMENTZ INC.
CASE OVERVIEW• Z Inc. Multinational Conglomerate, headquartered at Jackson, Michigan (USA)• Produce Construction equipment and Transmission system (diversification strategy)• Problems ▫ 30 year old plant ▫ $ 500,000 loss per month
CASE OVERVIEW (Contd. )• Reasons ▫ CEO: Overhead issue ▫ Finance VP: Operating outside our core competency ▫ Operations VP: High labor wage destroying performance ▫ Marketing VP: High defect rate (15% as against industry standard 2%) ▫ 60% of defects due to poor vendor performance
CASE OVERVIEW (Contd. )• Suggested Alternatives ▫ Sell of the plant ▫ Move the plant to Mexico
IPOM FRAMEWORK STRATEGIC CONTEXT 1. DIFFERENTIATION 2. COST LEADERSHIP 3.FOCUS STD VS CUSTOMISED PRODUCTION LOGISTICS &ACQUISITION OF LOCATION MATERAL RESOURCES DECISIONS MANAGEMENT
LOCATION STRATEGY• Low Value to weight ratio vs. High Value to weight ratio• Cost ▫ Scale Economies ▫ Nature of assembly operations ▫ Taxes and Transport• Logistical factors (port locations)• Exchange rate variation
LOGISTICS & MATERIAL MANAGEMENT• Fixed facilities location• Inventory Management• Order processing• Material Management & Transportation costs
Moving to Mexico• 6 months to build new facility• Double the shifts to build a 6 month inventory supply• 2 months transfer all the machines from Michigan to Mexico• 1 month complete the Mexican setup and start production
Another Tequila Crisis?• 2 months into the program ▫ Work at Mexico hasn’t started ▫ Shut down activity at Jackson underway• Problems ▫ Increase in Inventory ▫ Revenue loss ▫ Plant plan in jeopardy ▫ Vendor support in Mexico? ▫ Labor union in Mexico?
SOLUTIONS• Implement Change in production schedule• Understand conditions in Mexico before proceeding• Validate the points made in support of local labor• Devise a Supply Chain (Value Chain) Strategy
STRATEGY TO BE ADOPTED• Choose Generic Strategy• Detailed Analysis of ▫ Facility setup ▫ Labor productivity ▫ Supply of raw materials ▫ Percentage of Defect ▫ Transportation of finished goods• All of the above in Minimum Cost