Part Six Managing International Operations

Chapter Seventeen Global Manufacturing and Supply Chain Management

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Chapter Objectives
To describe different dimensions of global manufacturing strategy To examine the elements of global supply chain management To show how 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

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Factors Influencing Supply Chain Management

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Supply Chain Management

Supply chain - the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer.

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The Global Supply Chain

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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
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Global Manufacturing Strategies

The success of a global manufacturing strategy depends on four key factors:
compatibility configuration coordination control

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Compatibility
The degree of consistency between FDI decisions and a companys competitive strategy. Some company strategies that managers must consider:
Efficiency/cost Dependability Quality Innovation Flexibility
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Manufacturing Configuration
Three broad categories of manufacturing configuration are:
centralized facility regional facilities multidomestic facilities

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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.

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Information Technology
EDI (electronic data interchange) ERP (enterprise resource planning) MRP (material requirements planning) RFID (radio frequency ID) E-commerce Private technology exchange (PTX)

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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)

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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.

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Global Sourcing and Production Strategy

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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
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Outsourcing
Major outsourcing configurations:
Vertical integration. Outsourcing through industrial clusters. Other outsourcing.

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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

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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

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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.

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Major Sourcing Strategies

Assign domestic buyers for 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.

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Steps In Global Sourcing Process

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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.

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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.

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