POM - J. GalvánPOM - J. Galván 11

PRODUCTION AND PRODUCTION AND OPERATIONS OPERATIONS

MANAGEMENTMANAGEMENT

Ch. 3: Operations in a Global Ch. 3: Operations in a Global EnvironmentEnvironment

POM - J. GalvánPOM - J. Galván 22

Learning ObjectivesLearning Objectives

What is the difference in terms of What is the difference in terms of operations management when the operations management when the company is global?company is global?

POM - J. GalvánPOM - J. Galván 33

Logistics Management

Location Decisions

Supply Chain Management

Management Issues in Global Management Issues in Global OperationsOperations

Global Strategic ContextGlobal Strategic Context• DifferentiationDifferentiation• Cost leadershipCost leadership• ResponseResponse

POM - J. GalvánPOM - J. Galván 44

Possible strategiesPossible strategies

POM - J. GalvánPOM - J. Galván 55

Important issues to considerImportant issues to consider

How to organize the flow of goods - How to organize the flow of goods - Supply chain managementSupply chain management

Where to deploy resources- Where to deploy resources- Facility Facility location decisions location decisions • Types of facilitiesTypes of facilities• LocationsLocations

How are you going to move supplies How are you going to move supplies and products - and products - Materials Materials managementmanagement

POM - J. GalvánPOM - J. Galván 66

Supply-Chain ManagementSupply-Chain Management

SourcingSourcing Vertical integrationVertical integration Make-or-buy decisionsMake-or-buy decisions PartneringPartnering

POM - J. GalvánPOM - J. Galván 77

Location DecisionsLocation Decisions

Country-related issuesCountry-related issues Product-related issuesProduct-related issues Government policy/political riskGovernment policy/political risk Organizational issuesOrganizational issues

POM - J. GalvánPOM - J. Galván 88

Materials ManagementMaterials Management

Flow of materialsFlow of materials Transportation options and speedTransportation options and speed Inventory levelsInventory levels PackagingPackaging StorageStorage

POM - J. GalvánPOM - J. Galván 99

Reasons to Globalize Reasons to Globalize OperationsOperations

Reduce costs (labor, taxes, tariffs, Reduce costs (labor, taxes, tariffs, etc.)etc.)

Reduce risks (foreign exchange, etc.)Reduce risks (foreign exchange, etc.) Improve supply chainImprove supply chain Provide better goods and servicesProvide better goods and services Attract new marketsAttract new markets Learn to improve operationsLearn to improve operations Attract and retain global talentAttract and retain global talent

Tangible

Intangible

POM - J. GalvánPOM - J. Galván 1010

Trade and TariffTrade and Tariff

Maquiladoras - Mexican factories located Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive along the U.S.-Mexico border that receive preferential tariff treatmentpreferential tariff treatment

GATT - an international treaty that helps GATT - an international treaty that helps promote world trade by lowering barriers promote world trade by lowering barriers to the free flow of goods across bordersto the free flow of goods across borders

NAFTA - a free trade agreement between NAFTA - a free trade agreement between Canada, Mexico, and the United StatesCanada, Mexico, and the United States

POM - J. GalvánPOM - J. Galván 1111

Free trade may take us into the era Free trade may take us into the era of the floating factory - a six person of the floating factory - a six person crew will take a factory from port to crew will take a factory from port to port in order to obtain the best port in order to obtain the best market, material, labor and tax market, material, labor and tax advantagesadvantages

THOUGHTTHOUGHT

POM - J. GalvánPOM - J. Galván 1212

Achieving Global OperationsAchieving Global OperationsFour ConsiderationsFour Considerations

Global product designGlobal product design Global process design and Global process design and

technologytechnology Global factory location analysisGlobal factory location analysis Impact of Culture and EthicsImpact of Culture and Ethics

POM - J. GalvánPOM - J. Galván 1313

GlobalGlobal Product Design Product Design

Remember social and cultural Remember social and cultural differencesdifferences• packaging and marketing can help make packaging and marketing can help make

product seem “domestic” but -product seem “domestic” but -““liter” versus “quart”liter” versus “quart”““sweetness” and “taste”sweetness” and “taste”

POM - J. GalvánPOM - J. Galván 1414

GlobalGlobal Process Design and Technology Process Design and Technology

Information technology enables Information technology enables management of integrated, globally management of integrated, globally dispersed operationdispersed operation

Texas Instruments: 50 plants in 19 Texas Instruments: 50 plants in 19 countriescountries

Hewlett-Packard - product Hewlett-Packard - product development teams in U.S., Japan, development teams in U.S., Japan, Great Britain, and GermanyGreat Britain, and Germany

Reduces time-to-marketReduces time-to-market

POM - J. GalvánPOM - J. Galván 1515

Select CSFs based on parent Select CSFs based on parent organization’s strategic or organization’s strategic or operations objectivesoperations objectives

Obtain country-specific information Obtain country-specific information on the CSFson the CSFs

Evaluate each country’s CSFs using Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scalea 1 (bad) to 5 (good) rating scale

Sum the ratingsSum the ratings

GlobalGlobal Facility Location Analysis Facility Location Analysis

Using CSFs (Country specific factors) for Country Selection

POM - J. GalvánPOM - J. Galván 1616

national literacy ratenational literacy rate rate of innovationrate of innovation rate of technology rate of technology

changechange number of skilled number of skilled

workersworkers stability of governmentstability of government product liability lawsproduct liability laws export restrictionsexport restrictions similarity in languagesimilarity in language

You May Wish To ConsiderYou May Wish To Consider

¨ work ethicwork ethic¨ tax ratestax rates¨ inflationinflation¨ availability of raw availability of raw

materialsmaterials¨ interest ratesinterest rates¨ populationpopulation¨ number of miles of number of miles of

highwayhighway

POM - J. GalvánPOM - J. Galván 1717

GlobalGlobalImpact of Culture and EthicsImpact of Culture and Ethics

Cultures differ! Some accept/expect:Cultures differ! Some accept/expect:• variations in punctualityvariations in punctuality• long lunch hourslong lunch hours• expectation of thieveryexpectation of thievery• briberybribery• little protection of intellectual propertylittle protection of intellectual property• Extended working timeExtended working time• Smaller salariesSmaller salaries• No social benefits….No social benefits….

POM - J. GalvánPOM - J. Galván 1818

To Establish Global ServicesTo Establish Global Services

Determine if sufficient people or Determine if sufficient people or facilities exist to support the servicefacilities exist to support the service

Identify foreign markets that are Identify foreign markets that are open - not controlled by governmentsopen - not controlled by governments

Determine what services are of most Determine what services are of most interest to foreign customersinterest to foreign customers

Determine how to reach global Determine how to reach global customerscustomers