Global Manufacturing and
Supply Chain Management
International Business (MB 40)
Outline
Dimensions of Global Manufacturing
Elements of Global Supply Chain
Management
Role of Information Systems
Issues of Quality and Global Supply Chain
Inventory Management and Global Supply
Chain
Transportation Networks
Why Manufacture Globally?
Cost
Access to raw-material
New Markets
Multi-Point Communication
Overall goal, improvement in cash flows
of the parent firm to maximize
shareholder wealth
Global Manufacturing Strategies
Manufacturing
Setting up a subsidiary versus Virtual Manufacturing
Depends on manufacturing compatibility
What is manufacturing compatibility?
Compatibility depends on:
Efficiency
Dependability
Quality
Flexibility
Innovation
Global Manufacturing Strategies
Manufacturing Configuration
Should manufacturing be centralized in one country or should we
have manufacturing facilities in specific zones to service those
zones or should we go multidomestic with a facility in each country
When should we have a centralized location?
When should we go for multidomestic location?
Coordination and Control
Linking or integrating activities into a unified system is called
COORDINATION
Defining organizational structure and reporting systems to ensure
timely implementation of policies is termed as CONTROL
Global Manufacturing Strategies
Plant Location Strategies
Transportation costs, duties, proximity to customers and
suppliers, foreign exchange rate risk, economies of scale in
the production process, government incentives, climate,
technological requirements of the manufacturing process.
Plant Layout Planning Strategies
physical arrangement of economic activity centers within a
manufacturing facility
Every manufacturing facility cannot have the same type
layout—local conditions such as cost of labor, cost of land,
local culture must be considered in deciding about the plant
layout
Global Supply Chain
Management
Meaning of Supply Chain Management
Describes managers’ effort to oversee the flows of raw
materials, components, information, and finance through
their network of suppliers, assemblers, and distributors, and
customers located around the world.
Elements of Supply Chain Management
Supply Chain Management and Enterprise
Resource Planning (ERP)
E-Commerce
Internet, intranet, and extranet
Role of Information Systems and
Technology
Key to successful global supply chain
management
Supply Chain Management
LINKAGE OF ACTIVITIES
BUYING
MAKING
MOVING
INTEGRATES
SUPPLIER
DISTRIBUTOR
LOGISTICS REQUIREMENTS
MAJOR ENTITIES
Capacity, inventory levels, delivery schedule, payment terms
Supplier
Manufacturer
Distributor
Retail
Outlets
Customer
Orders, return requests, repair and service requests, payments
What Does Supply Chain
Involve?
NETWORK OF FACILITIES
MATERIALS
RAW MATERIALS – PRODUCTS
FINISHED PRODUCTS
LINKS
PROCUREMENT
LOGISTICS
ELIMINATE
REDUNDANCY
DELAYS
RESOURCES
What Does Supply Chain
Involve?
RIGHT AMOUNT OF PRODUCT
SOURCE
CONSUMPTION POINT
LEAST
• TIME
• COST
ROLE OF INFORMATION
SYSTEMS
coordinate, schedule, and control
procurement,
production,
inventory management, and
delivery of products and services
ROLE OF INFORMATION
SYSTEMS
Integrate
demand planning,
production forecasting,
materials requisition,
order processing,
inventory allocation,
order fulfillment,
ROLE OF INFORMATION
SYSTEMS
transportation services,
receiving, invoicing, and payment.
Supply chain management
systems
Intranets
Extranets
Supply chain management software
EXAMPLE
Sales Representative (Brussels)
Customer Order
Production
online
Warehouse replenishes
Shipment Date
Stock of Parts
Factory (Hong Kong)
Enterprise System
Customer Service
Track Representative
Corporate Headquarter
(London)
Accounting
Cost Centers
Payroll
Available Cash
Balance Sheets
Accounts Receivables/ Payables
Quality and Supply Chain
Meaning of Quality
Meeting or exceeding the expectations
of a customer
Total Quality Management (TQM)
versus Acceptable Quality Level (AQL)
Zero defects and TQM
Challenges in Supply Chain
Management
Operational Threats
Different languages
Differences in Currencies
Differences in Measurement Systems (metric versus decimal)
Strategic Challenges
National Cultures
Technological capabilities
Tax Policies
National Culture
Western culture typically foster adversarial positions in which
buyers and sellers share as little information as possible.
Toyota requires a broad understanding of a potential supplier’s
manufacturing capabilities and financial position
Supplier Networks
Meaning of outsourcing
The process of a firm having inputs supplied to it from outside
suppliers for the production process.
Domestic outsourcing versus global outsourcing
Why go for domestic sourcing?
Why go for global sourcing?
Why pursue global outsourcing?
Reduce costs
improve quality
exposure to global technology
improve delivery of supplies
access to materials non-available otherwise
establish presence in a foreign market
to compete in the global market
Outsourcing Configurations
Vertical Integration
Arm’s-length purchases from outside
suppliers
Japanese keiretsu relationships with
suppliers
Make or buy Decisions
Supplier Relations
How much should be the degree of
involvement with your suppliers?
Inventory Management
Outsourcing from around the world and
its impact on inventory management
issues of distance, time, and
uncertainty in foreign environment
Just-In-Time Systems