Global Manufacturing and Supply Chain Management

International Business (MB 40)

Outline

Dimensions of Global ManufacturingElements of Global Supply Chain ManagementRole of Information SystemsIssues of Quality and Global Supply ChainInventory Management and Global Supply ChainTransportation Networks

Why Manufacture Globally?

CostAccess to raw-materialNew MarketsMulti-Point Communication

Overall goal, improvement in cash flows of the parent firm to maximize shareholder wealth

Global Manufacturing Strategies

ManufacturingSetting up a subsidiary versus Virtual ManufacturingDepends on manufacturing compatibility

What is manufacturing compatibility?Compatibility depends on:

EfficiencyDependabilityQualityFlexibilityInnovation

Global Manufacturing Strategies

Manufacturing ConfigurationShould manufacturing be centralized in one country or should we have manufacturing facilities in specific zones to service those zones or should we go multidomestic with a facility in each countryWhen should we have a centralized location? When should we go for multidomestic location?

Coordination and ControlLinking or integrating activities into a unified system is called COORDINATIONDefining organizational structure and reporting systems to ensure timely implementation of policies is termed as CONTROL

Global Manufacturing StrategiesPlant Location Strategies

Transportation costs, duties, proximity to customers and suppliers, foreign exchange rate risk, economies of scale in the production process, government incentives, climate, technological requirements of the manufacturing process.

Plant Layout Planning Strategiesphysical arrangement of economic activity centers within a manufacturing facilityEvery manufacturing facility cannot have the same type layout—local conditions such as cost of labor, cost of land, local culture must be considered in deciding about the plant layout

Global Supply Chain Management

Meaning of Supply Chain ManagementDescribes managers’ effort to oversee the flows of raw materials, components, information, and finance through their network of suppliers, assemblers, and distributors, and customers located around the world.

Elements of Supply Chain ManagementSupply Chain Management and Enterprise Resource Planning (ERP)E-Commerce

Internet, intranet, and extranet

Role of Information Systems and Technology

Key to successful global supply chain management

Supply Chain Management

LINKAGE OF ACTIVITIESBUYINGMAKINGMOVING

INTEGRATESSUPPLIERDISTRIBUTORLOGISTICS REQUIREMENTS

MAJOR ENTITIES

Supplier Manufacturer DistributorRetail Outlets

Customer

Capacity, inventory levels, delivery schedule, payment terms

Orders, return requests, repair and service requests, payments

What Does Supply Chain Involve?NETWORK OF FACILITIES

MATERIALSRAW MATERIALS – PRODUCTSFINISHED PRODUCTS

LINKSPROCUREMENTLOGISTICS

ELIMINATEREDUNDANCYDELAYSRESOURCES

What Does Supply Chain Involve?

RIGHT AMOUNT OF PRODUCTSOURCECONSUMPTION POINTLEAST

• TIME• COST

ROLE OF INFORMATION SYSTEMS

coordinate, schedule, and control procurement, production, inventory management, and delivery of products and services

ROLE OF INFORMATION SYSTEMS

Integrate demand planning, production forecasting, materials requisition, order processing, inventory allocation, order fulfillment,

ROLE OF INFORMATION SYSTEMS

transportation services, receiving, invoicing, and payment.

Supply chain management systems

IntranetsExtranetsSupply chain management software

EXAMPLE

Enterprise System

Sales Representative (Brussels) Factory (Hong Kong)

Warehouse Customer ServiceRepresentative

Accounting

Balance Sheets Accounts Receivables/ Payables

Payroll Available Cash Cost Centers

Customer Order

Shipment DateStock of Parts

Track

Productiononlinereplenishes

Corporate Headquarter(London)

Quality and Supply Chain

Meaning of QualityMeeting or exceeding the expectations of a customerTotal Quality Management (TQM) versus Acceptable Quality Level (AQL)Zero defects and TQM

Challenges in Supply Chain Management

Operational ThreatsDifferent languagesDifferences in CurrenciesDifferences in Measurement Systems (metric versus decimal)Strategic ChallengesNational CulturesTechnological capabilitiesTax PoliciesNational CultureWestern culture typically foster adversarial positions in which buyers and sellers share as little information as possible.Toyota requires a broad understanding of a potential supplier’s manufacturing capabilities and financial position

Supplier NetworksMeaning of outsourcingThe process of a firm having inputs supplied to it from outside suppliers for the production process.Domestic outsourcing versus global outsourcingWhy go for domestic sourcing?Why go for global sourcing?Why pursue global outsourcing?Reduce costsimprove qualityexposure to global technologyimprove delivery of suppliesaccess to materials non-available otherwiseestablish presence in a foreign marketto compete in the global market

Outsourcing Configurations

Vertical IntegrationArm’s-length purchases from outside suppliersJapanese keiretsu relationships with suppliers

Make or buy Decisions

Supplier Relations

How much should be the degree of involvement with your suppliers?

Inventory Management

Outsourcing from around the world and its impact on inventory managementissues of distance, time, and uncertainty in foreign environmentJust-In-Time Systems