INTERNATIONAL

BUSINESS
GLOBAL MANUFACTURING
AND SUPPLY CHAIN
MANAGEMENT

Presented by-
Hainal Patel [03] &
Bhawna Ludhyani [20]
 Introduction
Managers need to resolve:
 Where in the world to put a factory
 How in the world to move goods and services from
suppliers to factories to customers
 What in the world to do themselves versus
outsourcing to someone else
Complications arise from many multinational
enterprises’ (MNEs’) reaction to tough global
competition by rushing overseas to lower
manufacturing costs or reach new markets
Global Manufacturing Strategy

COMPATIBILITY
CONFIGURATION
COORDINATION
CONTROL
compatibility
The degree of consistency between where and how
managers set up their foreign manufacturing
system and the company’s competitive strategy
There are many ways that managers can
improve compatibility
In well-run companies, managers safeguard
compatibility by giving greater weight to their
forecast of future conditions than they do to
current events
Configuration
refers to the issue of where the company wants to
physically build its factories
Independent plants
Network of plants
Centralized manufacturing site
Legacy manufacturing
CO-ORDINATION
Once an overseas plant is up and running, managers need to
oversee the flow of material, information, and finance among
its various customers, suppliers, and distributors
Managers must coordinate the different activities that go
into making and moving a good or service around the
world
Control
A well-designed control system helps everyone in the company carry out their
jobs by outlining their roles and stipulating responsibilities in the company’s
manufacturing strategy.

Formal manufacturing controls: Informal manufacturing controls:

 Virtually every company Managers foster a

relies on: company-wide
philosophy that
 Standard operating
encourages workers to
procedures [SOPs]
voluntarily watch and
 International standards continuously improve
organization [ISO] the production process
 Six sigma Total quality
management
[TQM]
 Managers need to look at the possible effects of product and country
factors on the 4 Cs
 Product factors:
Value-to-weight ratio: can make a huge difference in plant
configuration
Purpose of the product
Complexity of the product
Product life cycles
Degree of digitalization
 Country factors:
Challenges come from a range of seemingly innocent
circumstances
Language barriers
Time zone differences
Different attitudes and approaches to manufacturing
across nations
 Information Technology
 EDI (electronic data interchange)
 ERP (enterprise resource planning)
 MRP (material requirements planning)
 RFID (radio frequency ID)
 E-commerce
 Private technology exchange (PTX)
Quality
Quality is defined as meeting or exceeding the
expectations of customers.
Quality standards can be:
general (ISO 9000)
industry-specific
company-specific (AQL, zero defects,
TQM, and Six Sigma)
Total Quality Management

Total quality management (TQM) is a process

that stresses:
customer satisfaction
employee involvement
continuous improvements
The goal of TQM is to eliminate all defects.
 Supply Chain Management
Supply chain - the coordination of materials,
information, and funds from the initial raw
material supplier to the ultimate customer.
 Global Supply Chain
Management

Global supply chain management: describes

managers’ effort to oversee the flows of raw
materials, components, information, and
finance through their network of suppliers,
assemblers, distributors, and customers located
around the world.
Generally, a firm’s global supply chain strategy
includes the following elements:
 Customer service requirements
 Plant and distribution center network design
 Inventory management
 Outsourcing and third party logistics relationships
 Key customer and supplier relationships
 Business processes
 Information systems
 Organizational design and training requirements
 Performance metrics
 Performance goals

17
Extranet: a linkage to the main information system
via the Internet

Trying to link all the players in the global supply chain

is particularly vulnerable to two types of threats:
• Operational problems:
 Communication challenges
• Strategic issues:
 National cultures
 Technology
 Tax policies
18
Global Sourcing and Production
Strategy
 Supplier Networks

Sourcing: the process of a firm having inputs

supplied to it from outside suppliers (both domestic
and foreign) for the production process.
Domestic sourcing allows the company to avoid
problems related to:
language
culture
currency
tariffs, and so forth
Foreign sourcing allows the company to reduce
costs and improve quality, among other things
Outsourcing
Major outsourcing configurations:
Vertical integration.
Outsourcing through industrial clusters.
Other outsourcing.
 Make or Buy Decision
Under the make or buy decision, companies have
to decide if they will make their own parts or buy
them from an independent company .
Companies go through different purchasing
phases as they become more committed to global
sourcing
Supplier Relations

When a company sources parts from suppliers

around the world, distance, time, and the uncertainty
of the international political and economic
environment can make it difficult for managers to
manage inventory flows accurately
The Purchasing Function
Global progression in the purchasing function:
Domestic purchasing only.
Foreign buying based on need.
Foreign buying as part of a procurement
strategy.
Integration of global procurement strategy.
 Inventory management
 Functions of Inventory Management
Track inventory
How much to order
When to order
 Prioritization
INVENTORY HIDES PROBLEMS

Bad
Design
Lengthy Poor
Setups Quality
Machine
Inefficient Unreliable
Breakdown
Layout Supplier
JIT
FTZ
Foreign Trade Zones (FTZs) were created in
the United States to provide special customs
procedures to U.S. plants engaged in
international trade-related activities. Duty-free
treatment is accorded items that are processed
in FTZs and then
reeexported.
FTZ…BENEFITS
 Relief from inverted tariffs.
 Duty exemption on re-exports.
 Duty elimination on waste, scrap, and yield
loss.
 Weekly Entry Savings.
 Duty Deferral.
Transportation Networks

The transportation system links together

suppliers, companies and customers.
Foreign trade zones (FTZs) - special locations for
storing domestic and imported inventory in order
to avoid paying duties until the inventory is used
in production or sold.
 Case study
DENSO Corporation and
Global Suppliers Relations
 SUMMARY:
Denso is a Japanese auto parts supplier and is the
third-largest auto supplier in the world. It is a major
supplier to Toyota, but also supplies parts to all other
auto manufacturers in Japan. In order to increase
revenues, Denso is making a big push to diversify by
increasing sales to non-Japanese firms such as
Daimler Chrysler. Denso serves the U.S. market
through plants in the U.S. and in Mexico. China is
becoming increasingly important as its car market
begins to grow rapidly. China is also becoming a
source of increased competition as Chinese auto
parts makers grow.
QUESTIONS
1.What is driving DENSO’s globalization efforts, and
what do you see as the major challenges confronting
the company?

Changes in automobile manufacturing locations and

demand are influencing DENSO’s globalization
efforts. Growth has been stronger for the industry
outside of Japan, forcing DENSO to diversify
geographically in order to grow. Anticipated growth in
countries like China and India will present major
challenges to DENSO in the future, as it tries to
expand operations to meet demands for high quality
and low cost across the globe.
2. What challenges will DENSO face in maintaining
its commitment to quality in the future?

To satisfy Toyota’s rigid quality standards,

DENSO has had to adopt TQM and strive for zero
defects. In addition, by complying with both ISO
9001 and QS9000, DENSO qualifies as a supplier
for auto manufacturers throughout Asia, Europe and
North America. Although kanban is thought to be
on the decline, it is still widely used, and mastery of
the process gives DENSO an advantage with firms
that rely on that system.
However, kanban shifts production and
inventory management burdens to suppliers and
makes it more difficult for suppliers to manage
their production schedules. Nonetheless, given
its expertise and certification, DENSO is well
positioned to compete as a global supplier to the
automobile industry. In fact, DENSO currently
supplies parts to all companies manufacturing
automobiles in Japan.
3. From the standpoint of inventory management, why
is it going to be difficult for DENSO to supply
companies other than Toyota?

Toyota still uses the kanban inventory control

system, while DENSO’s other major customers have
abandoned kanban and now use more highly
fluctuating demand models. This requires DENSO to
work within multiple systems and greatly increases
the complexity of balancing the inflow of supplies to
production volumes and customer needs.