Global Production &

Supply Chain
Lecturer: Đậu Xuân Trường
Objectives
+Explain the importance of global manufacturing and choosing a
global supply chain
+Recognize the role of foreign branches in production
+Identify factors that influence businesses' decisions in choosing
supply sources
+Understand the functions of logistics and sourcing in the global
supply chain
Content?
+What is supply chain management?
+Where to manufacture products?
+Make a decision on whether to produce in-house or import from
outside suppliers
+Global supply chain functions
Supply Chain Management
+Is the integration and coordination of logistics, purchasing,
operations and operations of market channels from raw
materials to final customers.
+Reduce costs to create value
+Add value by better serving customer needs
Production and Supply Chain
+Cut the cost:
+ensuring total costs from raw materials to finished products are as low
as possible.
+Disperse production activities  where operations are most effective
+Effective supply chain management
Production and Supply Chain
+Add value: Establish quality standards  eliminate raw
materials, component parts, and defective productsbao
+Includes: upstream & downstream.
+Upstream (inbound supply chain): ensure quality from raw materials to
production facilities (through suppliers, companies, organizations
involved in production).
+Downstream (outbound supply chain): Ensuring product quality from
production facilities to end customers (through distributors and
retailers).
Production and Supply Chain

+ Quality management will reduce

costs through:
+ Increase productivity by limiting
wasted time producing
defective products
+ Reduce the cost of repairing
and adjusting defective
products
+ Reduce warranty costs and
time associated with repairing
defective products.
Choose the production location
+Factors affecting the decision to choose a production location
+National factors
+Technical factors
+Factors of production
+Hidden costs of manufacturing overseas
National Factors
+Countries have specific differences in human resources,
resources, and supporting industries
+Suitable for different industries.
+Location also affects the decision to choose a production
location
+Policies encouraging foreign investment
+Predictions about economic and political developments (interest
rates, inflation, etc.)
Technical factors
+Three characteristics of technical factors:
+Fixed cost level
+Efficiency of production scale
+Flexibility of production technology
Fixed cost level
+In some industries, fixed costs to build production facilities are
very high (industries producing high-tech products, aircraft and
automobile manufacturing).
 Enterprises have only 1 or less production facilities
 Risk of being affected by interest rates
Efficiency of production scale
+ Companies always strive to
achieve minimum efficient
scale
+ Minimum Efficient Scale is
high relative to global
demand  centralized
production is required to
achieve Minimum Efficient
Scale.
+ The minimum effective
scale is low compared to
global demand  multiple
production facilities can be
established.
How Toyota changed the
way they made things?
Factors of Production
+Two aspects of production factors affect the decision to choose
a manufacturing country:
+Value/Weight Ratio  suitable for shipping or not
+Local Demand
Determine the
location of the
production
facility
+ Concentrate production at one
location and then serve the whole
market
+ Manufactured in many different
locations and countries to
conveniently serve neighboring
markets
Strategic role of production facilities
+Offshore factory: produce components or final products at a lower cost
than manufacturing at home or anywhere else.
+Source factory: plays an important strategic role in the supply chain.
+Server factory: Supply to specific markets to avoid barriers such as tariffs,
and to reach nearby end customers.
+Contributor factory: Similar role to server factory but with greater
responsibility in final products, can choose own raw materials to suit each
different market.
+Outpost factory: placed near rival companies to gather information
+Lead factory: research on new products/innovations
Labor costs Hidden costs
Education costs

Industrial specility

Organizational culture

...
 Decide whether to buy or produce

Purchase from Suppliers In-house production

Global
trading
+ Domestic Internal Purchasing
+ Global Internal Purchasing
+ Domestic External Purchasing
+ Global External Purchasing