Global Production , Outsourcing , and Logistic Sandy Wibisono 0706306522

Introduction Where in the world should production activity be located ? What should be the long-term strategic role of foreign production sites ? Should the firm own foreign production activities, or is it better to outsource those activities to independent vendors ? How should a globally dispersed supply chain be managed , and what is the role of internet – based information technology in the management of global logistic ? Should the firm manage global logistics itself, or should it outsource the management to enterprises that specialize in this activity ?

Strategy , Production , and Logistics Production as “the activities involved in creating product”. Logistic is “the activity that control the transmission of physical material through value chain , from procurement through production and into distribution.

Strategy , Production , and Logistics Strategic Objective Lower cost. Increasing Quality. Production and logistic function must be able to accommodate demands for local responsiveness. Production and logistic must be able to respond quickly to shifts in customer demands.

Strategy , Production , and Logistics Increase Productivity Lowers Manufacturing Cost Increases Profit Improves Performance Reliability Lowers Rework and Scraps Cost Lower Services Cost Lower warranty Cost The Relationship between Quality and Cost

Where to Produce Country Factor Technological Factor Product Factor

Informal Trade Barrier Country Factor Political Economy Culture Relative Factor Cost Externalities Formal Trade Barrier Informal Trade Barrier Exchange Rates

Minimum Efficient Scale Technological Factor Technological Factor Fixed Cost Minimum Efficient Scale Flexible Manufacturing and Mass Customization

Value – to – weight ratio Product Factors Value – to – weight ratio Serve universal needs

Concentrated Production Favored Decentralized Production Favored Country Factor Differences in political economy Substantial few Differences in culture Differences in factor cost Trade Barriers Location externalities Important in industry Not important in industry Exchange rates stable volatile Technological Factor Fixed Costs High Low Minimum efficient scale Flexible manufacturing technology Available Not available Product Factor Value – to – weight ratio Serve universal needs Yes no

The Strategic Role of Foreign Factories Pressure from the center to improve a factory’s cost structure and/or customize a product to the demands of consumers in a particular nation can start a chain of events that ultimately leads to development of additional capabilities at the factory

The Strategic Role of Foreign Factories Improvement in the capabilities of a foreign factory can be the increasing abundance of advanced factor of production in the nation in which the factory is located

Outsourcing Production Make Buy

Facilitating Specialized Investments The Advantage of Make Lowering Cost Facilitating Specialized Investments Protecting Proprietary Product Technology Improving Scheduling

Strategic Flexibility The Advantage of Buy Strategic Flexibility Lower Costs Offsets

Strategic Alliances With Supplier Strategic alliance build a trust between the firm and its supplier. Trust results when a firm makes a credible commitment to continue purchasing from a supplier on reasonable terms. Alliance are not all good i.e. : Kodak and Canon , Sony build laptop for Apple , Microsoft and Flextronics.

Managing a Global Supply Chain Lowest possible cost Best serves customer needs

The Role of Just-in-Time Inventory JIT system is to economize on inventory holding cost by having materials arrive at a manufacturing plant just in time enter the production process and not before. The major cost saving comes from speeding up inventory turnover. This reduces inventory holding cost, such warehousing and storage cost.

The Role of IT and The Internet

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