1. Explain why global production and supply chain management decisions are of ce
ID: 343240 • Letter: 1
Question
1. Explain why global production and supply chain management decisions are of central importance to many global companies.
2. Explain how country differences, production technology, and production factors all affect the choice of where to locate production activities.
3. Explain how the role of foreign subsidiaries in production can be enhanced over time as they accumulate knowledge.
4. Identify the factors that influence a firm’s decision of whether to source supplies from within the company or from foreign suppliers.
Explanation / Answer
1. Explain why global production and supply chain management decisions are of central importance to many global companies.
Firms need strategic decisions made on global production and supply chain management in order to
2. Explain how country differences, production technology, and production factors all affect the choice of where to locate production activities.
When deciding where to locate production facilities, organizations will have to consider:
• Country factors: Firms should locate manufacturing activities where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Regulations affecting FDI and trade can significantly affect the appropriateness of specific countries, as can country’s sovereign rating which will impact foreign currency conversion rate. Along with these, access to human resources with appropriate skills, logistics infrastructure, experience of other firms who operated there etc.
• Technological factors: Level of fixed costs involved (single location vs multiple production facilities), Economies of scale of the technology, Flexible manufacturing technologies, Flexible manufacturing cells
• Production factors: a. Product value to weight ratio, b. does the product meet universal needs or localization is required? c. Distance to major markets d. Access to raw materials and technology
3. Explain how the role of foreign subsidiaries in production can be enhanced over time as they accumulate knowledge.
Strategic role of the factor will change over time basis shift in demand trends, change in regulations, and learning curve of the production facility team. Role of foreign subsidiaries in production can be enhanced through
4. Identify the factors that influence a firm’s decision of whether to source supplies from within the company or from foreign suppliers.
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