1. International Economics
Chapter 14
Global Production,
Outsourcing, and Logistics

4. one billion people

5. 1998 - 100,000
2008 - 500,000
2015 - 650,000
Export half

6. 2010 $1.1 Billion
Exported 200,000 400,000 a year
Export half

7. $2,500
9,375 Riyals

8. Labor cost in India is
one-tenth of Japan
Sends workers to Japan
for training

9. one billion people
lots of engineering
graduates
no preconceptions

11. Just-in-Time Delivery
kaizen
continuous improvement

12. Chennai
the Detroit of India
High-Quality
Low-Cost

13. Production Questions
Where
Strategic Role
Own or Outsource
How to manage the Supply Chain
Who should manage

14. The Value Chain
Primary
Activities Marketing Customer
R&D Production
and Sales Service
Information Human
Logistics
Support Systems Resources
Activities
COMPANY INFRASTRUCTURE

15. Production
Activities involved in
creating a product
Product can be a good or service
Physical or Intellectual

16. Logistics
The procurement and physical
transport of things through the
supply chain
From supplier to customer

17. Production and Logistics
Lower costs
Increase value
Reliability

18. Total Quality Management
TQM
Management is about
improving quality
Edward Deming in Japan

19. Sigma Six
Identify and remove defects
Minimize variability
Using statistics to improve quality
99.99966% perfect
3.4 in one million

20. ISO 9000
International Organization for
Standardization

21. Where to Produce?
Country Factors
Technological Factors
Product Factors

22. Country Factors
Political Economy
Culture
Factor Costs
Trade Barriers
Location Externalities
Exchange Rates

23. Technology Factors
Fixed costs
Minimum efficient scale
Flexible manufacturing scale

24. Minimum Efficient Scale
Producing at an output level
where no additional cost
reductions remain

25. Flexible Manufacturing
Technology
- Lean Production -
Designed to improve job
scheduling, reduce setup time,
and improve quality control

26. Mass Production
Massive Inventories
Defects
Unable to change

27. Mass Customization
Producing variety at low cost
Ohno Taiichi

28. 1950 - 24 hours
1971 - 3 minutes
Ohno Taiichi
Innovations

29. Product Factors
Value-to-weight ratio
Serves universal needs

30. CONCENTRATED DECENTRALIZED
COUNTRY
Difference in Political Economy Substantial Few
Difference in Culture Substantial Few
Difference in Factor Costs Substantial Few
Trade Barriers Few Substantial
Exchange Rates Stable Volatile
TECHNOLOGICAL
Fixed Costs High Low
Minimum Efficient Scale High Low
Flexible Manufacturing Available Not Available
PRODUCT
Value-to-Weight Ratio High Low
Serves Universal Needs Yes No