1. 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. 07458 Operations Management Operations in a Global Environment Chapter 3

2. 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. 07458 Boeing Suppliers (777)

3. 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. 07458 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

4. 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. 07458 Management Issues in Global Operations Global Strategic Context ¨ Differentiation ¨ Cost leadership ¨ Response Logistics Management Location Decisions Supply Chain Management

5. 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. 07458 Supply-Chain Management ¨Sourcing ¨Vertical integration ¨Make-or-buy decisions ¨Partnering

6. 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. 07458 Location Decisions ¨Country-related issues ¨Product-related issues ¨Government policy/political risk ¨Organizational issues

7. 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. 07458 Materials Management ¨Flow of materials ¨Transportation options and speed ¨Inventory levels ¨Packaging ¨Storage

8. 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. 07458 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

9. 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. 07458 Some Multinational Corporations

10. 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. 07458 $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.

11. 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. 07458 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

12. 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. 07458 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

13. 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. 07458 ¨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

14. 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. 07458 Achieving Global Operations Four Considerations ¨Global product design ¨Global process design and technology ¨Global factory location analysis ¨Impact of Culture and Ethics

15. 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. 07458 Global Product Design ¨Remember social and cultural differences ¨ packaging and marketing can help make product seem “domestic” but - ¨ “liter” versus “quart” ¨ “sweetness” and “taste”

16. 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. 07458 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

17. 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. 07458 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

18. 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. 07458 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

19. 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. 07458 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

20. 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. 07458 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