Global Manufacturing and Materials Management Chapter 16 © Mc. Graw Hill Companies, Inc. , 2000
Materials Management ¥Materials Management: the activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution. ¥Logistics: the procurement and physical transmission of material through the supply chain, from suppliers to customers. © Mc. Graw Hill Companies, Inc. , 2000 16 -1
Manufacturing and Materials Management - Strategic Objectives ¥Lower costs and, ¥Simultaneously, increase product quality. ¥Accommodate demands for local responsiveness. ¥Respond quickly to shifts in customer demand. © Mc. Graw Hill Companies, Inc. , 2000 16 -2
The Relationship Between Quality and Costs Increases Productivity Improves Performance Reliability Figure 16. 1 Lowers Rework and Scrap Costs Lowers Warranty and Rework Costs © Mc. Graw Hill Companies, Inc. , 2000 Lowers Manufacturing Costs Increases Profits Lowers Service Costs 16 -3
Total Quality Management (TQM) ¥ The leaders: W. Edwards Deming, Joseph Juran, and A. V. Feigenbaum “We have learned to live in a world of mistakes and defective products as if they were necessary to life. It is time to adopt a new philosophy in America. ” W. Edwards Deming © Mc. Graw Hill Companies, Inc. , 2000 16 -4
Where to Manufacture ¥Country factors. ¥Technological factors: ¤Fixed costs. ¤Minimum efficient scale. ¤Flexible manufacturing (Lean Production). • Reduce setup times. • Increase machine utilization. • Improve quality control Mass customization ¤Flexible machine cells. © Mc. Graw Hill Companies, Inc. , 2000 16 -5
Unit Costs A Typical Unit Cost Curve Minimum Efficient Scale Figure 16. 2 Volume © Mc. Graw Hill Companies, Inc. , 2000 16 -6
Manufacturing Location ¥ Fixed costs are substantial ¥ Minimum efficient scale is high ¥ Flexible manufacturing technologies available Single or few locations. ¥ Fixed costs are low ¥ Minimum efficient scale is low ¥ Flexible manufacturing technologies unavailable Major market locations if it better meets local demands. [ Trade barriers and transportation costs remain major impediments] © Mc. Graw Hill Companies, Inc. , 2000 16 -7
Product Factors and Location Strategies ¥Two product features affect location decisions: ¤Value to weight ratio. ¤Product serves universal needs. ¥Two strategies for locating manufacturing facilities: ¤Concentration. ¤Decentralization. © Mc. Graw Hill Companies, Inc. , 2000 16 -8
Location Strategy and Manufacturing Favored Manufactured Strategy Country Factors Differences in political economy Differences in culture Differences in factor costs Trade barriers Concentrated Decentralized Substantial Few Few Many Technological Factors Fixed costs High Minimum efficient scale High Flexible manufacturing technology Available Product Factors Value-to-weight ration High Serves universal needs Yes © Mc. Graw Hill Companies, Inc. , 2000 Low Not Available Low No Table 16. 1 16 -9
Belfast Carburetors and distributors Enfield Instruments, fuel and water gauges, plugs Treforest Basildon Radiators, water pump assembly, engine components Genk Spark plug insulators Body panels, road wheels Leamington Wülfrath Foundry production of engine components Transmission parts, engine components Cologne Dagenham -cast transaxle casings, gear and engine components Final assembly Bordeaux Transmissions Die Saarlouis Final assembly © Mc. Graw Hill Companies, Inc. , 2000 Valencia Final assembly Map 16. 1 in Text 16 -10
Strategic Role of Foreign Factories ¥ Initially, established where labor costs low. ¥ Later, important centers for design and final assembly. ¥ Upward migration caused by: ¤Pressure to improve cost structure. ¤Pressure to customize product to customer demand. ¤Increasing abundance of advanced factors of production. © Mc. Graw Hill Companies, Inc. , 2000 Dispersed Centers of Excellence are meet consistent with a Transnational Strategy 16 -11
Make or Buy ¥Advantages of Make: ¤Lower costs. ¤Facilitating specialized investments. ¤Proprietary production technology protection. ¤Improved scheduling. ¥Advantages of Buy: ¤Strategic flexibility. ¤Lower costs. ¤Offsets. © Mc. Graw Hill Companies, Inc. , 2000 16 -12
Coordinating a Global Manufacturing System ¥Materials management (includes logistics): ¤Achieve lowest possible cost that meets customer’s needs. ¥Power of ‘Just-in-Time’: ¤Economize on inventory holding costs. ¤Drawback: no buffer inventory. © Mc. Graw Hill Companies, Inc. , 2000 16 -13
The Role of the Organization ¥Organizational linkages are more numerous and complex. ¤More difficult to control costs. ¥Functionally separate materials management: ¤Equal weight with other departments. ¤Purchasing, production and distribution are one basic task: • controlling material flow from to customer. © Mc. Graw Hill Companies, Inc. , 2000 purchase 16 -14
Potential Materials Management Linkages North America Market A Europe Far East Market B Market C Markets Figure 16. 3 Plant 1 Plant 2 Plant 3 Source A Source B Source C © Mc. Graw Hill Companies, Inc. , 2000 Manufacturing Locations Source Locations 16 -15
Traditional Organizational Structure CEO Purchasing Manufacturing Marketing Production Planning and Control Distribution © Mc. Graw Hill Companies, Inc. , 2000 Finance Figure 16. 4 A 16 -16
Organization Structure with Materials Management as Separate Function Strategic manager/CEO Materials management Manufacturing Purchasing Production planning and control © Mc. Graw Hill Companies, Inc. , 2000 Marketing Distribution Finance Figure 16. 4 B 16 -17
Role of Information Technology ¥ Track component parts to assembly plant: ¤Optimize production scheduling. ¤Accelerate production, when necessary. ¥Creating linkages between a firm and its suppliers and shippers. ¤Communicate without time delay. ¤Minimizes paperwork. © Mc. Graw Hill Companies, Inc. , 2000 16 -18
© Mc. Graw Hill Companies, Inc. , 2000 16 -19
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