This document discusses various manufacturing considerations for organizations. It explores options for sourcing raw materials from around the world to maximize efficiencies. Manufacturing options that are evaluated include outsourcing production, insourcing production, and a hybrid model. Key factors that are examined for each option include implications, pros and cons, and examples. Additionally, considerations for whether to manufacture in the home country or host country based on stage of growth are reviewed. Tools like demand forecasting and assessing local trade barriers are also emphasized.

1. Industry Studies 1
Make, Take and Sell Challenge:
Manufacturing Capability
Topic Number: 3

2. Overview
Organisations continually strive to maximise
efficiencies whilst sourcing the best quality and
sustainable raw materials. A key consideration when
developing a product is how best to manufacture it in
order to achieve the scale required to service
customers. There are a variety of options to consider
that we will explore in this workshop.
We will also discuss the issues with sourcing and
manufacturing in one country and then selling it in
another. Finally, we will develop our understanding of
the various manufacturing implications on your
product and come up with the optimal approach.

3. Learning outcomes for these workshops
• Develop and determine how to source a variety of
raw materials from around the world to maximise
product efficiencies
• Critically evaluate the variety of manufacturing
options you have available and apply them
appropriately to your business
• Be able to forecast the demand for your product
• Articulate the various manufacturing implications of
producing a product in one country and selling it in
another

4. Where to
source
your raw
materials
from?

5. A three point plan to identifying raw
material suppliers
Analyse
the
situation
Supplier
Evaluation
1
2
3
Identify
Opportunities

6. Identify Opportunities: What do you need?
Opportunities are usually triggered by a business
requirement for a product or service.
Material Requirements Service Requirements
Equipment
Components
Raw materials
Computer programmers
Transportation services
Maintenance service

7. Analyse the situation: Where can you get
what you are looking for?

8. Analyse the situation: Determine ease of
getting materials to your factory
You need to assess the associated costs of transport and other
factors such as tariffs. Therefore, the lowest cost production
option may not be the best route to go down.

9. Once we have identified where, the question
is whom is the best supplier?
Quality
Processes/Ca
pabilities
Do they offer the
best product within
the price that you
want to pay?
Do they have the
ability to deliver what
is expected currently
and in the future?
Price Regulations/Ethics
Do they offer the
best product at the
most competitive
price?
Do they work within
an internationally
accepted
regulatory/ethical
code?

10. Example from Walmart
View video: https://www.youtube.com/watch?v=yZC4neLax5o

11. What
manufacturing
model do you
deploy?

12. So you know what you want to produce… lets
understand how to produce it… consider three
routes…
Outsource
Insource
Outsource
&
Insource
1
2
3

13. Adopts to consider: A DLG Example
Source: McIvor (2008)

14. Outsourcing Production
Typical
Outsourcing
Locations
India
Pakistan
Bangladesh

15. Outsourcing Production: Implications
Pros
Immediate
access to skilled
personnel
Cons
Speed of
delivery
Minimal
management
risk
Lack
of
control
Requires
continual
monitoring
Viability of
service
provider

16. Insourcing: Zara in Action
It is claimed that Zara
needs just two weeks to
develop a new product
and get it to stores,
compared to the six-month
industry average,
and launches around
10,000 new designs
each year. Zara has
resisted the industry-wide
trend towards
transferring fast fashion
production to low-cost
countries.

17. Insourcing Production: Implications
Pros
Complete
control
over
process
Cons
Easier
planning
cycle
Learning
economies
Longer to
put
in place
Potentially
more
costly
New
capability
required

18. A hybrid model? Apple’s Top 200 Suppliers

19. Hybrid Production: Implications
Pros
Cons
Ability
to
move
quickly
Scale
with
demand
Maintain
majority
control
Coordination
issues
Bottlenecks
harder
to
identify
Worst
of
both
worlds?

20. Where to
manufacture?
Home vs host
country

21. Considering risk and reward
Home Country Host Country
• Less upfront cost
• Less risky
• Less restrictions
However…
• May not make to local
spec
• Tariffs & duties to be
paid
• Issues in logistics
• Less logistical issues
• More tailored to needs
• Speed to market
However…
• Set up
costs/investment
• Adhere to local
regimes/requirements
• Not easy to pull out

22. Stage of growth is important; lets look at
internationalisation model
Source: Uppsala

23. Forecasting demand helps to minimise risk
Total
Population
Income on
Food
Income on
beverages
Income on
alcohol
Income on
beer
Source: Kotler et al (2012)

24. Consider local tariff and non-tariff barriers
Duty on imports
Local content
requirements
A tax collected on imports
and some exports by the
customs authorities of a
country. This tax is used
to raise state revenue.
A minimum level of local
content is requireed under
trade laws when giving
foreign companies the
right to manufacture in a
particular place.
Quotas Anti-dumping regulations
A limited quantity of a
particular product which
under official controls can
be produced, exported, or
imported.
A company is dumping if
it is exporting a product
to the EU at prices lower
than the normal value of
the product

25. How to
manufacture?

26. Consider the 4 V model

27. Mass Production vs Mass Customisation

28. Mass Customisation in Action: Nike

29. Consider ‘Just in time’ operations

30. End of Workshop
Note: This recording is for your
personal use only and not for further
distribution or wider review.
© Pearson College 2013