1. Chapter 16. Global Production, Outsourcing, and Logistics

2. Introduction trade barriers fall & global market develop
⇒⇒ Firms confront something :
1. production activity location
2. the long - term strategic of foreign production site
3. own production ? or another production ?
4. globally dispersed supply chain be managed
5. manage global logistics itself
or outsource the management to enterprises

3. Microsoft
Microsoft outsourced production of its Xbox video game console to Flextronics
Because it lacked the skills required to assemble a complex electronics product.
After ??

4. Strategy, Production, and Logistics
production of physical goods
Logistics
the activity that controls the transmission of physical materials through the value chain
Production & Logistics are linked

5. Strategy, Production, and Logistics
Strategic objectives
1. lower costs
2. increasing quality
The objectives of reducing costs and increasing quality are dependent

6. Strategy, Production, and Logistics
TQM
Six Sigma
ISO 9000

7. Two Other Objective – Production & Logistics
1. Accommodate demands for local responsiveness
2. Shift in customer demand quickly

8. Where to produce Country specific factors
Political economy, culture and relative factor costs
Presence of concentrated global activities
Local manufacturing activities

9. Technology factors Fixed costs Minimum Efficient Scale
Flexible Manufacturing
Mass Customisation

10. Product factors Value to weight ration High Low Universal needs
Consumer tastes and preferences

11. Location of Production facilities
Centralisation of location
Decentralisation of location
Location decisions can be difficult
Automobile Industry
Strategic role of foreign factories

12. Outsourcing Production : Make or Buy Decisions
Decisions about whether they should
perform a certain value activity
themselves or outsource it to another
entity.

13. The Advantage of Make Lowering Costs
Facilitating Specialized Investments
Protecting Proprietary Product Technology
Improving Scheduling

14. Lowering Costs
If the firm can perform the production activity most efficiently, they can continue manufacturing a product or component part in-house.
Boeing decided to keep the design and final integration of aircraft.

15. Facilitating Specialized Investments
When substantial investments in specialized assets are required to manufacture a component, the firm will prefer to make the component internationally rather than contract it out to a supplier.

16. Protecting Proprietary Technology
If the firm outsources the production containing proprietary technology, it runs risks.
To maintain control over its technology, the firm might prefer to make such products or component parts in-house.

17. Improving Scheduling
Production cost savings by making planning, coordination, and scheduling of adjoining processes easier.
Scheduling can be exacerbated by the time and distance between the firm and its suppliers.

18. The Advantage of Buy
Strategic Flexibility
Lower Costs
Offsets

19. Strategic Flexibility
The firm can maintain its flexibility to switch orders between suppliers as circumstances dictate.
The firm can avoid risks which come from exchange rates, trade barriers and political unstableness by buying from an independent suppliers in that country

20. Lower Costs
The more subunits in an organization, the more problems coordinating
The resulting increase in organizational complexity can raise a firm’s cost structure.

21. Offsets
Outsourcing may help the firm capture more orders from that country.

22. Managing A Global Supply Chain
Logistics

23. Pioneered by Japanese firms during the 1950s and 60s, just in time inventory systems now play a major role in most manufacturing firms. The basic philosophy behind just in time (JIT) systems is to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production and not before.

24. Information technology, particularly internet based electronic data interchange, plays a major role in material management. EDI facilities the tracking of inputs, allows the firm to optimize it's production schedule, lets the firm and its supplier communicate in real time and eliminates the flow of paperwork between a firm for its supplier.

25. Thank You !