Globalization Unit 3 Notes PDF

3. International Operation Study Goals  what offshoring and outsourcing have in common and what makes them different.  how global production networks can be set up and controlled.  how an international logistics network can be managed efficiently and smoothly. 3.1 O shoring and O...

3. International Operation Study Goals  what offshoring and outsourcing have in common and what makes them different.  how global production networks can be set up and controlled.  how an international logistics network can be managed efficiently and smoothly. 3.1 O shoring and Outsourcing  What reasons can insourcing or backsourcing be based on? o lack of cost advantages – lack of quality  Offshoring: relocating the processes of a business to another country. o e.g. relocating call center services to countries abroad  Outsourcing: the transfer of parts of the value chain, regardless of the place of performance of these services. Reasons for Offshoring Reasons for Outsourcing  Lower wages abroad allow for cost  Cost savings reduction  Higher quality or greater level of  Access to qualified personnel innovation  Escape from overregulation (shorter  Focus on chore competencies approval procedures)  Flexibility and capacity fluxuations  Reduction of the “time to market”  Access to special know-how  Access to new markets (sales and  Transfer of risks to the supplier procurement markets)  Local content requirements and trade restrictions abroad  Tax aspects and subsidies  Lower environmental standards 18 Company sub-functions that are most often outsourced include: 1. IT operations and services 2. Training and further education 3. Supply chain 4. Human resources and personnel management (especially recruiting) 5. Finance and accounting 6. Customer relationship management and marketing  Insourcing (backsourcing): reincorporating previously outsourced processes. This happens in the following cases: o The expected benefits of outsourcing never happen o The control of global outsourcing parties is higher than expected o Outsources parties aren’t delivering the expected level of quality o Intellectual property and essential expertise starts to migrate out of the company o Dependence of the outsourced party needs to be scaled back 3.2 Global Production Networks  Which tasks are performed by a lead site? o global hub for product and process knowledge o support of global markets  Global Production Network (GPN): refers to the interconnected system of organizations, institutions, and consumers involved in the production, distribution, and consumption of goods or services, spread across different countries. o Can be designed based on 3 different framework concepts:  global commodity chains  global value chains  global production networks  Criteria for selecting a suitable site: o Describe optimal location requirements based on company’s objectives o Describe and analyze the identified sites o Build a system to classify the location factors o Rough selection of suitable locations’ o Short list the best locations o Select the optimal location 19 The specific roles of different locations: 1. Lead location: global hub for product and process knowledge. Sets the standard for production. 2. Contributor location: responsible for product development 3. Source location: specializes in process development and optimization; recommends product enhancements 4. Server location: responsible for the development of supplier network. Ensures smooth operation of supplier networks 5. Offshore location: recommendations for process improvement. 6. Outpost location: manages its own purchasing, logistics, and maintenance. Handles localized production needs and technical processes. There are 4 different site roles: 1. Isolated factory: deals in purely operational/productive activities in closed production areas. Little need to exchange info and employees. 2. Receiving factory: adopts innovations and must adapt to rapidly changing tasks. Rarely exchanges employees with other locations. 3. Hosting Network Player: operates exchange of information and innovations. Trains the staff of other locations and communicates within the network. 4. Active Network Player: operates proactive exchange of innovations and sends employees to other locations. Communicates intensively within the network. Network manager holds a central position and monitors and controls the production network following the company strategy. Rollout refers to the expansion of a small-scale production process to other locations within the global production network. Service provision within a network: 1. Full-scale production: competitive production of products from raw materials to finished products. 2. Benchmarking production: in-house production standards are the benchmark for the components produced externally (outsourced). 3. Ramp-up production: aimed at the fast implementation of new production systems that are transferred to other locations during a roll-out. 4. Prototype production: focuses on initial trial production of new products before they are rolled out to other locations. 5. Laboratory production: focuses on developing and testing new materials (without interrupting ongoing series production). 20   Which service provision tasks happen mostly in lead locations or specialized contributor locations? o Tasks of ramp-up, prototype, or laboratory production 3.3 Global Logistics  Which two classes of logistical data can be differentiated? Give an example each. o logistical master data, e.g. article number – logistical transactional data, e.g. invoice numbers There are 4 systems of global logistics: 1. Procurement logistics includes all flows of goods, information, and capital related to sourcing and purchasing. 2. Production logistics includes all physical movements of raw, auxiliary, and operating materials supplied to production and transported further to different production locations. 3. Distribution logistics (includes returns logistics): concerns transporting the end product to the customer. 4. Disposal logistics: processes for the disposal and recycling of goods residues and waste products from production.  What is the best example of extremely complex production logistics? o The production and assemble of aircraft  What are some challenges of distribution logistics? o Transporting damaged goods o Loss of goods in transit  What are the challenges of disposal logistics? o High level of regulation  Logistical master data: have longer validity independent of the concrete physical material flow. o e.g., article numbers, article dimensions or location data such as addresses  Logistical transactional data: are order related and are frequently changed. o e.g., order number, invoice number or issue data of the inventory management such as out-of-stock  Throughput times: the periods of time that parts and unfinished goods require from receipt to their use in production. 21 The primary objectives of global logistics: 1. Ensure the flow of materials across national and continental borders to avoid idle times. 2. Guarantee the flow of information for the traceability of the physical flow of goods at all times. 3. minimize throughput times in production and distribution logistics. 4. ensure the lowest possible level of stock through synchronization of procurement and production logistics. The challenges in achieving global logistics goals include  the volatility of replenishment times, seasonal availability of goods.  disturbances, delays, and damage caused by the transport system depending on the means of transport chosen.  decreasing economic efficiency when the transport speed is accelerated.  infrastructural differences on international logistics routes.  media breaks in the handling of goods, which force time-consuming reloading Questions:  The degree of in-house production in the company’s value chain is referred to as... o the vertical range of manufacture.  What term describes the regulations for the provision of certain services in a particular country? o local content requirements  In logistics, forced changes of the means of transport are called... o media disruption 22