BSB119 Lecture Notes - Lecture 11: Supply Chain, Quality Control, Outsourcing
Week 11 Global Business Lecture Notes
Global Production
1. Introduction to Global Production
• With a shift towards globalisation of production, firms increasingly source goods
and services from various locations to take advantage of national differences in cost
and quality of various factors of production
• Today, firms are confronted with decisions regarding:
o Where should production be located?
o Should production be concentrated in a single country or decentralised
around the globe?
o What should be the long-term strategic role of foreign production sites?
o Should production and logistics activities be owned by the firm or
outsourced?
o How should a global supply chain be managed?
• Some key concepts:
o Production: refers to activities involved in creating a product, inludig…
▪ Service and manufacturing activities
▪ Converting inputs to a product
▪ Quality control
o Logistics and materials management: refers to activities that control the
transmission of physical materials through a value chain
▪ procurement → production → distribution
o Supply chain: the particular network of material and information exchanges
that is euied to…
▪ transform raw material inputs into a finished product
▪ deliver it into a finished product
▪ and deliver it into the hands of the end user
• Beakig it do… Logistics encompasses the management of activities across a
supply chain:
o Sourcing (selecting best suppliers according to price, quality, service and
delivery time)
o Making (producing goods and services in a cost-efficient way)
o Delivering fulfillig ustoes deads ost-effectively & reliably)
o Returning (handling returns from customers and to suppliers in a way that
minimises waste
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• Logistics encompasses the management of activities across the supply chain
• A supply chain encompasses all activities associated with the flow and transaction of
goods from the raw material stage (extraction), through to the end user, as well as
the associated information flows.
• The suppl hai…also efeed to as the logistis etok, osists of supplies,
manufacturing centres, warehouses, distribution centres, and retail outlets, as well
as raw materials, work-in-process inventory, and finished products that flow
etee the failities. “ihi-Levi et al., 2008, p. 1)
2. Strategy, Production and Logistics
• Strategic objectives in the production and logistics functions of an international firm:
o Lowering costs while raising efficiency in managing the global supply chain
(maximise productivity, increase quality, elimininate defects, reduce waste,
etc)
o Responding to customer demands and satisfying customer needs
o To control the costs of production while ensuring timely delivery
• Additional international logistics challenges:
o the geographical distances
o involvement of many different transport modes
o different regulatory requirements: pricing, packaging, safety, documentation
• A firm that improves its quality control will also reduce its costs of value creation
• No time and resources wasted on producing poor-quality products that cannot be
sold; and, reduces costs and time for reworking, scraping, warranty, etc. associated
with fixing defective products
• To achieve this, a firm may
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