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Study Notes for Exam CHapter 17

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Ryerson University
Global Management Studies
GMS 724
Howard Lin

***Chapter 17: Global Manufacturing and Supply-Chain Management*** What is Supply-Chain Management – Supply chain: coordination of materials, information, and funds from initial raw material supplier to ultimate customer (supply chain is bigger) – Logistics: (Aka. Materials management) part of the supply-chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers’ requirements GLOBAL MANUFACTURING STRATEGIES Four Key Factors in Manufacturing Strategy 1. Compatibility: degree of consistency between FDI decisions and a company\s competitive strategy a. Efficiency/cost – cost minimization strategies and the drive for global efficiencies force MNEs to establish economies of scale in manufacturing i. offshore manufacturing: any investment that takes place in a country other than the home country cost analysis: an in depth assessment of the complete cost of a transaction that takes into account acquisition, ownership, and disposal costs b. Dependability – customer demand, prompt deliveries, risks of not being able o get components or finished goods to market on time as supply chain lengthens, thus shortening distance in supply chain = increase dependability c. Quality – if foreign operations can ensure high quality and contribute to innovation, companies will continue to set up operations abroad d. Innovation – when companies invest abroad to take advantage of low cost labour, they are not as concerned about innovation e. Flexibility – need it because of differences in national markets may result in regional manufacturing to service local markets (may not be able to produce all products in one location and ship them around the world) 2. Manufacturing Configuration a. Centralized manufacturing strategy – selection of standard and lower priced products to difference markets (basic manufacture and export strategy), common to new companies b. Regional manufacturing strategy – facilities to serve customers within specific region c. Multidomestic manufacturing strategy – companies manufacture products close to their customers, using country specific manufacturing facilities to meet local needs  Rationalization: process where countries often also specialize in the production of parts of final goods 1. Coordination: linking or integrating activities into a unified system 2. Control – such as organizational structure and performance measurement systems, ensure that managers implement company strategies INFORMATION TECHNOLOGY AND GLOBAL SUPPLY-CHAIN MANAGEMENT – Key to making the global supply chain work is good information system – Companies rely more and more on information technology (IT) to meet their needs: QUALITY – Quality: meeting or exceeding expectations of a customer – Conformance to specifications, value, fitness for use support (provided by the company), and psychological impressions (image) Zero Defects Acceptable Quality Level – refusal to tolerate defects of any kind – tolerable level of defects that can be corrected – idea perfected by Japanese through repair and service warranties – required buffer inventories rework stations, and expediting – goal is to push through products fast as possible and deal with mistakes later – inferior to zero defects because companies take quality more seriously, thus beat competition The Deming Approach to Quality Management – Deming’s 14 Points encompass the idea that the responsibility for quality resides within the policies and practices of managers 1. Create constancy of purpose 2. Adopt a new philosophy 3. Cease mass inspection 4. End awarding business son the basis of price tag 5. Constantly improve the system 6. Institute training on the job 7. Improve leadership 8. Drive out fear 9. Break down barriers between departments 10. Eliminate slogans 11. Eliminate work standard 12. Remove barriers to pride 13. Institute education and self improvement 14. Put everybody to work Total Quality Management (TQM) – Process that stressed customer satisfaction, employee involvement, and continuous improvement of quality – Goal is to eliminate all defects – Difference between AQL and TQM is the attitude towards quality ○ In AQL, quality is a characteristic of a product that meets or exceeds engineering standards ○ In TQM, quality means that a product is so food that the customer wouldn’t think of buying from anyone else – A process of continuous improvement at every level of organization (eg. From mailroom to boardroom) – Does not use any specific production philosophy or require use of other techniques – Proactive strategy – Kaizen: continuous improvemen
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