-BY SARITA DEVI

QUESTIONS TO BE ANSWERED Where in the world should production activities be

located?

Should they be located in a single country or dispersed around the globe?

What should be the long-term strategic role of foreign production sites?

SYLLABUS Procurement for international operations-

International quality standards

Logistics and Supply Chain Management

CASE STUDY- IN CHINA

CASE STUDY- PHILIPS IN CHINA

CASE STUDY- PHILIPS IN CHINA

PRODUCTION AND LOGISTICS PRODUCTION- Activities involved in creating a

product.

LOGISTICS- Activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution.

BOTH are inter- dependent.

Strategic Importance of Production and Logistics To Lower Costs

To increase product quality

To accommodate demands for local responsiveness

To respond quickly to shifts in customer demand.

RELATIONSHIP BETWEEN QUALITY AND COSTS

IMPROVES PERFORMANCE

RELIABILITY

INCREASES PRODUCTIVITY

LOWERS REWORK

AND SCRAP COSTS

LOWERS WARRANTY

COSTS

LOWERS MANUFACTURING COSTS

LOWERS SERVICE

COSTS

INCREASES PROFITS

Where to Produce??

Country factors

1. Economic

2. Political

3. Cultural

4. Factor costs

5. Location externalities

6. Trade barriers

7. Exchange rate

Technological factors

1. Fixed Costs

2. Minimum efficient scale

3.Flexible manufacturing

Technology

4. Mass Customization

Product factors

1. Value to weight ratio

2. Serves universal

Needs

Decentralization vs Concentration Country Factors Concentrated Decentralized

Diff. in political economy

Substantial Few

Diff. in culture Substantial Few

Diff. in factor costs Substantial Few

Trade barriers Few Substantial

Location externalities

Important in industry

Not important in industry

Exchange rates Stable Volatile

Decentralization vs Concentration Technological Factors

Concentrated Decentralized

Fixed Costs High Low

Minimum Efficient Scale

High Low

Flexible manufacturing technology

Available Not available

Decentralization vs Concentration Product Factors Concentrated Decentralized

Value to Weight ratio

High Low

Serves universal needs

Yes No

CASE STUDY- TOYOTA’S PRODUCTION SYSTEM

Most efficient auto company

Flexible manufacturing system

Developed by- Taiichi Ohno

CASE STUDY- TOYOTA’S PRODUCTION SYSTEM

He saw mass production as flawed

1. Long production runs, massive inventories, large

storehouses- thus expensive

2. If initial machine settings wrong, entire lott with

defects

CASE STUDY- TOYOTA’S PRODUCTION SYSTEM

3. Unable to accommodate customer

preferences

Ohno tried to make shorter production runs

Developed a system of levers and pulleys

CASE STUDY- TOYOTA’S PRODUCTION SYSTEM

Reduced time for changing dies on stamping equipment from a

day to 3 minutes.

Benefits- small production runs economical, address customer

diversity

Reduced warehouse costs, lesser defective parts, source of

problem could be identified

CASE STUDY- GE FROM CHINA TO US

CASE STUDY- GE FROM CHINA TO US

CASE STUDY- GE FROM CHINA TO US

CASE STUDY- GE FROM CHINA TO US

CASE STUDY- HP IN SINGAPORE

In late 1960’s, move towards Asia as a low-cost location

Electronic components- using labor-intensive processes

First factory-1970

Not much lower costs but other benefits were available

CASE STUDY- HP IN SINGAPORE -Education level of workforce

-English speaking people

-Stable govt.

-Good infrastructure

-Good communication and transportation networks

-Developing industrial and commercial base

Favorable terms on taxes, tariffs and subsidies

CASE STUDY- HP IN SINGAPORE In beginning- only basic components

In 1973- manufacture of basic handheld calculators shifted from US to Singapore

Transferred other products like keyboards, solid-state displays, integrated circuits

Designing was there with US only.

HP41C Handheld calculators

Goal was given to Singaporean unit to reduce costs further

CASE STUDY- HP IN SINGAPORE The unit asked to redesign the product

20 engineers from Singapore sent to US for training

Reduced cost by 50%

Entire production and designing of calculators shifted to Singapore in 1983

In 1984,Partial transfer of Ink-jet production

In 1986, Keyboards

CASE STUDY- HP IN SINGAPORE The unit was given added

responsibilities- Designing HP ink-jet printer for Japanese market

Failed initially

HP DeskJet 505 Printer

Research Lab also opened by HP

OUTSOURCING PRODUCTION: ADVANTAGES OF MAKE

Lowering Costs Facilitating Specialized Investments

Protecting proprietary

product technology

Accumulating dynamic

capabilities

Improving Scheduling

OUTSOURCING PRODUCTION: ADVANTAGES OF BUY

Strategic Flexibility

Lower Costs

Offsets

GLOBAL SUPPLY CHAIN MANAGEMENT

Logistics

Manage GSC at lowest possible cost

Lowering the costs of value creation

Just-in- Time Inventory

Lowers holding costs

Working capital requirements

ROCI Lower stock of

Unsold inventory

Improves product quality

Lower buffer stocks

Demand and supply

fluctuations not met

GLOBAL SUPPLY CHAIN MANAGEMENT

Information Technology

EDI Easy

communication Lesser

paperwork

Lesser delays Less expensive

TQM VS SIX SIGMA TQM SIX SIGMA

Predecessor to Six sigma Direct descendent of TQM.

Firstly adopted by Japanese managers during 1980’s.

Comes from Greek letter- represent a standard deviation from mean

Developed in America by W. Edward Deming, Joseph Juran and A.V. Feigenbaum.

Developed in USA

Mistakes, Defects and Poor-quality are not acceptable and should be eliminated.

Aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company.

Supervision should be improved Puts stronger focus on customer requirements

Work standards should include both number and quality.

Regular Training required

Commitment of everyone is required.

TQM VS SIX SIGMA TQM SIX SIGMA

Focus is on organizational level

Focus is on project level

Expect conformance to internal quality standards

Expect a success rate of 99.9997% or less than 3.4 defects per million.

TQM is an integrated organizational approach in delighting customers both external and internal by meeting their expectations on a continuous basis through everyone involved with the organizational working on continuous improvement in all products/processes along with proper problem solving methodology.

Six sigma is a set of techniques and tools for process improvement.