Global Production, Outsourcing and Logisitics Flashcards
Exam 3 (13 cards)
What are the drivers to making/buying products?
- Falling Barriers
- Growth in new markets
- Innovation and technology
- Global increase in demand and services
What is industry agglomeration?
Industry agglomeration is when businesses from the same or related industries group together in one area or region.
What are country factors related to global production?
- Country attractiveness and stability
(ex companies pulling out of china due to economy - industry agglomeration
- expected exchange rate
What are technology factors related to global production?
- Set up costs
- minimum efficent scales
- flexible manufactoring
What are product factors realted to global production?
- value to weight ratio
- products serve a universal need
What is MES? How does it work?
What is Minimum Efficient Scale
MES is the smallest amount of production a company needs to do in order to produce at the lowest possible cost per unit.
1. If MES is Large:
You have to produce a lot to keep costs low.
2. If MES is Small:
You don’t need to make much to be cost-efficient.
A large MES limits flexibility, but saves on costs through scale.
A small MES increases flexibility, local presence, and sometimes faster delivery.
What is “JIT” Just in time?
Just-In-Time (JIT) is an inventory and production strategy where materials, parts, and products are delivered or made only when needed, not before.
What are benefits of buying instead?
Advantages of buying-
Can shift orders to different locations and suppliers as conditions change.
In some cases, it might be more cost effective and quicker to buy (because their are no set up costs)
It may result in preferential treatment from local government where you buy
Which type of firms tend to buy?
Single brand retailers like ZARA, H&M, GAP
Multi Brand retailers like Wlamart
Manufacturing Firms like Honda, Boeing, DELL, and Ford
What are disadvantages to “JIT”
Difficult to respond to unanticipated spikes in demand
If supply lines are interrupted, it is difficult to continue production.
Disruptions (like delays from suppliers) can stop the whole process
No buffer inventory means there’s little room for error.
What is EDI?
It is the electronic exchange of business documents (like invoices, purchase orders, shipping notices) between companies—without paper or manual input.
EDI lets businesses send important documents to each other automatically, in a standard digital format.
What are advantages of EDI?
communication and coordination costs dramatically drop, and complex systems of ordering production and delivery are now more feasible.
What are benefits to JIT ?
Less money tied up in inventory
Less storage space needed
Faster response to changes in demand
Reduces waste and overproduction
Why would firms decide to make part, or all, of a product? Advantages
May lower costs over time
Avoid dependency on independent suppliers
Safe guard technological capabilities from being transferred to suppliers (ex similarities between apple and samsung. Apple sued b/c they believe they received info from suppliers)
Firms can be more efficient/tighter coordination and control over the flow of parts
