Chapter Eighteen

© 2001 Prentice Hall 18-1

International Businessby

Daniels and Radebaugh

Chapter 18Global Manufacturingand Supply ChainManagement


ObjectivesTo describe different dimensions of global manufacturing

strategyTo examine the elements of global supply chain managementTo show how quality affects the global supply chainTo illustrate how supplier networks functionTo explain how inventory management is a key dimension of

the global supply chainTo present different alternatives for transporting products

along the supply chain from suppliers to customers


OPERATIONS

OBJECTIVES

STRATEGY

EXTERNAL INFLUENCES

COMPETITIVE ENVIRONMENT

PHYSICAL AND SOCIETAL FACTORS

Functions• Marketing• Exporting and importing• GLOBAL MANUFACTURING• SUPPLY CHAIN MANAGEMENT• Accounting• Finance• Human resources

Modes

MEANSOverlayingAlternatives

Global Manufacturing and Supply Chain Management


IntroductionSupply chain—encompasses the coordination of

materials, information, and funds from the initial raw material supplier to the ultimate customer

Management of the value-added process• Network is quite broad

– coordination of the network takes place through interactions between firms in the networks

Logistics (materials management)—that part of the supply chain that focuses on the transportation and storage of materials and final goods


Suppliernetwork

Customernetwork

Manufacturingconfiguration

The Global Supply Chain


Global Manufacturing StrategiesManufacturing compatibility—degree of consistency between

FDI decisions and competitive strategy• Strategies that managers must consider include:

– cost-minimization strategies—establish economies of scale in manufacturing, often by producing in areas with low-cost labor

» offshore manufacturing—e.g., Mexico’s maquiladora operations

– dependability– quality– flexibility– innovation


Global Manufacturing Strategies (cont.)Manufacturing configuration—three basic forms

– centralized manufacturing in one country– regional manufacturing facilities– multidomestic—country-specific manufacturing

facilities• MNEs choose a combination of these forms• Rationalization—countries specialize in the production of

parts or final goodsCoordination and control

• Coordinating—linking or integration of activities into a unified system

– must be considered when manufacturing configuration is established

• Controlling—ensures that company strategies are carried out

– includes organizational structure and reporting systems


Global Manufacturing Strategies (cont.)Plant location strategies—determine which countries to invest

in and where in the specific countries• Depends on a variety of factors

Layout planning strategies—decisions about the physical arrangement of economic activity centers within a manufacturing facility

• Economic activity centers—where the different production tasks are performed

• Cost of land is a factor

Global Supply Chain ManagementElectronic data interchange (EDI)—links suppliers, customers,

and third-party intermediaries to expedite documents and financial flows

• Links exporters with customs• Drawbacks—limited, expensive, and inflexible

– based on proprietary standards


CustomerService

Requirements

OrganizationalDesign andTraining

Requirements

PerformanceGoals

Global SupplyChain Management

BusinessProcesses

Plant andDistribution

Center NetworkDesign

InformationSystems

Key Customerand SupplierRelationships

PerformanceMetrics

InventoryManagement

Outsourcingand Third-Party

LogisticsRelationships

Elements of a Global Supply Chain Management


Global Supply Chain Management (cont.)Enterprise resource planning (ERP)—software that can

link information flows from different parts of a business and from different geographic areas

• Brings information together within the firm• Unable to tie in the customer and take advantage

of e-commerceE-commerce—use of Internet to join together suppliers

with companies, companies with customers• Helps to automate and speed up internal processes

in a company and spreads efficiency gains to the business systems of its customers and suppliers

• Extranet—use of Internet to link a company with outsiders

• Intranet—use of Internet to link parts of the firm• Use varies by location and industry


QualityMeeting or exceeding the expectations of the customer

• Conformance to specifications, value, fitness for use, support, and psychological impressions

• Zero defects—Japanese refuse to tolerate defects of any kind

• Acceptable quality level—unacceptable products dealt with through repair facilities and service warranties

Total Quality Management (TQM)—proactive strategy whose goal is to eliminate all defects

• Three principles of TQM– customer satisfaction– employee involvement– continuous improvement (kaizen)—identifying

problems and enlisting employees throughout the organization to help eliminate the problems


Quality (cont.)Quality standards—exist at three levels

• General standard – award for quality—Baldridge and Deming

awards– certification standard—accepted worldwide

» ISO 9000—European set of five universal standards for quality assurance

» non-European companies operating in Europe must become ISO certified to have access to that market

» ISO 9001—most detailed and comprehensive standard in the series

» ISO 9004-2—pertains to software• Industry-specific standards—typically pertain to

quality of suppliers• Individual companies—set standards for their

suppliers


Supplier NetworksSourcing—problem of acquiring inputs for the production

process• Sourcing involves both domestic and foreign suppliers

– sourcing in the home country avoids numerous problems

– domestic sources may be unavailable or expensive• Companies can manufacture parts internally or purchase

them from other manufacturers• Companies can assemble their own products internally or

subcontract to other firmsOutsourcing configurations

• Vertical integration—company owns entire supplier network

• Arm’s-length purchases—outsourcing• Japanese keiretsu relationships with suppliers


Preengagement• Companies selling goods and services solely in the domestic market• Those companies considering but not currently exporting

Phase 1

Initial Exporting• Companies that do sporadic, marginal exporting• Companies that see lots of potential in export markets• Companies unable to cope with exporting demands

Phase 2

Advanced• Companies become regular exporters• Companies gain extensive overseas experience• Companies may use other strategies for entering markets

Phase 3

Phases of Export Development


Improve Delivery of

Supplies

Establish aPresence in a

Foreign Market

Reduce Costs

Reasons for Global SourcingStrategies

React toCompetitor’s

OffshoreSourcingPractices

Increase Exposureto WorldwideTechnology

StrengthenReliabilityof Supply

Improve Quality

Gain Accessto Materials

Satisfy OffsetRequirements

Supplier Networks


Supplier Networks (cont.)Make or buy decision—outsource or supply parts from internal

production• MNEs could focus on critical parts and parts that they

make distinctively well• Outsourcing—purchasing inputs from outside suppliers

not related to the company– suppliers have distinct competitive advantages

Supplier relations—firms must determine how to work with their suppliers

• Japanese companies develop close relationships• U.S. companies tend to have arm’s-length relationships

Purchasing function—select best supplier, establish a solid relationship, evaluate supplier’s performance

• Alliances—buyer and seller provide information about orders, upcoming design changes, and long-range plans


Sourcing of rawmaterials, parts,and components

Manufacture andassembly of

components andfinal products

Sale of productsStage ofproductionand sales

Homecountry

Abroad

Both

Homecountry

Abroad

Both

Homecountry

Abroad

Both

Location ofsourcing,production,and sales

Global Sourcing and Production Strategy


Inventory ManagementCompanies must manage the flow and storage of inventory

• Distance, time, and uncertainty in foreign environments cause foreign sourcing to complicate inventory management

Just-in-time (JIT) systems—sourcing raw materials and parts just as they are needed in the manufacturing process

• Spares the cost of storing large inventories• Must develop solid supplier relationships

– may have to make concessions to foreign suppliers• Typically implies sole sourcing

– problematic if sole supplier is foreign


Evaluate operating andcompetitive environments

Define scope of internationalpurchasing effort

Identify and evaluate potentialsuppliers worldwide

Determine appropriate nature ofbuyer-supplier relationship

Request/evaluateproposals from suppliers

Continual reevaluation of implementationstatus, requirements, and capabilities

Select “best” supplier, establish contract termsand conditions, and build desired relationship

Steps in the Global Sourcing Process


Inventory Management (cont.)Foreign Trade Zones (FTZs)—special locations for storing

domestic and imported inventory and avoiding paying duties until the inventory is used in production or sold

Intended to encourage foreign investment• Can be general-purpose zones or subzones

– major growth in subzones• Use in export business has been expanding

Transportation NetworksTransportation of goods is very complicated

• Transportation is key element of logistics system– gather, track, and process large quantities of

information • Decisions about warehousing system also necessary

Third-party intermediaries—an important dimension

Chapter Eighteen

Documents

Transcript of Chapter Eighteen