International Business Chapter 17

22 cards·by lizarusakova

What is production in general?

Activities involved in creating a product

What is logistics?

Activity that controls transmission of physical material through value chain from procurement through production and into distribution

Why production and logistics are linked?

Because firm's ability to perform its production depends on timely supply of high-quality material inputs

Why produce abroad?

Lower the costs of value creation;add value by better serving customers needs

Improved quality(addition of value) and lower costs are interrelated, and improved qualitycontrol reduces costs by...

Increasing productivity,lowering rework and scrap costs, reducing warrannty costs (lower manufacturing and service costs)

Does it pay to produce with excellent quality?

Absolutely, it increases profits

What is total quality management philosophy(TQM)?

Philosophy that mistakes,defects and poor-quality materials are not acceptable and should be eliminated

What is Six Sigma quality improvement methodology(sucessor of TQM)?

Statistically based philosophy that reduces defects,boosts productivity,eliminateswaste and cuts costs(production accurate to 99.99966%)

What is ISO 9000?

Series of standards developed by Int Org for Stand(ISO) that define effective quality assurance system for manufacture and service industry

2 other objectives of production and logistics in addition to lowering costs and improving quality

Accomodate demand for local responsiveness(consumer tastes,infrastructure);respond quickly to shifts in customer demand

3 groups of factors that affect your decision "where to produce"

Country, technological and product factors

What are country factors?

Pol,ec,cult costs differ(locate activities with most conducive to firm goal conditions);location externalies;trade barriers;stable exch rate

What is location externalities?

Access to skilled labour pool and supporting industries

What are technological factors?

Fixed costs,Minimum Efficient Costs,technological constraints that can makes it necessary to perform in one location

Fixed costs in terms of technilogical factor

Fixed costs of setting up production can be high so you are forced to serve from one location or several few locations

Definition of Minimum Efficient Scale(MES) as a technological factor

As plant output expands,unit costs decrease.The larger MES of plant to total global demand,the greater argument for centralizing production

What is flexible manufacturing(lean production) as a technological factor?

Manufacturing technologies designed to reduce time for complex equipment;increase individual machine utilization;improve quality control

What is mass customization?

Ability to use manufacturing technologies to achieve 2 goals:lower costs and product customization

Product factors to take into consideration

Value-to-weight ratio and product serving universal needs(reduced need for local responsiveness,production concentration at optimal location

Explain value-to-weight ratio

Expensive+little costs(transportation costs are small);inexpensive+big weight(high trans costs - better not to export)

Philosophy of Just-in-Time(JIT) inventory

Economize on inventory holding costs by having them arrive at manufacturing plant on time toenter production

Drawback of JIT

Leaves firm without