© McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

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© McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16

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Transcript of © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

Page 1: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Global Manufacturing and Materials Management

Chapter 16

Page 2: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Materials Management

Materials Management: the activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution.

Logistics: the procurement and and physical transmission of material through the supply chain, from suppliers to customers.

16-1

Page 3: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Manufacturing and Materials Management - Strategic Objectives -

Lower costs and, Simultaneously, increase product quality. Accommodate demands for local

responsiveness. Respond quickly to shifts in customer

demand.

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Page 4: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

The Relationship Between Quality and Costs

Increases Productivity

LowersRework andScrap Costs

LowersWarranty andRework Costs

Improves Performance

Reliability

LowersService Costs

LowersManufacturing

CostsIncreases

Profits

Figure 16.1

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Page 5: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Total Quality Management(TQM)

The leaders: W. Edwards Deming, Joseph Juran, and A.V. Feigenbaum

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“We have learned to live in a world of mistakes and defective products as if they were necessary to life. It is time to adopt a new philosophy in America.” W. Edwards Deming

Page 6: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Where to Manufacture Country factors. Technological factors:

Fixed costs. Minimum efficient scale. Flexible manufacturing (Lean Production).

• Reduce setup times.

• Increase machine utilization.

• Improve quality control

Flexible machine cells.

Mass customization

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Page 7: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

A Typical Unit Cost CurveU

nit

Cost

s

Volume

Minimum

Efficient Scale Figure 16.2

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Page 8: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Manufacturing Location Fixed costs are substantial Minimum efficient scale is high Flexible manufacturing technologies

available

Fixed costs are low Minimum efficient scale is low Flexible manufacturing technologies

unavailable

Single or few locations.

Major market locations if it better meets local demands.

[ Trade barriers and transportation costs remain major impediments]

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Page 9: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Product Factors and Location Strategies

Two product features affect location decisions: Value to weight ratio. Product serves universal needs.

Two strategies for locating manufacturing facilities: Concentration. Decentralization.

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Page 10: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Location Strategy and Manufacturing

Serves universal needs Yes No

Flexible manufacturing technology Available Not Available

Minimum efficient scale High Low

Substantial Few

Differences in factor costs Substantial Few

Technological Factors

Product Factors

Fixed costs High Low

Concentrated Decentralized

Trade barriers Few Many

Value-to-weight ration High Low

Country Factors

Differences in political economy

Favored Manufactured Strategy

Differences in culture Substantial Few

Table 16.1

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Page 11: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Belfast Carburetors and

distributors

Treforest Spark plug insulators

Leamington Foundry production

of engine components

Dagenham Final assembly

Bordeaux Transmissions

Enfield Instruments, fuel and water gauges,

plugs

Basildon Radiators, water pump assembly,

engine components

Genk Body panels, road wheels

Wülfrath Transmission parts, engine components

Saarlouis Final assembly

Cologne Die-cast transaxle casings, gear and

engine components

Valencia Final assembly

Map 16.1 in Text 16-10

Page 12: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Strategic Role of Foreign Factories

Initially, established where labor costs low. Later, important centers for design and final

assembly. Upward migration caused by:

Pressure to improve cost structure. Pressure to customize product to

meet customer demand. Increasing abundance of advanced

factors of production.

Dispersed Centers of Excellence are consistent with a Transnational Strategy

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Page 13: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Make or Buy Advantages of Make:

Lower costs. Facilitating specialized investments. Proprietary product production technology

protection. Improved scheduling.

Advantages of Buy: Strategic flexibility. Lower costs. Offsets.

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Page 14: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Coordinating a Global Manufacturing System

Materials management (includes logistics): Achieve lowest possible cost that meets

customer’s needs.

Power of ‘Just-in-Time’: Economize on inventory

holding costs. Drawback: no buffer inventory.

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Page 15: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

The Role of the Organization Organizational linkages are more numerous and

complex. More difficult to control costs.

Functionally separate materials management: Equal weight with other departments. Purchasing, production and distribution

are one basic task:• controlling material flow from purchase

to customer.

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Page 16: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Potential Materials Management Linkages

Plant 1

Market A

Source A Source B

Plant 2

Market B

Source C

Plant 3

Market C Markets

Manufacturing Locations

Source Locations

Far EastEuropeNorth America

Figure 16.3

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Page 17: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Traditional Organizational Structure

CEO

DistributionProduction Planning

and Control

Purchasing Manufacturing Marketing Finance

Figure 16.4A

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Page 18: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Organization Structure with Materials Management as Separate Function

Strategicmanager/CEO

Productionplanning

and controlPurchasing

Materials management

Manufacturing Marketing Finance

Distribution Figure 16.4B

16-17

Page 19: © McGraw Hill Companies, Inc., 2000 Global Manufacturing and Materials Management Chapter 16.

© McGraw Hill Companies, Inc., 2000

Role of Information Technology Track component parts to assembly plant:

Optimize production scheduling. Accelerate production, when necessary.

Creating linkages between a firm and its suppliers and shippers. Communicate without time delay. Minimizes paperwork.

16-18

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© McGraw Hill Companies, Inc., 2000 16-19


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