Global Production and Supply Chains - PDF

Facultad Economía y Negocios Alejandra Vasquez Delama Welcome to ENNEG310 Business I / 01-02 Monday & Wednesday, 11:00 – 12:20 / 12:30 – 13:50 Alejandra Vasquez Delama [email protected] Facultad Economía y Negocios Alejandra Vasquez Delama Global production, supply chai...

Facultad Economía y Negocios Alejandra Vasquez Delama Welcome to ENNEG310 Business I / 01-02 Monday & Wednesday, 11:00 – 12:20 / 12:30 – 13:50 Alejandra Vasquez Delama [email protected] Facultad Economía y Negocios Alejandra Vasquez Delama Global production, supply chains, and digital business models Facultad Economía y Negocios Alejandra Vasquez Delama Overview 1. What is a supply chain? 2. Operations management strategies 3. Global sourcing 4. Debate: Should companies outsource innovation? 5. Global supply chain in the digital age 6. Quality Management Negocios I 3 Facultad Economía y Negocios Alejandra Vasquez Delama What is a supply chain? Negocios I 4 Facultad Economía y Negocios Alejandra Vasquez Delama What is a supply chain? Supply chain = network that links together different aspects of the value chain, from sourcing and procurement to conversion through operations to the final consumer Supply Chain Management is about handling complexity Supply-chain management = activities in the value chain that occur outside the company Operations management (logistics management) = internal activities Suppliers can be vertically integrated or independent Supplier network can be locally concentrated or internationally dispersed Negocios I 5 Facultad Economía y Negocios Alejandra Vasquez Delama Negocios I 6 Facultad Economía y Negocios Alejandra Vasquez Delama Supply Chain Management (SCM) The flow of goods and services encompassing everything (processes, systems, people) from the production of a product with raw materials to its final delivery and consumption Includes steps like production, shipment, distribution and return systems SCM is the attempt to control and orchestrate such a complexity in the most profitable manner. https://www.lokad.com/supply-chain-management-definition Negocios I 7 Facultad Economía y Negocios Alejandra Vasquez Delama https://abcsupplychain.com/what-is-supply-chain/ Negocios I 8 Facultad Economía y Negocios Alejandra Vasquez Delama https://www.quora.com/What-is-meant-by-upstream-and-downstream-Supply-Chain 9 Facultad Economía y Negocios Alejandra Vasquez Delama Original Equipment Manufacturers An original equipment manufacturer (OEM) = a company whose goods are used as components in the products of another company, which then sells the finished item to users Works together with the value-added reseller (VAR) E.g., processors (Intel) in computers of Dell, Microsoft, Samsung, etc. Microchips (semiconductor producers) by TSMC, NVIDIA for devices, cars, phones, etc. Negocios I 10 Facultad Economía y Negocios Alejandra Vasquez Delama https://quizlet.com/74409499/chapter-10-supply-chain-management-flash-cards/ Negocios I 11 Facultad Economía y Negocios Alejandra Vasquez Delama Exercise Find steps and needs of a global supply chain for a book. Negocios I 12 Facultad Economía y Negocios Alejandra Vasquez Delama What’s the problem here? Negocios I 13 Facultad Economía y Negocios Alejandra Vasquez Delama Negocios I 14 Facultad Economía y Negocios Alejandra Vasquez Delama Operations Management = the administration of business practices to create the highest level of efficiency possible within an organization Converting materials and labor into goods and services as efficiently as possible to maximize the profit of an organization Examples: defining the size of manufacturing plants, project management methods, implementing information technology networks, inventory management, raw materials acquisition, quality management and maintenance policies Negocios I 15 Facultad Economía y Negocios Alejandra Vasquez Delama Operations management strategies = conversion of inputs into outputs The success of a global operations management strategy depends on: Compatibility Configuration Coordination, and Control Negocios I 16 Facultad Economía y Negocios Alejandra Vasquez Delama Compatibility Suppliers must be compatible with the firm’s strategy (cost leadership / differentiation) Factors: Efficiency/cost reduction of operational costs Dependability: degree of trust in a company’s products, delivery, and price promises Quality: Performance reliability, good service, speed of delivery, and dependable product maintenance Innovation: Ability to develop new products and ideas Flexibility: Ability of the production process to make a variety of products and adjust the volume of output Negocios I 17 Facultad Economía y Negocios Alejandra Vasquez Delama Manufacturing Configuration Centralized Manufacturing (production in one country) Regional Manufacturing (e.g. apparel industry in south-east Asia, automobiles in Brazil or Mexico) Multi-Domestic Manufacturing (dispersed production, in several countries) Offshoring: placing manufacturing / processes abroad Nearshoring: changing manufacturing / processes closer to market Onshoring: bringing manufacturing / processes back Negocios I 18 Facultad Economía y Negocios Alejandra Vasquez Delama Outsourcing Situation in which one company externalizes a process or function to another company, e.g., IT services to India What can be challenges? Language differences, long distances, lengthy supply lines, exchange-rate fluctuations, wars and insurrections, strikes, politics, tariffs, and complex transportation channels Negocios I 19 Facultad Economía y Negocios Alejandra Vasquez Delama Outsourced (2006) https://www.youtube.com/watch?v=lI9x9cKp wHc (00:22:06) Directed by John Jeffcoat Todd Anderson (Josh Hamilton), salesman for a Seattle novelty products company, has to travel to India when his department (call center) is outsourced What are the problems with outsourcing in this scene? Negocios I 20 Facultad Economía y Negocios Alejandra Vasquez Delama Industrial Clusters Use of the regionalization of manufacturers, e.g. in Puebla (Mexico) for automotive industry, or high-tech in Silicon Valley (US) Favors knowledge spill-over effects Negocios I 21 https://www.scaruffi.com/svhistory/sil23v.html Facultad Economía y Negocios Alejandra Vasquez Delama Global sourcing Negocios I 22 Facultad Economía y Negocios Alejandra Vasquez Delama Reasons for global sourcing? Cost reduction through cheaper labor, laxer work rules, and lower land and facilities costs Improvement of quality Increase exposure to worldwide technology Strengthen reliability of supply by supplementing domestic suppliers with foreign ones Gain access to materials that are only available abroad Establish a presence in a foreign market React to competitors’ offshore sourcing practices Negocios I 23 Facultad Economía y Negocios Alejandra Vasquez Delama Outsourcing configurations Vertical integration when a company owns the entire supplier network, or a significant part of it. The company produces the most expensive parts itself. can reduce transaction costs by internalizing different levels in the value chain. Forms: backward integration vs. forward integration Negocios I 24 Facultad Economía y Negocios Alejandra Vasquez Delama The dilemma: Make or buy? Should a company take over the whole manufacturing and production process? Which elements should be outsourced? 🡪 MNEs should focus on those parts of production that are critical to the product and that they are particularly good at making (core competencies) Outsource parts when suppliers have a distinct comparative advantage Negocios I 26 Facultad Economía y Negocios Alejandra Vasquez Delama Global supply chains in the digital age IT facilitates global supply chain management In The World is Flat, Flattener #3 is workflow software: standard protocols such as HTTP that allow computers to work with each other business processes such as SAP workflow software is critical for the supply-chain management process. Negocios I 30 Facultad Economía y Negocios Alejandra Vasquez Delama Tom Friedman’s The World is Flat (2005) “Ten Flatteners” of the world #1: Collapse of Berlin Wall--11/'89 #2: Netscape: Netscape and the Web: files, films, music and pictures could be accessed and manipulated on a computer screen by all people across the world. #3: Workflow software: The ability of machines to talk to other machines with no humans involved #4: Open sourcing: Communities uploading and collaborating on online projects (e.g. software, blogs, Wikipedia) #5: Outsourcing: allows companies to split service and manufacturing activities into components which can be subcontracted. #6: Offshoring: The internal relocation of a company's manufacturing or other processes to a foreign land in order to take advantage of less costly operations there. #7: Supply chaining: modern retail supply chain is like a river, using technology to streamline item sales, distribution, and shipping. #8: Insourcing: UPS as a prime example for insourcing, in which the company's employees perform services-- beyond shipping--for another company #9: In-forming: Google and search engines are the prime example. "Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people“. #10: "The Steroids": Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP). Negocios I 31 Facultad Economía y Negocios Alejandra Vasquez Delama E-Commerce The Internet has revolutionized trade and global supply chains; facilitates information and knowledge exchange IT can help companies manage their global supply chains but it must be carefully integrated into their overall strategy Especially MNC must be sure to integrate all its subsidiaries in its database system Intranet: internal database of a company to manage processes, structures, procurement, etc. Extranet: suppliers can keep track of changes in demand; plugged into the ordering process, they can track the progress of their orders from factory to doorstep Negocios I 32 Facultad Economía y Negocios Alejandra Vasquez Delama Electronic Data Interchange (EDI) The electronic linkage of suppliers, customers, and third-party intermediaries to expedite documents and financial flows E.g. Sharepoint Negocios I 33 Facultad Economía y Negocios Alejandra Vasquez Delama Enterprise Resource Planning (ERP) Software to manage day-to-day business activities such as accounting, procurement, project management, risk management and compliance, and supply chain operations Material requirements planning = computerized information system that addresses complex inventory situations and calculates the demand for parts from the production schedules of the companies that use them https://softwarepara.net/que-es-un-erp-significado/ Negocios I 34 Facultad Economía y Negocios Alejandra Vasquez Delama Enterprise Resource Planning (ERP): SAP Negocios I 35 Facultad Economía y Negocios Alejandra Vasquez Delama Radio frequency ID (RFID) System that labels a product with an electronic tag that stores and transmits information on the product’s origin, destination, and quantity Data can be rewritten or captured and sent to a computer-network database, which collects, organizes, stores, and moves the data https://www.youtube.com/watch?v=z6v6 7BgcVy4 https://www.clase10.com/proceso-del-sector-textil-con-uso-de-rfid/ Negocios I 36 Facultad Economía y Negocios Alejandra Vasquez Delama Total quality management (TQM) Process that stresses three principles: customer satisfaction, continuous improvement, and employee involvement Process of continuous improvement at every organizational level Implies that the company is doing everything it can to achieve quality at every stage of the process (translated and adapted from Kamiske & Brauer, 1995, 24) Negocios I 38 Facultad Economía y Negocios Alejandra Vasquez Delama Lean Manufacturing A reason why companies might hesitate when considering whether to source parts from foreign suppliers is because of lean manufacturing = process of reducing waste in all areas of the supply chain Popularized by Toyota Relies on the efficiencies gained by reducing waste and defects Closely tied to quality management Negocios I 39 Facultad Economía y Negocios Alejandra Vasquez Delama Just-in-time (JIT) Inventory management, which focuses on “reducing inefficiency and unproductive time in the production process to improve continuously the process and the quality of the product or service.” JIT system gets raw materials, parts, and components to the buyer “just in time” for use, sparing companies the cost of storing large inventories https://www.youtube.com/watch?v=OXVi7dOF3jU Negocios I 40 Facultad Economía y Negocios Alejandra Vasquez Delama The Kanban System Kanban system, named after the Japanese word for “card” or “visible record.” Kanban cards are used to control the flow of production through a factory. Components are shipped to a plant just before they need to go into production, where they are kept in a bin with an attached card identifying the quantity of items in the bin. When the assembly process begins, a production-order card signifies that a bin needs to be moved to the assembly line Negocios I 41 Facultad Economía y Negocios Alejandra Vasquez Delama Six Sigma Statistical approach to quality management developed by Motorola and popularized by General Electric System of quality control that scrutinizes a company’s entire production system Aims to eliminate defects, slash product cycle times, and cut costs across the board Uses data and rigorous statistical analysis to identify “defects” in a process or product, reduce variability, and achieve as close to zero defects as possible Negocios I 42 Facultad Economía y Negocios Alejandra Vasquez Delama Questions?