Global Manufacturing and Supply Chain Management

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Global Manufacturing and Supply Chain Management
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Strategy, Production, and Logistics

• Production is the activities involved in creating
  a product
• Can be both service and manufacturing activities
• Logistics is the activity that controls the
  transmission of physical materials through the
  value chain
• Production and logistics are closely linked since
  a firms ability to perform its production
  activities efficiently depends on a timely supply
  of high quality material inputs

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Strategy, Production, and Logistics

• Production and logistics functions have a number
  of important strategic objectives
• Lower costs
• Increase product quality by eliminating defective
  products from both the supply chain and the
  manufacturing process
• These objectives are interrelated
• Increasing productivity because time is not
  wasted producing poor-quality products that
  cannot be sold, leading to a direct reduction in
  unit costs
• Lowering rework and scrap costs associated with
  defective products
• Reducing the warranty costs and time associated
  with fixing defective products

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Production Strategy

Production operations are essential to achieve
objectives
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Capacity Planning
Assessing a companys ability to produce enough
output to satisfy market demand

• Number of work shifts
• Number of employees
• Size of facilities
• Subcontracting

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Facilities Location Planning
Selecting the location for production facilities
Location economies
Centralized
Decentralized
Economic benefits derived from locating production
activities in optimal locations (generates more
value)
Centralized production tends to be well-suited to
global strategy
Decentralized production tends to be
well-suited to multinational strategy
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Process Planning

• Standardization
• Suits low-cost leadership
• More automated (EOS)

• Adaptation
• Suits differentiation and focus

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Facilities Layout Planning
Deciding the spatial arrangement of production
processes within facilities
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Supply Chain Terms

• Supply chains the coordination of materials,
  information, and funds from the initial raw
  material supplier to the ultimate customer
• Logistics (materials management) that part of
  the supply chain process that plans, implements,
  and controls the efficient, effective flow and
  storage of goods, services, and related
  information

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Factors Managers Must Consider

• Efficiency/cost-reduction of manufacturing costs
• Dependability-degree of trust in a companys
  products and its delivery and promises
• Innovation-ability to develop new products and
  ideas

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Factors ManagersMust Consider, cont

• Quality-performance reliability, service quality,
  speed of delivery, and maintenance quality of the
  product
• Flexibility-ability of the production process to
  make different kinds of products and to adjust
  the volume of output

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Manufacturing Configurations

• Centralized manufacturing offering a selection of
  standard, lower-priced products to different
  markets
• Regional manufacturing to serve customers within
  a specific region
• Multi-domestic manufacturing (market expansion)
  in individual countries as their demand becomes
  significant so manufacturing is closer to
  customers and meeting local needs

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Supplier Networks Acquiring Physical Resources

• Companies can manufacture parts internally or
  purchase them from external manufacturers
• make or buy decision
• Outsourcing is the process of a company having
  inputs supplied to it from outside suppliers for
  the production process

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Decision to Make
Vertical integration Extend control over inputs
(backward integration) or output (forward
integration)
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Decision to Buy
Reasons to buy
Outsourcing
Buying from another company a good or service
that is not central to a companys competitive
advantage
Lower risk
Greater flexibility
Market power
Barriers to buying
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Global Component Network
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Advantages of Global Sourcing

• Reduce costs due to less expensive labor
• Improve quality
• Increase exposure to worldwide technology
• Improve delivery of supplies
• Strengthen reliability of supply by supplementing
  domestic with foreign suppliers
• Gain access to materials available only abroad
• Establish presence in a foreign market
• Satisfy offset requirements
• React to competitors offshore sourcing problems

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Phases of Global Purchasing

• Domestic purchasing only
• Foreign buying based on need
• Foreign buying as part of procurement strategy
• Integration of global procurement strategy

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Quality

• Quality is the ability to meet or exceed the
  expectations of the customer
• Conformance to specifications
• Value
• Fitness for use
• Support provided by the company
• Psychological impressions (image)

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Quality Improvement
Total Quality Management (TQM)
ISO 9000
Continuous quality improvement to meet or exceed
customer expectations through quality-enhancing
processes
International Standards Organization 9000 is
a certification a firm gets when it meets the
highest quality standards in its industry
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Levels of Quality Standards

• General level
• ISO 9000
• Malcolm Baldridge National Quality Award
• Industry-specific level
• Company level

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Other Production Issues
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Decision to Reinvest or Divest
Reinvest
Divest

• Promising outlook
• Growing market
• Highest return

• Unprofitable outlook
• Social unrest

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Financing Business Operations

• Borrowing
• Take advantage of interest rates variation across
  countries
• back-to-back loan
• Issuing equity
• Selling stocks to raise capital
• Internal funding
• Swapping debt or equity
• Charging for royalties and licensing fees