Global Manufacturing and Supply Chain Management

Victoria Vivian

Globalization and BusinessChapter 7: Global Manufacturing and Supply Chain Management

IntroductionGlobal Manufacturing Strategy

The Four C’sGlobal Supply Chain Management

ConfigurationInformation’s Role

Potential Weak Links in the Global SC

Why manufacture abroad

Successful stories

HP in Guadalajara, Mexico Established in 1982Several lines of productionR&DIT and FinanceLatin American Distribution OperationEmploys 1500 experts

One more successful story Motorola in SingaporeEstablished in 1973Start as a sales office

with 6 employees1983- Motorola

Excellence Center1994 – Motorola

Innovation CenterEmploys 2,000 people

ManufacturingR&DSoftware designMarketing Sales and DistributionHR, Finance, etc

Declining tariffsNissan closed its plant

in Clayton, Australia in 1992 (20 years of manufacturing)

Mitsubishi shut down its Adelaide plant with losses of 930 jobs

Australian operation lost $1.5 billion over the past decade

It’s getting more complicated Low wages do not mean low

total costs. Xerox in ShanghaiMotorola in Tianjin The companies have to

trade off low labor costs for more qualified employees.

Cost of Living Survey - Worldwide Ranking 2007Mar-07 Mar-06 City Country

1 1 MOSCOW Russia2 5 LONDON United Kingdom3 2 SEOUL South Korea4 3 TOKYO J apan5 4 HONG KONG Hong Kong6 8 COPENHAGEN Denmark7 7 GENEVA Switzerland8 6 OSAKA J apan9 9 ZURICH Switzerland10 10 OSLO Norway11 13 MILAN Italy12 12 ST. PETERSBURG Russia13 15 PARIS France14 17 SINGAPORE Singapore15 10 NEW YORK CITY, NY United States16 18 DUBLIN Ireland17 24 TEL AVIV Israel18 21 ROME Italy19 21 VIENNA Austria20 14 BEI J ING China21 19 SYDNEY Australia22 25 HELSINKI Finland23 36 STOCKHOLM Sweden24 27 DOUALA Cameroon25 41 AMSTERDAM Netherlands26 53 MADRID Spain26 20 SHANGHAI China28 21 KIEV Ukraine29 59 ATHENS Greece30 52 ALMATY Kazakhstan

Labor pool and costs (cont) Salaries in China have been

increasing at a rate of 8% for the last five years, and are forecast to rise by more than 9% in 2008

High pay increases in India last year (7.2%) continue into 2008

US employees are predicted to see real increases of just 1.4%

Six strategic roles of foreign factories

Germany: Export ChampionsDevise excellent technical solutions

Obsession with quality and over-engineering

Number one exporter in the worldNeumann microphonesC. Bechstein pianos

German Exports in 2006

Germany: Export ChampionsThe Export Champions – Decoupled from the home economy

Do their standards need to be so high?

Making Germany’s unskilled labor pool more competitive-not their problem

“Bazaar Economy” share of imported inputs to German goods destined for export increased from 30% to 39% between 1995 and 2002

Germany: Export ChampionsFuture Implications

Improve education on a basic level

Integration of the non-German population

Britain’s solution – 1980s saw high unemployment – created many service industries

Must be able to acknowledge business failure

Secrets, Lies, and SweatshopsSome companies guilty of Chinese labor abuses in their supplier’s factories.

Possible Solutions for the Chinese Labor AbusesCompanies such as GE & Motorola have not had problems with labor abuses, and this seems to be due to the fact that they own and operate their factories in China

http://www.youtube.com/watch?v=WutW8usfTTg

http://video.msn.com/?mkt=en-us&fg=rss&vid=4d455f0a-f3dd-4a01-9254-6fa8db113964&from=34

Discussion QuestionsLean Production in an International Supply Chain

Why would a company allow or even promote the geographical dispersion of any value added activities in its supply chain?

Do you think that just because CCT accomplished a couple of the factors which define lean production it’s entire production process can be characterized as lean?

Germany: Export ChampionsWhat are the potential drawbacks for a company that ignores its home market in favor of an emphasis on exporting?

What factors need to be considered when determining the right balance of global centralization versus local decentralization?