Chapter 3

Question 1

What are the reasons for offshoring and outsourcing?

Answer 1

-different wage levels in global labor
markets
-to reduce costs in global
sales markets
-growing availability of service providers
-production capabilities on global
procurement markets

Question 1

What is offshoring?

Answer 1

-subset of outsourcing
-relocation of business processes from one country to another (e.g. call centers)

Question 2

What is vertical range of manufacture

Answer 2

degree of in-house production within company’s value chain

Question 3

What is outsourcing?

Answer 3

transfer of property rights and know-how to third companies

aim: to reduce vertical range of manufacture by shifting internal sub-functions to external partners

Question 4

What is difference between offshoring and outsourcing?

Answer 4

Outsourcing doesn’t imply that the shift of sub-functions occurs abroad.

Question 5

Reasons for offshoring

Answer 5

-cost reduction through lower wage
levels abroad
-access to qualified personnel
-lower environmental standards
-local content requirements
-shorter approval procedures
-access to new markets (sales &
procurement)
-reduction of “time to market”
-trade restrictions abroad
-tax aspects and subsidies

Question 6

Reasons for outsourcing

Answer 6

-cost savings
-higher quality of innovation
-access to special know-how
-focus on core competencies
-flexibility & capacity fluctuations
-transfer of risks to supplier

Question 7

What are local content requirements?

Answer 7

laws controlling the supply of parts of production process in a nation

Question 8

How can outsourcing or offshoring can be determined?

Answer 8

-if activities in question are not particularly strategic and if external partners can carry these out faster, better (specialization) and cost effectively (economies of scale)
-strategic factors of market proximity & risk management

Question 9

What sub-functions are commonly outsourced?

Answer 9

-Supply chain
-HR, especially recruiting
-IT operations and services
-Training
-Finance & accounting
-Customer relationship management &
marketing

Question 10

What is insourcing or backsourcing?

Answer 10

process of reintegrating previously outsourced processes and functional areas

Question 11

Reasons of outsourcing or backsourcing?

Answer 11

-dependence needs to be scaled back
-outsourcing parties are incapable of
delivering required level of quality
-calculated cost advantages of
outsourcing never occur
-control of outsourcing partners is
more difficult than expected
-success-critical know-how is migrating
from company and can lead to risks

Question 12

what are the 3 phenomenas in global production networks

Answer 12

liberalization and opening of international production markets & trade

expansion of international direct investment

splitting and geographical spread of value chains (manufacturing and processing industries)

Question 13

What do global production networks do?

Answer 13

integrate all relevant firms, institutions & consumers that are involved in production, distribution and consumption of a good within a coherent system

Question 14

What are the 3 different framework concepts of global production networks?

Answer 14

-global commodity chains
-global value chains
-global production networks

Question 15

What is configuration?

Answer 15

-structure of network in global production networks
-task: selection of suitable national site

Question 16

What is coordination

Answer 16

management of global production network

Question 17

Approach in selecting suitable site during configuration in global production networks

Answer 17

-description of optimal location
requirements depending on
company’s objectives
-description & analysis of identified
sites
-development of a classification system
to structure location factors
-rough selection of suitable locations
-creation of shortlist according to
criteria (using e.g. utility value analysis
or transport cost analysis)

Question 18

What is utility value analysis?

Answer 18

procedure of evaluating alternatives according to scoring model

Question 19

What are roles and competencies in global production networking?

Answer 19

-contributor location (responsible for
production development)
-lead location (global hub for product
and process knowledge; support for
global markets
-offshore location: recommendations
for process improvement
-outpost location: responsible for own
purchasing and logistics, maintenance,
technical processes and production
-source location (responsible for
process development and
optimization)
-server location (responsible for
development of supplier networks)

Question 20

What are the 4 site roles that are part of a knowledge network?

Answer 20

hosting network player: operates exchange of information & innovations, trains staff, communicates within network

active network player: operates proactive exchange of innovations, send employees to other location, communicates intensively within network

isolated factory: deals purely operational/ productive activities in closed production areas. little need to exchange info & employees

receiving factory: adopts innovations must adapt more rapidly to changing tasks. rare exchange of employees

Question 21

Types of service provision within a network?

Answer 21

-full-scale production: competitive
production from raw material to
finished product

-benchmarking production: in-house
production becomes benchmark for
components produced externally

-ramp-up production: rapid implementation of new production systems that are transferred to other locations during roll-out

-prototype production: specializes in initial trial production & optimizing production process before roll-out

-laboratory production: development & testing of new materials; extended arm of development

(ramp-up, prototype, laboratory are not realized in all locations of global production network, only at lead-/ specialized contributor - locations

Question 22

What is roll out?

Answer 22

expansion of small scale production process to other locations within global production network

Question 23

What is logistics system?

Answer 23

coordinated network of physical transport capacity & intelligent IT; the optimized fast and cost-efficient transport of goods while remaining localizable

Question 24

Tasks of logistics?

Answer 24

identifying, implementing, developing, adapting logistics performance potential to changing conditions

should efficiently manage the flow of goods and related info within strategic framework

Question 25

4 different systems of global logistics

Answer 25

-procurement logistics
-production logistics
-distribution (& returns) logistics
-disposal logistics

Question 26

What is procurement logistics?

Answer 26

include all flow of goods, information and capital that are related to sourcing & purchasing

goods for direct consumption or that need to be processed or refined

Question 27

What is production logistics?

Answer 27

The physical movement of auxiliary, raw and operating materials that are transported to other locations for further production. (e.g. semi-finished- & preliminary- products, modules, components) (e.g. production of aircraft)

Question 28

What is distribution logistics

Answer 28

transporting finished goods to end users
(has to strike right balance between fastest possible and most economical means of transport) (e.g. perishable goods)

Question 29

What is disposal logistics?

Answer 29

process of disposal of waste & recycling of goods

Question 30

What are problems of disposal logistics?

Answer 30

high density regulation on proper disposal & recycling

Question 31

What are the 2 classes of data in logistics information?

Answer 31

-logistical master date: have longer validity independent of physical material (article number, article dimensions, location data)

-logistical transactional data: order-related and frequently changed (order number, invoice number, issue data)

Question 32

Objectives of global logisitcs

Answer 32

-guarantee traceability of flow of information
and physical goods at all times
-minimize throughput times in production and distribution logistics
-ensure lowest possible level of stock through synchronization of procurement & production logistics
-ensure flow of materials across national & continental borders to avoid idle times

Question 33

What are throughput times?

Answer 33

periods of time that parts and unfinished goods require from receipt to use in production

Question 34

What is the strategic objective of global logistics?

Answer 34

reduce amount of capital that is tied up

focus on shortest possible throughput times & economic balance between buffer stock & just-in-time production (e.g. automotive industry)

Question 35

Challenges in logistics?

Answer 35

-media breaks, forced time-consuming reloading
-volatility of replenished times, seasonal availability of goods
-infrastructural differences on international logistics routes
-disturbances, delays & damage caused by transport system
-decreasing economic efficiency when transport speed is accelerated

Question 36

What are media breaks

Answer 36

Forced changes in means of transport due to infrastructure

Question 37

Where are in ramp-up, prototype and laboratory production realized?

Answer 37

Lead location and contributor location

Question 38

Where are full-scale productions realized?

Answer 38

Outpost location