global operations outsourcing. introduction competitive organization is lean and flexible. key to...
TRANSCRIPT
GLOBAL OPERATIONS
OUTSOURCING
Introduction
Competitive organization is lean and flexible.Key to successful restructuring: focus on core competencies or strategically important activities.Withdraw from non-core functions. Outsourcing non-core activities.
Outsourcing
Transferring company’s recurring and non-core internal activities and decision rights to outside providersSet forth in a contract, in order for the company to gain advantages
The Companies:
Procter and Gamble (P&G)
IBM
Philip Morris
TYC.
Procter & Gamble (core competency)
Marketing Products: Tide, Ivory, Bounty, Crest, Pepto-Bismol, Vicks, Always, Pampers.
Manufacturing of major brands.
Sales
Procter & Gamble (supply chain)
Suppliers:Raw materialsPacking mat.
Transport from suppliers to P&G Production
WarehouseTransport from plant to warehouse
Transport from warehouse to client
OUTSOURCEDNOT OUTSOURCED
Procter & Gamble (outsourcing)
Suppliers:Not a core competency.Make sure raw and packing materials are of quality.Work closely with suppliers.Small network of suppliers.
Transportation from suppliers to P&G.
Procter & Gamble (outsourcing)
ManufacturingStrategic for P&GMetamucil was manufactured in Searle, now it is imported from Phoenix, one of P&G’s production plants.Bundles (packing for club stores) is outsourced.
Procter & Gamble (outsourcing)
Transportation (plants to warehouse, warehouse to clients)
Small number of carriers (Schnider)• Quality in the trailers• Administrative issues
Security• Thefts in the city, costs are divided with carriers.• Special “body guard system”
Economies of Scale
Procter & Gamble (outsourcing)
Warehousing (EXEL Logistics)Master Distribution Center, 2 X-Docks.Physical management of warehouse.
• Physical control of inventory.• Operation of forklifts• Truck load and unload• Returns (re-packing)
Warehouse space.Proof of Delivery (Outsourced January 2000)
BenefitsCostHuman resources• Organizational benefits (value added for
the whole organization).• IWS (focus of the organization)
Procter & Gamble (outsourcing)
IBM (core competency)
Hard-disk and head technology.
Unique design for head and hard-disks.
leading technology
Final assembly
IBM (supply chain)
Gather customer requirements
initial production development
early manufacturing and assemble
volume production
sales & marketing
logistics center
delivery
OUTSOURCEDNOT OUTSOURCED
IBM (outsourcing)
IBM decided to outsource parts and specialized componentsPurchases the parts from the suppliers and assembles them in the warehouses.3 - 5 per part components when suppliers
IBM (outsourcing)
cost reduction and supply chain management Reasons:
smoothing the flow patternoptimize quality flexibility inventory Costresponse time
Philip Morris (core competency)
Manufacture and sale of cigarettes.
MarketingMARLBORO, VIRGINIA SLIMS, MERIT, BENSON & HEDGES and PARLIAMENT
Philip Morris (supply chain)
Suppliers:raw materials
Manufacturing Logistics and Distribution
OUTSOURCEDNOT OUTSOURCED
Philip Morris (outsourcing)
Suppliers:Philip Morris does not farm the plant for leaf tobacco; buys from farmers. It does not produce the paper; buys from paper suppliers.Relationships between Philip Morris and its suppliers are close to partnerships.Philip Morris gets better rates while suppliers secure their business volume.
Philip Morris (outsourcing)
DistributionThird party logistics to distribute the cigarettes to retailers• Responsible for damages that might
occur during the transportation of goods.
Philip Morris (outsourcing)
Reasons:Enhance effectiveness by focusing on what Philip Morris does best.Redirect resources to more strategic activities that provide a greater return.Increase flexibility to meet changing business conditions .Control operating cost.
TYC Brother Industrial Co., Ltd. (core competency)
Producer of automotive lamps and lighting products
primary customers are in the collision parts industry
Products (development of exterior lighting)
exterior lighting program, A/C Condensers, and OEM replacement side view mirrors
Sales (distribution of end product)
TYC Brother Industrial Co., Ltd. (supply chain)
Supplier: raw materials Manufacturing, Assembling
Shipping from production plants to warehouse
Warehousing
OUTSOURCEDNOT OUTSOURCED
TYC Brother Industrial Co., Ltd. (outsourcing)
Certain brands of lamps in order to save costs.
molding process normally requires millions of dollars
Condensers and mirrors.
TYC Brother Industrial Co., Ltd. (outsourcing)
ReasonsCost reductions between 20% and 30% when it outsources lamps Having a complete line of products to offer their clients.Retailer.
Conclusions
As world markets trend towards increased competition and an ever increasing need for decreased production costs, many companies will find the need to outsource many more functions in the value chain and supply chain.