Understand the concept of supply chain management.

Supply chain management is the process of coordinating and integrating the flow of materials, information, finances, and services within and among companies in the value chain, from suppliers to the ultimate consumer. Supply chain management is integral to the achievement of cost and quality objectives in companies and to international competitiveness.

Recognize the relationship between design and supply chain management.

The design of a company's products and services has a fundamental relationship with the types of inputs the company will require, including labor, materials, information, and financing. Concurrent engineering approaches to design allow proposed designs to be subjected to earlier assessments on cost, quality, and manufacturability dimensions, enhancing the efficiency and effectiveness of subsequent supply chain management activities.

Describe the five global sourcing arrangements.

A firm may establish a wholly owned subsidiary in a low-labor- cost country to supply components to the home country plant or to supply a product not produced in the home country. An overseas joint venture may be established in a country where labor costs are lower to supply components to the home country. The firm may send components to be machined and assembled by an independent contractor in an in-bond plant. The firm may contract with an independent contractor overseas to manufacture products to its specifications. The firm may buy from an independent overseas manufacturer.

Appreciate the importance of the added costs of global sourcing.

International freight, insurance, and packing may add 10 to 12 percent to the quoted price, depending on the sales term used. Import duties, customhouse broker's fees, cost of letter of credit, cost of inventory in the pipeline, and international travel are some of the other added costs.

Understand the increasing role of electronic purchasing for global sourcing.

The establishment of electronic purchasing systems on a company or industry basis can influence the number and type of suppliers available internationally to firms. Although there are a number of challenges to their use, electronic purchasing systems can produce significant reductions in the costs of inputs, both direct and indirect products and services. These systems can also permit the optimization of supply chains across networks of organizations, not merely within a single company.

Understand the the just-in-time (JIT) production system and potential problems with its implementation.

JIT requires coordinated management of materials, people, and suppliers. JIT's goal is to eliminate inventories, reduce process and setup times, and use participative management to ensure worker input and loyalty to the firm. JIT includes total quality management (TQM), of which continuous improvement is an integral part. JIT is restricted to repetitive operations. It is a balanced system, and so if one operation stops, the whole production line stops. But it is difficult to achieve a balanced system. In addition, JIT makes no allowances for contingencies. A sudden breakdown will stop the entire production system. Finally, putting JIT into effect is a slow process.

Understand synchronous manufacturing and mass customization.

The goal of synchronous manufacturing is unbalanced manufacturing scheduling rather than the balanced scheduling of JIT; attention is focused on the bottleneck of the manufacturing system, and scheduling for the entire operation is controlled by the output of the bottleneck operation. Mass customization involves the use of flexible, usually computer-aided manufacturing, systems to produce and deliver customized products and services for different customers worldwide.

Comprehend the concept of Six Sigma systems and their application.

Six Sigma is a business management process that concentrates on eliminating variation and reducing defects from work processes. The five steps of the Six Sigma approach— define, measure, analyze, improve, and control—represent a method for creating a closed-loop system for making continuous improvements in business processes. The Six Sigma methodology often requires that companies rethink the way they do things and that they adapt their culture, sometimes dramatically. Successful culture change requires a concerted, long-term effort, particularly if the organization is multinational, with subsidiaries and offices around the world.

Explain the potential of global standardization of production processes and procedures, and identify impediments to standardization efforts.

Standards help to ensure that materials, products, processes, and services are appropriate for their purpose, helping companies to meet market and competitive demands. Standardization of activities helps to simplify organization and control at headquarters because replication enables the work to be accomplished with a smaller staff of support personnel and internal best practices can more readily be applied across a company's international operations. However, differences in the foreign environmental forces, especially the economic, cultural, and political forces, cause units of an international multiplant operation to differ in size, machinery, and procedures, complicating efforts to achieve standardization of processes and procedures.

Know the two general classes of activities, productive and supportive, that must be performed in all manufacturing systems.

A manufacturing system is essentially a functionally related group of activities for creating value. After the system is operable, two general classes of activities, productive and supportive, must be performed. Productive activities are all those functions that are part of the manufacturing process. Among the important supportive activities are purchasing, maintenance, and the technical function.