Global Production and Outsourcing Quiz

Questions and Answers

What are the main production issues for firms?

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

What is the best marketing strategy?

Where should production activities be located? (correct)

Should the firm manage global logistics itself? (correct)

What program do most firms use to improve quality?

Six Sigma

Production should always be concentrated in a single location.

False

What factors should firms consider when deciding where to locate production?

Product factors Signup and view all the answers

The role of ________ is crucial in materials management.

information technology Signup and view all the answers

What is a major drawback of Just-In-Time (JIT) inventory systems?

Reliance on reliable suppliers Signup and view all the answers

Which of the following is true about flexible manufacturing?

It reduces setup times. Signup and view all the answers

What is the purpose of Electronic Data Interchange (EDI)?

To facilitate real-time communication between firms and suppliers. Signup and view all the answers

What are the advantages of outsourcing?

Greater flexibility Signup and view all the answers

What is one key factor affecting the attractiveness of a country as a production location?

Regulations affecting Foreign Direct Investment (FDI) Signup and view all the answers

Study Notes

Main Production Issues for Firms

Key decisions include location of production, long-term role of foreign sites, ownership vs. outsourcing, management of supply chains, and logistics management.
Efficient production and logistics can lower costs and enhance customer service.
Quality improvements often utilize the Six Sigma program, originating from Total Quality Management (TQM).

Production Location Considerations

Production should be responsive to logistics and customer demand.
Important factors:
- Country Factors: Economic, political, and cultural conditions that impact production efficiency.
- Technological Factors: Fixed costs, minimum efficient scale, and flexibility of manufacturing technology.
- Product Factors: Value-to-weight ratio and universality of product needs.

Country Factors

Assess skilled labor availability, trade barriers, exchange rate expectations, transportation costs, and regulations affecting foreign direct investment (FDI).
Future currency expectations can influence production location effectiveness.

Technological Factors

High fixed costs favor centralized production; low fixed costs may allow multiple locations.
High minimum efficient scale necessitates centralized production, while low scale permits diverse manufacturing to meet local demand.
Flexible manufacturing technology enables customization and efficient production, allowing rapid responses to market needs.

Product Factors

High value-to-weight ratio products benefit from centralized production; low ratios encourage multiple production sites.
Universal need products allow for centralized manufacturing due to reduced necessity for local responsiveness.

Strategies for Locating Production Facilities

Concentration: Centralizing production in optimal locations for cost efficiency through economies of scale.
Decentralization: Establishing regional facilities closer to markets for quicker response to local demand.

Strategic Role of Foreign Factories

Foreign factories can evolve from low-cost operations to centers of advanced design capabilities.
Key is adapting to changes in regulations and enhancing production facilities to maintain market competitiveness.

Make-or-Buy Decisions

Firms face critical choices between in-house production (make) vs. outsourcing (buy).
Key advantages of 'make':
- Vertical integration provides cost efficiency for specific components.
- Protects proprietary technology and facilitates coordination.
Advantages of 'buy' include flexibility, cost reduction, and the potential to capture international orders.

Managing a Global Supply Chain

Efficient logistics are vital for cost management and meeting customer demands.
Just-In-Time (JIT) inventory systems minimize holding costs and improve quality control but risk stock shortages during unexpected demand surges.

Role of Information Technology

Web-based information systems enhance production scheduling and materials management.
Electronic Data Interchange (EDI) allows real-time tracking, communication, and reduces paperwork, facilitating global supply chain efficiency.

Description

This quiz explores key issues related to global production, outsourcing, and logistics. It examines critical questions that international firms must consider, from production location to supply chain management. Test your understanding of the strategic roles of foreign production sites and the decision-making processes involved in outsourcing.