Global Production

Strategy, Production, Logistics

Value

chain activities

Production, marketing, logistics, R&D, HR, IS

Production:
physical goods, as well as services

Logistics:
controls physical transmission of materials through

the value chain

Production

and logistics decisions

Lower costs of value creation

Add value through better attention to customer needs

Production and Materials

Management / Logistics

Production activities
Service and manufacturing
Conversion of inputs to a product

Materials management activities

Physical transmission of materials through value

chain:
procurement > production > distribution

Logistics activities encompass

Procurement and physical transmission of material

through the supply chain

suppliers > customers

Relationship Between
Quality and Costs
Quality
Increases
Productivity
Improves
Performance
Reliability

Lowers
Rework and
Scrap Costs
Lowers
Warranty
Costs

Lowers
Manufacturing
Costs
Lowers
Service
Costs

Increases
Profits

Quality and Cost Management

TQM:
technique to improve products and services
quality
Six Sigma: Statistically based cost cutting system
Reduces defects, boosts productivity, eliminates

waste

ISO 9000
European Unions standards for quality
Set by code
Firm must be certified ISO 9000 before it may

access the EU marketplace

Which Manufacturing Location?

Country Factors
Favorable economic, political, cultural conditions

Technological Factors
Fixed costs relatively low
Minimum efficient scale

Magnitude of plant output to realize scale-economies

Market demand level adequacy
Flexible manufacturing; lean production
Mass customization
Flexible machine cells
Product features: value-to-weight ratio, universal needs

Where to Locate?
Concentrate Manufacturing if:
Costs

of manufacturing are responsive to

country environment (one location best)

Trade

barriers are low

Product

serves universal needs

Minor difference in customer needs

Minimal consumer preferences

Where to Locate?
Concentrate Manufacturing if:
Trade

barriers are low

Exchange

rates among currencies with

impact on your business are stable

Production

technology

Has high fixed costs

Has high minimum efficient scale
Exists in flexible manufacturing format

When to Decentralize Manufacturing?

Country environment does not affect costs

Trade barriers are high

Production technology
Has low fixed costs
Has low minimum efficient scale
Does not exists in flexible manufacturing format

Product value-to-weight ratio is low

Product does not serve universal needs

Customer needs different
Consumer preferences different

Make-or-Buy?

Make advantage
Lower costs in-house?
Are specialized assets needed?
Is proprietary technology needed?

Know-how protection issue (Dunning)

Buy advantage
Strategic flexibility needed?
Lower costs by buying?

In either case improved scheduling is important

Other Issues
Strategic

alliances with suppliers

Just-in-time inventory system
management
The role of information technology
The role of the internet