Global considerations in operations management

3 Global Considerations in Operations

- Global Sourcing of Inputs
- Global Outsourcing
- Overseas Manufacturing

Global Sourcing of Inputs

Purchasing raw materials in an overseas country, shipped and assembled to the businesses country

Why do businesses Import inputs

- Exploit cheap labour

- High quality labour

- Cheaper raw material

- Inputs not being avaliable locally

Strengths of Globally sourcing inputs

- Teaches business how to conduct business in potential markets
- Cheaper materials, reduce costs
- Potential Higher quality materials

Weaknesses of Globally sourcing inputs

- Hidden costs associated with different countries and timezones
- Long delivery times
- Risk of global issues causing supply-chain disruptions

Overseas Manufacturing

A good being produced in a country that is diffrent from the location of the businesses head office

Why do businesses use overseas manufacturing

- Reduce labour costs
- More specialised labour make outputs to higher quality
- More specialised labour make outputs quicker

Strengths of Overseas Manufacturing

- Reduce labour costs
- More specialised producers make outputs to higher quality
- More specialised producers make outputs quicker

Weaknesses of Overseas Manufacturing (3)

- Hidden costs associated with different countries
- Extra transport can worsen the environment
- Local job losses and worse CSR

Types of processes outsourced

- Marketing
- Customer service
- Software development

Global Outsourcing

contracting specific business operations to an external business in another country

Strengths of Outsourcing

- Business is able to focus on core activities
- Potentially cheaper labour
- Potentially quicker production due to being more specialised

Weaknesses of Outsourcing

- Management has less overall control
- Loss of local jobs worsening CSR
- Potential communication issues

Differences of Global Sourcing of Inputs and Outsourcing

- GS obtaining resources overseas, Outsourcing contracting entire business processes to external companies
- GS production occurs domestically so more control, Outsourcing gives less control as external company manages the task overseas

Differences of Global Sourcing of Inputs and Overseas Manufacturing

- GS obtaining resources overseas whereas OM actual production of goods overseas
- GS, production occurs domestically so more control, OM, production is done offshore, less direct control over processes

Differences of Outsourcing and Overseas Manufacturing

- Outsourcing handing over functions to another company who gets paid a fee. OM setting up or owning its own facilities in another country
- Outsourcing, entire responsibility with external company so less control. OM, business retains more control.

Similarities of All

- Both aim to reduce costs through cheaper labour/materials
- Both involve international operations