Summary lecture on facilities strategy and globalization

Transcription

1 Summary lecture on facilities strategy and globalization Conclusions from ITT,Applichem, etc. An integrated approach New paradigms for the global environment

2 Conclusions from ITT, Applichem, etc. Fit with strategy Focus of plants Scale and cost Centralization and standardization Means of evaluation and plant roles Sourcing and allocation models

3 A strategy for the facilities network emphasizes a number of issues Scale Logistics and flow patterns Focus Global flexibility and access Access to R&D

4 Product/Market-Process Focus Mean of Focus Volume Product Market Process Example Off Low Vol. High Vol. On Low Vol. High Vol. Job Batch Line Detroit Saginaw Lima Job Batch Line Detroit Fremont Lancaster Mayesville

5 Scale Analysis Subcontract Technology 1 COST Technology 2 VOLUME

6 1.5 Consumer goods example Cost per 0.9 unit ($/unit) Volume in millions of units

7 Additional logistics drivers Raw material access (e.g.wood products) Distributed production for heavy products Warehouses for commodities because of transportation scale Customer service requirements

8 Modeling supply chain flow Supply chain management often requires sophisticated models to determine questions such as Number of inventory locations Assignment of market areas and products to facilities

9 flows sources Destinations Simple facilities network and supply chain for two-stage LP

10 Suppliers Plants Distribution Centers Customers Network for Multi-location supply chain

11 General Manufacturing Models (shared capacity, warehouses or two stages, fixed costs details in extra slide) x y lkj ikl D D lj j = D lj = Total flow of l from k to j = Total flow of type l from i to k = Demand of l at zone j A A k il = Capacity at warehouse k = Capacity at plant I for product l

12 Some Examples of Strategies 1. Different process steps and scale, significant logistics Central stage 1, decentralized stage 2 2. Significant central R&D Central plant for at least early life cycle 3. Significant product flexibility Decentralized satellite plants for some stages The examples underscore the need to develop a strategically consistent focus approach and then appropriately analyze scale and logistics

13 A suggested approach Develop a strategy and appropriate means of focus Using data, benchmarking and analysis of technology, develop scale curves Identify major decision choices and service requirements covering plant and process options Do the analysis

14 Case Study Worldwide Consumer Goods Manufacturer 25 Product Groups About 10 Production Locations Variety of Product Values and Weights Over Capacity Lack of Focus Significant Tax Issues

15 Stage 1 Stage 2 Customer Why Separate? Differing Scale Market presence Tax Laws Focus Technological complexity Approach Cross sectional analysis Model of variable costs Tax analysis Detailed analysis of actual fixed costs Solution: Move "light" products to tax havens Better focus facilities by product group

16 Globaliazation adds some additional complexities Increase in worldwide exports Business level trends lower scale, higher-skill level manufacturing systems such as FMS JIT systems that also underscore the need for sophisticated vendor infrastructure TQM and organizational learning Faster product development Customization needs High-value products such as wafers and chips

17 Complexities (continued) Macro level trends Large, sophisticated overseas markets with local needs Non-tariff barriers Regionalized trading economies Variable factor costs Particular case of China

18 Global strategies emphasize some additional factors Global product volumes Decentralized network based on regional presence Infrastructure versus cost Changing product cost structure Skill requirements Vendors Flexibility in several ways Multiple stages, players and movements Global product and development supply chains

19 Exchange rate model Cost one plant two plants three plants four plants five plants Total capacity

20 Modeling framework for facilities strategy subject to exchange-rate uncertainty (Huchzermeir and Cohen) Stochastic Exchange Rate Model Supply Chain Options Switching Costs Supply Chain Network Model State, Option Value Valuation Model Expected Options Values

21 Strengths Global Market Production Technologies Four-stage approach to strategy development Crosssectional Data Business and Operations Strategy Supply Chain Strategy and Plant Scale Location Strategy Capacity Factors Supplier Industries Competitive Environment Internal Constraints Infrastructural Requirements Logistics Costs Supply Chain Modeling Factor Costs Risk k Factors Political and Market Issues

22 Summary Methods for analyzing focus, scale flow, etc. Impact of new markets and technologies Global product design and flow patterns Flexibility Factors we still need to address: Outsourcing and globalization Longer lead times

23 For those of you interested in details, formulation for general case Could also have shared cap at plants.with no warehouses, define plant variables to go to customers directly. Can add another level for sourcing or two stages of plants. k j, l k i lj y x x y x ikl lkj lkj ikl lkj f A l il D A j lj kz k kj x, lkj z kj where f is the unit usage of product l is zero or one, forcing constraint