International Operation Quiz

Offshoring and Outsourcing

• Offshoring involves relocating business processes to another country, such as moving call center services abroad.

• Outsourcing refers to transferring parts of the value chain to an external provider, independent of location.

• Reasons for Offshoring include:

  • Lower wages offering cost reductions.
  • Access to qualified personnel and new markets.
  • Escape from overregulation and reduction of "time to market."
  • Tax advantages and lower environmental standards.

• Reasons for Outsourcing include:

  • Cost savings and improved quality or innovation.
  • Focus on core competencies and risk transfer to suppliers.
  • Flexibility to manage capacity fluctuations.
  • Access to specialized expertise.

• Commonly Outsourced Functions:

  • IT operations and services
  • Training and further education
  • Supply chain management
  • Human resources
  • Finance and accounting
  • Customer relationship management

• Insourcing (backsourcing) is the process of bringing previously outsourced functions back in-house due to insufficient benefits, quality issues, or protecting intellectual property.

Global Production Networks

• Global Production Network (GPN) is an interconnected system across countries involving organizations, institutions, and consumers in production, distribution, and consumption.

• Site Selection Criteria:

  • Identify optimal location requirements based on objectives.
  • Analyze potential sites and classify location factors.
  • Shortlist and select the best locations for operations.

• Specific Roles in GPN:

  • Lead location: Global hub setting production standards.
  • Contributor location: Handles product development.
  • Source location: Focuses on process optimization and enhancements.
  • Server location: Manages supplier networks.
  • Offshore location: Improves processes.
  • Outpost location: Manages local purchasing and operations.

• Logistics Roles:

  • Isolated factory: Focus on operational activities with minimal interaction.
  • Receiving factory: Adapts quickly to innovations.
  • Hosting Network Player: Facilitates information exchange and staff training.
  • Active Network Player: Proactively shares innovations and exchanges staff across locations.

Global Logistics

• Logistical Data Types:

  • Master data: Long-lasting information, e.g., article numbers.
  • Transactional data: Frequently changing order-related data, e.g., invoice numbers.

• Logistics Systems:

  • Procurement logistics: Manages sourcing, purchasing, and goods flow.
  • Production logistics: Oversees raw materials and their movement to production.
  • Distribution logistics: Focuses on delivering end products to customers, including challenges like damages and loss.
  • Disposal logistics: Deals with waste disposal and recycling under stringent regulations.

• Primary Objectives of global logistics include:

  • Ensuring smooth material flows across borders.
  • Maintaining traceability of goods and information.
  • Minimizing throughput times in production and distribution.
  • Reducing stock levels through synchronized logistics processes.

• Challenges faced in achieving global logistics goals:

  • Volatile replenishment times and seasonal availability.
  • Disturbances and damage during transportation.
  • Infrastructure differences affecting logistics.
  • Media disruptions requiring switching transport modes.

Key Terms

• Vertical range of manufacture: Degree of in-house production within the value chain.
• Local content requirements: Regulations governing service provision in specific countries.
• Media disruption: Forced change in transportation methods, causing logistical challenges.