Part Five
Chapter
Global Operations
Management
Competing in a Global Marketplace
Thirteen
Slide
13-1
Manufacturing and Materials Management
 Production:
activities that involve
Service and manufacturing
 converting inputs to a product

 Materials

management: activities that
Control the transmission of physical materials through the
value chain:
procurement –> production –> distribution
 Logistics

Procurement and physical transmission of material
through the supply chain
suppliers –> customers
Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-2
Quality and Costs
Quality …
Increases
Productivity
Improves
Performance
Reliability
Lowers
Rework and
Scrap Costs
Lowers
Warranty
Costs
Lowers
Manufacturing
Costs
Lowers
Service
Costs
Increases
Profits
Fig. 13.1
Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-3
ISO 9000
 European
 Set
Unions standards for quality
by code
 Firm
must be certified “ISO 9000” before it is
allowed access to the EU marketplace
Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-4
Manufacturing Location Decision
 Country

Factors
Favorable economic, political, cultural conditions
 Technological
Factors
Fixed costs relatively low
 Minimum efficient scale

 Scale
of output a plant needs to realize scale-economies
 Market demand must be sufficient to reach this scale

Flexible manufacturing-lean production-mass customization
 Product
features
Value-to-weight ratio
 Universal needs

Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-5
Where to Locate?
 Concentrate
manufacturing if:
Costs of manufacturing are responsive to country
environment (one location best)
 Trade barriers are low
 Exchange rates among currencies with impact on your
business are stable
 Production technology

 Has
high fixed costs
 Has high minimum efficient scale
 Exists in flexible manufacturing format
Product value-to-weight ratio is high
 Product serves universal needs – minor difference in
customer needs, consumer preferences

Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-6
Where to Locate?
 Decentralize
manufacturing if:
Country environment does not affect costs much
 Trade barriers are high
 Production technology

 Has
low fixed costs
 Has low minimum efficient scale
 Does not exists in flexible manufacturing format
Product value-to-weight ratio is low
 Product does not serve universal needs – significant
difference in customer needs, consumer preferences

Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-7
Make-or-Buy?
 “Make”
advantage
Lower costs in-house?
 Are specialized assets needed?

 Investment

issue
Is proprietary technology needed?
 Know-how
 “Buy”
protection issue (Dunning)
advantage
Strategic flexibility needed?
 Lower costs by buying?
 Offsets a possibility by?

 In
either case “improved scheduling” just as important
Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.
Slide
13-8
Other Issues
 Strategic
alliances with suppliers
 Just-in-time
 The
inventory system management
role of information technology
Irwin/McGraw-Hill
Copyright  2001 The McGraw-Hill Companies, Inc. All rights reserved.