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24 Cards in this Set
- Front
- Back
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What Are The Main Production Issues For Firms?International firms must answer five interrelated questions
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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? |
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Production
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activities involved in creating a product
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Logistics
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procurement and physical transmission of material through the supply chain, from suppliers to customers
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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 |
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How can production and logistics Add value by better serving customer needs?
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eliminate defective products from the supply chain and the manufacturing process
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How Can Quality Be Improved?
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Six Sigma program - a direct descendant of total quality management (TQM)
reduce defects, boost productivity, eliminate waste, and cut costs |
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Firms should locate production so that ..
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can be locally responsive
can respond quickly to shifts in customer demand |
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Firms should consider 3 factors...
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Country factors
Technological factors Product factors |
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Why Are Country Factors Important?
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Manufacturing should be located where economic, political, and cultural conditions are most conducive to the performance of that activity
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Why Are Technological Factors Important?Firms should consider
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The level of fixed costs
The minimum efficient scale The flexibility of the technology |
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The level of fixed costs
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High fixed costs,produce in a single location or a few locations
Low fixed costs, multiple production plants may be possible |
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The minimum efficient scale
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(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 |
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The flexibility of the technology
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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 |
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Production should be concentrated in a few locations when..
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High fixed costs
High minimum efficient scale of production & flexible manufacturing technologies are available |
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Production in multiple locations makes sense when
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Low fixed costs
Low minimum efficient scale of production Flexible manufacturing technologies are not available |
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Two product factors impact location decisions
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value-to-weight ratio
universal needs |
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The product's value-to-weight ratio
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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 |
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Whether the product serves universal needs
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concentrating manufacturing in a central location
Low need for local responsiveness |
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global learning
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valuable knowledge can be found in foreign subsidiaries
firms are less likely to switch production to new locations |
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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 |
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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 |
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Do Strategic Alliances With Suppliers Make Sense?
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Sometimes,
firms can capture the benefits of vertical integration without the associated organizational problems by forming long-term strategic alliances with key suppliers |
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Logistics
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activities necessary to get materials to a manufacturing facility, through the manufacturing process,
and out through a distribution system to the end user |
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Improvement in a facility comes from
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Pressure to lower costs or respond to local markets
An increase in the availability of advanced factors of production |
