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International productions operations management

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This Presentation analyses the concepts of International Productions & Operations Management through a Case Z, Inc.

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International productions operations management

  1. 1. INTERNATIONAL PRODUCTIONS &OPERATIONS MANAGEMENTZ INC.
  2. 2. 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
  3. 3. 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
  4. 4. CASE OVERVIEW (Contd. )• Suggested Alternatives ▫ Sell of the plant ▫ Move the plant to Mexico
  5. 5. IPOM FRAMEWORK STRATEGIC CONTEXT 1. DIFFERENTIATION 2. COST LEADERSHIP 3.FOCUS STD VS CUSTOMISED PRODUCTION LOGISTICS &ACQUISITION OF LOCATION MATERAL RESOURCES DECISIONS MANAGEMENT
  6. 6. 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
  7. 7. LOGISTICS & MATERIAL MANAGEMENT• Fixed facilities location• Inventory Management• Order processing• Material Management & Transportation costs
  8. 8. 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
  9. 9. Moving to MexicoJackson, Michigan MexicoSales $9,500,000 Sales $9,500,000Labor Expenses $2,000,000 Labor Expenses $120,000Materials $4,000,000 Materials $4,000,000Expense ExpenseEquipment $1,000,000 Equipment $1,000,000Expense ExpenseOverhead $3,000,000 Overhead $3,000,000Expense ExpenseNet profit ($500,000) Net profit $1,380,000 Flaw: Logistics Cost (Inbound & Outbound), Overhead Expense
  10. 10. 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?
  11. 11. 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
  12. 12. 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
  13. 13. THANK YOUPRESENTED BYKARTHICK – DM14123MEENA – DM14161VIJAY KRISHNAN – DM14257

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