Download Global Manufacturing and Supply Chain Management

Chapter Seven
Global Manufacturing and Supply
Chain Management
Prentice Hall, 2002
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Chapter Objectives
 To understand the conditions that shape how companies
set up foreign manufacturing facilities
 To appreciate the relationship between a company’s
strategy and the design of its global manufacturing
system
 To grasp the trade-offs that companies face in designing
a competitive manufacturing system
 To understand the idea of global supply chain
management
 To realize how global supply chain management helps
companies meet international objectives
 To appreciate the decisions that companies face in
making and moving products around the world
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Introduction
Managers must now resolve:
• Where in the world to put a factory
• How in the world to move goods and services
from suppliers to factories to customers
• What in the world to do themselves versus
outsourcing to someone else
Complications arise from many multinational
enterprises’ (MNEs’) reaction to tough global
competition by rushing overseas to lower
manufacturing costs or reach new markets
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Introduction
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Global Manufacturing Strategy
 We use the generic term manufacturing to describe the efforts of
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industrial and service companies to make products that are sold to
foreign markets
The idea of global manufacturing strategy brings into play a mix of
economic, competitive, legal, political, and environmental
conditions
Common patterns of decision making among well-run MNEs
suggest that the success of global manufacturing strategy depends
on how well managers deal with the 4 Cs:
• Compatibility: the degree of consistency between where and
how managers set up their foreign manufacturing system and
the company’s competitive strategy
There are many ways that managers can improve
compatibility
In well-run companies, managers safeguard compatibility
by giving greater weight to their forecast of future
conditions than they do to current events
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Global Manufacturing Strategy
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Configuration: refers to the issue of where the
company wants to physically build its factories
Independent plants
Network of plants
Centralized manufacturing site
Legacy manufacturing
Coordination: once an overseas plant is up and
running, managers need to oversee the flow of material,
information, and finance among its various customers,
suppliers, and distributors
Managers must coordinate the different activities
that go into making and moving a good or service
around the world
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Global Manufacturing Strategy
• Control: a well-designed control system helps everyone in the
company carry out their jobs by outlining their roles and
stipulating responsibilities in the company’s manufacturing
strategy
Formal manufacturing controls:
o Virtually every company relies on controls that are
precisely stated in an operating manual
Standard operating procedures (SOPs)
o International Standards Organization (ISO)
Six sigma
Informal manufacturing controls:
o Managers foster a company-wide philosophy that
encourages workers to voluntarily watch and
continuously improve the production process
Total quality management (TQM)
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Global Manufacturing Strategy
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Global Manufacturing Strategy
 The 4 Cs of the global manufacturing strategy give managers a quick
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guide to keep sight of fundamental questions
Managers need to look at the possible effects of product and country
factors on the 4 Cs
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Product factors:
Value-to-weight ratio: can make a huge difference in plant
configuration
Purpose of the product
Complexity of the product
Product life cycles
Degree of digitalization
Country factors:
Challenges come from a range of seemingly innocent
circumstances
o Language barriers
o Time zone differences
o Different attitudes and approaches to manufacturing across
nations
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Global Supply Chain Management
 Global supply chain management:
describes managers’
effort to oversee the flows of raw materials, components,
information, and finance through their network of suppliers,
assemblers, distributors, and customers located around the
world
 Innovative supply chain management creates enormous
potential to lower costs and boost earnings
 Recent trends in technology give managers powerful tools
to improve the strategic performance of their global supply
chains
 Typically, when we visualize a supply chain, a step-by-step
view of the classic buy-make-move-store-sell cycle comes
to mind
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Global Supply Chain Management
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Global Supply Chain Management
 Making and moving a product depends on the
shipment and transfer of a range of inputs among
several factors that are usually spread across several
countries
 An important dimension of supply chain
management is logistics, sometimes called materials
management
• Logistics: part of the supply chain process that
plans, implements, and controls the efficient,
effective flow and storage of goods, services, and
related information from the point of origin to the
point of consumption
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Global Supply Chain Management
Generally, a firm’s global supply chain
strategy includes the following elements:
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Customer service requirements
Plant and distribution center network design
Inventory management
Outsourcing and third party logistics relationships
Key customer and supplier relationships
Business processes
Information systems
Organizational design and training requirements
Performance metrics
Performance goals
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Global Supply Chain Management
 Information technologies, particularly recent
trends in the Internet, have given managers many
tools to amplify the idea of global supply chain
management
 Ultimately, information technology is a tool that
gives managers the chance to see the company’s
supply chain in terms of the inner workings of
several tiers of suppliers, distributors, and other
partners
 Extranet: a linkage to the main information
system via the Internet
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Global Supply Chain Management
Trying to link all the players in the global
supply chain is particularly vulnerable to two
types of threats:
• Operational problems:
Communication challenges
• Strategic issues:
National cultures
Technology
Tax policies
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The Strategy of Making and Moving
Products: Important Moderators
 Issues, such as the following, shape managers’ decision
making:
• Inventory management
• Supplier relations
• Purchasing functions
• Foreign trade zones
• Transportation infrastructure
 Throughout the manufacturing and supply chain,
managers continually struggle with deciding which
activities to perform inside the company and which
activities to subcontract to independent companies
Outsourcing
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The Strategy of Making and Moving
Products: Important Moderators
 Many companies cannot find domestic sources that can compete
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with foreign sources and generally one of three sourcing strategies
is utilized
Vertical integration
• Arm’s-length purchase from outside suppliers
• Network sourcing
Good supplier relations are imperative
The purchasing agent is the link between the company’s
outsourcing decision and its supplier relationships
Typically purchasing goes through four phases
• Domestic purchasing only
• Foreign buying based on need
• Foreign buying as part of an international procurement strategy
• Integration to global procurement strategy
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