CH17 International Business

What are some additional international objectives?

Production and supply chain functions must be able to: Accommodate demands for local responsiveness. Respond quickly to shifts in customer demand.

Locating Production Facilities

Centralized Decentralized

What do Global Logistics entail?

Core activities: Global distribution center. Global inventory management. Packaging is the container that holds the product itself. Transportation Reverse Logistics

Operationally favoring a buy decision

Cost and production capacity are the core elements of a buy decision but a company must also make decisions about these items, in this order: multisource policy, lack of expertise, supplier competencies, small volumes, inventory planning, brand preference, and nonessential items.

Operationally favoring a make decision

Cost and production capacity are the core elements of a make decision but a company must also make decisions about these items, in this order: quality control, proprietary technology, limited suppliers, excess capacity, having control, assurance of continual supply, and industry drivers.

What is Six Sigma?

Descendent of total quality management (Deming). (Total quality management (TQM) refers to the management philosophy that takes as its central focus the need to improve the quality of a company's products and services.) Statistically based philosophy that aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company.

What are the roles of information technology?

Electronic data interchange (EDI): Electronic interchange of data between two or more companies. Enterprise resource planning (ERP): Wide-ranging business planning and control system that includes supply chain-related subsystems. Collaborative planning, forecasting, and replenishment (CPFR). Vendor management of inventory (VMI): Allows for a holistic overview of the supply chain with a single point of control for all inventory management. Warehouse management system (WMS). To be competitive today, firms must have some form of supply chain information system.

What are Global distribution centers?

Facility that positions and allows customization of products for delivery anywhere in the world. Used by manufacturers, importers, exporters, wholesalers, retailers, transportation companies, and customs agencies to store products and provide a location where customization can be facilitated. The order-processing part of the order-fulfillment process.

What are technological factors?

Fixed costs. Flexible Manufacturing and Mass Customization Minimum efficient scale. (Refers to the level of output at which most plant-level scale economies are exhausted.)

The Hidden Costs of Foreign Locations

High employee turnover. Shoddy workmanship. Poor product quality. Low productivity.

What is Global inventory management?

How much inventory to hold, in what form to hold it, and where to locate it in the supply chain. Strategy must effectively trade off the service and economic benefits of making products in large quantities and positioning them near customers against the risk of having too much stock or the wrong items.

What are the International Standards?

ISO 9000: Certification process that requires certain quality standards that must be met. Focuses management attention on the need to improve the quality of products and processes. Required by European Union for a firm's manufacturing processes and products.

Strategic Roles for Production Facilities

Importance of global learning: valuable knowledge does not just reside in firm's domestic operations. Offshore factory. Source factory. Server factory. Contributor factory. Outpost factory. Lead factory.

The relationship between quality and costs

Improving performance reliability results in increased productivity and lower rework and scrap costs which leads to lower manufacturing costs and ultimately to an increase in profits. Improving performance reliability also results in lower warranty costs which leads to lower service costs and ultimately an increase in profits.

Downstream/outbound relationships

In this example, the three participants are buyer, customer, and client. They interact across a continuum, from a transactional focus to a relationship focus. A transactional focus interaction has low coordination and low integration; while a relationship focus interaction has high coordination and high integration.

Explain upstream/inbound relationships

In this example, the three participants are vendor, supplier, and partner. They interact across a continuum, from a transactional focus to a relationship focus. A transactional focus interaction involves low coordination and low integration; while a relationship focus interaction has high coordination and high integration.

How does improved quality control reduce costs?

Increases productivity. Lowers rework and scrap costs. Reduces warranty costs and time.

Coordination in Global Supply Chains

Integration and coordination are critically important. Shared decision making creates a more integrated, coherent, efficient, and effective global supply chain. Operational objectives: Responsiveness. Variance reduction. Inventory reduction. Shipment consolidation. Quality. Life-cycle support.

What is the role of just-in-time inventory?

Inventory logistics system designed to deliver parts to a production process as they are needed, not before. Speeds up inventory turnover. Reduces inventory holding costs. Frees up working capital. Boosts profitability. Can improve product quality. But leaves the firm without a buffer of inventory.

What are the 5 strategic levels in global purchasing?

Level I: companies engage in domestic purchasing activities only. Level II: companies engage in international purchasing activities only as needed. Level III: companies engage in international purchasing activities as part of the firm's overall supply chain management strategy. Level IV: global purchasing activities that are integrated across worldwide locations. Level V: engaging in global purchasing activities that are integrated across worldwide locations and functional groups.

What are make or buy decisions?

Made at both the strategic and operational levels, with the strategic level being focused on the long term and the operational level being more focused on the short term. Make decisions can result from issues of product success, specialized knowledge, strategic fit, cost, and production capacity. Inventory planning is also critically important.

What is packaging and what functions does it perform?

Packaging is the container that holds the product itself. Primary. Secondary. Transit. Functions: Perform. Protect. Inform.

What are Country Factors?

Political and economic systems, culture, and relative factor costs differ from country to country. These include Location economies. Formal and informal trade barriers. Transportation costs. Rules and regulations. Exchange rates.

Define reverse logistics and state its goals.

Process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal. Goal is to optimize the after-market activity or make it more efficient. Important part of the global supply chain.

What are Production Factors?

Product Features Locating Production Facilities Strategic Roles for Production Facilities

Value Creation Activities

Production includes activities involved in creating a product. Supply chain management is the integration and coordination of logistics, purchasing, operations, and market channel activities from raw material to the end-customer.

How do Flexible Manufacturing and Mass Customization influence technological factors?

Reduces setup times for complex equipment. Increases utilization of individual machines through better scheduling. Improves quality control at all stages of manufacturing process Enables companies to customize products to demands of small consumer groups. Flexible machine cells.

Define transportation and it's primary drivers

Represents the largest percentage of any logistics budget; refers to the movement of raw material, component parts, and finished goods throughout the global supply chain Primary drivers: Distance. Transport mode (ocean, air, or land). Size of load. Load characteristics. Oil prices.

What are strategic objectives for strategy, production, and supply chain management?

To ensure that the total cost of moving from raw materials to finished goods is as low as possible for the value provided to the end-customer. To increase product (or service) quality by establishing process-based quality standards and eliminating defective raw material, component parts, and products from the manufacturing process and the supply chain.

Interorganizational Relationships

Two keys are trust and commitment. Value between nodes and actors in global supply chains is a function of the cost (money and nonmoney resources) given up in return for the quality (products, services, information, trust, and commitment) received.

Product Features

Value-to-weight ratio influences transportation costs. Universal needs.

What are some issues in international business?

Where should production facilities be located? What should be the long-term strategic role of foreign production sites? Should the firm own foreign production activities, or is it better to outsource those activities to independent vendors? How should a globally dispersed supply chain be managed, and what is the role of information technology in the management of global logistics, purchasing (sourcing), and operations? Should the company manage global supply chains itself, or should it outsource the management to enterprises that specialize in this activity?

What is an upstream supply chain?

the portion of the supply chain from raw materials to the production facility; also called the inbound supply chain.