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The Global of Operations Strategies Phutthiwat Waiyawuththanapoom Globalization Is Increasing 1 ใน 5 ผลิตภัณฑ์ของสหรัฐอเมริ การมาจากต่างประเทศ บริ ษทั สัญชาติอเมริ การมากกว่าครึ่ งมีการดาเนินการในต่างประเทศ บริ ษทั สัญชาติผสมเติบโตอย่างรวดเร็ วทั้งในและต่างประเทศ A Conceptual Framework Global market Forces Global cost Forces Globalization process of operations strategies Political and macroeconomic Forces Technological Forces Global Market Forces Intensify Foreign Competition in Local Market Growth in Foreign Demand Global Market Presence as a Competitive Treat Changing Competitive Priorities in Product Market Presence in State-of-the-Art Market Technological Forces Technological Advancements and Effective Mass Customization in Global Market Diffusion of Technology Knowledge and Global Location Technology Sharing and Interfirm Collaborations Global Location of R&D Facilities Global Cost Forces Diminishing Importance of Direct Labor Cost in Offshore Sourcing Strategies Emergence of New Cost Priorities in the Location of Global Operating Activities Increasing Capital Intensity of Production Facilities Political And Macroeconomic Forces Exchange Rate Fluctuations and the Value of Operating Flexibility in Global Manufacturing and Sourcing Networks Emergence of Regional Trade Agreements and Their Impact on the Structuring of Global Manufacturing and Logistics Networks Effect of Trade Protection Mechanisms on Global Operation Strategies Current and Future Challenges The globalization of operations strategies pays Pursuing fewness pays Global locations of R&D pays Globalization is a gradual process, not a one-time event Global marketing Strategies Changing Consumer Behavior Foreign markets not only are physical removed; they also differ culturally Specific cost structure in the foreign market may dictate special pricing Distribution channel found in the domestic environment may be available in the foreign market Portion of the product may have to modified to meet local needs Promotional methods may need to be adjusted to local media Types of Consumer Behavior 1. Individualism WWI, Asian or Western cultures ABC Product Classification (A = Moderate movers, B = Slow movers, C = based on level of sale) Types of Consumer Behavior 2. Time-Based Competition Enter to market faster(Design, production and distribution) 3. Environmentalism Green products, recover packaging, transport 4. Global Products Geographical Integration: Global Versus Local marketing Operate in different environment, coordinating international activities, and learning from experience Global Marketing Driven by three business development trends A Global consumer base offers buyers with the same need Consumer are prepared to give up specific requirements in order to obtain a better deal – quality and lower price Companies are more aggressive in pursuing economics of scale in both manufacturing and marketing Marketing Tools/technology Database (Point-of-sale) Media development (satellite TV) Advertising agencies setting up worldwide network Product standardization (firm, brand name, product characteristics, sale technique, methods to distribution) Local Marketing Focus national, regional and personal characteristics Complexity to enter International market Local to Global Functional Integration Of Logistics And Operation: The Global Products 1. Product /service expectations Identify and define service component Prioritize service components by customer need Define the quantitative measures for each component Functional Integration Of Logistics And Operation: The Global Products 2. Interactions between Marketing, Operation Management and Logistics The physical characteristics of product (size, volume, weight, or fragility) The product’s modularity and its suitability for pre- and post-manufacturing Product packaging The system used to track products throughout the flow channel Simultaneous Development of Marketing and Logistics T I M E Marketing -Product -Packaging -Price -Promotion Logistics -Procureme nt -Manufactur ing -Distribution -Catalogue -After-sale T I M E Marketing -Product -Packaging -Price -Promotion Logistics -Procureme nt -Manufactur ing -Distribution -Catalogue -After-sale Sectorial Integration: Manufacturer/Distributor Maximize customer satisfaction/ Low cost Fundamental Question What will the partners’ strategic position be at the end of the alliance? Why would the prospective partner agree to an alliance? Which of the partner’s weakness would be alliance improve? Sectorial Integration: Manufacturer/Distributor Practical Question: What resource are the partners willing to contribute to the relationship How will conflicts and problems be resolved? What assessment method will be used to evaluate the working of the partnership and its results? How will performance results be shared? What are the provisions for negotiating or dissolving the partnership The Goal of Cooperation Addressing uncertainty (demand, price, cost, supply) Maintaining management oversight and control over the service provider Achieving goals Solving problems or resizing opportunities Efficient Consumer Response(ECR) Electronic Data Interchange (EDI) Quick Response (QR) Efficient Consumer Response (ECR Efficient Consumer Response(ECR) Launch in US in 1992 By Kurt Salmon Associates Supermarket industry links in supply chain Cut inventory (from 104 to 61) Cut price (10.8%) The ECR Program Demand and Information flow Warehouse Supplier Warehouse Distributor Point-of-sale Good and supply flow Customer Figure shows Product flow optimization Promotions and terms of sale Product mix New product introduction incorporating logistics and product life cycle The main prerequisites for the proper implementation of an ECR project are: Developing EDI Setting up special partnerships Elaborating indicators and performance assessment measures Putting together multi-functional team Involving Top management The following conditions will guarantee the success of ECR: Never losing sight of the goal: customer satisfaction Getting the project piloted by the managing director Adopting a positive win-win attitude and rejecting winlose attitude Measuring the contribution of data processing to the process Setting up the means to measure real performance and controlling progress achieved Taking into account as realistically as possible competitors’ strong points ECR Focuses on customer’s actual demand Uses information drive the system Potential Areas of Cooperation in ECR Product flow optimization: -Reduced product lead-time -EDI -Distribution optimization -Packaging New product introduction: -Product introduction -Promotional Introduction -Product life cycle issues Customer Satisfaction Product mix: -Use of scanning determinant -Management of categories Promotion and term of sale: -Optimization of purchase term -Promotional rationalization -Reduction of speculative purchasing The Need For A Global Marketing Approach Geographical integration in choosing between global and local strategy Functional integration in achieving the development of the global product and finding ways to customize it as late as possible in the value chain Sectorial integration in achieving the timely and cost-efficient product delivery to the demanding consumer via coordinated electronic information flow Global Operation and Logistics Planning:Supplier Network Development Traditional versus New Supplier partnerships Traditional Approach • • • • • • • • • Primary emphasis on price Short-term contact Evaluation by bids Many suppliers Improvement benefits shared based on relative power Improvement at discrete times intervals Problems are suppliers’ responsibility to correct Clear delineation of business responsibility Information is proprietary Supplier Partnerships • Multiple criteria • Longer term contracts • Intensive and extensive evaluation • Fewer selected suppliers • Improvement benefits are shared more equitably • Continuous improvement is sought • Problems are jointly solved • Quasi-vertical integration •Information is shared Reason for Outsourcing Strategic Reasons Improve business focus Gain access to world class-capability Accelerate re-engineering benefits Share risks Free resources for other purpose Reason for Outsourcing Tactical Reasons Reduce or control operating costs Make capital funds available Create cash infusion Compensate for lack of internal resources Improve management of difficult or out-of-control functions The elements of outsourcing 1. Industry level changes: Tierization of Industry and the Supplier Pyramid The elements of outsourcing 2. Company level changes: System purchasing Multiple criteria -Low cost -High quality -High flexibility -High service -Continuous improvement and innovation System sourcing -Increase value of purchase -Reduced number of vendors -Tier structure of supply chain Collaborative program -Product design and development -Quality upgrade -Continuous improvement Increase value of purchase per vendor Long term relationship with vendors Benefits due to: -Economic of scale -Learning curve The elements of outsourcing 3. Black box design 4. Reduce vendor base A Framework Of Analysis Which products/components should be outsourced? What criteria should be used for supplier selection? How might these factors change across the life of the main product The Strategic Importance and Critical matrix 1. The strategic value of the part itself - Stand alone = Print cartridges for laser printer - Fit into product, technology complexity 2. The criticality of the part to the final product - A second important of the part - Extent to quality and reliability Framework to decide what part to final assembly High Strategic value of the part in isolation Novelty Proprietary (Outsource/In-house) Technology Quality Service (In-house) Technology Quality Commodity Utility (Outsource) Price (Outsource) Cooperation Service Low Low Criticality of the part to final assembly High Dynamic Evolution with the Product Life cycle Resource capability factors – technology and quality to a vendor’s infrastructure capabilities Service factors – a consistent, highly cooperative attitude toward service and delivery on the part of vendor Price factor – any price advantage offered by a vendor that may be exploited by its customer Environment factors – element beyond the control of companies, such as government regulations that limit a company’s choice of vendor