Part Six Managing International Operations Chapter Seventeen Global

Chapter Objectives • To describe different dimensions of global manufacturing strategy • To examine the elements of global supply chain management • To show quality affects the global supply chain • To illustrate how supplier networks function • To explain how inventory management is a key dimension of the global supply chain • To present different alternatives for transporting products along the supply chain from suppliers to customers 2 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Supply Chain Management • Supply chain - the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer. 3 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Logistics • Logistics, or materials management, is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements 4 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Global Manufacturing Strategies • The success of a global manufacturing strategy depends on four key factors: § § compatibility configuration coordination control 5 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Compatibility • The degree of consistency between FDI decisions and a company’s competitive strategy. • Some company strategies that managers must consider: § § § Efficiency/cost Dependability Quality Innovation Flexibility 6 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Manufacturing Configuration • Three broad categories of manufacturing configuration are: § centralized facility § regional facilities § multidomestic facilities 7 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Coordination and Control • Coordinating is the linking or integrating of activities into a unified system. • Control can be the measuring of performance so companies can respond appropriately to changing conditions. 8 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Information Technology • • • EDI (electronic data interchange) ERP (enterprise resource planning) MRP (material requirements planning) RFID (radio frequency ID) E-commerce Private technology exchange (PTX) 9 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Quality • Quality is defined as meeting or exceeding the expectations of customers. • Quality standards can be: § general (ISO 9000) § industry-specific § company-specific (AQL, zero defects, TQM, and Six Sigma) 10 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Total Quality Management • Total quality management (TQM) is a process that stresses: § customer satisfaction § employee involvement § continuous improvements • The goal of TQM is to eliminate all defects. 11 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Supplier Networks • Sourcing: the process of a firm having inputs supplied to it from outside suppliers (both domestic and foreign) for the production process. • Domestic sourcing allows the company to avoid problems related to: § § language culture currency tariffs, and so forth • Foreign sourcing allows the company to reduce costs and improve quality, among other things 12 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Outsourcing • Major outsourcing configurations: § Vertical integration. § Outsourcing through industrial clusters. § Other outsourcing. 13 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Make or Buy Decision • Under the make or buy decision, companies have to decide if they will make their own parts or buy them from an independent company • Companies go through different purchasing phases as they become more committed to global sourcing 14 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Supplier Relations • When a company sources parts from suppliers around the world, distance, time, and the uncertainty of the international political and economic environment can make it difficult for managers to manage inventory flows accurately 15 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

The Purchasing Function • Global progression in the purchasing function: § Domestic purchasing only. § Foreign buying based on need. § Foreign buying as part of a procurement strategy. § Integration of global procurement strategy. 16 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Major Sourcing Strategies • • Assign domestic buyers foreign purchasing. Use foreign subsidiaries or business agents. Establish international purchasing offices. Assign the responsibility for global sourcing to a specific business unit or units. • Integrate and coordinate worldwide sourcing. 17 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Lean Manufacturing and Just-in-Time Systems • Lean manufacturing - a productive system whose focus is on optimizing processes through the philosophy of continual improvement. • JIT - sourcing raw materials and parts just as they are needed in the manufacturing process. 18 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Transportation Networks • The transportation system links together suppliers, companies and customers • Foreign trade zones (FTZs) - special locations for storing domestic and imported inventory in order to avoid paying duties until the inventory is used in production or sold. 19 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall