POM - J. Galván 1 PRODUCTION AND OPERATIONS MANAGEMENT Ch. 3: Operations in a Global Environment

POM - J. Galván 2 Learning Objectives What is the difference in terms of operations management when the company is global? What is the difference in terms of operations management when the company is global?

POM - J. Galván 3 Logistics Management Location Decisions Supply Chain Management Management Issues in Global Operations Global Strategic Context Differentiation Differentiation Cost leadership Cost leadership Response Response

POM - J. Galván 4 Possible strategies

POM - J. Galván 5 Important issues to consider How to organize the flow of goods - Supply chain management How to organize the flow of goods - Supply chain management Where to deploy resources- Facility location decisions Where to deploy resources- Facility location decisions Types of facilitiesTypes of facilities LocationsLocations How are you going to move supplies and products - Materials management How are you going to move supplies and products - Materials management

POM - J. Galván 6 Supply-Chain Management Sourcing Sourcing Vertical integration Vertical integration Make-or-buy decisions Make-or-buy decisions Partnering Partnering

POM - J. Galván 7 Location Decisions Country-related issues Country-related issues Product-related issues Product-related issues Government policy/political risk Government policy/political risk Organizational issues Organizational issues

POM - J. Galván 8 Materials Management Flow of materials Flow of materials Transportation options and speed Transportation options and speed Inventory levels Inventory levels Packaging Packaging Storage Storage

POM - J. Galván 9 Reasons to Globalize Operations Reduce costs (labor, taxes, tariffs, etc.) Reduce costs (labor, taxes, tariffs, etc.) Reduce risks (foreign exchange, etc.) Reduce risks (foreign exchange, etc.) Improve supply chain Improve supply chain Provide better goods and services Provide better goods and services Attract new markets Attract new markets Learn to improve operations Learn to improve operations Attract and retain global talent Attract and retain global talent Tangible Intangible

POM - J. Galván 10 Trade and Tariff Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive preferential tariff treatment 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 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 NAFTA - a free trade agreement between Canada, Mexico, and the United States

POM - J. Galván 11 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 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 THOUGHT

POM - J. Galván 12 Achieving Global Operations Four Considerations Global product design Global product design Global process design and technology Global process design and technology Global factory location analysis Global factory location analysis Impact of Culture and Ethics Impact of Culture and Ethics

POM - J. Galván 13 Global Product Design Remember social and cultural differences Remember social and cultural differences packaging and marketing can help make product seem domestic but - packaging and marketing can help make product seem domestic but - liter versus quart liter versus quart sweetness and taste sweetness and taste

POM - J. Galván 14 Global Process Design and Technology Information technology enables management of integrated, globally dispersed operation Information technology enables management of integrated, globally dispersed operation Texas Instruments: 50 plants in 19 countries Texas Instruments: 50 plants in 19 countries Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and Germany Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and Germany Reduces time-to-market Reduces time-to-market

POM - J. Galván 15 Select CSFs based on parent organizations strategic or operations objectives Select CSFs based on parent organizations strategic or operations objectives Obtain country-specific information on the CSFs Obtain country-specific information on the CSFs Evaluate each countrys CSFs using a 1 (bad) to 5 (good) rating scale Evaluate each countrys CSFs using a 1 (bad) to 5 (good) rating scale Sum the ratings Sum the ratings Global Facility Location Analysis Using CSFs (Country specific factors) for Country Selection

POM - J. Galván 16 national literacy rate national literacy rate rate of innovation rate of innovation rate of technology change rate of technology change number of skilled workers number of skilled workers stability of government stability of government product liability laws product liability laws export restrictions export restrictions similarity in language similarity in language You May Wish To Consider ¨work ethic ¨tax rates ¨inflation ¨availability of raw materials ¨interest rates ¨population ¨number of miles of highway

POM - J. Galván 17 Global Impact of Culture and Ethics Cultures differ! Some accept/expect: Cultures differ! Some accept/expect: variations in punctuality variations in punctuality long lunch hours long lunch hours expectation of thievery expectation of thievery bribery bribery little protection of intellectual property little protection of intellectual property Extended working time Extended working time Smaller salaries Smaller salaries No social benefits…. No social benefits….

POM - J. Galván 18 To Establish Global Services Determine if sufficient people or facilities exist to support the service Determine if sufficient people or facilities exist to support the service Identify foreign markets that are open - not controlled by governments Identify foreign markets that are open - not controlled by governments Determine what services are of most interest to foreign customers Determine what services are of most interest to foreign customers Determine how to reach global customers Determine how to reach global customers