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Learning Objectives. Welcome to class of International Operations Management Dr. Satyendra Singh University of Winnipeg. Objectives…. Learning Objectives. Understand the concept of supply chain management Recognize the relationship between design and supply chain management

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learning objectives
Learning Objectives

Welcome to class of

International Operations Management

Dr. Satyendra Singh

University of Winnipeg

learning objectives1

Objectives…

Learning Objectives
  • Understand the concept of supply chain management
  • Recognize the relationship between design and supply chain management
  • Describe the five global sourcing arrangements
  • Appreciate the importance of added costs of global sourcing
  • Understand the increasing role of electronic purchasing for global sourcing
  • Understand the just-in-time (JIT) production system and potential problems with its implementation
objectives
Objectives
  • Understand synchronous manufacturing and customization
  • Comprehend the concept of Six Sigma systems and their application
  • Explain the potential of global standardization of production processes and procedures, and identify impediments to standardization efforts
  • Know the two general classes of activities in manufacturing systems, productive and supportive, that must be performed in all manufacturing systems
supply chain management
Supply Chain Management
  • Process of coordinating and integrating the flow of materials, information, finances, and services within and among companies in the value chain from suppliers to the ultimate consumer
lower costs improved products
Lower Costs/Improved Products
  • Desired results may be obtained through
    • Improvement within existing operations
    • Opening new operations
    • finding outside sources for inputs
      • Outsourcing
        • Hiring others to perform some of the noncore activities and decision making in a company’s value chain, rather than having the company and its employees continue to perform those activities
    • Combination of above
global supply chain management
Global Supply Chain Management
  • Involves total systems approach to managing flow of
    • Materials
    • Information
    • Finances
    • Services
international operations management
International Operations management

Make

  • Outsourcing (Core vs. Peripheral)
    • Make
      • Yourself
      • Partnership
        • Controlled
        • uncontrolled
    • Buy
      • Short-term supplier relationship
      • Long-term supplier relationship
    • Strategic Vulnerability vs. Potential Competitive Advantage (PCA)
    • Problems with Outsourcing
      • International freight, insurance, packaging (10%)
      • Import duty (0-50%)
      • Cost of letter of credit (1%)
      • International travel and communications (2-10%)
      • Reworking on product specification (0-15%)
  • JIT vs. JIC
  • Standardization vs. Customization
  • ISO 9000 vs. ISO 14001
  • 3BL  Financial. Environmental and Social

PCA

Contract

Buy

Strategic vulnerability

make or buy decision
Make or Buy Decision

Production Costs

1

2

Make

3

Buy

Market Orientation

design of products and services
Design of Products and Services
  • Design has fundamental relationship with type of inputs required
  • Important consideration is extent to which products and services will be standardized or adapted
  • Over-the-Wall approach is traditional approach
    • Sequential steps
  • Alternative approach is cross-functional participation
    • May involve customers
outsourcing
Increasingly common option

Relocating some or all of a business’s activities or processes outside of the company

Focus on core competencies

Leverage skills of other companies

Reduce costs

Improve flexibility and speed of response

Enhance quality

Can outsource in same country or another country

Offshoring: a foreign location

Choices increased by

Global access to vendors

Falling costs of interactions

Improved information technology and communication

Outsourcing
global sourcing
Considerations

Costs

Control

Expertise

Distance

Languages

Laws and regulations

Begin simple

Then move to complex

Global Sourcing…
global sourcing1
Global Sourcing
  • The Lure of Global Sourcing
    • Suppliers with improved competitiveness
      • Cost
      • Quality
      • Timeliness
    • Suppliers in less developed countries with low-cost labor
      • Attractive for labor-intensive products with low skill requirements
global sourcing arrangements
Global Sourcing Arrangements
  • Arrangement that provide a firm with foreign products
    • Wholly owned subsidiary
    • Overseas joint venture
    • In-bond plant contractor
    • Overseas independent contractor
    • Independent overseas manufacturer
use of electronic purchasing for global sourcing
Use of ElectronicPurchasing for Global Sourcing
  • Growth of electronic procurement exchanges
    • Identify potential suppliers or customers
    • Facilitate efficient and dynamic interactions among prospective buyers and suppliers
    • Recognize strategic function of purchasing
global electronic procurement
Electronic Exchange Options

Catalog purchases

Permits buyers and suppliers to interact through a standard bid/quote system

Facilitates obtaining letters of credit, contracting for logistics and distribution, and monitoring daily

Benefits

Cut costs and invoice and ordering errors

Improve productivity and internal purchasing processes

Reduce trading cycle time, paper

Compare bids

Global Electronic Procurement
global sourcing2
Global Sourcing
  • Problems
    • Unanticipated added costs
      • Currency fluctuations
      • Transportation cost increases
    • E-procurement exposes business systems to wide range of potential security issues
added costs
Added Costs
  • International freight, insurance and packing
  • Import duties
  • Customhouse broker’s fees
  • Transit or pipeline inventory
  • Cost of letter of credit
  • International travel and communication costs
  • Company import specialists
  • Reworking of products out of specification
advanced production techniques
Advanced Production Techniques
  • Systems to improve competitiveness
    • Just-in-time supply chains (JIT)
    • Highly synchronized manufacturing systems
    • Mass customization
    • Six Sigma
japan s use of jit
Japan’s Use of JIT
  • Requirements to operate without inventory
    • Components defect-free
    • Components delivered to each point at specified time
    • Sellers maintain inventory of finished products
    • Process time reduced
    • Manufacturers simplified product lines
    • Suppliers cooperate
    • Designers, managers, purchasing people and marketers work as a team
total quality management
Total Quality Management
  • System in which organization is managed so that it excels on all dimensions of product and service that are important to the customer
  • TQM uses Quality Circles
    • Small work groups meet to discuss ways to improve functional areas and product quality
problems with jit in u s canada
Failure to realize JIT is a total system, includes TQM

Cultural differences in U.S./Canada workers

Highly specialized work

No company loyalty

Failure to train and integrate suppliers

JIT restricted to operations that produce same parts repeatedly

If one operation stops, entire production line stops

Achieving a balanced system difficult: production capacities differ among machines

No allowances for contingencies

Much trial and error are required to put system into effect

Problems with JIT in U.S./Canada
advanced production techniques1
Advanced Production Techniques
  • Synchronous Manufacturing
    • Manufacturing system with unbalanced operations that emphasizes total system performance
  • Mass Customization
    • Flexible manufacturing system to produce customized products and services
  • Six Sigma
    • Business management process for reducing defects and eliminating variation
logistics
Logistics
  • Movement of materials
    • Must interface with sourcing , manufacturing, design, engineering and marketing
    • Packaging and transportation requirements can greatly increase logistics costs
    • Many companies outsource logistics
standards for global operations
Standards for Global Operations
  • Standards
    • Documented agreements on technical specifications or other precise criteria used consistently as guidelines, rules, or definitions of the characteristics of a product, process, or service
  • ISO 9000 (International Organization for Standards) most used in Europe, for quality
  • ISO 9001most comprehensive standard
impediments to standardization
Impediments to Standardization
  • Economic Forces
    • Wide range of market sizes
    • Cost of production
    • Backward vertical Integration
      • Arrangement in which facilities are established to manufacture inputs used in the production of firm’s final products
impediments to standardization1
Cultural Forces

Developing countries may lack skilled workers

Resources directed to professional vs. technical education

Use of specialized machines favored

Absenteeism

Impediments to Standardization
impediments to standardization2
Political Forces

Country needs new jobs

Government insists on most modern equipment

Impediments to Standardization
some design solutions
Some Design Solutions
  • Hybrid Design
    • Hybrid capital-intensive mixed with labor intensive processes when abundant unskilled labor
  • Intermediate Technology
    • Production methods between capital- and labor-intensive methods
local manufacturing system
Local Manufacturing System
  • Commonly scaled-down version of that found in the parent company
  • Horizontal/Vertical integration
    • Vertical more traditional
    • Horizontal less prevalent in foreign subsidiaries
design of the manufacturing system
Design of the Manufacturing System…
  • Manufacturing system
    • Functionally related group of activities for creating value
    • Factors involved in efficient operation
      • Plant location
      • Plant layout
      • Materials handling
      • Human element
design of the manufacturing system1
Plant location

Affects both production and distribution costs

Needs labor, raw materials, water and power

Must locate in export processing zones

Plant layout

Arrangement of machinery, personnel and service facilities

Materials Handling

Careful planning can save production costs

Poor handling leads to excessive inventory, idle machinery, late deliveries and damaged goods

Human element

Effectiveness depends on people

People are affected by the system

Design of the Manufacturing System
operation of the manufacturing system
Operation of the Manufacturing System…
  • Manufacturing system has two classes of activities
    • Productive activities
    • Supportive activities
operation of the manufacturing system1
Operation of the Manufacturing System

Obstacles to Meeting Manufacturing Standards

  • Low output
  • Inferior quality
  • Excessive manufacturing costs
obstacles to meeting manufacturing standards
Low Output

Supplier problems, absenteeism

Poor coordination of production scheduling

Culture differences,attitudes, educational levels, planning

Inferior Product Quality

Good quality is relative

Lack of maintenance and operating skills

Excessive Manufacturing Costs

Low output

Budget problems

Overoptimistic sales forecast

Supply problems, supplier, water/power

Overstocked inventory

Resistance to lay off workers

Obstacles to Meeting Manufacturing Standards
supportive activities
Supportive Activities…
  • Quality control
  • Inventory control
  • Purchasing
    • Must consider costs
    • Develop suppliers
    • Know import procedures and key government officials
    • Monitor foreign exchange
supportive activities1
Supportive Activities
  • Maintenance
    • Goal to ensure acceptable level of production
    • Two alternatives
      • Preventive
      • Breakdown
  • Technical Function
    • Provides operations with manufacturing specifications
    • Checks quality of inputs and finished products
    • Influential in selecting sources of supply