Chp. 17: Global Production and Supply Chain Management

What are the benefits or relationships with partners (upstream) & clients (downstream)?

1 or 2 higher poits of higher quality for the raw materials, component parts, and/or products whose improvement will yield the greatest value to the customer for foreseeable future

What 3 factors should firms consider when choosing their location for production?

1. Country factors 2. Technological factors 3. Production factors

What are the core activities performed in purchasing?

1. Developing an appropriate strategy for global purchasing 2. Selecting the type of purchasing strategy best suited for the company

How can production & supply chain management lower costs?

1. Disperse production to the most efficient locations 2. Manage the global supply chain efficiently to better match supply & demand

What are the core activities performed in logistics?

1. Global distribution center management 2. Inventory management 3. Packaging & materials handling 4. Transportation 5. Reverse logistics

What 4 factors should firms consider the potential for before making the decision to locate production in a foreign location

1. High employee turnover 2. Poor workmanship 3. Poor product quality 4. Low productivity

What are 2 product factors that impact location decisions?

1. Product's value-to-weight ratio 2. Whether the product serves universal needs

What 6 operational objectives should be addressed to achieve operational integration & collaboration?

1. Responsiveness 2. Variance reduction 3. Inventory reduction 4. Shipment consolidation 5. Quality 6. Life-cycle support

What country factors should a firm consider?

1. The availability of skilled labor & supporting industries 2. Formal & informal trade barriers 3. Expectations about future exchange rate changes 4. Transportation costs 5. Regulations affecting FDI

What technological factors should a firm consider?

1. The level of fixed costs 2. The minimum efficient scale: level of output at which plant-level scale economies are exhausted 3. The flexibility of the technology (lean production)

When should a firm buy component parts to go into its final products?

1. When it gives the firm greater flexibility 2. When it helps drive down the cost structure 3. When it capture orders from international customers

What are the 5 interrelated questions an international firm must answer about production?

1. Where should production activities be located? 2. What should be the long-term strategic role of foreign production sites? 3. Should the firm own foreign production activities or outsource those activities? 4. How should a globally dispersed supply supply chain be managed, & what is the role of Internet-based information technology in the management of global logistics? 5. Should the firm manage global logistics itself, or should it outsource the management to enterprises that specialize in this activity?

What are some options for a global supply chain?

1.Electronic data interchange (EDI) 2. Enterprise resource planning (ERP) 3. Collaborative planning, forecasting, and replenishment (CPFR) 4. Vendor management of inventory (VMI) 5. Warehouse management system (WMS)

What is outsourcing?

A multinational corporation buys products or services from one of its suppliers that produces them somewhere else, whether domestically or globally. In that sense, it also refers to external purchasing in relation to purchasing strategy

Offshore outsourcing

A multinational corporation buys products/services from one of its suppliers in a country other than the one in which the product is manufactured or the service is developed. This again is a form of global external purchasing in terms of purchasing strategy

Offshoring

A multinational corporation buys products/services from one of its suppliers that produces them somewhere globally (outside the home country). This is a form of global external purchasing in terms of purchasing strategy

Insourcing

A multinational corporation decides to stop outsourcing products/services & instead starts to produce them internally. It refers to internal purchasing in the context of purchasing strategy

Nearshoring

A multinational corporation transfers business or information technology processes to suppliers in nearby country, often one that shares a border w/the firm's own country. nearshoring is not a purchasing activity per se, it involves facilitating global external purchasing

Co-sourcing

A multinational corporation uses both its own employees from inside the firm & an external supplier to perform certain tasks often in concert w/each other. This applies to all 4 forms of purchasing strategy. It implies that the relationship btw the firm & its supplier is rather strategic in nature - often, this involves the top suppliers in a particular product or component category

What is a global supply chain coordination?

A shared decision-making opportunity & operational collaboration of key global supply chain activities

If a products value-to-weight ratio is high should a firm produce in a single location or multiple locations across the world?

A single location

What is total quality management (TQM)?

Aims to reduce defects, boost productivity, eliminate waste, & cut costs throughout the company

How can production & supply chain management add value by better serving customer needs?

By eliminating defective products from the supply chain & the manufacturing process

Where should production be located?

Firms should locate production so that... 1. Productions & logistics can be locally responsive 2. Production & logistics can respond quickly to shifts in customer demand

What standards must EU firms meet before gaining access to the EU marketplace?

ISO 9000

What program do most firms use to improve quality?

Six Sigma

What is Just-In-Time Inventory?

Systems that economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process

True or False: JIT systems leave the firm with no buffer stock of inventory to meet unexpected demand or supply changes.

TRUE

True or False: There may be hidden costs associated with foreign production

TRUE

What are the benefits of relationships with suppliers (upstream) & customers (downstream)?

The firm will receive all the favorable characteristics that the raw materials, component parts, &/or products have relative to the next best alternative in the global marketplace

What is global learning?

The flow of skills & product offerings from foreign subsidiary to home country & from foreign subsidiary to foreign subsidiary

What is supply chain management?

The integration & coordination of logistics, purchasing, operations, & market channel activities from raw material to the end-customer

What is purchasing?

The part of the supply chain that involves worldwide buying of raw material, component parts, & products used in manufacturing of the company's products & services

What are logistics?

The part of the supply chain that plans, implements, & controls the effective flows & inventory of raw material, component parts, & products used in manufacturing

Why do web-based information systems play a crucial role in materials management?

They allow firms to optimize production scheduling according to when components are expected to arrive

When should a firm make the component parts to go into its final product?

This is:Vertical integration. 1. When costs are lower to make them 2. When it facilitates investments in highly specialized assets 3. To protect proprietary technology 4. To facilitate scheduling of adjacent processes

What are the benefits of relationships with vendors (upstream) & buyers (downstream)?

Typical transactional exchange benefits. Costs equal to quality for the goods bought, but not necessarily for the best goods in the marketplace

When should production be in multiple locations make sense?

When... 1. Both fixed costs & minimum efficient scale of production are low 2. appropriate flexible manufacturing technologies are not available

When should production be concentrated in a few locations?

When... 1. Fixed costs are substantial 2. Minimum efficient scale of production is high 3. Flexible manufacturing technologies are available

Where should manufacturing be located?

Where economic, political & cultural conditions are most conducive to the performance of that activity