Global Manufacturing and Supply Chain Management International Business (MB 40)

Outline Dimensions of Global Manufacturing Elements of Global Supply Chain Management Role of Information Systems Issues of Quality and Global Supply Chain Inventory Management and Global Supply Chain Transportation Networks

Why Manufacture Globally? Cost Access to raw-material New Markets Multi-Point Communication Overall goal, improvement in cash flows of the parent firm to maximize shareholder wealth

Global Manufacturing Strategies Setting up a subsidiary versus Virtual Manufacturing Depends on manufacturing compatibility What is manufacturing compatibility? Compatibility depends on: Efficiency Dependability Quality Flexibility Innovation

Global Manufacturing Strategies Manufacturing Configuration Should 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 country When should we have a centralized location? When should we go for multidomestic location? Coordination and Control Linking or integrating activities into a unified system is called COORDINATION Defining organizational structure and reporting systems to ensure timely implementation of policies is termed as CONTROL

Global Manufacturing Strategies Plant 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 Strategies physical arrangement of economic activity centers within a manufacturing facility Every 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 Management Describes 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 Management Supply 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 ACTIVITIES BUYING MAKING MOVING INTEGRATES SUPPLIER DISTRIBUTOR LOGISTICS REQUIREMENTS

MAJOR ENTITIES Capacity, inventory levels, delivery schedule, payment terms Supplier Manufacturer Distributor Retail Outlets Customer Orders, return requests, repair and service requests, payments

What Does Supply Chain Involve? NETWORK OF FACILITIES MATERIALS RAW MATERIALS – PRODUCTS FINISHED PRODUCTS LINKS PROCUREMENT LOGISTICS ELIMINATE REDUNDANCY DELAYS RESOURCES

What Does Supply Chain Involve? RIGHT AMOUNT OF PRODUCT SOURCE CONSUMPTION POINT LEAST 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 Intranets Extranets Supply chain management software

EXAMPLE Sales Representative (Brussels) Factory (Hong Kong) Customer Order Production online replenishes Warehouse Enterprise System Customer Service Representative Track Shipment Date Stock of Parts Corporate Headquarter (London) Accounting Payroll Available Cash Cost Centers Balance Sheets Accounts Receivables/ Payables

Quality and Supply Chain Meaning of Quality Meeting or exceeding the expectations of a customer Total Quality Management (TQM) versus Acceptable Quality Level (AQL) Zero defects and TQM

Challenges in Supply Chain Management Operational Threats Different languages Differences in Currencies Differences in Measurement Systems (metric versus decimal) Strategic Challenges National Cultures Technological capabilities Tax Policies National Culture Western 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 Networks Reduce costs improve quality Meaning of outsourcing The process of a firm having inputs supplied to it from outside suppliers for the production process. Domestic outsourcing versus global outsourcing Why go for domestic sourcing? Why go for global sourcing? Why pursue global outsourcing? Reduce costs improve quality exposure to global technology improve delivery of supplies access to materials non-available otherwise establish presence in a foreign market to compete in the global market

Outsourcing Configurations Vertical Integration Arm’s-length purchases from outside suppliers Japanese 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 management issues of distance, time, and uncertainty in foreign environment Just-In-Time Systems