International Operations Management

Agenda
Describe the nature of international operations management Analyze the supply chain management and vertical integration decisions facing international production managers Analyze the meaning of productivity and discuss how international firms work to improve it Explain how firms control quality and discuss total quality management in international business Analyze how international firms control the information their managers need to make effective decisions

International Operations Management

Operations Management

- the set of activities an organization uses to

transform different kinds of inputs into final goods and services

International Operations Management

- the transformation-related activities of an

international firm

The International Operations Management Process

Strategic Context
Differentiation Cost leadership Focus Standardized vs. Customized Production

Acquisition of Resources Supply Chain Management Make-or-buy decision

Location Decisions Country-related issues Product-related issues Government policies Organizational issues

Logistics and Materials Management Flow of materials Transportation options Inventory levels Packaging
2004 Prentice Hall

17-4

Competitive Strategy

Competitive Strategy
Essential to achieving objectives Reflects overall firm strategy
Low-cost leadership Differentiation Focus

Competitive Strategy Process Planning

Deciding the process that a company will use to create its product
Low-cost leadership Large scale Efficiency Differentiation / Focus Skills Flexibility
15 - 7

Competitive Strategy Standardized or Adapted

Low-cost leadership
Standardized Automated Large batches

Differentiation / Focus
Adapted Small scale Higher cost
15 - 8

Competitive Strategy Facilities Layout Planning

Deciding the spatial arrangement of production processes within facilities

Reflects business strategy

Geography may be a factor

15 - 9

Acquisition of Resources
Supply Chain Management Make of Buy Decisions

Supply Chain Management

A set of processes and steps a firm uses to acquire the various resources it needs to create its products

Make or Buy Decisions

Basic Make or Buy Options

Make or Buy Decisions

Influence Factors for Make-or-Buy Decision
Raw materials / Intermediate components Size Scope of operations Technological expertise Nature of product Facility availability

Make or Buy Decisions

Competitive Advantage versus Strategic Vulnerability in the Make-or-Buy Decisions
Potential for Competitive Advantage High

Strategic Control Moderate Control Low Control

High Degree of Strategic Vulnerability Low

Low

Make or Buy Decisions

Necessary Trade-offs in Make-or-Buy Decision
Cost Control considerations Risk Investment Flexibility

Make or Buy Decisions

Decision to Make

Vertical integration
Extent to which a firm either provides its own resources or obtains them from other sources Extend control over inputs (backward integration) or outputs (forward integration)

Reasons to make
Lower cost Greater control

Make or Buy Decisions

Decision to Buy

Outsourcing

Reasons to buy
Lower risk Greater flexibility Market power

Buying from another company a good or service that is not central to a companys competitive advantage

Location Decisions

Facilities Location Planning

Selecting a location for production facilities
Resources, conditions Labor costs, productivity

Service customer needs

Factory to market distance

Factors affecting Location Decisions

Country-Related Issues Product-Related Issues Government Policies Organizational Issues

Factors affecting Location Decisions Country-Related Issues

Resource availability Cost Infrastructure Country-of-origin effects

Factors affecting Location Decisions

Country-related issues play key roles in location decisions for manufacturers

Factors affecting Location Decisions Product-Related Issues

Value-to-weight ratio Technology Importance of customer feedback

Factors affecting Location Decisions Government Policies

Stability of political process National trade policies Economic development incentives Existence of foreign trade zones (FTZ)

Factors affecting Location Decisions Organizational Issues

Business strategy

- Cost leadership - Differentiation

Organizational structure Inventory management policies

- Just-in-time (JIT) inventory management

system

Capacity Planning
Assessing a companys ability to produce enough output to satisfy market demand
Work shifts Labor laws Facility capacity Subcontracting

Location Economies
Economic benefits derived from locating production activities in optimal locations Key Fact: Each production activity generates more value in a particular location than could be generated elsewhere

Centralized vs. Decentralized

Centralized production Low-cost leadership Global strategy Transportation costs Decentralized production Differentiation / Focus Multinational strategy Buyer preferences

International Logisitic & Materials Management

Materials & Assets Transportation options Inventory levels Packaging

International Logistics and Materials Management

International logistics: management of

- flow of materials, parts, supplies, and other

resource from suppliers to the firm - flow of materials, parts, supplies, and other resources within and between units of the firm itself - flow of finished products, services, goods from the firm to customers

Differences in Domestic and International Materials Management

Distance involved in shipping Number of transport modes Complexity of regulatory context

International Service Operations

International Service Business: firm that transforms resources into an intangible output that creates utility for its customers Characteristics:

Intangible Not storable Require customer participation Tied to the purchase of other products

International Service Operations

This BP Connect store allows customers to buy BP petroleum products, coffees from South America, and to access the Internet from the pump

Materials and Assets

Raw materials
Quality Quantity

Fixed assets
Existing Facility Greenfield

Other Production Issues

Importance of cost containment

Shipping costs

Inventory costs

Just-in-time manufacturing

Decision to Reinvest or Divest

REINVEST DIVEST

Promising outlook Growing market Highest return

Unprofitable outlook Social unrest

Thank You