15.3: The Strategic Role of a Foreign Production Site

Question 1

What is the strategic role of a foreign production site in global production?

Answer 1

A foreign production site is integral to global production as it helps manage logistics, sourcing, and distribution strategies in line with the company’s global operations, aiming to minimize costs and enhance product quality.

Question 2

How do global services firms manage delivery on a global scale?

Answer 2

Global services firms manage delivery by using one supplier for all service-related needs worldwide, often through a global account management approach to improve relationship management, product extension opportunities, and pricing.

Question 3

What are the core activities performed in logistics?

Answer 3

Core logistics activities include global distribution center management, inventory management, packaging and materials handling, transportation, and reverse logistics.

Question 4

Why is global distribution center management important?

Answer 4

Global distribution centers (DCs) enable strategic warehousing and product processing, optimizing labor and transportation costs and facilitating customization close to major markets.

Question 5

What is the importance of global inventory management?

Answer 5

Global inventory management involves strategic decision-making regarding the holding and placement of raw materials, work-in-process inventory, and finished goods, crucial for optimizing supply chain efficiency.

Question 6

How does packaging contribute to the global supply chain?

Answer 6

Packaging performs multiple functions, such as protecting products, aiding their storage and transportation, and providing information. It is designed for efficiency at various stages of the supply chain.

Question 7

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What role does transportation play in the global supply chain?

Answer 7

Transportation is crucial for moving raw materials and finished goods throughout the supply chain and typically represents the largest percentage of logistics budgets due to the distances involved.

Question 8

What is reverse logistics and why is it significant?

Answer 8

Reverse logistics manages the return of goods from the point of consumption to the point of origin for value recapturing or disposal, optimizing after-market activities and contributing to cost savings and sustainability.

Question 9

What is global purchasing within the context of supply chain management?

Answer 9

Global purchasing involves the worldwide buying of raw materials, component parts, and products used in manufacturing, which includes developing strategies for global purchasing and selecting the best-suited type for the company.

Question 10

What are the five strategic levels of purchasing from domestic to global?

Answer 10

The five levels range from

Level I, engaging only in domestic purchasing,

to Level V, which integrates and coordinates purchasing across worldwide locations and functional groups.

Question 11

What are the four choices for purchasing strategy?

Answer 11

The choices are domestic internal purchasing, global internal purchasing, domestic external purchasing, and global external purchasing.

Question 12

What outsourcing and purchasing options are available to multinational corporations?

Answer 12

Options include outsourcing, insourcing, offshoring, offshore outsourcing, nearshoring, and co-sourcing, each with different implications for cost, control, and supply chain strategy.

Question 13

What does Level II in global purchasing entail?

Answer 13

Level II involves companies that engage in international purchasing as needed, with their approach often being reactive and uncoordinated among the buying locations within the company.

Question 14

How is Level III different in global purchasing strategies?

Answer 14

At Level III, companies begin to recognize the importance of a well-formulated and executed international purchasing strategy, which starts to integrate and coordinate purchasing activities across the company’s various units.

Question 15

What is the focus of Level IV in global purchasing?

Answer 15

Level IV pertains to the integration and coordination of global purchasing activities that are dispersed across worldwide locations, aiming to elevate the firm’s competitive edge by integrating purchasing strategies across various buying locations worldwide.

Question 16

at is ‘domestic internal purchasing’?

Answer 16

Domestic internal purchasing refers to a company sourcing materials and parts from within its own country. This method is typically used when companies have substantial domestic operations and wish to minimize international logistics complexity.

Question 17

What is ‘global internal purchasing’?

Answer 17

Global internal purchasing involves sourcing materials and parts from the company’s operations in different countries. This approach is used to leverage global efficiencies and is often part of a strategy to optimize costs and supply chain logistics on an international scale.

Question 18

What does ‘domestic external purchasing’ mean?

Answer 18

Domestic external purchasing means buying materials, parts, or services from suppliers located within the company’s home country but outside the company itself. It combines local sourcing advantages with the benefits of external specialization.

Question 19

How is ‘global external purchasing’ defined?

Answer 19

Global external purchasing is when a company sources materials, parts, or services from suppliers located in different countries around the world. This strategy aims to exploit global cost differentials and access specialized capabilities not available domestically.

Question 20

What is ‘outsourcing’?

Answer 20

Outsourcing is when a company buys products or services from third-party suppliers rather than producing them in-house, which can be domestically or globally. This strategy focuses on leveraging external expertise and cost advantages.

Question 21

What is ‘insourcing’?

Answer 21

Insourcing is when a company reverses its outsourcing strategy by deciding to produce previously outsourced products or services internally. It is the opposite of outsourcing and often aimed at increasing control over production and supply chains.

Question 22

Define ‘offshoring’.

Answer 22

Offshoring occurs when a company relocates production or services to another country, often to take advantage of lower costs, tax benefits, or to be closer to new markets. It is a type of global external purchasing strategy.

Question 23

What does ‘offshore outsourcing’ refer to?

Answer 23

Offshore outsourcing is when a company contracts with suppliers in a different country to provide products or services. It combines the benefits of outsourcing with the efficiencies available from international markets.

Question 24

Explain ‘nearshoring’.

Answer 24

Nearshoring is the practice of transferring business processes to companies in nearby countries, often to reduce costs while maintaining a closer proximity and time zone alignment to the core business.

Question 25

What is ‘co-sourcing’?

Answer 25

Co-sourcing is a collaborative business practice where a company partners with another firm to share the management of a particular process, leveraging each other’s strengths for mutual benefit.