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24 Cards in this Set

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What Are The Main Production Issues For Firms?International firms must answer five interrelated questions
WHERE should production activities be located?
WHAT should be the long-term strategic role of foreign production sites?
Should the firm own foreign production activities or outsource those activities to independent vendors?
How should a globally dispersed supply chain be managed, and what is the role of Internet-based information technology in the management of global logistics?
Should the firm manage global logistics itself, or should it outsource the management to enterprises that specialize in this activity?
Production
activities involved in creating a product
Logistics
procurement and physical transmission of material through the supply chain, from suppliers to customers
How can production and logistics
Lower the costs of value creation?
disperse production to the most efficient locations
manage the global supply chain efficiently to better match supply and demand
How can production and logistics Add value by better serving customer needs?
eliminate defective products from the supply chain and the manufacturing process
How Can Quality Be Improved?
Six Sigma program - a direct descendant of total quality management (TQM)

reduce defects, boost productivity, eliminate waste, and cut costs
Firms should locate production so that ..
can be locally responsive
can respond quickly to shifts in customer demand
Firms should consider 3 factors...
Country factors
Technological factors
Product factors
Why Are Country Factors Important?
Manufacturing should be located where economic, political, and cultural conditions are most conducive to the performance of that activity
Why Are Technological Factors Important?Firms should consider
The level of fixed costs

The minimum efficient scale

The flexibility of the technology
The level of fixed costs
High fixed costs,produce in a single location or a few locations

Low fixed costs, multiple production plants may be possible
The minimum efficient scale
(the level of output at which most plant-level scale economies are exhausted)

high, choose centralized production in a single location or a limited number of locations

low, respond to local market demands and hedge against currency risk by operating in multiple locations
The flexibility of the technology
reduces set up times
increases the utilization of individual machines
improves quality control

allows firms to produce a wide variety of end products at a relatively low unit cost
Production should be concentrated in a few locations when..
High fixed costs
High minimum efficient scale of production
& flexible manufacturing technologies are available
Production in multiple locations makes sense when
Low fixed costs
Low minimum efficient scale of production
Flexible manufacturing technologies are not available
Two product factors impact location decisions
value-to-weight ratio

universal needs
The product's value-to-weight ratio
High value-to-weight ratio, produce the product in a single location and export to other parts of the world

Low value-to-weight ratio, there is greater pressure to manufacture the product in multiple locations
Whether the product serves universal needs
concentrating manufacturing in a central location

Low need for local responsiveness
global learning
valuable knowledge can be found in foreign subsidiaries

firms are less likely to switch production to new locations
Why Make?

Vertical integration - making component parts in-house
Lowers costs
Facilitates investments in highly specialized assets -
Protects proprietary technology
Facilitates the scheduling of adjacent processes
Why Buy?

Buying component parts from independent suppliers
Gives the firm greater flexibility
Helps drive down the firm's cost structure

Helps the firm capture orders from international customers
Do Strategic Alliances With Suppliers Make Sense?
Sometimes,

firms can capture the benefits of vertical integration without the associated organizational problems by forming long-term strategic alliances with key suppliers
Logistics
activities necessary to get materials to a manufacturing facility, through the manufacturing process,
and out through a distribution system to the end user
Improvement in a facility comes from
Pressure to lower costs or respond to local markets
An increase in the availability of advanced factors of production