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Global Management 4

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Prof Richard Lynch, Middlesex University

The document discusses global operations management from three perspectives: 1) It analyzes how and where operations contribute value in different countries, how operations strategy decisions are made, and how these decisions impact other business functions. 2) It examines decisions around make-or-buy, supplier relationships, product design, factory layout, and their implications for human resources and marketing. 3) It discusses managing production globally and the use of total quality management, noting that TQM requires support from top management, works across the entire organization, and emphasizes getting processes right the first time.

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Global management: the operations* perspective Main topics Global management from an operations perspective Analyse global operations management Managing operations globally *Operations is another word for production
Global management from an operations perspective-1 Environment Analyse how and where operations contribute to value added, e.g. cutting costs, adapting to market Operations strategy decisions, e.g. make-or-buy, product design, factory layout and processes Consider implications in other functional areas, e.g. HRM and marketing Note : much of this is explored in Lynch Ch 9, which is available as a free download from this website
Global management from an operations perspective-2 Operations environment is changing: Technological environment: Hill 1993 Increased pace of technological change World manufacturing capacity: implications Higher R&D investment Top management expertise in manufacturing Obsession with the short term Discontinuities: Strebel 1992 sharp, sudden changes in technology that can have a dramatic effect on organisations competitive advantage Global production, e.g. low labour cost countries such as Philippines, Indonesia and China See Lynch Ch 9
Global management from an operations perspective-3 Decisions that need to be taken Make or buy? Supplier relationships Manufacturing strategy Product design prior to manufacture Factory layout and processes Logistics and transport Implications in other functional areas: HRM Marketing Finance See Lynch Ch 9
Analysing global operations management-1: how Japanese companies force down operations costs USA Market research Product characteristics Design Engineering Supplier pricing Cost: if too high, then return to the design phase Manufacturing Periodic cost reduction Japan Market research Product characteristics Planned selling price less desired profit Target costs then sent to design engineering supplier pricing Target costs for each component given to departments and suppliers Manufacturing Continuous cost reduction Keypoint : today, this probably exagerates the importance of a specifically Japanese approach
Analysing global operations management -2: some trends World production overcapacity Earlier product introductions More frequent design changes Urgent cutting of development time Rising cost of R&D Markets : low world growth entry of new industrial nations Competition : more market segmentation shorter product lifecycles Technology : wider availability of electronics more immediate diffusion of technology world-wide
Analysing global operations management: some techniques Design : more costs are taken out at the design phase of operations than any other stage. Kaizen : continuous improvement across every aspect of production. Kanban system : system used to signal stock replenishment Cellular layout arrangements and team working : allow workers to operate a number of machines at once and provide mutual support. Supplier relationships : close cooperation to achieve new levels of cost reduction Just-in-time systems : delivery of stock just as the current supplies are due to run out. Total quality management : emphasises the role of quality in meeting the needs of customers developed by operations but involves many aspects of companies. See Lynch 5 th edition Toyota Case at end of text for more detail
Managing production globally -1 Two structural constraints Length of time to build some plant and factories Difficulty of altering them once they are installed Main factors Market adaptability: flexible mass manufacturing Winning against competition Added value through enhanced performance or service Cutting costs of manufacture Human resource objectives in terms of worker satisfaction and job performance See work of Prof Terry Hill (1993)
Managing production globally-2 Total Quality Management (TQM) is the modern strategic approach to quality delivery on a global scale TQM will only happen if it is driven from the top of an organisation: it must be part of the organisations purpose Characteristics of TQM: Works throughout the organisation Lays emphasis on workers being responsible for their own quality Tries to get things right first time, rather than rectify defects later crucial issue
Managing production globally-3 Competitive advantage may follow from the adoption of TQM, if it has not been successfully undertaken by competitors However, TQM has many costs such as: International management complex and difficult Necessary to negotiate with suppliers in each country: often requires education of supplier after the contractual agreement Training schemes for workers Costs of empowering worker Cost of a steering group to monitor quality programmes TQM often takes years to implement fully, whereas its costs are often obvious from an early stage

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Global Management 4

  • 1. Global management: the operations* perspective Main topics Global management from an operations perspective Analyse global operations management Managing operations globally *Operations is another word for production
  • 2. Global management from an operations perspective-1 Environment Analyse how and where operations contribute to value added, e.g. cutting costs, adapting to market Operations strategy decisions, e.g. make-or-buy, product design, factory layout and processes Consider implications in other functional areas, e.g. HRM and marketing Note : much of this is explored in Lynch Ch 9, which is available as a free download from this website
  • 3. Global management from an operations perspective-2 Operations environment is changing: Technological environment: Hill 1993 Increased pace of technological change World manufacturing capacity: implications Higher R&D investment Top management expertise in manufacturing Obsession with the short term Discontinuities: Strebel 1992 sharp, sudden changes in technology that can have a dramatic effect on organisations competitive advantage Global production, e.g. low labour cost countries such as Philippines, Indonesia and China See Lynch Ch 9
  • 4. Global management from an operations perspective-3 Decisions that need to be taken Make or buy? Supplier relationships Manufacturing strategy Product design prior to manufacture Factory layout and processes Logistics and transport Implications in other functional areas: HRM Marketing Finance See Lynch Ch 9
  • 5. Analysing global operations management-1: how Japanese companies force down operations costs USA Market research Product characteristics Design Engineering Supplier pricing Cost: if too high, then return to the design phase Manufacturing Periodic cost reduction Japan Market research Product characteristics Planned selling price less desired profit Target costs then sent to design engineering supplier pricing Target costs for each component given to departments and suppliers Manufacturing Continuous cost reduction Keypoint : today, this probably exagerates the importance of a specifically Japanese approach
  • 6. Analysing global operations management -2: some trends World production overcapacity Earlier product introductions More frequent design changes Urgent cutting of development time Rising cost of R&D Markets : low world growth entry of new industrial nations Competition : more market segmentation shorter product lifecycles Technology : wider availability of electronics more immediate diffusion of technology world-wide
  • 7. Analysing global operations management: some techniques Design : more costs are taken out at the design phase of operations than any other stage. Kaizen : continuous improvement across every aspect of production. Kanban system : system used to signal stock replenishment Cellular layout arrangements and team working : allow workers to operate a number of machines at once and provide mutual support. Supplier relationships : close cooperation to achieve new levels of cost reduction Just-in-time systems : delivery of stock just as the current supplies are due to run out. Total quality management : emphasises the role of quality in meeting the needs of customers developed by operations but involves many aspects of companies. See Lynch 5 th edition Toyota Case at end of text for more detail
  • 8. Managing production globally -1 Two structural constraints Length of time to build some plant and factories Difficulty of altering them once they are installed Main factors Market adaptability: flexible mass manufacturing Winning against competition Added value through enhanced performance or service Cutting costs of manufacture Human resource objectives in terms of worker satisfaction and job performance See work of Prof Terry Hill (1993)
  • 9. Managing production globally-2 Total Quality Management (TQM) is the modern strategic approach to quality delivery on a global scale TQM will only happen if it is driven from the top of an organisation: it must be part of the organisations purpose Characteristics of TQM: Works throughout the organisation Lays emphasis on workers being responsible for their own quality Tries to get things right first time, rather than rectify defects later crucial issue
  • 10. Managing production globally-3 Competitive advantage may follow from the adoption of TQM, if it has not been successfully undertaken by competitors However, TQM has many costs such as: International management complex and difficult Necessary to negotiate with suppliers in each country: often requires education of supplier after the contractual agreement Training schemes for workers Costs of empowering worker Cost of a steering group to monitor quality programmes TQM often takes years to implement fully, whereas its costs are often obvious from an early stage