Production strategy

ObjectivesIntroductionResearch, development and innovationGeneration of good and services

Examine the role of research, development, and innovation in production strategy

Relate some of the most critical steps in generating goods and services, including global sourcing, costing techniques, quality maintenance, effective materials handling, inventory control, and the proper emphasis on service

Describe the nature and importance of international logistics in production strategy

MNEs, like domestic firms, are concerned with the efficient use of labor and capital. Both are also interested in: investing in research and development (R&D)organizing operations to generate successful

new product lines and to increase production and service efficiency

MNEs need to organize their production management so that they can minimize operating costs through the use of logistics and inventory control Backward integration: The ownership of equity

assets used earlier in the production cycle, such as an auto firm that acquires a steel company

Forward integration: The purchase of assets or facilities that move the company closer to the customer such as a computer manufacturer that acquires a retail chain which specializes in computer products

Horizontal integration: The purchase of firms in the same line of business such as a computer chip firm which acquires a competitor.

In the past many MNEs focused most heavily on the production strategy aspect of operations, failing to realize that an effective production strategy begins with new product developmentNew product development/service developmentSpeed to market

Time-to-market accelerators: Factors that help to reduce bottlenecks and errors and to ensure product quality

Modular integrated robotized system: A software-based production process that relies entirely on robots

Concurrent engineering: The process of having design, engineering, and manufacturing people working together to create a product, in contrast to working in a sequential manner.

Global sourcing: The use of suppliers anywhere in the world, chosen on the basis of their efficiency.

Manufacturing of goods:Cost

Modular manufacturing: a process that allows suppliers of parts to take on part of the assembly

QualityContinuous improvement

Production systemsLocation, layout, materials handling

Inventory controlJust-in-time, Demand-Flow Technology TM

Developing a strong service orientation:Many products have a service element associated

with them

Determining the product/service balanceProviding the right amount of service

International logistics: The designing and managing of a system to control the flow of materials and products throughout the firmTransportation

For example: ocean shipping and air shippingChoice criteria of transportation

Time, predictability, cost and non-economic factorsPackagingStorage