International Business Environments & Operations Daniels ● Radebaugh ● Sullivan International Business Environments and Operations 15e by Daniels, Radebaugh, and Sullivan Copyright © 2015 Pearson Education, Inc.

Global Manufacturing and Supply-Chain Management Chapter 18 Global Manufacturing and Supply-Chain Management Chapter 18: Global Manufacturing and Supply-Chain Management Copyright © 2015 Pearson Education, Inc.

Copyright © 2015 Pearson Education, Inc. Learning Objectives Describe the different dimensions of a global manufacturing strategy Examine the critical factors in successful global supply-chain management Show how supplier networks function Explain how quality affects global supply and effective inventory management Discuss how to establish successful transportation networks as part of the global supply chain The Learning Objectives for this chapter are: To describe the different dimensions of a global manufacturing strategy To examine the elements of global supply-chain management To show how supplier networks function To describe how information technology is critical to an effective global supply-chain strategy To explain how quality affects global supply and effective inventory management To discuss how to establish successful transportation networks as part of the global supply chain Copyright © 2015 Pearson Education, Inc.

The Global Component Network for Ford’s European Manufacturing of the Escort

What is Supply-Chain Management? The supply chain: the network that links together the different aspects of the value chain, coordinating materials, information, and funds from the initial raw material supplier to the ultimate customer Supply chain management aka operations and supply-chain management (OSM): the design, operation, and improvement of systems that create and deliver the firm’s primary products and services Logistics (aka materials management): that part of the supply chain process that plans, implements, and controls the efficient and effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements Supply chain management refers to everything from creating supplier relationships to getting the product to the final consumer. Copyright © 2015 Pearson Education, Inc.

An integrated supply chain and operations model This illustration shows a generic industry supply chain of a firm Copyright © 2015 Pearson Education, Inc.

Global Supply Chain Strategies The success of a global manufacturing strategy depends upon good strategies in three specific areas: Compatibility Manufacturing Configuration Coordination and Control

Copyright © 2015 Pearson Education, Inc. Compatibility Compatibility-in the context of manufacturing strategy, the degree of consistency between a firm’s foreign direct investment decisions and its competitive strategy Four key factors influence the success of a company’s global manufacturing strategy. The first, compatibility, refers to the degree of consistency between the foreign investment decision and the company’s competitive strategy. The second, manufacturing configuration, requires the company to consider whether to centralize manufacturing in one country, establish regional operations, or set up multidomestic production. Third, coordination involves integrating activities into a unified system. Finally, control involves measuring performance so the company can respond appropriately to changing conditions. Copyright © 2015 Pearson Education, Inc.

Manufacturing Configuration The three basic configurations that MNEs consider en route to developing their global manufacturing strategies are: centralized manufacturing in a single country regionalized manufacturing in specific regions served local manufacturing in each country market served Multidomestic manufacturing or marketing is common among multinationals

Coordination and Control Coordination: the linking and integrating of participants and activities throughout the (global) supply chain into a unified system Control: embraces systems such as organizational structure and performance measurement that are designed to help ensure that strategies are implemented, monitored, and revised, as appropriate

Global Sourcing Sourcing: is the process of obtaining a supply of inputs (raw materials and parts) for production. Firms pursue global sourcing strategies in order…. To reduce costs through cheaper labor, laxer work rules, and low land and facilities costs To improve quality To increase exposure to worldwide technology To improve the delivery-of-supplies process To strengthen reliability of supply–supplementing domestic suppliers with foreign ones To gain access to materials that are only available abroad To establish presence in a foreign market To satisfy offset requirements To react to competitors’ offshore sourcing practices

Copyright © 2015 Pearson Education, Inc. Global Sourcing This illustration shows how sourcing is important in different aspects of business Copyright © 2015 Pearson Education, Inc.

Global Sourcing-A Few Terms Outsourcing is when a company externalizes a function or process to another business. Contract Manufacturing is when the entire manufacturing process is being handled by another firm. Vertical Integration is when a company owns the entire supplier network, or at least a significant part of it. Industrial Clusters occur when buyers and suppliers locate close to each other to facilitate doing business. Dell Computer in Malaysia Keiretsu – Japanese group of independent companies that work together to manage the flow of goods Vertical Integration is when a company owns the entire supplier network, or at least a significant part of it. Industrial Clusters occur when buyers and suppliers locate close to each other to facilitate doing business, for example Dell Computer in Malaysia. A Keiretsu is a Japanese group of independent companies that work together to manage the flow of goods Copyright © 2015 Pearson Education, Inc.

Total Quality Management TQM is a process that stresses customer satisfaction, employee involvement, and continuous improvement of quality Quality: conformance to specifications, value enhancement, fitness for use, after-sales support, and psychological impressions (image) Six Sigma: aims to eliminate defects, slash product cycle times, and cut costs across the board. An idea perfected by Japanese manufacturers who refuse to tolerate defects (zero-defects) of any kind Kaizen: the Japanese process of continuous improvement, which requires identifying problems and enlisting employees at all levels of the organization to help eliminate them

Copyright © 2015 Pearson Education, Inc. Quality Standards Levels of quality standards General ISO 9000 Malcom Baldridge National Quality Award Industry specific Company specific Companies that meet general levels of quality assurance focus on the International Organization for Standardization (ISO) standards including ISO 9000 which is a global set of quality standards designed to promote quality at every level of an organization. The ISO 4000 standards focus on environmental management. Meeting ISO standards can be essential to business. Non-European companies operating in Europe, for example, must be ISO certified. In addition to these general standards, most companies also strive to meet industry level and company specific standards of quality. Copyright © 2015 Pearson Education, Inc.

Inventory Management Inventory management: the planning and control of the levels, flows, and storage of inputs, unfinished, and finished goods Just-in time manufacturing (JIT): focuses on reducing inefficiency and unproductive time in the production process to improve continuously the process and the quality of the product or service. The system reduces inventory costs by having inputs delivered just as they are needed in the production process Foreign trade zones (FTZs): government-designated areas in which goods can be stored, inspected, and/or manufactured without being subject to formal customs procedures until they actually enter a country

Information Technology and Global Supply-Chain Management Electronic Data Interchange links suppliers, manufacturers, customers, and intermediaries Enterprise Resource Planning/Material Requirements Planning links information flows from different parts of a business and from different geographic areas Radio Frequency ID (RFID) labels products with an electronic tag, which stores and transmits information regarding the product’s origin, destination, and quantity E-Commerce joins together suppliers with companies and companies with customers The key to making a global information system work is getting the relevant information in a timely manner. Information technology is essential to this process. There are several technologies that can facilitate information flows and business including electronic data interchange, enterprise resource planning/material requirements planning, radio frequency ID, and e-commerce. Copyright © 2015 Pearson Education, Inc.

Chapter 18: Discussion Questions Define and explain the role of “supply chain management” in firm strategy. Explain how the success of a global supply chain strategy depends upon compatibility, manufacturing configuration, and coordination and control. Define Total Quality Management and explain its importance in global supply chain management. Define global sourcing and explain the role it plays in global supply chain management. Explain Inventory Management in global supply chain.

Copyright © 2015 Pearson Education, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2015 Pearson Education, Inc.