Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-1 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Operations Management Operations in a Global Environment Chapter 3

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-4 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Boeing Suppliers (777)

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-5 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Examples ¨Boeing - flourishing because both its sales and production are world-wide ¨Benetton - moving inventory to stores around the world faster than its competitors ¨Sony - purchases components from suppliers in Thailand, Malaysia, etc. ¨Coleco - meets surges in demand for Cabbage Patch dolls by contracting with firms in China and Hong Kong and shipping by air carriers such as Singapore and Korean Airlines

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-6 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Management Issues in Global Operations Global Strategic Context ¨ Differentiation ¨ Cost leadership ¨ Response Logistics Management Location Decisions Supply Chain Management

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-7 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Supply-Chain Management ¨Sourcing ¨Vertical integration ¨Make-or-buy decisions ¨Partnering

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-8 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Location Decisions ¨Country-related issues ¨Product-related issues ¨Government policy/political risk ¨Organizational issues

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-9 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Materials Management ¨Flow of materials ¨Transportation options and speed ¨Inventory levels ¨Packaging ¨Storage

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-10 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Defining Global Operations ¨International business - engages in cross-border transactions ¨Multinational Corporation - has extensive involvement in international business, owning or controlling facilities in more than one country ¨Global company - integrates operations from different countries, and views world as a single marketplace ¨Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-11 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Some Multinational Corporations

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-14 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J $20,000 Pontiac LeMans ¨About $6,000 heads to South Korea for auto’s assembly ¨$3,500 goes to Japan for engines, axles, and electronics ¨$1,500 goes to Germany for design ¨$800 goes to Taiwan, Singapore, and Japan for smaller parts ¨$500 heads to England for marketing ¨$100 goes to Ireland for information technology ¨the rest  $7,600, goes to GM and its US bankers, insurance agents, and attorneys.

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-15 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Reasons to Globalize Operations ¨Reduce costs (labor, taxes, tariffs, etc.) ¨Reduce risks (foreign exchange, etc.) ¨Improve supply chain ¨Provide better goods and services ¨Attract new markets ¨Learn to improve operations ¨Attract and retain global talent Tangible Intangible

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-16 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Trade and Tariff ¨Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment ¨GATT - an international treaty that helps promote world trade by lowering barriers to the free flow of goods across borders ¨NAFTA - a free trade agreement between Canada, Mexico, and the United States

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-17 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J ¨Free trade may take us into the era of the floating factory - a six person crew will take a factory from port to port in order to obtain the best market, material, labor and tax advantages

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-18 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Achieving Global Operations Four Considerations ¨Global product design ¨Global process design and technology ¨Global factory location analysis ¨Impact of Culture and Ethics

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-19 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Global Product Design ¨Remember social and cultural differences ¨ packaging and marketing can help make product seem “domestic” but - ¨ “liter” versus “quart” ¨ “sweetness” and “taste”

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-20 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Global Process Design and Technology ¨Information technology enables management of integrated, globally dispersed operation ¨Texas Instruments: 50 plants in 19 countries ¨Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and Germany ¨Reduces time-to-market

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-21 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Global Facility Location Analysis ¨Select CSFs based on parent organization;’s strategic or operations objectives ¨Obtain country-specific information on the CSFs ¨Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scale ¨Sum the ratings Using CSFs for Country Selection

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-22 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J You May Wish To Consider ¨national literacy rate ¨rate of innovation ¨rate of technology change ¨number of skilled workers ¨stability of government ¨product liability laws ¨export restrictions ¨similarity in language ¨work ethic ¨tax rates ¨inflation ¨availability of raw materials ¨interest rates ¨population ¨number of miles of highway

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-23 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Global Impact of Culture and Ethics ¨Cultures differ! Some accept/expect: ¨ variations in punctuality ¨ long lunch hours ¨ expectation of thievery ¨ bribery ¨ little protection of intellectual property

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) 3-24 © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J To Establish Global Services ¨Determine if sufficient people or facilities exist to support the service ¨Identify foreign markets that are open - not controlled by governments ¨Determine what services are of most interest to foreign customers ¨Determine how to reach global customers