310 ch 14 production outsourcing logistics
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International EconomicsChapter 14
Global Production, Outsourcing, and Logistics
Global Production, Outsourcing, and Logistics
Global Production, Outsourcing, and Logistics
one billion people
2008 - 500,000
1998 - 100,000
2015 - 650,000Export half
$1.1 Billion400,000 a yearExport half
2010Exported 200,000
$2,5009,375 Riyals
Labor cost in India is one-tenth of Japan
Sends workers to Japan for training
one billion people
lots of engineering graduates
no preconceptions
kaizencontinuous improvement
Just-in-Time Delivery
Chennai
the Detroit of India
High-QualityLow-Cost
WhereStrategic RoleOwn or OutsourceHow to manage the Supply ChainWho should manage
Production Questions
InformationSystems
LogisticsHuman
Resources
COMPANY INFRASTRUCTURE
SupportActivities
PrimaryActivities
R&DR&D ProductionProduction MarketingMarketingand Salesand Sales
CustomerCustomerServiceService
The Value Chain
Activities involved in creating a product
Production
Product can be a good or servicePhysical or Intellectual
The procurement and physical transport of things through the
supply chain
Logistics
From supplier to customer
Lower costs
Production and Logistics
Increase valueReliability
Management is about improving quality
Edward Deming in Japan
Total Quality ManagementTQM
Identify and remove defectsMinimize variability
Using statistics to improve quality99.99966% perfect3.4 in one million
Sigma Six
International Organization for Standardization
ISO 9000
Country FactorsTechnological Factors
Product Factors
Where to Produce?
Political EconomyCulture
Factor CostsTrade Barriers
Location ExternalitiesExchange Rates
Country Factors
Fixed costs
Minimum efficient scale
Flexible manufacturing scale
Technology Factors
Producing at an output level where no additional cost
reductions remain
Minimum Efficient Scale
Designed to improve job scheduling, reduce setup time, and improve quality control
Flexible Manufacturing Technology
- Lean Production -
Massive Inventories
Defects
Unable to change
Mass Production
Producing variety at low cost Mass Customization
Ohno Taiichi
1950 - 24 hours1971 - 3 minutes
Innovations
Ohno Taiichi
Value-to-weight ratio
Serves universal needs
Product Factors
CONCENTRATED DECENTRALIZED
COUNTRY
Difference in Political Economy Substantial Few
Difference in Culture Substantial Few
Difference in Factor Costs Substantial Few
Trade Barriers Few Substantial
Exchange Rates Stable Volatile
TECHNOLOGICAL
Fixed Costs High Low
Minimum Efficient Scale High Low
Flexible Manufacturing Available Not Available
PRODUCT
Value-to-Weight Ratio High Low
Serves Universal Needs Yes No
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