Deck 16: Global Production, Outsourcing, and Logistics

Question 1

What are the benefits to Boeing of outsourcing so much work on the 787 to foreign suppliers What are the potential risks Do the benefits outweigh the risk

Answer 1

Outsourcing production of the 787 Boeing hoped suppliers would pay for part of the $8 billion development costs, that outsourcing would help Boeing sell planes in the countries work was outsourced to, that Boeing would have access to experts around the world, and that development time would be reduced by two years.
The risks include suppliers outsourcing jobs themselves, suppliers not being able to fulfill orders on time or correctly, linguistic/political issues in foreign supplier's countries, and a complicated web of production that is hard to police.
Yes, when the supplier relationships could be properly managed the benefits can outweigh the risks.

Question 2

An electronics firm is considering how best to supply the world market for microprocessors used in consumer and industrial electronic products. A manufacturing plant costs about $500 million to construct and requires a highly skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing in this industry are currently low. Should the firm adopt a concentrated or decentralized manufacturing strategy What kind of location(s) should the firm favor for its plant(s)

Answer 2

The firm should adopt a concentrated manufacturing strategy; $500 million up front fixed costs when the entire market over a decade for all companies in the industry is $10 to $15 billion makes a single factory a good idea. Since tariffs are low, this single factory could supply a lot of markets at little higher cost than multiple factories could.
The firm should favor putting the factory in places where there is little chance the factory will be nationalized or disrupted, where there is a highly skilled workforce, near the firm's industrial/consumer electronics customer's factories, and/or near significant transport nodes like railways or ports.

Question 3

The globalization of production makes many people more aware of the differences in manufacturing costs worldwide. The U.S. Department of Labor's Bureau of International Labor Affairs publishes a Chartbook of International Labor Comparisons . Locate the latest edition of this report and identify the hourly compensation costs for manufacturing workers in the United States, Italy, Mexico, New Zealand, Norway, and Singapore.

Answer 3

not answer

Question 4

In 2007 and 2008 Boeing ran into several well-publicized issues with regard to its management of a globally dispersed supply chain. What are the causes of these problems What can a company like Boeing do to make sure such problems do not occur in the future

Question 5

A chemical firm is considering how best to supply the world market for sulfuric acid. A manufacturing plant costs about $20 million to construct and requires a moderately skilled workforce. The total value of the world market for this product over the next 10 years is estimated to be between $20 billion and $30 billion. The tariffs prevailing in this industry are moderate. Should the firm favor concentrated manufacturing or decentralized manufacturing What kind of location(s) should the firm seek for its plant(s)

Question 6

The internationalization of manufacturing has become much more predominant in recent years. In fact, Industry Week magazine ranks the world's largest manufacturing companies by sales revenue. Identify the largest Indian and Japanese manufacturing companies as provided in the most recent ranking by paying special attention to the industries in which these companies operate.

Question 7

Some critics have claimed that by outsourcing so much work, Boeing has been exporting American jobs overseas. Is this criticism fair How should the company respond to such criticisms

Question 8

A firm must decide whether to make a component part in-house or to contract it out to an independent supplier. Manufacturing the part requires a nonrecoverable investment in specialized assets. The most efficient suppliers are located in countries with currencies that many foreign exchange analysts expect to appreciate substantially over the next decade. What are the pros and cons of (a) manufacturing the component in-house and (b) outsourcing manufacturing to an independent supplier Which option would you recommend Why

Question 9

Reread the Management Focus on Philips in China, then answer the following questions:
a. What are the benefits to Philips of shifting so much of its global production to China
b. What are the risks associated with a heavy concentration of manufacturing assets in China
c. What strategies might Philips adopt to maximize the benefits and mitigate the risks associated with moving so much production capacity offshore

Question 10

Explain how an efficient logistics function can help an international business compete more effectively in the global marketplace.