Thirteen C h a p t e rC h a p t e r Global Operations Management Part Five Competing in a Global Marketplace

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Manufacturing and Materials Management Production: activities that involve  Service and manufacturing  converting inputs to a product Materials management: activities that  Control the transmission of physical materials through the value chain: procurement –> production –> distribution Logistics  Procurement and physical transmission of material through the supply chain suppliers –> customers Slide 13-1

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Quality and Costs Improves Performance Reliability Increases Productivity Lowers Rework and Scrap Costs Lowers Warranty Costs Lowers Manufacturing Costs Increases Profits Lowers Service Costs Fig Quality … Slide 13-2

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. ISO 9000 European Unions standards for quality Set by code Firm must be certified “ISO 9000” before it is allowed access to the EU marketplace Slide 13-3

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Manufacturing Location Decision Country Factors  Favorable economic, political, cultural conditions Technological Factors  Fixed costs relatively low  Minimum efficient scale Scale of output a plant needs to realize scale-economies Market demand must be sufficient to reach this scale  Flexible manufacturing-lean production-mass customization Product features  Value-to-weight ratio  Universal needs Slide 13-4

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Where to Locate? Concentrate manufacturing if:  Costs of manufacturing are responsive to country environment (one location best)  Trade barriers are low  Exchange rates among currencies with impact on your business are stable  Production technology Has high fixed costs Has high minimum efficient scale Exists in flexible manufacturing format  Product value-to-weight ratio is high  Product serves universal needs – minor difference in customer needs, consumer preferences Slide 13-5

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Decentralize manufacturing if:  Country environment does not affect costs much  Trade barriers are high  Production technology Has low fixed costs Has low minimum efficient scale Does not exists in flexible manufacturing format  Product value-to-weight ratio is low  Product does not serve universal needs – significant difference in customer needs, consumer preferences Where to Locate? Slide 13-6

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Make-or-Buy? “Make” advantage  Lower costs in-house?  Are specialized assets needed? Investment issue  Is proprietary technology needed? Know-how protection issue (Dunning) “Buy” advantage  Strategic flexibility needed?  Lower costs by buying?  Offsets a possibility by? In either case “improved scheduling” just as important Slide 13-7

Irwin/McGraw-Hill Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved. Other Issues Strategic alliances with suppliers Just-in-time inventory system management The role of information technology Slide 13-8