Ops_Gm_571

Week Five - OPS/GM 571 Bottlenecks in a Process Week Four Theresa Valentine Smith University of Phoenix OPS/GM 571 Instructor: Mark Fairbanks March 14, 2011 Assignment Four * * Introduction * * * Choosing a country to supply a company’s products can be tricky. The key is to know various factors will affect success, what are the alternatives, local culture and climate of the chosen country. In other words, do your homework. * * Although the rolling transmitter product was suggested to be sought from one of the following three (3) countries, Germany - Japan – Pakistan, Company C feels the best market to purchase this product is in Shenzhen, China. There are many manufacturers to choose from in Shenzhen and Company C can coordinate shipping with other relevant products. In light of the current labor strike in China, it is the company’s goal temporarily to outsource to a company in Japan. Japan is a stable alternative and offers much of the same benefits as Chinese companies. Once the strike comes to a conclusion, we remain confident in our decisions to return operations to China. * To remain competitive in the global market, more companies are restructuring their supply chains and moving their manufacturing operations to China. This decision to manufacture in China does not however come without careful consideration. Conventional thought suggests manufacturing in China because of lower costs and improved quality. However, there are other factors to evaluate and consider as preparation for alternative solutions. Factors such as product cycle time, speed to market, and proximity to suppliers are often more important than simply low cost. Innovative, leading-edge products require unique supply chain requirements. * Beyond costs, the company had to look at the characteristics of the product and market, the company’s core competencies, and profitability. Commercializing new technologies into innovative products is a precise activity to stay ahead of market competition. Short life cycles and greater product variety increase the unpredictability of the supply chain. The following diagram references categories to consider when developing the supply chain, operational, and logistics strategies. * * Many factors of supply chain management that confront global manufacturers remain relatively stable. How these factors interact can make each year a new challenge, and 2011 looks to hold a particularly interesting mix that may make supply chain management a balancing act. According to Simon Ellis, of IDC Manufacturing, the three main criteria for sourcing decisions are manufacturing costs, logistics/fulfillment costs, and supply lead time. These considerations are not necessarily unusual but 2011 may change the mix a bit more. Global sourcing of raw materials and outsourced manufacturing services, for which they contract, are among a host of other supply chain factors (DeAngelis, 2011). Three factors to watch closely: 1.       The appreciation of China’s currency 2.       The price of oil as the world economy continues to recover 3.       China’s policy on exporting rare earth metals used in electronics and related products China’s currency: China has become a manufacturing powerhouse because it has kept its currency, the Yuan, cheap compared to the United States dollar. It gives United States-based manufacturers cost incentive to set up outsourced manufacturing operations there. Lately the international pressure on China to let its currency grow against the dollar has intensified, and China has allowed some appreciation. The year 2011 may be a year in which costs in China rise significantly. That would change the supply chain management equation significantly for many United States manufacturers (DeAngelis 2011). The price of oil: The run-up toward $150-per-barrel oil in 2008 was a result primarily of an inflated commodity futures market, where speculative traders placed big bets on oil on the assumption that we were near peak production and that oil would soon be as precious as gold. The price may have come down, but those worries have not gone away. Adding lingering concern with an increase in global demand for oil, as economies worldwide start gaining traction, the result could be a repeat of just a few years ago. Oil prices right now, during a relative lull in economic growth, stand at more than $80, and have flirted with $90 recently. Some observers are talking again about oil reaching $150 per barrel (DeAngelis 2011). Rare earth metals: China controls the overwhelming majority of the world’s supply of rare earth metals, such as scandium, yttrium, and the lanthanides, which are used in products as diverse as mobile phones, glass, cars, wind turbines, and missiles. Over the course of many months this year, China refused to export any rare earth materials, forcing manufacturers in Japan and elsewhere to draw down their inventories and scramble for alternatives. China has recently opened the supply lines for rare earths but has expressed a desire to curb production to protect the environment. The Company must consider that cutbacks could recur in 2011 (DeAngelis 2011). Finally, the company must be intimately aware of the cultural differences between the United States and China. China is a very old country, more than 5,000 years. They have been through many political changes from feudalism, communism, civil war, invasion, and currently an uncertain but growing market. China opened its doors to foreign trade and investors in 1978 and has undergone significant political and economic change. Today, China offers a huge potential market for investment, sales, and cultural exchange. To ensure a successful working relationship, companies must understand and respect China’s history as well as their business culture and etiquette. Important business etiquette points are make eye contact to show signs of trustworthiness; address the Chinese counterpart by their title and last name; wait for your counterpart to initiate the greeting, normally a handshake; know that a nod is not a sign of agreement but a sign of simply listening; show no excessive emotion while conducting business as it is interpreted as unfriendly; and finally, use no negative replies. Substitute “no” with “maybe” or “I will consider it.” Also recommended is to read and have an understanding of the Chinese four key cultural values; mian-zi (face or personal pride), guanxi (relationship or connection), keqi (thoughtful, courteous behavior), and Confucianism (Confucius’ teachings of ethical behavior, complete respect for personal responsibility and obligation). Conclusion Most foreign countries are more volatile than the United States. To stay competitive, companies take advantage of the positive aspects of a particular country, but as in most situations there is good along with bad. Deciding the company’s tolerance for these challenges is the key balancing act. Alternative strategies are necessary, as part of the strategic plan, to address areas of concern. Alternative strategies often include temporary manufacturing sites, built-in float for delivery times, and alternative sources in which to buy raw materials. It is rare that companies will have the best of all worlds. * * References Chase, R. B., Jacobs, F., & Aquilano, N. J. (2006). Operations management for competitive advantage (11th ed.). Boston, MA: McGraw Hill/Irwin. Chiappinelli, C. (2010). The Top 3 Supply Chain Management Worries in 2011. MA - Managing Automation. Retrieved from http://blog.managingautomation.com/channel/2010/11/supply-chain DeAngelis, S. F. (2011). Insights about the effect ... with focus on supply chain management. Enterprise Resilience Management. Retrieved from http://enterpriseresilienfeblog.typepad.com Jiang, B. (2003). What pulled Sony out of China' HighBeam Research. Retrieved from http://www.highbeam.com/doc/1G1-97177447.html Winters, E. (2008). Headed for China' Cultural Considerations. China Success Stories. Retrieved from http://www.chinasucessstories.com