international business, 5th edition

chapter 17
international operations management

Chapter Objectives 1
Describe the nature of international operations management
Analyze the supply chain management and vertical integration decisions facing international production managers Analyze the meaning of productivity and discuss how international firms work to improve it

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Chapter Objectives 2
Explain how firms control quality and discuss total quality management in international business Analyze how international firms control the information their managers need to make effective decisions

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Operations Management
Operations management is the set of activities an organization uses to transform different kinds of inputs (materials, labor, and so on) into final goods and services.
International operations management refers to the transformation-related activities of an international firm.

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Figure 17.1 The International Operations Management Process

Strategic context

Production

Acquisition of resources

Location decisions

Logistics

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Complexities of International Operations Management

Resources

Location

Logistics

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Forms of Operations Management

Production management

Service operations management

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Supply Chain Management

Supply chain management is the set of processes and steps a firm uses to acquire the various resources it needs to create its products.

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Figure 17.2 Basic Make-or-Buy Options

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Influence Factors for the Make-or-Buy Decision

Size Technological expertise

Scope of operations

Nature of product

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Figure 17.3 Competitive Advantage versus Strategic Vulnerability

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Necessary Trade-Offs in the Make-or-Buy Decision

Flexibility

Cost

Trade-offs
Investment Risk Control

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Factors Affecting Location Decisions

Country-related issues Product-related issues Government policies Organizational issues

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Country-Related Issues

Resource availability Cost Infrastructure

Country-of-origin effects

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Country-Related Issues
Such issues play key roles in location decisions for manufacturers.

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Product-Related Issues

Value-to-weight ratio

Required production technology

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Government Policies
Stability of political process
National trade policies

Economic development incentives

Existence of foreign trade zones (FTZ)

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Organizational Issues

Business strategy

Organizational structure

Inventory management policies

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International Logistics
International logistics is the management of the flow of materials, parts, supplies, and other resources from suppliers to the firm; the flow of materials, parts, supplies, and other resources within and between units of the firm itself; and the flow of finished products, services, and goods from the firm to customers.

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Factors Distinguishing International and Domestic Logistics

Transport distance Number of transport modes

Complexity of regulatory content

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Characteristics of International Services

Services are intangible
Services are not storable Services may require customer participation Services may be tied to the purchase of other products

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Managing Service Operations

Capacity planning

Location planning

Facilities design and layout

Operations scheduling
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Productivity
Productivity is an economic measure of efficiency that summarizes the value of outputs relative to the value of the inputs used to create the outputs.

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Strategies for Enhancing Productivity Spend more on R&D

Improve operations

Increase employee involvement

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International Organization for Standardization

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Figure 17.4 Essential Components of Total Quality Management

Strategic Commitment to Quality

Employee High-Quality Up-to-Date Involvement Materials Technology

Effective Methods

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Key Components of Total Quality Management

Statistical process control

Benchmarking

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