Lecture 10 - Global manufacturing and supply chain management

Question 1

Risks and vulnerabilities of international supply chains and just-in-time* (S)

Answer 1

Retailers may be afraid that logistics provider leak promotions etc. to other competitiors (thus may want to withhold information internally).

Bullwhip effect

JUST-IN-TIME:

Question 2

Factors influencing manufacturing location choice: country and product factors, government policies and organizational issues (S)

Answer 2

Country factors
– Resource availability
– Cost
– Infrastructure: electricity, water etc; services for employees and managers (healthcare, housing, education)
– Country-of-origin effects. Japan: high-quality electronics; Denmark: stylish design Product factors
– Value-to-weight ratio → transportation costs. Iron ore, refrigerators vs. microprocessors, diamonds
– Required production technology: compare sales to efficient facility
size → number of facilities to open
– Customer feedback: is it important to obtain and incorporate into production quickly?

Government policies
– Political stability, corruption (World Bank’s Worldwide Governance Indicators)
– Trade policies: tariffs, trade barriers
– Investment incentives: lower taxes, land, job training
– Foreign trade zones: specially designated geographical area, preferential tariffs for imports/exports
Organizational issues
– Firm’s business strategy: cost leadership vs. quality vs. differentiation
– Organizational structure: centralized vs. decentralized

Question 3

Bullwhip effect (Risks and vulnerabilities)

Answer 3

Bullwhip effect  order get more exaggerated from each step in the order process.

Causes

• Demand forecasting problem
• Orders shipped in batches
• Panicking when demand is not met
• Shortage gaming (ordering more than you actually need, expecting that the supply won’t be able to deliver the full amount, so you get what you actually need.) Purposefully exaggerate the order.

Solution

• Share information
• Reduce batch size stabilize prices
• Minimize excessive order
• Stabilize prices

Question 4

Just-in-time Vulnerability

Answer 4

The fact that you do not have a stock of products, then if production is stopped or jammed by externalities, then they have a serious issue in

Tsunami in Japan 2011: some Japanese suppliers could not be replaced
– Mitsubishi Gas Chemical and Hitachi Chemical: 90% of the market for a resin → microchips → smartphones
– Kureha:70%ofthemarketforapolymer→iPod’sbattery – iPod consists of 400—500 manufactured parts
• Disruptions to supply chains
– Toyota estimated scarcity of 500 rubber, plastic and
electronic parts because of the tsunami • Just-in-timemanufacturing
→ “Just-in-case” buffer systems

Risks: interruptions in supply can be very
problematic

Question 5

Global Supply Chains vulnerability (geographically dispersed and centralising various functions - higher exposure)

Answer 5

Global supply chains are also more dispersed geographically. If each positions are focussed and specialised (such as the Mandate strategy presented by Ghemawat) on certain exercise types. then the supply chain is also become more exposed to disasters (such as natural disasters or other location-specific risk) as the firm now covers the world map more broadly.