global production outsourcing and logistic

7/30/2019 Global Production Outsourcing and Logistic

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GlobalProduction ,

Outsourcing ,

and Logistic

Sandy Wibisono

0706306522


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Introduction

Where in the world should production activity be located ? What should be the long-term strategic role of foreign

production sites ?

Should the firm own foreign production activities, or is it

better to outsource those activities to independentvendors ?

How should a globally dispersed supply chain be

managed , and what is the role of internet based

information technology in the management of globallogistic ?

Should the firm manage global logistics itself, or should it

outsource the management to enterprises that specialize

in this activity ?


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Strategy , Production , and

Logistics

Productionas the activities involved in

creating product.

Logisticis the activity that control the

transmission of physical material through

value chain , from procurement through

production and into distribution.


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Logistics

Strategic Objective

Lower cost.

Increasing Quality.

Production and logistic function must be able

to accommodate demands for local

responsiveness.

Production and logistic must be able torespond quickly to shifts in customer

demands.


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Logistics

Increase

Productivity

Improves

Performance

Reliability

Lowers Rework

and Scraps

Cost

Lower warranty

Cost

Lowers

Manufacturing

Cost

Lower Services

Cost

Increases Profit


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Where to Produce

CountryFactor

TechnologicalFactor

ProductFactor


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Country Factor

Political

Economy

Culture

RelativeFactor Cost

Externalities

FormalTrade Barrier

InformalTrade Barrier

ExchangeRates


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Technological Factor

TechnologicalFactor

Fixed Cost

MinimumEfficient Scale

FlexibleManufacturingand Mass

Customization


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Product Factors

Value toweight ratio

Serveuniversal

needs


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Concentrated

Production

Favored

Decentralized

Production

Favored

Country Factor

Differences in political economy Substantial few

Differences in culture Substantial few

Differences in factor cost Substantial few

Trade Barriers few Substantial

Location externalities Important in industry Not important in industry

Exchange rates stable volatile

Technological Factor

Fixed Costs High Low

Minimum efficient scale High Low

Flexible manufacturing technology Available Not available

Product Factor

Value to weight ratio High Low

Serve universal needs Yes no


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The Strategic Role of Foreign

Factories

Pressure from the center to improve a

factorys cost structure and/or customize a

product to the demands of consumers in a

particular nation can start a chain ofevents that ultimately leads to

development of additional capabilities at

the factory


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The Strategic Role of Foreign

Factories

Improvement in the capabilities of a

foreign factory can be the increasing

abundance of advanced factor of

production in the nation in which thefactory is located


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Outsourcing Production

Make

Buy


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The Advantage of Make

LoweringCost

FacilitatingSpecializedInvestments

ProtectingProprietary

ProductTechnology

ImprovingScheduling


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The Advantage of Buy

StrategicFlexibility

LowerCosts

Offsets


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Strategic Alliances With Supplier

Strategic alliance build a trust between the

firm and its supplier.

Trust results when a firm makes a credible

commitment to continue purchasing from a

supplier on reasonable terms.

Alliance are not all good

i.e. : Kodak and Canon , Sony build laptop

for Apple , Microsoft and Flextronics.


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Managing a Global Supply Chain

Lowest possible cost

Best serves customer needs


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The Role of Just-in-Time Inventory

JIT system is to economize on inventory

holding cost by having materials arrive at a

manufacturing plant just in time enter the

production process and not before.

The major cost saving comes from

speeding up inventory turnover.

This reduces inventory holding cost, such

warehousing and storage cost.


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The Role of IT and The Internet


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global production outsourcing and logistic

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