Ch. 15: Global Production and Supply Chain Management

supply chain management

The integration and coordination of logistics, purchasing, operations, and market channel activities from raw material to the end-customer.

purchasing

The part of the supply chain that includes the worldwide buying of raw material, component parts, and products used in manufacturing of the company’s products and services.

logistics

The part of the supply chain that plans, implements, and controls the effective flows and inventory of raw material, component parts, and products used in manufacturing.

upstream supply chain

The portion of the supply chain from raw materials to the production facility.

downstream supply chain

The portion of the supply chain from the production facility to the end-customer.

total quality management (TQM)

Management philosophy that takes as its central focus the need to improve the quality of a company’s products and services.

Improved quality control reduces costs by

Increasing productivity because time is not wasted producing producing poor-quality products that cannot be sold, leading to a direct reduction in unit costs. Lowering rework and scrap costs associated with defective products. Reducing the warranty costs and time associated with fixing defective products.

Six Sigma

Statistically based methodology/goal for improving product quality and boosting productivity. 99.99966 percent accurate, 3.4 defects per million units.

ISO 9000

Certification process that requires certain quality standards that must be met

minimum efficient scale

The level of output at which most plant-level scale economies are exhausted.

flexible manufacturing technology

Manufacturing technology designed to improve job scheduling, reduce setup time, and improve quality control.

lean production

See flexible manufacturing technology.

mass customization

The production of a variety of end products at a unit cost that could once be achieved only through mass production of a standardized output.

flexible machine cells

Flexible manufacturing technology in which a grouping of various machine types, a common materials handler, and a centralized cell controller produce a family of products.

global learning

The flow of skills and product offerings from foreign subsidiary to home country and from foreign subsidiary to foreign subsidiary.

offshore factory

A factory that is developed and set up mainly for producing component parts or finished goods at a lower cost than producing them at home or in any other market.

source factory

A factory whose primary purpose is also to drive down costs in the global supply chain. Managers of this factory have more of a say in certain decisions.

contributor factory

A factory that serves a specific country or world region.

outpost factory

A factory that can be viewed as an intelligence-gathering unit. Often placed near a competitor’s headquarters.

lead factory

A factory that is intended to create new processes, products, and technologies that can be used throughout the global firm in all parts of the world.

make-or-buy decision

The strategic decision concerning whether to produce an item in-house (“make”) or purchase it from an outside supplier (“buy”).

global distribution center

A facility that positions and allows customization of products for delivery to worldwide wholesalers or retailers or directly to consumers anywhere in the world; also called a global distribution warehouse.

global inventory management

The decision-making process regarding the raw materials, work-in-process (component parts), and finished goods inventory for a multinational corporation.

packaging

The container that holds the product itself. It can be divided into primary, secondary, and transit packaging.

transportation

The movement of inventory through the supply chain.

reverse logistics

The process of moving inventory from the point of consumption to the point of origin in supply chains for the purpose of recapturing value or proper disposal.

just in time (JIT)

Inventory logistics system designed to deliver parts to a production process as they are needed, not before.

blockchain technology

A database mechanism that allows for the transparent sharing of information within a business network such as a supply chain.

global supply chain coordination

The shared decision-making opportunities and operational collaboration of key global supply chain activities.

just-in-case

A strategy, where the firm holds a larger buffer stocks of critically important inventory just-in-case of future supply chain disruptions.