B207 Week 12 Block 2 Session 3: International operations
3.1 The Internationalisation of operations
Internationalisation of supply chains can create lengthy supply chains
e.g. Tennis balls used for Wimbledon,
12 components of a tennis ball
which travel through 12 different countries to create finished product
total of over approx. 50,000 miles before reaching London
sometimes there is limited control over where raw materials can be sourced, or where they can be processed if a specialist process is required
none of the tennis ball components are sourced locally. Absence of local sourcing can become a Corporate Social Responsibility issue for companies
main advantage of supply chain: cost
main disadvantage of supply chain: - -carbon footprint
- time delay caused by long supply chain can result in orders having to be placed far in advance, tracking issues, and planning complexity
- opportunity for things to go wrong such as quality control, planning errors
- different currencies and tax issues
- sustainability
-different ethical standards
3.2 Implications of internationalisation
Advantages of internationalisation IN THEORY:
- better sourcing,
-supply network improvements,
-locations near customers,
-exposure to international competition encouraging innovation and improvement
operations input-process-output model can be used to analyse challenges of internationalisation
Saudi Arabia Hospital example
Differences between managing in UK vs in Saudi Hospital
Input:
-large expat workforce
-language issues
-different lifestyle leads to high staff turnover
Process:
- hospital needs to be more self sufficient by way of staff accommodation, staff welfare, leisure, catering facilities
- local culture influence design, e.g. need prayer rooms and gender segregation
-planning and scheduling needs to accommodate for prayer breaks
-restrictions on mixed gender team work
output:
- different healthcare needs
- gender segregation
-staff need to interact with patients differently due to culture
3.3 why become a global operation?
Dell example (offshoring call centres to india)
advantages:
-reduction in operation costs
-lower wages
-time difference allows for easier staffing of call centres
challenges faced: -backlash by customers due to poor customer service caused by poor call centre management (inappropriate targets), communication (language/cultural differences) and lost sales opportunities because customers are frustrated
is lower wages ethical? is it creating unacceptable working conditions and quality of life for the employees?
3.4 Offshoring and re-shoring
4 Stages of manufacturing network development
who: Moncza and Trent
When: 1991
The 4 Stages
- Domestic Sourcing
- Reactive international sourcing
- Proactive international sourcing
- Global sourcing networks
start up companies sourcing locally. ease of control/ lack of complexity
lack of domestic supply leads to sourcing materials internationally
international sourcing for better prices and quality
collaborative supply networks created
examples: Hornby and Lego
main learning points from examples:
-understand the root of the problem before going international, is internationalisation actually going to solve it?
-offshoring changes all aspect of performance including quality, speed and flexibility, in addition to unit cost
-cost benefits (such as low labour cost) may not last as the country experiences economic expansion
-understand the total cost of moving production
-anticipate the disruption which will be caused
-assess suppliers across many different factors
-understand the risks clearly
-understand how difficult it will be to reverse
3.5 International operations strategies
Facility location
factors influencing location decision
local factors
room for expansion
local land availability and costs
local quality of life
local transport links
availability of housing, hospitals, schools etc for employees
competition proximity
headquarter proximity
customer proximity
proximity of suppliers
country specific factors
climate restrictions
employee quality of life
transport costs/lead times
social/cultural restrictions
competition presence
labour availability
infrastructure
supplier availability and capability
location of markets
economic factors
legal and regulatory frameworks
political risks
two questions to ask:
- which country would be the best to locate in to serve a particular region?
- which part of that country would provide the best location to meet requirements?
international operations configurations
- Global coordinated operations
- Regional operations
- Home country operations with exports
- multi-domestic operations
3.6 International services
service operations likely to face slightly different challenges
e.g. supermarkets in China, meat is unwrapped and handled + live animals to show freshness