29.03.10 Operations Final Ppt

InternationalInternationalOperations Operations ManagementManagement

Submitted to: Submitted by: Dr. Neeraj Sharma Jaideep Singh

Pankhuri Wadehra

International Operations Management

Nature of international operations management The supply chain management and vertical integration

decisions facing international production managers The meaning of productivity and how international

firms work to improve it How international firms control the information their

managers need to make effective decisions? How firms control quality and discuss total quality

management in international business? Risk Management in Global Operations

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Introduction definitions, role of IOM, strategic issues, complications

Resource Acquisition make or buy decisions

Location Decisions market size, efficiency, strategic asset seeking Off-shoring

Materials Management International Service Operations Operations and Logistics Supply-Chain Management

Bullwhip or Whiplash Effect Productivity Total Quality Management Risk Management in Global Operations


International Operations Management 4

Introduction definitions, role of IOM, strategic issues, complications

Resource Acquisition make or buy decisions

Location Decisions market size, efficiency, strategic asset seeking

Materials Management International Service Operations


International operations management is the set of activities used by an international business to transform different kinds of resource inputs (material, labor, and so forth) into final goods and services.



Operations Management: the set of activities an organization uses to transform different kinds of inputs into final goods and services

International Operations Management: the transformation-related activities of an international firm

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Transformation process in ‘Operations’ can have different forms, such as Physical : Manufacturing Operations

Locational : Transportation or Warehouse Operations

Exchange : Retail Operations

Psychological : Entertainment

Physiological : Health care

Informational : Communication

A properly designed and managed operating system plays a major role in determining product and service quality, and productivity.

In addition, operations management plays a role in determining how quickly a firm can respond to changes or new developments in technology, consumer tastes and preferences, pricing levels, competitive threats, and so forth.


International operations management must be closely aligned with a firm’s strategy. In fact, the way in which a firm structures and manages its operations function influences and is influenced by its strategy.

For example, a firm following a differentiation strategy will be relatively more likely to customize operations across national markets. A low cost strategy and standardized production will tend to be a good fit, in general.


International operations management is a far more complex task than domestic operations management. At the international level, managers must contend with suppliers from different countries, different government regulations wherever the firm does business, a heterogeneous market, disparate transportation facilities and networks, and relatively long distances.


Several sets of decisions must be made regarding where and how to produce goods and services. For example, a firm must decide where and how it will obtain necessary resources for the operations management function. Furthermore, the firm must make a number of location-related decisions such as where to build a plant or sales office. In addition, a firm must make decisions regarding transportation choices and inventory levels.


Global sourcing of inputs Global production of goods and services Global Transportation of Products Global management of entire supply chain


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Strategic Context•Differentiation•Cost leadership•Focus

Standardized vs. CustomizedProduction

Acquisition of Resources•Supply Chain •Management•Vertical Integration•Make-or-buy decision

Location Decisions•Country-related issues•Product-related issues•Government policies•Organizational issues

Logistics and Materials Management•Flow of materials•Transportation options•Inventory levels•Packaging

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LowLowHighHighLowLow

Local Responsiveness ConsiderationsLocal Responsiveness Considerations(Quick Response and/or Differentiation)(Quick Response and/or Differentiation)

Import/export or license existing product

ExamplesU.S. SteelHarley Davidson

International Strategy

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International StrategyInternational Strategy



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Standardized product

Economies of scale Cross-cultural

learning

ExamplesTexas InstrumentsCaterpillarOtis Elevator

Global Strategy18


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Standardized product Economies of scale Cross-cultural learning


Global Strategy




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Global StrategyGlobal Strategy




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Use existing domestic model globally

Franchise, joint ventures, subsidiaries

ExamplesHeinzMcDonald’sThe Body ShopHard Rock Cafe

Multidomestic Strategy

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Global Strategy




Multidomestic Strategy Use existing

domestic model globally Franchise, joint ventures,

subsidiaries

ExamplesHeinz The Body ShopMcDonald’s Hard Rock Cafe

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subsidiaries




Global StrategyGlobal Strategy

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Move material, people, ideas across national boundaries

Economies of scale Cross-cultural

learning

ExamplesCoca-ColaNestlé

Transnational Strategy22


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Global Strategy Transnational Strategy Move material, people, ideas

across national boundaries Economies of scale Cross-cultural learning

ExamplesCoca-ColaNestlé






subsidiaries


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Strategic decisions must be made with respect to globalization

What works in one country may not work in another

Strategies must be changed to account for these differences

Other issues Political, social, cultural, and economic

differences

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Decision Area AffectsProduct and service design Costs, quality liability and environmental

Capacity Cost structure, flexibility

Process selection and layout Costs, flexibility, skill level, capacity

Work design Quality of work life, employee safety, productivity

Location Costs, visibility

Quality Ability to meet or exceed customer expectations

Inventory Costs, shortages

Maintenance Costs, equipment reliability, productivity

Scheduling Flexibility, efficiency

Supply chains Costs, quality, agility, shortages, vendor relations

Projects Costs, new products, services, or operating systems

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Product

Quality

Process

Location

Layout

Human resource

Supply chain

Inventory

Scheduling

Maintenance

FLEXIBILITY:Sony’s constant innovation of new products………………………………....Design HP’s ability to lead the printer market………………………………Volume

Southwest Airlines No-frills service……..…..LOW COST

DELIVERY: Pizza Hut’s 5-minute guarantee at lunchtime…………………..…..………………….Speed Federal Express’s “absolutely, positively on time”………………………..….Dependability

QUALITY: Motorola’s HDTV converters….……........Conformance Motorola’s pagers………………………..….Performance

Caterpillar’s after-sale service on heavy equipment……………....AFTER-SALE SERVICE

Fidelity Security’s broad line of mutual funds………….BROAD PRODUCT LINE

Figure 2.4Figure 2.4

OperationsOperations SpecificSpecific CompetitiveCompetitiveDecisionsDecisions ExamplesExamples Strategy UsedStrategy Used AdvantageAdvantage

Response(Faster)

Cost leadership(Cheaper)

Differentiation(Better)

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Too much emphasis on short-term financial performance

Failing to take advantage of strengths and opportunities

Neglecting operations strategy Failing to recognize competitive threats

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Too much emphasis in product and service design and not enough on improvement

Neglecting investments in capital and human resources

Failing to establish good internal communications

Failing to consider customer wants and needs

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Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

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Banks, ATMsConvenienceLocationLocation

DisneylandNordstroms

Superior customer service

ServiceService

Burger KingSupermarkets

VarietyVolume

FlexibilityFlexibility

Express Mail, Fedex,One-hour photo, UPS

Rapid deliveryOn-time delivery

TimeTime

Sony TVLexus, CadillacPepsi, Kodak, Motorola

High-performance design or high quality Consistent quality

QualityQuality

U.S. first-class postageMotel-6, Red Roof Inns

Low CostPricePrice30


Operations managers typically must decide important and complex issues in three areas: Resources–managers must decide where and how to

obtain the resources the firm needs to produce its products

Location–managers must decide where to build administrative facilities, sales offices, etc.

Logistics–managers must decide on modes of transportation and methods of inventory control

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Supply chain management: set of processes and steps a firm uses to acquire the various resources it needs to create its products

Vertical integration: extent to which a firm either provides its own resources or obtains them from other sources

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The decision to make-or-buy may be influenced by the firm’s ability to write an enforceable contract (a “control” issue). In countries where laws protecting intellectual property are weak, many firms prefer to make rather than buy inputs.


Clearly, political risk will tend to be reduced when the firm buys its inputs instead of investing in foreign-based facilities.

International Operations Management34

A firm that buys from external suppliers has the flexibility to switch suppliers as circumstances warrant it.

This flexibility is particularly important in situations where technology is rapidly changing or where inflation or exchange-rate risks are a factor.

International Operations Management35

There has been a trend towards shrinking the number of suppliers firms work with, when possible. This trend promotes globalization by suppliers for numerous industries to better support their global customers.


A firm that buys from external suppliers has the flexibility to switch suppliers as circumstances warrant it.

This flexibility is particularly important in situations where technology is rapidly changing or where inflation or exchange-rate risks are a factor.



Size Scope of operations Technological expertise Nature of product

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StrategicControl

ModerateControl

LowControl

High LowDegree of Strategic Vulnerability

Low

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Cost Control Risk Investment Flexibility

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If a firm decides to make its own inputs, it needs to decide where to locate facilities.

Historically, most FDI has been motivated by a desire to serve the local or regional market. Thus, demand conditions are consistently found to be important influences on location decisions. Market size has consistently been the most important predictor of inward FDI.


An increasingly important set of influences relates to strategic asset seeking. Firms are engaging in FDI more and more frequently to access intellectual property, technology, or specialized pools of labor which have come to be dispersed around the globe. Firms seek out these assets or pools of labor to aid their quest to be globally competitive.



Country-Related Issues Product-Related Issues Government Policies Organizational Issues

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Resource availability Cost Infrastructure Country-of-origin effects

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Value-to-weight ratio Technology Importance of customer feedback

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Stability of political process National trade policies Economic development incentives Existence of foreign trade zones (FTZ)

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Business strategy Cost leadership Differentiation

Organizational structure Inventory management policies

Just-in-time (JIT) inventory management system

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Relocation of business processes to a low-cost location by shifting the task overseas is termed as ‘off-shoring’.


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Captive off-shoring Third party off-shoring Near-shoring


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Relocating business processes to a low cost location and delivering from a shared service centre owned by the company itself.


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Also known as outsourcing, third party off-shoring involves relocation of business process from within the client country to an outside vendor operating at low-cost location.


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Strategic Reasons Improve business focus Gain access to world class facilities Accelerate re-engineering benefits Share risks Free resources for other purposes

Tactical Reasons Reduce or control operating costs Make capital funds available Create cash infusion Compensate for lack of internal resources Improve management of difficult or out-of-

control functions

Relocation of a business process to a country within the same geographical region .

Shifting business processes from the U.S. to Mexico or from Western to Eastern Europe.


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Logistics includes physical distribution, warehousing, freight transportation (inbound and outbound from manufacturing plants and in some industries customer service (sales order processing, inventory planning and production planning.

Supply chain (for a manufacturer)includes the logistics business functions above, and also includes purchasing, sourcing, procurement, buying, manufacturing operations,production scheduling and inventory control and materials management, facilities location planning, the information technology to coordinate between suppliers, the company, and customers (wholesalers and retailers and end users


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Activities

Purchase

Manufacture

Logistics

Distribution

Transport

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Operations It is Physical process Accepts input and transform into valuable output To meet customer’s need

Logistics It is a management of flows It is between business functions Flows from companies to market

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Production

Conception

Procurement

Disposal Destruction

Renovation Collecting Recovery

After Sales Support

Physical Distribution

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Environmental Factors affecting Flow Management

Market – It change under the influence of several factors Competition Technology – it change logistics in the form of

manufacturing innovations, e.g. barcodes Government Regulations – environmental regulations

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Geographical IntegrationFrom Local to Worldwide logistics

Functional IntegrationFrom function-dominated logistics

to flow-dominated logistics

Sectorial IntegrationFrom a sector-based logistics

(producer/distributor) toInter-sector logistics

Global Logistics & Operations

Management

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Logistics Management Logistics Management Overview

TenElements

Of Logistics

ServiceBased

Industries

Products based

industries

Export &Import

business

Retail Chain Outlets

Mfg & distribution

Electronic & M business

Media, Entertainment &Music

Travel, Tourism, leisure & Event Mgmt

BPO, KPO & Fin. Services

International Trade Operations

SCM-Supply Chain Mgmt

SDM-Services delivery Mgmt

ISCM /Global SCM

Repairs, Maint.& Post sales services

LogisticsAdmin Managing Logistics change Motivation, Training, coordin.

Information Systems Forecasting Inventory Warehousing &Distribution Centres Material Handling Systems Transportation Protective Packaging Order Processing Purchasing & Sourcing Supply Chain Design

Resource-oriented logistics (Capital, materials and people)

Information-oriented logistics (Availability of products, time to deliver and customer needs)

User-oriented logistics (Final Customer)

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Suppliers Quality

Cost Flexibility

MyCompany

CustomersSuppliersMarket

Response

Competitors

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Lot size Response time Service level Product variety Price Innovation

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Linear Supply ChainLinear Supply Chain71


Perceived demand seasonality and forecast error can increase as we proceed upstream in the supply chain. This phenomenon is known as Bullwhip or Whiplash effect.

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InefficiencyExcessive InventoryDissatisfied CustomersLost RevenueIneffective Production Schedules

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Behavioral causes of Bullwhip Behavioral causes of Bullwhip

Individual Decisions

Types of Incentive

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Non-Behavioral causes of BullwhipNon-Behavioral causes of Bullwhip

Demand Forecast Updating

Order Batching

Price Fluctuation

Rationing & Shortage Gaming

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Information sharing across supply chain links

Lead time reductionBetter product allocation facilitiesPenalties on order cancellationReduction in processing costsContinuous Replenishment Programs

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Uncertainties in Global Supply ChainUncertainties in Global Supply Chain

Substantial Geographic DistanceForecasting Difficulties &InaccuraciesExchange Rate UncertaintiesInfrastructural InadequaciesExplosive Dimensions of Product

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Productivity is the input-output ratio within a time period with due consideration for quality


Economic measure of efficiency that summarizes the value of outputs relative to the value of inputs used to create the outputs Helps to determine firm’s overall success Contributes to long-term survival Contributes to overall standard of living

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Production management was the term used to refer to those activities necessary to manufacture products

Operations management refers to activities necessary to produce and deliver a service as well as a physical product


Spend more on research and development Improve operations Increase employee involvement

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Quality: totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs American Society for Quality Control

ISO 9000: 2000 International set of quality guidelines Basis for quality certification International Organization for Standardization

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Strategic Commitment To Quality

EmployeeInvolvement

High QualityMaterials

Up-to-DateTechnology

Effective Methods

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TQM: Integrated effort to systematically and continuously improve the quality of an organization’s products and/or services

Statistical process control: family of mathematically based tools for monitoring and controlling quality

Benchmarking: process of legally and ethically studying how other firms do something in a high-quality way and then either imitating or improving on their methods

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Degree of Exposure to Exchange rate

Source of firm’s inputs, including financing Location of the firm’s final markets Location of production


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Characteristics Transactions/Translational Operating

Nature of exposure Contractual/ Accounting Future operating cash flows and competitive

Financial items considered

Contractual and asset valuation: Debt, payables, receivables

Non contractual :Revenues, costs and profits

Inputs to measure exposure

Accounting statements/ contracts

Future operating cash flows and competitive position

Exchange rates that affect profit

Nominal RealInternational Operations Management

Types of foreign exchange exposure Transaction exposure Translational exposure Operating exposure

1. Customer Reactions

2. Competitor Reactions

3. Supplier Reactions

4. Government Reactions


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Development of a global network of production facilities with excess capacity

Development of a portfolio of global suppliers

Design of flexible, creative and fast product development processes

Ability to select and expand product line for various markets


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Development of flexibly structured supplier and the distribution channel selection

Pricing strategies for exporting firms Exchange rate pass-through pricing policies Pricing adjustments to preserve market share

Use of operational flexibility to minimize operating exposure


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Forward contracts

Futures contracts

Options


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www.ggogle.co.in www.wikipedia.org

THANKSInternational Operations Management

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http://www.ggogle.co.in/

http://www.wikipedia.org/

29.03.10 Operations Final Ppt

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