1. Global Manufacturing and Materials Management16
Chapter
Global Manufacturing and Materials Management

2. Case: Competitive advantage at Dell
Dells business model based on direct selling of customized product at low prices
Location advantages (Brazil, Ireland, Malaysia, China & US)
Close to markets
Low shipping costs
Speed of delivery
Supply base global
Dell manages global supply chain to minimize inventory and customize PCs in three days

3. Materials management
Activity that controls the transmission of physical materials through the value chain
Includes procurement, production and into distribution
Logistics : Procurement and physical transmission of materials through the supply chain, from suppliers to customers

4. Manufacturing and materials management Strategic objectives
Lower costs
Disperse manufacturing
activities to efficient global
locations
Increase productivity
Using Total Quality Management
(W. Edward Demming)

5. Manufacturing and materials management Strategic objectives
Accommodate demands for local responsiveness
decentralize production
Respond quickly to shifts on customer demand
time-based competition
extremely important

6. The relationship between quality and cost
Fig 16.1

7. Where to manufacture? Country Factors Technological Product Locating
Manufacturing
Facilities

8. Country factors Optimum economic, political, and cultural conditions
Externalities
Skilled labor pools
Supporting industries
Formal and informal trade barriers
Exchange rate

9. Technological factors
Fixed costs
Minimum efficient scale
Flexible manufacturing
reduce setup times for complex equipment
increase machine utilization
improve quality control
flexible machine cells to perform a variety of operations
Mass customization
Low cost
Product
customization

10. Manufacturing location
Fixed costs are substantial
Minimum efficient scale is high
Flexible manufacturing
technologies available
Fixed costs are low
Minimum efficient scale is low
Flexible manufacturing technologies
unavailable
Trade barriers and transportation costs remain major impediments
Single or few locations.
Major market locations if it better meets local demands.

11. A typical unit cost curve
Fig 16.2

12. Product factors and location strategies
Two product features affect location decisions:
Value to weight ratio.
Product serves universal needs
Two basic strategies
Concentrating in a centralized location and serving the world market
Decentralizing them in various regional or national locations close to major markets when opposite conditions exist

13. Centralized location Factor costs have substantial impact
Low trade barriers
Externalities favor certain location
Stable exchange rates
High fixed costs, high minimum efficient scale
relative to global demand or flexible manufacturing technology
Product’s value-to-weight ratio is high
Product serves universal needs

14. Decentralized location
Factor costs do not have substantial impact
High trade barriers
Location externalities not important
Exchange rates volatile
Low fixed costs, low minimum efficient scale
Flexible manufacturing technology unavailable
Product’s value-to-weight ratio is low
Significant differences in consumer tastes and preferences exist between nations.

15. Location strategy and manufacturing

16. Strategic role of foreign factories
Initially, established where labor costs low
Later, important centers for design and final assembly
Upward migration caused by pressures to:
Improve cost structure
Customize product to
meet customer demand.
and
An increasing abundance of
advanced factors of production
Dispersed centers of excellence are consistent with a Transnational Strategy

17. Make or buy decisions
Should a firm make or buy the component parts that go into their final product?
Advantages of making own components:
Lower costs if most efficient producer
Facilitating specialized investments
Proprietary product technology protection
Improved scheduling

18. Advantages of buy versus make
Strategic flexibility in sourcing components
Lower firm’s cost structure
Offsets
Strategic alliances with suppliers give benefits of vertical integration without the associated organizational problems

19. Managing a global supply chain
Objective of materials management in managing a firm’s global supply chain
Maintain lowest possible cost
In a way that best serves the customer’s needs
Role of just-in time inventory
Economize on inventory holding costs
Speeds inventory turnover
Drawback: no buffer stock

20. Role of organization
Organizational linkages more numerous and complex
More difficult to control costs
Require separate materials management as a function
Equal weight with other departments
Decide between centralized and decentralized organizational structure

21. Potential materials management linkages
Fig 16.3

22. Traditional organizational structure

23. Organization structure with materials management as separate function
Fig 16.4B
Strategic
manager/CEO
Production
planning
and control
Purchasing
Manufacturing
Marketing
Finance
Distribution
Materials
management

24. Role of information technology and the internet
Track component parts across the globe to an assembly plant
Optimize and adjust production scheduling
Electronic data interchange (EDI)
Used to coordinate flow of materials between suppliers ,firm, shippers and customers
Communicate without time delay
Increases flexibility and responsiveness of the whole global system
Paperwork decreased
Significant competitive advantage