PRODUCTION AND OPERATIONS MANAGEMENT Ch 3 Operations in

PRODUCTION AND OPERATIONS MANAGEMENT Ch. 3: Operations in a Global Environment POM - J. Galván 1

Learning Objectives n What is the difference in terms of operations management when the company is global? POM - J. Galván 2

Management Issues in Global Operations Global Strategic Context • Differentiation • Cost leadership • Response Supply Chain Management Location Decisions POM - J. Galván Logistics Management 3

Possible strategies POM - J. Galván 4

Important issues to consider n n How to organize the flow of goods Supply chain management Where to deploy resources- Facility location decisions • Types of facilities • Locations n How are you going to move supplies and products - Materials management POM - J. Galván 5

Supply-Chain Management Sourcing n Vertical integration n Make-or-buy decisions n Partnering n POM - J. Galván 6

Location Decisions Country-related issues n Product-related issues n Government policy/political risk n Organizational issues n POM - J. Galván 7

Materials Management Flow of materials n Transportation options and speed n Inventory levels n Packaging n Storage n POM - J. Galván 8

Reasons to Globalize Operations Tangible n n n Intangible n n Reduce costs (labor, taxes, tariffs, etc. ) Reduce risks (foreign exchange, etc. ) Improve supply chain Provide better goods and services Attract new markets Learn to improve operations Attract and retain global talent POM - J. Galván 9

Trade and Tariff n n n Maquiladoras - Mexican factories located along the U. S. -Mexico border that receive preferential tariff treatment GATT - an international treaty that helps promote world trade by lowering barriers to the free flow of goods across borders NAFTA - a free trade agreement between Canada, Mexico, and the United States POM - J. Galván 10

THOUGHT n Free trade may take us into the era of the floating factory - a six person crew will take a factory from port to port in order to obtain the best market, material, labor and tax advantages POM - J. Galván 11

Achieving Global Operations Four Considerations Global product design n Global process design and technology n Global factory location analysis n Impact of Culture and Ethics n POM - J. Galván 12

Global Product Design n Remember social and cultural differences • packaging and marketing can help make product seem “domestic” but n “liter” versus “quart” n “sweetness” and “taste” POM - J. Galván 13

Global Process Design and Technology Information technology enables management of integrated, globally dispersed operation n Texas Instruments: 50 plants in 19 countries n Hewlett-Packard - product development teams in U. S. , Japan, Great Britain, and Germany n Reduces time-to-market n POM - J. Galván 14

Global Facility Location Analysis Using CSFs (Country specific factors) for Country Selection Select CSFs based on parent organization’s strategic or operations objectives n Obtain country-specific information on the CSFs n Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scale n Sum the ratings n POM - J. Galván 15

You May Wish To Consider n n n n national literacy rate of innovation rate of technology change number of skilled workers stability of government product liability laws export restrictions similarity in language POM - J. Galván ¨ ¨ ¨ ¨ work ethic tax rates inflation availability of raw materials interest rates population number of miles of highway 16

Global Impact of Culture and Ethics n Cultures differ! Some accept/expect: • variations in punctuality • long lunch hours • expectation of thievery • bribery • little protection of intellectual property • Extended working time • Smaller salaries • No social benefits…. POM - J. Galván 17

To Establish Global Services Determine if sufficient people or facilities exist to support the service n Identify foreign markets that are open - not controlled by governments n Determine what services are of most interest to foreign customers n Determine how to reach global customers n POM - J. Galván 18