Intbusl Su 8.2

Study unit 8.2 Global manufacturing and materials management 8.2.1 Importance of strategy, management and logistics a. Production: * Activities involved in creating a product * Applies to service and manufacturing activities b. Logistics: * Activity that controls the transmission of physical materials through the value chain (procurement -> production -> distribution) * Linked to production – firm’s ability to perform production activities efficiently depends on timely supply of inputs c. Strategic objectives: * Production and logistics have a number of strategic objectives * To lower costs: * Disperse production activities to different global locations where they can be performed most efficiently * efficient global supply chain management – better match supply and demand – reduced amount of inventory in system and increased inventory turnover – means less working capital in inventory – less likely to have excess inventory on hand which cannot be sold and has to be written off * To increase product quality * Eliminate defects from both supply chain and manufacturing process * Improved quality control linked to lowering costs: * Increased productivity – no time wasted on producing poor quality products which cannot be sold - leads to direct reduction in unit costs * Lowering rework and scrap costs related to defective products * Reduced warranty costs related to fixing defective products * Costs of both production and after-sales reduced – costs of value creation reduced d. Quality and Cost linked to TQM and Six Sigma * Six Sigma quality improvement methodology * Used by most managers to improve reliability of product offering * Direct descendant of TQM * Statistically based – aims to reduce defects, boost