Week 9: Global Supply Chain Management Flashcards
(36 cards)
The basic career options in global supply
chains include its main functions of
Logistics, purchasing (sourcing),
production and operations management, and marketing channels
SCM Institutions
• The Council of Supply Chain Management
Professionals (CSCMP)
• Association for Supply Chain Management (ASCM)
• Master Program:
UBC: Master of Science in Business Administration in
Transportation and Logistics (MSCB)
MIT Supply Chain Management Master’s Programs
Master of Supply Chain Analytics
Global Supply Chain
Global Supply Chain
In today’s global economy, firms must decide
- Where to locate productive activities
- What the long-term strategic role of foreign production sites should be
• Whether to own foreign production activities or
outsource those activities
• How to manage a globally dispersed supply chain and
what the role of Internet-based information technology
should be in the management of global logistics
• Whether to manage global logistics or outsource
What Is SCM?
Wikipedia definition
In commerce, supply chain management (SCM), the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfilment from point of origin to point of consumption.
What Is SCM?
Prof. David Simchi-Levi @ MIT
The system of suppliers, manufacturers, transportation, distributors, and vendors that exists to transform raw materials to final products and supply those products to customers.
Supply Chain Management
(SCM) Definition
Amir’s definition
Managing a set of chains
(manufacturers, wholesalers,
retailers, distributors, etc.) to
match supply with demand.
SCM, OM, & Logistics
SCM, OM, & Logistics
Is SCM all about production?
SCM is not all about production
It can also include service (example matching demand at hospitals in Montreal)
Strategy, Production, and Supply Chain Management 1
Production: activities involved in creating a product or
service
Supply chain management: the procurement and
physical transmission of material through the supply
chain, from suppliers to customers
• Purchasing: worldwide buying of raw material,
component parts, and products used in manufacturing the product or service.
• Logistics: plans, implements, and controls the effective flows and inventory of raw material, component parts, and products used in manufacturing
Strategy, Production, and Supply Chain Management 2
The strategic objectives of the production and logistics
function are:
• To lower costs
• To increase product quality by eliminating defective
products from the upstream and downstream supply
chain and manufacturing process
• Quality refers to reliability
The upstream from raw materials to the production facility (this is sometimes also called the inbound supply chain).
The downstream supply chain (e.g., wholesaler, retailer): from the production facility to the end-customer (this is also sometimes called the outbound
supply chain).
The Relationship Between Quality Control and Costs
Look at Figure 15.1 (slide 28)
Hard to balance cost, time, scope / quality
-High quality = increase cost
Strategy, Production, and Supply Chain Management 3
The Six Sigma quality improvement program aims to
reduce defects, boost productivity, eliminate waste,
and cut costs throughout a company
• Six Sigma is a direct descendant of total quality
management (TQM)
• First adopted by Japanese companies
• In addition, some countries have also promoted specific quality guidelines like the EU’s ISO 9000
Strategy, Production, and Supply Chain Management 4
Two other objectives are important for international
companies:
- Production and logistics functions must be able to
accommodate demands for local responsiveness (the
degree to which the company must customize their
products and methods to meet conditions in other
countries.) - Production and supply chain management must be able to respond quickly to shifts in customer demand
Global Production
Global Production
Make-or-Buy Decisions
Make or buy decisions
• Decisions about whether to perform a certain value
creation activity in-house or outsource it to another firm
are important to a firm’s manufacturing strategy
• Main factors in the decision are cost and production
capacity
Where to Produce 1
Country Factors
• Location economies
• Formal and informal trade barriers
• Transportation costs
• Regulations affecting FDI (Foreign Direct Investment)
• Expected future movements in exchange rates
Where to Produce 2
Technological Factors
• Fixed Costs
• If they are very high, a firm might serve the world market from a single location or from very few locations
Aim for break-even point
What is the definition of breakeven point?
- F: fixed cost
- p: price per unit
- c: cost per unit
- x: number units
Breakeven point:
(p-c)x=F -> x=F/(p-c)
(20-10)x=1,000 -> x=100 units
Where to Produce 2
Technological Factors
• Minimum Efficient Scale
• The larger the minimum efficient scale—the level of output at which most plant-level scale economies are exhausted—of a plant, the more likely centralized production makes sense
As in the case of low fixed costs, the advantages of a low minimum efficient scale include
allowing the firm to accommodate demands for local responsiveness or to hedge against
currency risk by manufacturing the same product in several locations.
Where to Produce 3
Technological Factors continued
• Flexible Manufacturing
- Enable firms to produce a wide variety of end products at a unit cost that traditionally would require mass production of a standardized output
- Also known as lean production
- Reduce set up times for complex equipment
- Increase the utilization of individual machines through better scheduling
- Improve quality control at all stages of the manufacturing process
Mass customization
The term mass customization has been coined to describe the ability of companies to use flexible manufacturing technology to reconcile two goals that were once thought to be incompatible: low cost and product customization. Flexible manufacturing
technologies vary in their sophistication and complexity.
One of the most famous examples of a flexible manufacturing technology, Toyota’s production system, has been credited with making Toyota the most efficient auto company in the world. Toyota’s flexible manufacturing system was developed by one
of the company’s engineers, Taiichi Ohno. After working at Toyota for five years and visiting Ford’s U.S. plants, Ohno became convinced that the mass production philosophy for making cars was flawed. He saw numerous problems with mass production.
Lean Production
Lean production is an approach to management that focuses on cutting out waste, whilst ensuring quality. This approach can be applied to all aspects of a business – from design, through production to
distribution.
From video: Kaizen, 1 car for every 1.6 man power
Made over 250 million vehicles
Where to Produce 4
Technological Factors continued
• Flexible Manufacturing and Mass Customization continued
- Another common flexible manufacturing technology are the flexible machine cells: grouping of various types of machinery, a common materials handler, and a centralized cell controller
- Adopting flexible manufacturing technologies can help the firm to customize products to meet the demands of small customer groups in different national markets
