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International Business. Chapter Seventeen Global Manufacturing and Supply Chain Management. Introduction. Supply chain management: the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer

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international business

International Business

Chapter Seventeen

Global Manufacturing and Supply Chain Management


Supply chain management: the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer

Logistics (also called as materials management): that part of the supply chain process that plans, implements, and controls the efficient and effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements

global manufacturing strategies
Global Manufacturing Strategies
  • Global supply chain:links the suppliers’ suppliers with the customers’ customers, accounting for every step of the process between the raw material and the final consumer of the good or service
  • The success of a global manufacturing strategy depends upon:
    • Compatibility
    • Configuration
    • Coordination and Control
manufacturing compatibility
Manufacturing Compatibility

Compatibility: in the context of manufacturing strategy, the degree of consistency between a firm’s foreign direct investment decisions and its competitive strategy

Offshore manufacturing:manufacturing activities that occur within facilities of a firm that lie beyond the borders of its home country, i.e., foreign direct investment made specifically for the purpose of serving a firm’s domestic market

Maquiladora is an example of offshore manufacturing

manufacturing configuration
Manufacturing Configuration
  • The three basic configurations that MNEs consider en route to developing their global manufacturing strategies are:
    • centralized manufacturing in a single country
    • regionalized manufacturing in specific regions served
    • local manufacturing in each country market served

Multidomestic marketing and manufacturing approach is most common among multinationals

coordination and control
Coordination and Control

Coordination:the linking and integrating of participants and activities throughout the (global) supply chain into a unified system

Control:embraces systems such as organizational structure and performance measurement that are designed to help ensure that strategies are implemented, monitored, and revised, as appropriate

total quality management
Total Quality Management

TQM is a process that stresses customer satisfaction. Employee involvement, and continuous improvement of quality

Quality: conformance to specifications, value enhancement, fitness for use, after-sales support, and psychological impressions (image)

Six Sigma: an idea perfected by Japanese manufacturers who refuse to tolerate defects of any kind

Kaizen: the Japanese process of continuous improvement, which requires identifying problems and enlisting employees at all levels of the organization to help eliminate them

global sourcing
Global Sourcing

Sourcing: the process of a firm having inputs supplied to it from outside suppliers for the production process. Firms pursue global sourcing strategies in order to:

  • reduce costs
  • improve quality
  • increase exposure to worldwide technology
  • improve delivery of supply
  • gain access to materials that are only available abroad
  • establish a presence in a foreign market
  • satisfy offset (countertrade) requirements
  • react to competitors’ sourcing practices
inventory management
Inventory Management

Inventory management:the planning and control of the levels, flows, and storage of inputs, unfinished, and finished goods

Just-in time manufacturing (JIT):a system that reduces inventory costs by having inputs delivered just as they are needed for the production process

Foreign trade zones (FTZs):government-designated areas in which goods can be stored, inspected, and/or manufactured without being subject to formal customs procedures until they actually enter a country

discussion questions
Discussion Questions
  • Explain how the success of a global manufacturing strategy depends upon compatibility, manufacturing configuration, and coordination and control.
  • Define Total Quality Management and explain its importance in global supply chain management.
  • Define global sourcing and explain the role it plays in global supply chain management.
  • Explain Inventory Management in global supply chain.