GLOBAL PRODUCTION STRATEGIES
For businesses to thrive they must adopt a strategic approach to development and balance trade-offs for human resources, location of production, and the level of regional integration with suppliers.
Production Strategies
A Brief Overview Production Strategy in a Global Context
In this paper, we explore potential issues faced by firms utilizing a global production strategy in business. Understand the three major approaches to production review challenges and opportunities presented with each method.
The three major approaches to production:
a) centralized production, b) regional production, and c) fully vertically integrated production.
At least three key decisions that need to be made prior to starting any new enterprise are exceptionally clear and pivotal for setting the right strategy. For businesses to thrive they must adopt an approach and practice human resource management, location of production, and select the level of integration with suppliers.
Opening Statement
Business planning requires a certain deliberate approach to key areas of development which will serve to shape the production and delivery of the finished product to a business’s end customer. For global producers working accross international markets business planning decisions carry significant strategic importance for determining total quality and total risk profile of an organization. Regionality of production, raw materials sourcing and product differentiation are key factors effecting the total cost and adaptability of businesses seeking output at optimal levels of production and simultaneously meeting market demand.
Business Planning Factors:
• Capacity. • Location. • Sourcing. • Labour. • Facilities. • Process. • Differentiation. • Make or Buy. • Financing. • Quality Control. • Level of Standardization.
Important factors affecting each decision shown above are the desired level of control over outputs, the budget available for development activities such as training and technical systems for supplier integration and customer orders, the amount of lead time to deliver goods from suppliers or to reach markets, and the criticality of key inputs such as raw materials, skilled labour, or specialized equipment to produce the finished product.
Strategic Planning:
An Example Scenario:
Profile of a Company’s Requirements for Successful Production:
- High degree of control over supplier inputs and a strict quality assurance program, and
- High availability of raw materials, and
- Includes a critical component to manufacture of the finished good, and
- Little need for technically skilled labour in-house for the final assembly, and
- Distribution to geographically proximate markets.
Model the Decision for this Company’s Business Development
Regional production due to available resources with minimal logistics or lead times, localized human resources recruitment because the training can be done on-site, and acquisition of best-in-class supplier for full vertical integration and supply assurance for the critical component, thus yielding greater control over total quality and protection of proprietary production methods used.
Centralized Production:
Global Production Strategies
• Centralized production vs. decentralized production is a key factor for the level of differentiation in the production of goods and decision-making power required at various stages in production. More autonomy is needed when production challenges have broad range of potential solutions especially when there is an equal degree of uncertainty for their resolution. Developing processes and procedures to conduct business in a centrally managed system requires foresight and a dedicated approach to resolve procedural issues that will arise and doing so from a managerial perspective.
• Vertically integrated production and deeply integrated supplier systems to increase overall control and transparency of the upstream value chain. Methods of integrated production along a supply chain may include vested interests, partial ownership, highly developed service level agreements, or mergers and acquisitions of key parts, service, and material suppliers. Dependencies amidst producers vary with availability, proprietary risks, and the estimated cost of replacement for the same input from other sources making decisions for the level of integration with various suppliers highly relevant to strategy.
Integrated Economies:
Considerations for companies in the international production planning process.
Corporations will select the geographic location of their production based on ease of doing business and integrated economies are a good place to look for expansion opportunities.
Some nations have sought to remove restrictions for materials and labour to encourage movement freely between them and then share the successes or failures of a more integrated economic market at the global level.
Reinvestment vs. Divestment:
The need to innovate due to changes in technology and climate could demand higher allocation of resources for survival if the business wishes to secure itself a place in the markets of the future or they may divest to reward shareholders and to share business profits as commitments require which creates positive attraction for more investment.
Quality in Production:
Examples include, yet are not limited to the following;
Regionalization and the Importance of Human Resources:
Protective clothing, required equipment, and resourcing provisions to supply employees with personal protective equipment can be up to the employer to provide if they wish to uphold certain standards and reduce incidents from non-compliant or lowquality substitutions purchased by employees. Effectively using a human resource department and purchasing to supply from local providers might be an adept way to integrate more fully with the local economy and increase future availability for the same standard of supply.
Prepare. Know Your Requirements Going In.
Conclusion:
In conclusion, an international business plan complete with an assessment, offers a multitude of opportunities to explore the risk appetite of ventures, either established or starting up. Regardless of the level of success in domestic markets each are well-advised to take an open and honest appraisal of their current capacity, potential environments, and ability to withstand any unforeseen challenges or achieve greater success with new opportunities.
References:
- Boxall, P. and Steeneveld, M. (1999), Human Resource Strategy and Competitive Advantage: A Longitudinal Study of Engineering Consultancies. Journal of Management Studies, 36: 443-463. https://doi.org/10.1111/1467-6486.00144
- Hax, A. C. and Meal, H. C. (1973), Hierarchical Integration of Production Planning and Scheduling. https://dspace.mit.edu/bitstream/handle/1721.1/1868/SWP-0656-14561389.pdf
- Wild, J. J., Wild, K. L. (20180110). International Business, The Challenges of Globalization. (9th Edition. ed.). New York, NY, USA: [[VitalSource Bookshelf version]]. Retrieved from vbk://9780134730066
At Supply Chain Logistics Consulting our mandate is to improve the way things are done and we would be happy to hear from you. Do you have a specific problem you are solving? A unique solution or a successful story about making a significant change?
Let us know.
Write your response in the comments or send us a message on our contact page. If we get enough responses, we will be highlighting our favorite examples in featured posts so that our readers can benefit from them as well.
If you are interested in hiring a management consultant for your business or project and want to learn more about our management consulting services, please contact us today. We are a professional management consulting firm with years of experience in helping people at businesses like yours to achieve results.
Visit Supply Chain Logistics Consulting online and Subscribe on all our channels.
