Global Operations and Supply Chain Management
Global Operations and Supply Chain Management
Global operations management
Operations management is related to the administration of the business practices in order to create a high level of business efficiency in an organization by converting the material and the labor in the form of goods and services in an efficient manner for maximizing the profit of the firm. Whereas the Global Operations Management has the state of art knowledge on how to manage the operations in the global environment. It will involve the global issues related the operations which are important and relevant to the company ability to collaborate with the supply chain partners for them to remain strong and competitive globally. It allows for the understanding of the global services, manufacturing, consulting companies.
Companies of all the sizes adopt globalization for different reasons. And the international trade has increased massively in the recent years and the transfer of the goods, services and capital is having a huge effect on the economies throughout the world. And in this scenario the understanding of the international operations management is very important for the practitioners. International companies played a very important role in the operations management in the whole world (Sameer Prasad, 2000).
Advantages and disadvantages of global procurement
A lot of the services companies have started to create job overseas for them to gain access to the foreign markets easily. They have to consult, repair and audit at the places where the customers are situated rather than telling the customers to go to them. The growth has been seen in the foreign markets and the domestic ones are saturated and matured already. The time of the isolationism has already passed and 60 % of the revenues of America is coming from overseas. This globalization can be seen in many sectors like banking, customer’s products, jobs, and these revenues exceed to the domestic ones. Some of the businesses hire workers from other countries because of the limitations of immigration due to which they send the work there. And all this happens with the advancement of technology by outsourcing the work. This method help them to gain lower costs in both domestic and foreign. Telecommunication is done through homes sometimes which extends the suppliers both at the home and abroad. The most common type of outsourcing is telecommunication and customer service in the US where this work gets done through low cost areas. Most of the companies try to make core competencies which is a little difficult and thus make the end value of the product. A lot of companies outsource their work to the others. But sometimes there are a lot of problems in the out sourcing and the companies do not outsource management, accountability, responsibility and other services. On the other side outsourcing or global procurement can help the companies to survive in very competitive markets. Outsourcing can help in having global coverage around the clock. A unilateral policy cannot be adopted when the others are doing so. So a different type of strategy has to be made which makes the business successful. It is important for the companies to have some exposure in this area to get more newsworthiness. American companies are gaining a lot of advantages in this regard as they are outsourcing call centers and data entry type of works from developing countries and the insourcing generated more management, engineering baking related services. However necessary precautions need to be taken here in the current practices of the business in the outsourcing. Companies taking this approach just because everybody is doing it may be very surprised to see that it has unexpected costs and complications involved. Almost half of the contracts get terminated because of a lot of reasons. Some may face financial problems others might be already engaged in other projects. Some companies face a setback when the companies that are outsourced find another project that is more interesting and leave theirs (Weidenbaum, 2005). Sometimes the desired outcomes are not achieved. There might be lack of the capableand efficient service providers which may pose the problems of inability to provide efficient transportation networks, tools, warehousing, in experienced staff and lack of IT knowledge. There might be loss of control on the activity that is being outsourced and is one of the most common problem as explained in the literature. Sometimes poor transportation and infrastructure and the local regulations are obstacles which are not a problem for the western countries. The loss of skills is one of the most important obstacles in the literature (Kwok Hung Lau, 2006).
Reasons of outsourcing
Companies outsource to reduce the high costs and achieving greater economies of scale. Most of the companies outsource to save overheads of the short term costs. Some of the reasons of IT sourcing were cost effectiveness of specialized computing and system development skills and special functional capabilities. Outsourcing is for all areas of the business and not related to only one activity or function. It could tackle to one function or the whole system process for greater value in the whole organization. Some of them are customer’s response handling, management and procurement (ANDREW KAKABADSE, 2002). It begins by understanding your own business core identity and then finding your unique competitive advantage which will help in understanding your business requirements that what needs to be done from outside. It can help in achieving innovation and improve the quality of the product and increase the revenues. Other do it to find the skills which they can do and to improve the business focus (Corbett, 2004).
Reasons of insourcing
Insourcing is opposite of outsourcing and is done thoroughly in today’s supply chain by doing the initial tasks in the company rather than outsourcing them. One of the reason for insourcing could be to do the work within the company which previously got done from the other companies. It could be because of the dissatisfaction they have faced earlier due to which they decided to get it done through their own employees for better performance. It could also be due to maintain control over the business processes. Insourcing could help in securing the jobs. It helps in reducing the taxes, unemployment, transportation costs, and other costs. It is a time and money consuming process and needs profitability analysis to before the implementation (CHUDZICKA, 2013). Some other reasons might be that the logistics is considered a core competency, in-house services have many capabilities, there are too much complexities to consider outsourcing, better knowing the business, difficulty is integrating the systems, not having costs reductions and political instabilities (Outsourcing vs. Insourcing , 2014).
Advantages and disadvantages of global production
In the manufacturing field the advantages of the globalization and product development reduces the disadvantages in many aspects. Many countries are expanding their operations globally to gain advantages and cut costs. The globally connected teams, plants and the systems give the manufactures flexibility as they will need to respond to the demand of the markets and price changes. These initiatives which also includes the development centers, hourly T&M work, production agreements make the economy better by maximizing the profits. Spending less on the labor and materials gives the companies edge on others and the agreements based on hours make the real time scaling possible and thus reducing over productions and in order to make the companies able to meet the demands of the consumers. One of the largest and the most important benefit is the practices of reducing the costs as in the manufacturing process the material and the labor cots make up 70% of the total costs and by moving the operations in other countries and making them in the countries where the material is cheaper help in reducing the costs while not compromising on the quality. This kind of affordable production helps in more price adjustments by the manufacturers to suit the demand of the market. And the flexibility of the market makes the sales revenue greater and make the company more profitable. These initiatives makes the entire cycle fast and thus the companies become able to move the products into the markets in affordable prices. The hourly agreements makes the companies able to come up with more product lines and variation at the low costs based on the trends in the markets. It make it easy to make specialized products and produce in abundance because of the costs. It gives the power of specialization and the offshore agreements make it happen to build a divers team from around the company as the demand asks. It is more affordable to make special products. This global product gives the manufactures the ability to scale the operations as the demand changes and the hourly agreements can be made to fir to the consumer’s choice without difficulties. If the response to the market is on time and low cost then your business will survive and there are good chances to gain opportunities. Such globalization optimizes the development, uses of the resources and supply chain management in order to suit the market. It can minimize the scaling risks and down time and provides a framework to the multinational companies. The framework of global production network has a lot of potential and helps us in understanding of economies and geographical complexities. All the actors are involved in this and not just the producers. The production processes are continuously fragmenting as the production processes are divided in many countries and sharing the trade in components. Countries which have been able to become a part of this network have gain a lot of industrialization. The power full driver of these networks is the vertical specialization. In this network both the intra firm and the inter firm and the coordination’s (Ernst, 2003).
Although the outsourcing may reduce the production cost but it may involve a variety of challenges and risks. One of them is the dependence on the suppliers as the outsourcing make this thing happen and the wages might increase in other countries and the manufacturers might increase the prices. And also the supplier might not be able to fulfill the order on time and intrupt the supply chain and even if the company wants to take back the production unit in its own country it would be difficult. Sending the manufacturing in other countries will involve the problem of control where suppliers can make wrong choices it would cause more costs and bad quality and when the company owns them they have full control due to which they can easily handle the processes. This can cause the problem of jobs and these companies might be seen as giving the domestic jobs to the foreign workers and make negative image of the company thus increasing the cost of the advertising. Some other challenged might include the ending problems, currency volatility and the supply chains sustainability and pressurizes over the prices. The increase is in the India and China has reduced the production in the developed countries. The big companies have downsized and this has been universally adopted. The competition will increase as of the protection measures like the tariffs, exchange rates, subsidies, manipulation (Thornton, 2010). From another article it’s been concluded that this decision will ultimately effect the unemployment at home and it will decrease the demand of the unskilled workers (Robert C. Feenstra, 2001)
Considerations of production facility location
Cost is one of the important consideration in facility decision and appears in almost all the lists of the factors. These costs include the cost of labor for hiring the labor in the other country. Another cost is the transportation cost for any type of the transportation. There are many types of energies that are needed to be taken in consideration and is one of the biggest concern of countries based on the location and it may be limited. Management cost is another consideration as this is also a type of labor cost but it is an important role and it needs to be taken separately. Construction cost may occur on the construction of the facility if they do it in the home town and this can be tackle by locating the facility to the place where it is most suitable. Trend is also another factor in the cost whereas the facility location has a long term effect on the firm and it’s very important to have a very dynamic way to approach this consideration.Another important consideration is the labor which is a requirement of almost all the businesses who tend to move towards the location where the labor force is favorable. Some companies look for facilities where the unskilled labor are for low cost. Another important factor is the education and the training level of the labor. Some may acquire high skilled labors while others may require skilled ones. Unemployment rate might have a positive effect or a negative effect on the company Union flexibility is also a factor because there are labor unions who play an important role for the labors. Another important factor is the motivation of the labor force. Infrastructure location decision is also very important as when it comes to the importance of the infrastructure and usually the company’s move towards the countries where they find infrastructure according to the requirements. The availability of the transportation that includes land, quality and reliability of transportation. Utility availability, quality and reliability of the utilities should be taken into account. Then comes another important characteristic that is market and the final goal of the company is to provide the products to the customers and being close to the market give companies a competitive edge as they will be more responsive to the demands of the customers including the proximity to the customer, market size, purchasing power, proximity of suppliers, quality and reliability of suppliers, proximity to the parent company, trends.Government also plays a major role in deciding what type of decisions a company can take and this is known as regulations which includes compensation laws, insurance law, environmental laws and legal systems. Economic factors also play a very important role in the considerations as the tax structure and policies are involved in it along with the financial incentives and the currency, the national debt, interest rate, inflation, GDP, exchange rate.While moving to another country the quality of the lives should be taken into consideration which involves the environment of that country the attitude towards the business the standards of the living the climate of that country the healthcare system the education system and the religion. Political system involves political factors which includes stability, government structure, consistency of the policies, the attitude of the government towards the foreign investment, some of the social factors also play an important role like culture, norms, customs, language of that country, consumer characteristics which involves the spending habits in demography. All these are the major considerations that should be considered while locating a facility in another country or relocating the facility (Kalantari, 2013)
Global supply chain benefits
Global supply chain can be extremely competitive as we get good supplies, good prices for the supplies and the products will be of excellent standards without even going for extensive research of the suppliers companies which get into the Global supply chain. It can help in cutting their costs down and have the economic viability for their businesses and is one of the most important method for the supply chain cost reduction. Global supply chain helps those companies within the country which are not doing well to operate from outside of the country like the developing countries to get the things done. If you have got good suppliers and contacts then you might reduce the cost of the stock and you might have to retain which will make you save your costs and will give you a competitive edge over the others. It can help you get supplies any time of any type of item from anywhere easily that is produced in any corner of the world. Sometimes previously when one item was not available the company’s might have to wait for its availability which can cause great loss to the business Global supply chain works on 24/7 basis because of the time differences in the many different countries so it’s also means that it never sleeps. It brings new opportunities for the markets and other important aspect is that we learn a lot of things from others. By looking at the different business operations and approaches and practices of the other countries we might learn something new to apply onto our businesses for the new production methods or distribution methods if we have the willingness to learn. The global supply chain has to be very flexible. You might become very successful by using the appropriate supply chain management globally and if you are not part of it then your survival chances might shrink as it’s difficult to understand but if the company gets the right amount of knowledge in the right kind of contacts with this supplier’s then it might become very successful company even in the economic downturn.The market in the world offers a lot of opportunities for the businesses to make a diverse selection of the materials products and the workers and this huge selection gives the opportunity to select a very high quality and low cost options. It gives the opportunity to the business to reach the new markets in the new customers with different locations. It also gives a business to grow. Such companies can produce more, often sell more. It gives you the chance to save your money which is a very big benefit for the company.The major goal or the major advantage of the global supply chain management is getting a competitive edge. We can gain competitive edge by providing superior products or features by differentiating them from the competitors in the eyes of the customers (Werner Delfmann, 2000).
ANDREW KAKABADSE, N. K. (2002). Trends in Outsourcing: Contrasting USA and Europe . Eurpeon Management Journal .
CHUDZICKA, J. (2013). Insourcing as a new trend in GLobal Bsuiness. Foundation of Management .
Corbett, M. F. (2004). The Outsourcing Revolution. Semanticscholaars.
Ernst, D. (2003). How Sustainable are Benefits from Global Production Networks? Malaysia’s Upgrading Prospects in the Electronics Industry. East West Center Woking Papers .
Kalantari, A. H. (2013). Facility Location Selection for Global Manufacturing. University of Wisconsin Milwaukee.
Kwok Hung Lau, J. Z. (2006). Drivers and Obstacles of Outsourcing Practices in China . International Journal of Physical Distribution and Logistics Management , 776-792.
Outsourcing vs. Insourcing . (2014, 03 08). ASL Distribution Services. North America.
Robert C. Feenstra, G. H. (2001). Global Production Sharing and Rising Inequality: A Survey of Trade and wages. National Bereau of Economic Research.
Sameer Prasad, S. B. (2000). International operations management research. Journal of operations management .
Thornton, P. (2010). The Global Manufacturing sector: Current Issues. CIMA the Chartered Institute of Management Accountants.
Weidenbaum, M. (2005). Outsourcing: Pros and consB. Business Horizons, 311-315.
Werner Delfmann, S. A. (2000). Supplu Chian Management in the Global Context.