J0444J0444

OPERATION MANAGEMENTOPERATION MANAGEMENT

Strategi Operasi di Strategi Operasi di Lingkungan GlobalLingkungan Global

Pert

4

Universitas Bina Universitas Bina NusantaraNusantara

Examples of Global Examples of Global StrategiesStrategies

Boeing – both sales and production are Boeing – both sales and production are worldwide.worldwide.

Benetton – moves inventory to stores Benetton – moves inventory to stores around the world faster than its competitor around the world faster than its competitor by building flexibility into design, by building flexibility into design, production, and distributionproduction, and distribution

Sony – purchases components from Sony – purchases components from suppliers in Thailand, Malaysia, and around suppliers in Thailand, Malaysia, and around the worldthe world

GM is building four similar plants in GM is building four similar plants in Argentina, Poland, China, and ThailandArgentina, Poland, China, and Thailand

Boeing Suppliers (777)Boeing Suppliers (777)

Firm Country PartsAlenia Italy Wing flaps

AeroSpaceTechnologies

Australia Rudder

CASA Spain Ailerons

doors, wing sectionFuji Japan Landing gear

GEC Avionics United Kingdom Flight computers

Korean Air Korea Flap supports

Menasco Aerospace Canada Landing gears

Short Brothers Ireland Landing gear doors

SingaporeAerospace

Singapore Landing gear doors

The Role ofThe Role of

MaquiladorasMaquiladoras World Trade Organization (WTC)World Trade Organization (WTC) North American Free Trade North American Free Trade

Agreement (NAFTA)Agreement (NAFTA) European Union (EU)European Union (EU)

Management Issues inManagement Issues in Global Operations Global Operations

Global Strategic Global Strategic ContextContext– DifferentiationDifferentiation– Cost leadershipCost leadership– ResponseResponse

Logistics Logistics ManagemeManagementnt

Location Location DecisionsDecisions

Supply Chain Supply Chain ManagemeManagementnt

Supply-Chain ManagementSupply-Chain Management

SourcingSourcing Vertical integrationVertical integration Make-or-buy decisionsMake-or-buy decisions PartneringPartnering

Location DecisionsLocation Decisions

Country-related issuesCountry-related issues Product-related issuesProduct-related issues Government policy/political riskGovernment policy/political risk Organizational issuesOrganizational issues

Materials ManagementMaterials Management

Flow of materialsFlow of materials Transportation options and speedTransportation options and speed Inventory levelsInventory levels PackagingPackaging StorageStorage

Defining Global OperationsDefining Global Operations

International business - engages in cross-border International business - engages in cross-border transactionstransactions

Multinational Corporation - has Multinational Corporation - has extensiveextensive involvement in international business, owning or involvement in international business, owning or controlling facilities in more than one countrycontrolling facilities in more than one country

Global company - integrates operations from Global company - integrates operations from different countries, and views world as a single different countries, and views world as a single marketplacemarketplace

Transnational company - seeks to combine the Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of global-scale efficiencies with the benefits of local responsivenessbenefits of local responsiveness

Some Multinational Some Multinational CorporationsCorporations

WorkforceCompany Home

Country% SalesOutsideHomeCountry

% AssetsOutsideHomeCountry

% Foreign

Colgate-Palmolive

USA 72 63 NA

DowChemical

USA 60 50 NA

Gillette USA 62 53 NA

Honda Japan 63 36 NA

IBM USA 57 47 51

Citicorp USA 34 46 NA

Some Multinational Some Multinational CorporationsCorporations

WorkforceCompany Home

Country% SalesOutsideHomeCountry

% AssetsOutsideHomeCountry

% Foreign

ICI Britain 78 50 NA

Nestlé Switzerland 98 95 97

Philips Netherlands 94 85 82

Siemens Germany 51 NA 38Electronics

Unilever Britain & Netherlands

95 70 64

Reasons to Globalize Reasons to Globalize OperationsOperations

Reduce costs (labor, taxes, tariffs, Reduce costs (labor, taxes, tariffs, etc.)etc.)

Improve the supply chainImprove the supply chain Provide better goods and servicesProvide better goods and services Attract new marketsAttract new markets Learn to improve operationsLearn to improve operations Attract and retain global talentAttract and retain global talent

TangibleTangible

IntangibleIntangible

Trade and TariffTrade and Tariff

Maquiladoras - Mexican factories located Maquiladoras - Mexican factories located along the U.S.-Mexico border that receive along the U.S.-Mexico border that receive preferential tariff treatmentpreferential tariff treatment

GATT - an international treaty that helps GATT - an international treaty that helps promote world trade by lowering barriers promote world trade by lowering barriers to the free flow of goods across bordersto the free flow of goods across borders

NAFTA - a free trade agreement between NAFTA - a free trade agreement between Canada, Mexico, and the United StatesCanada, Mexico, and the United States

Trade PaysTrade PaysGDP (PPP*) per PersonGDP (PPP*) per Person 1990 Growth Rates, % 1990 Growth Rates, %

-1

0

1

2

3

4

5

More globalized poor countries

Rich countries

Less globalized poor countries

*PPP – Purchasing Power Parity

Free trade may Free trade may

take us into the era of the floating take us into the era of the floating factory - a six person crew will factory - a six person crew will

take a factory from port to port in take a factory from port to port in order to obtain the best market, order to obtain the best market,

material, labor and tax advantages material, labor and tax advantages

Achieving Global OperationsAchieving Global Operations-Four Considerations--Four Considerations-

Global product designGlobal product design Global process design and Global process design and

technologytechnology Global factory location analysisGlobal factory location analysis Impact of Culture and EthicsImpact of Culture and Ethics

GlobalGlobal Product Design Product Design

Remember social and cultural Remember social and cultural differencesdifferences– packaging and marketing can help packaging and marketing can help

make product seem “domestic” but -make product seem “domestic” but - ““liter” versus “quart”liter” versus “quart” ““sweetness” and “taste”sweetness” and “taste”

GlobalGlobal Process Design and Process Design and

TechnologyTechnology Information technology enables Information technology enables

management of integrated, globally management of integrated, globally dispersed operationdispersed operation

Texas Instruments: 50 plants in 19 Texas Instruments: 50 plants in 19 countriescountries

Hewlett-Packard - product development Hewlett-Packard - product development teams in U.S., Japan, Great Britain, and teams in U.S., Japan, Great Britain, and GermanyGermany

Reduces time-to-marketReduces time-to-market

GlobalGlobal Facility Location Facility Location

AnalysisAnalysis

Select CSFs based on parent Select CSFs based on parent organization;’s strategic or organization;’s strategic or operations objectivesoperations objectives

Obtain country-specific information Obtain country-specific information on the CSFson the CSFs

Evaluate each country’s CSFs using Evaluate each country’s CSFs using a 1 (bad) to 5 (good) rating scalea 1 (bad) to 5 (good) rating scale

Sum the ratingsSum the ratings

Using CSFs for Country Selection

You May Wish To You May Wish To ConsiderConsider

national literacy ratenational literacy rate rate of innovationrate of innovation rate of technology rate of technology

changechange number of skilled number of skilled

workersworkers stability of governmentstability of government product liability lawsproduct liability laws export restrictionsexport restrictions similarity in languagesimilarity in language

work ethicwork ethic tax ratestax rates inflationinflation availability of raw availability of raw

materialsmaterials interest ratesinterest rates populationpopulation number of miles of number of miles of

highwayhighway

Managing Global Managing Global Service OperationsService Operations

Must take a different perspective Must take a different perspective onon

Capacity planningCapacity planning Location PlanningLocation Planning Facilities design and layoutFacilities design and layout SchedulingScheduling

Some Global Some Global StrategiesStrategies International Strategy: uses exports and International Strategy: uses exports and

licenses to penetrate the global arealicenses to penetrate the global area Multidomestic Strategy: uses decentralized Multidomestic Strategy: uses decentralized

authority with substantial autonomy at each authority with substantial autonomy at each businessbusiness

Global Strategy: Uses a high degree of Global Strategy: Uses a high degree of centralization, with headquarters coordinating centralization, with headquarters coordinating to seek standardization and learning between to seek standardization and learning between plantsplants

Transnational Strategy: Exploits economies of Transnational Strategy: Exploits economies of scale and learning, as well as pressure for scale and learning, as well as pressure for responsiveness, by recognizing that core responsiveness, by recognizing that core competencies reside everywhere in the competencies reside everywhere in the organizationorganization

Match Product & Match Product & ParentParent Arrow shirtsArrow shirts

Braun Household Braun Household AppliancesAppliances

Burger KingBurger King Firestone TiresFirestone Tires Godiva ChocolateGodiva Chocolate Haagen_dazs Ice CreamHaagen_dazs Ice Cream Jaguar AutosJaguar Autos MGM MoviesMGM Movies Lamborghini AutosLamborghini Autos Goodrich TiresGoodrich Tires Alpo PetfoodsAlpo Petfoods

1. Volkswagen1. Volkswagen

2. Bidermann International2. Bidermann International

3. Bridgestone3. Bridgestone

4. Campbell Soup4. Campbell Soup

5. Credit Lyonnais5. Credit Lyonnais

6. Ford Motor Company6. Ford Motor Company

7. Gillette7. Gillette

8. Grand Metropolitan8. Grand Metropolitan

9. Michelin9. Michelin

10. Nestlé10. Nestlé

Match Product & Match Product & CountryCountry Arrow shirtsArrow shirts

Braun Household Braun Household AppliancesAppliances

Burger KingBurger King Firestone TiresFirestone Tires Godiva ChocolateGodiva Chocolate Haagen_Dazs Ice CreamHaagen_Dazs Ice Cream Jaguar AutosJaguar Autos MGM MoviesMGM Movies Lamborghini AutosLamborghini Autos Goodrich TiresGoodrich Tires Alpo PetfoodsAlpo Petfoods

1. France1. France

2. Great Britain2. Great Britain

3. Germany3. Germany

4. Japan4. Japan

5. United States5. United States

6. Switzerland6. Switzerland

Developing Missions Developing Missions and Strategiesand Strategies

10 Strategic OM 10 Strategic OM DecisionsDecisions Goods & service design Goods & service design Quality Quality Process & capacity designProcess & capacity design Location selectionLocation selection Layout designLayout design Human resource and job Human resource and job

designdesign Supply-chain managementSupply-chain management InventoryInventory SchedulingScheduling MaintenanceMaintenance

Operations Decisions

Goods Services

Goods & services decisions

Product is usually tangible

Product is usually intangible

Quality Objective quality standards

Subjective quality standards

Process and capacity design

Customer not involved in most of process

Customer may be directly involved in process. Capacity must match demand to avoid lost sales

Goods & Services and the Goods & Services and the 10 OM Decisions10 OM Decisions

Operations Decisions

Goods Services

Location Selection

May need to be near raw materials or labor force

Product is usually intangible

Layout Design

Layout can enhance production efficiency

Subjective quality standards

Human Resources and Job Design

Workforce focused on technical skills. Labor standards consistent. Output-based wage system.

Customer may be directly involved in process. Capacity matches demand to avoid lost sales

Goods & Services and the Goods & Services and the 10 OM Decisions – 10 OM Decisions – ContinuedContinued

Operations Decisions

Goods Services

Supply chain management

Supply-chain relationships critical to final product

Supply-chain relationships important, not necessarily critical

Inventory Raw materials, work-in-process, and finished goods

Most services cannot be stored

Scheduling Ability to convert inventory may allow leveling of production rates

Primarily concerned with meeting the customer's immediate schedule

Goods & Services and the Goods & Services and the 10 OM Decisions – 10 OM Decisions – ContinuedContinued

Goods & Services and the Goods & Services and the 10 OM Decisions – 10 OM Decisions – ContinuedContinued

Operations Decisions

Goods Services

Maintenance Maintenance is often preventive and takes place at the production site

Maintenance is often "repair" and takes place at the customer's site

Process DesignProcess Design

Low Moderate HighVolume

High

Moderate

Low

Varie

ty o

f Pro

duct

s

Process-focusedJob Shops

(Print shop, emergencyroom , machine shop,

fine diningRepetitive (modular)

focusAssembly line

(Cars, appliances, TVs, fast-food restaurants) Product-focused

Continuous(steel, beer, paper, bread, institutional

kitchen)

Mass Customization

Customization at high Volume

(Dell Computer’s PC)

Operations Strategies Operations Strategies for Two Drug for Two Drug CompaniesCompanies Brand Name Drugs,

Inc. Generic Drug Corp.

Product Selection and Design

Heavy R & D; Extensive labs; focus on development in broad range of \drug categories

Low R & D investment; focus on development of generic drugs

Quality Quality is a major priority; Standards exceed regulatory requirements

Meets regulatory requirements on a country-by-country basis as necessary

Operations Strategies Operations Strategies for Two Drug for Two Drug Companies - ContinuedCompanies - Continued Brand Name Drugs,

Inc. Generic Drug Corp.

Process Product & modular production processes Long product runs in specialized facilities Build capacity ahead of demand

Process focused General production processes; “Job Shop” approach, short run; Focus on high utilization

Location Still located in city in which it was founded

Recently moved to low tax, low labor cost environment

Scheduling Central production planning

Many short run products complicate scheduling

Operations Strategies Operations Strategies for Two Drug for Two Drug Companies - ContinuedCompanies - Continued Brand Name Drugs,

Inc. Generic Drug Corp.

Human Resources

Hires the best; nation-wide searches

Very experienced top executives provide direction; other personnel paid below average

Supply Chain

Long term supplier relationship

Tends to purchase competitively to find bargains

Inventory Maintains high finished goods inventory, primarily to ensure all demands are met

Process focus drives up WIP inventory. Finished goods inventory tends to be low

Operations Strategies Operations Strategies for Two Drug for Two Drug Companies - ContinuedCompanies - Continued Brand Name

Drugs, Inc. Generic Drug Corp.

Maintenance Highly trained staff; Extensive parts inventory

Highly trained staff to meet challenging demands

How It WorksHow It Works

CompanyMission

BusinessStrategy

Functional AreaStrategies

MarketingDecisions

OperationsDecisions

Fin./Acct.Decisions

If competitive advantage, leads to achieving

Distinctive competencies affect

Four International Four International Operations StrategiesOperations Strategies

Multidomestic Multidomestic StrategyStrategy

Operating decisions are Operating decisions are decentralized to each country to decentralized to each country to enhance local responsivenessenhance local responsiveness

Global StrategyGlobal Strategy

Operating decisions are centralized Operating decisions are centralized and headquarters coordinates the and headquarters coordinates the

standardization and learning standardization and learning between facilitiesbetween facilities

Transnational Transnational StrategiesStrategies

Combines the benefits of global-Combines the benefits of global-scale efficiencies with the benefits scale efficiencies with the benefits

of local responsivenessof local responsiveness

International StrategyInternational Strategy

Global markets are penetrated Global markets are penetrated using exports and licensesusing exports and licenses