OM Chapter 2

________ decisions involve determining what value creation, support, and/or general management processes should move to other countries.

Offshoring

Value Chains in a Global Business Environment: Multinational enterprise

Organization that sources, markets, and produces its goods and services in several countries -To minimize costs -To maximize profit -Provide satisfaction to customers -Contribute to social welfare.

One of the simplest functional forms to determine the value of goods or services is ________ .

Perceived benefits/ cost to the buyer

1. Value

Perception of the benefits associated with goods and services (the customer benefit package) in relation to what buyers are willing to pay for them.

Supply Chain: Portion of the value chain that focuses on:

Physical movement of goods and materials Supporting flows of information and financial transactions through the supply, production, and distribution processes

Which of the following perspectives describes a value chain?

Pre- and postproduction services framework

Vertical Integration

Process of acquiring and consolidating elements of a value chain to achieve more control

Outsourcing

Process of having suppliers provide goods and services that were previously provided internally -The United States has experienced waves of outsourcing such as: 1. Goods-producing jobs 2. Simple service work 3. Skilled knowledge work.

Value Chain Integration

Process of managing information, physical goods, and services to ensure their availability at the right: 1. Place 2. Time 3. Cost 4. Quantity 5. Quality

Reshoring:

Process of moving operations back to company's domestic location.

Which of the following is a preproduction service of a value chain?

Product and service guarantees

Which of the following is a preproduction service in the value chain at Amazon?

Product variety

Value chains involve all major functions in an organization such as purchasing, marketing and sales, human resource management, finance and accounting, information systems and technology, distribution, and service and support.

True

Vertical integration provides more control of the elements in a value chain and adds more complexity to manage the value chain.

True

Value-creation processes are those ________ processes that create and deliver value to customers.

Core

Which of the following types of value chain processes directly creates and delivers goods and services to customers?

Core processes

Which of the following is a fixed cost for a company?

Cost of a building

The term green integration is often used to describe sustainability activities that involve operations and the value chain.

False

Variable costs typically include the cost of leasing equipment.

False

Issues for Managing Global Value Chains

Global value chains face higher levels of risk and uncertainty -Requiring more inventory -Day-to-day monitoring to prevent product shortages

Sustainable Value Chains 2

Green operations and vocabulary -Certain terms are used to describe sustainability activities that involve operations and the value chain Example - Green operations, green manufacturing, and green practices -OM practices can improve environmental sustainability in value chains.

Value can be increased by increasing perceived benefits while holding price or cost constant.

True

Value chain

is a network of facilities and processes that describes the flow of goods, services, information, and financial transactions from suppliers through the facilities and processes that create goods and services and deliver them to customers. -Create goods and services and deliver them to customers -Views an organization from the customer's perspective They are easier to apply the services and goods they are broader.

Value chain integration in manufacturing

-Consolidating information systems among suppliers, factories, distributors, and customers. -Managing the supply chain and scheduling factories. -Studying new ways to use technology.

Challenges Facing Multinational Enterprises

-Designing a value chain to meet the slower growth of: --Industrialized countries --Emerging economies -Locating manufacturing and distribution facilities around the globe to: Capitalize on value chain efficiencies and improve customer value

OM Practices for Environmental Sustainability

-Designing goods and services using recyclable and environmentally friendly materials. -Remanufacturing -Designing facilities and using equipment that conserve energy -Using electronic media and technology to reduce paper and fuel.

Issues for Managing Global Value Chains 3

-International purchasing can lead to disputes and legal challenges -Requires understanding of national cultures and practices before extending firm's value chain to other nations -Privatizing companies and property is another form of major change in global trade and regulatory issues -Pre-planning, response, and recovery from natural or man-made disasters

Value chain integration in services

-Third-party integrators for the leisure and travel industry (e.g., Orbitz, and Travelocity). -Information networks provided by third-party information technology integrators. -Third-party integrators that manage patient billing and hospital inventories.

OM Practices for Environmental Sustainability 2

-Using transportation modes that minimize costs and carbon output -Cleaning and reusing water used for manufacturing

The Economics of Outsourcing

-VC1 = Variable cost/unit if produced -VC2 = Variable cost/unit if outsourced -FC = Fixed costs associated with producing the part -Q = Quantity produced (volume) -Total cost of production = (VC1)Q + FC -Total cost of outsourcing = (VC2)Q -If the total cost of outsourcing is less than the total cost of in-house production, then outsourcing is a better decision -If not, the firm should produce in-house

Which of the following statements is true of value chains and supply chains?

A supply chain is a portion of a value chain.

Value Chain Paradigms and Perspectives: Input-Output Model

A value chain begins with suppliers who provide inputs that are transformed into value-added goods and services through processes that are supported by resources such as equipment and facilities, labor, money, and information. These goods and services are delivered or provided to customers and targeted market segments.

Vertical Integration: Forward integration

Acquiring capabilities toward distribution or even customers

Vertical Integration: Backward integration

Acquiring capabilities toward suppliers

Offshoring:

Building, acquiring, or moving of process capabilities from a domestic location to another country location while maintaining ownership and control. -Involves determining what value creation, support, and general management processes should move to other countries

2. Value proposition

Competitively dominant customer experience.

Coordinating the operational capability to design and deliver an integrated ________ of physical and digital goods and services is the essence of operations management.

Customer benefit package.

A disadvantage of sustainable value chains is that they often lead to decreased revenues.

False

A value chain focuses primarily on the physical movement of goods and material, and supporting flows of information and financial transactions through the supply, production, and distribution processes.

False

Decentralizing value chain activities increases the control that a firm has over cost, quality, and other important business metrics, and often decreases risks.

False

Offshoring is the process of having suppliers provide goods and services that were previously provided internally.

False

Outsourcing is similar to vertical integration in the sense that an organization retains ownership of all its processes and functions.

False

Outsourcing is the process of moving operations back to a company's domestic location.

False

The focus on value has forced many traditional goods-producing companies to add ________ to their customer benefit packages.

Services

Which of the following is a second wave of outsourcing experienced by the United States that involved simple service work?

Standard credit card processing

Sustainable Value Chains

Sustainability improves: -Organization's perception among consumers. Sustainable practices can lead to increased revenues Many customers favor products and services that are designed and produced in a sustainable way

Issues for Managing Global Value Chains 2

Transportation is more complex in global value chains -Infrastructure vary in foreign countries Global purchasing can be a difficult process to manage when: -Sources of supply, regional economies, and governments change.

A multinational enterprise is an organization that sources, produces, and markets its goods and services in several countries.

True

Centralization and decentralization are two forms of operational structure of a value chain.

True

Fixed costs typically include administrative costs.

True

The decision to purchase a good or service or a customer benefit package is based on an assessment by the customer of the perceived benefits in relation to its price.

True

The Concept of Value

Underlying purpose of every organization is to provide value to its customer and stakeholders

Challenges Facing Multinational Enterprises 2

Usage of performance metrics in making critical value chain decisions Decision on whether partnerships should be developed with competitors.

To increase value

a. increase perceived benefits while holding price or cost constant; b. increase perceived benefits while reducing price or cost; or c. decrease price or cost while holding perceived benefits constant.

The decision on whether to outsource is usually based on economics, and ________ can be used to provide insight into the best decision.

break-even analysis

In the United States, the third wave of outsourcing includes

computer chip design

The ________ of a value chain is the configuration of resources, such as suppliers, factories, warehouses, distributors, technical support centers, engineering design and sales offices, and communication links.

operational structure