Operations but also its foreign subsidiaries foreign

This preview shows page 102 - 106 out of 133 pages.

operations but also its foreign subsidiaries. Foreign factories that upgrade their capabilities over time are creating valuable knowledge that might benefit the whole corporation. Foreign factories can have one of a number of strategic roles: 1) An offshore factory is one that is developed and set up mainly for producing component parts or finished goods at a lower cost than producing them at home. a. investments in technology and managerial resources should ideally be kept to a minimum to achieve greater cost-efficiencies 2) Source factory drives down costs in the global supply chain, but also has a significant strategic role. Managers of a source factory have more of a say in certain decisions, such as purchasing raw materials and component parts used in the production at the source factory.
3) Server factory is linked into the global supply chain for a global firm to supply specific country or regional markets around the globe. set up to overcome intangible and tangible barriers (tariffs, taxes...). 4) Contributor factory is similar to server factory, but has responsibilities for product and process engineering and development. Can try new suppliers, etc. and actually compete with the global firm’s home factories for testing new ideas and products. Thus, not as big a part of the global supply chain. 5) Outpost factory is an intelligence-gathering unit set up near competitors/demanding customers/key suppliers. (often operates as a server and/or offshore factory as well) 6) Lead factory is intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world. Important! Hidden costs of foreign locations Significant issues in some outsourcing locations: - high employee turnover - shoddy workmanship - poor product quality - low productivity 17.4 - Make-or-Buy Decisions Produce an item in-house (“make”) or purchase it from an outside supplier (“buy”). - Strategic decisions that are pro “make”: o Issues of product success o If it’s specialized knowledge o Strategic fit (e.g. with other production OR if it’s a core competency) - In reality, the make-or-buy decision is often based largely on two critical factors: o Cost issues related to raw materials or parts needed to “make” o Production capacity. Two things: Is there capacity to produce the product at a cost that is at least no higher than the cost of buying it from an external supplier. Does it take the capacity of something else, we want to “make”? To facilitate the make-or-buy decision, we have captured the dynamics of this choice in two figures that center on either operationally favoring a make decision or operationally favoring a buy decision:
Each decision needs to be evaluated separately, not jointly. After the cost and production capacity decisions have been explored and made (really, after the cost and production hurdles have been overcome), the next set of decisions follows logically from the path.
17.5 - The functions of logistics and purchasing (sourcing) within global supply chains -

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture