Industry Studies 1

Make, Take and Sell Challenge: Manufacturing Capability

Topic Number: 3

Organisations continually strive to maximiseefficiencies whilst sourcing the best quality andsustainable raw materials. A key consideration whendeveloping a product is how best to manufacture it inorder to achieve the scale required to servicecustomers. There are a variety of options to considerthat we will explore in this workshop.

We will also discuss the issues with sourcing andmanufacturing in one country and then selling it inanother. Finally, we will develop our understanding ofthe various manufacturing implications on yourproduct and come up with the optimal approach.

Overview

• Develop and determine how to source a variety of raw materials from around the world to maximiseproduct efficiencies

• Critically evaluate the variety of manufacturing options you have available and apply them appropriately to your business

• Be able to forecast the demand for your product

• Articulate the various manufacturing implications of producing a product in one country and selling it in another

Learning outcomes for these workshops

Where to source

your raw materials

from?

A three point plan to identifying raw material suppliers

Analysethe

situation

Supplier Evaluation

1

2

3

Identify Opportunities

Identify Opportunities: What do you need?

Opportunities are usually triggered by a business requirement for a product or service.

Material Requirements Service Requirements

Equipment

Components

Raw materials

Computer programmers

Transportation services

Maintenance service

Analyse the situation: Where can you get what you are looking for?

Analyse the situation: Determine ease of getting materials to your factory

You need to assess the associated costs of transport and other factors such as tariffs. Therefore, the lowest cost production

option may not be the best route to go down.

Once we have identified where, the question is whom is the best supplier?

QualityProcesses/Ca

pabilities

Price Regulations/Ethics

Do they offer the best product within the price that you

want to pay?

Do they have the ability to deliver what is expected currently

and in the future?

Do they offer the best product at the most competitive

price?

Do they work within an internationally

accepted regulatory/ethical

code?

Example from Walmart

View video: https://www.youtube.com/watch?v=yZC4neLax5o

What manufacturing model do you

deploy?

So you know what you want to produce… lets understand how to produce it… consider three

routes…

Outsource

Insource

Outsource &

Insource

1

2

3

Adopts to consider: A DLG Example

Source: McIvor (2008)

Outsourcing Production

India

Pakistan

Typical Outsourcing Locations

Bangladesh

Outsourcing Production: Implications

Pros

Cons

Immediate access to skilled

personnel

Speed of delivery

Minimal management

risk

Lack of

control

Requires continual

monitoring

Viability of service provider

Insourcing: Zara in Action

It is claimed that Zaraneeds just two weeks todevelop a new productand get it to stores,compared to the six-month industry average,and launches around10,000 new designseach year. Zara hasresisted the industry-wide trend towardstransferring fast fashionproduction to low-costcountries.

Insourcing Production: Implications

Pros

Cons

Complete control over

process

Easier planning

cycle

Learning economies

Longer to put

in place

Potentially more costly

New capability required

A hybrid model? Apple’s Top 200 Suppliers

Hybrid Production: Implications

Pros

Cons

Ability to

move quickly

Scale with

demand

Maintain majority control

Coordination issues

Bottlenecks harder

to identify

Worst of

both worlds?

Where to manufacture? Home vs host

country

Considering risk and reward

Home Country Host Country

• Less upfront cost

• Less risky

• Less restrictions

However…

• May not make to local spec

• Tariffs & duties to be paid

• Issues in logistics

• Less logistical issues

• More tailored to needs

• Speed to market

However…

• Set up costs/investment

• Adhere to local regimes/requirements

• Not easy to pull out

Stage of growth is important; lets look at internationalisation model

Source: Uppsala

Forecasting demand helps to minimise risk

Total Population

Income on Food

Income on beverages

Income on alcohol

Income on beer

Source: Kotler et al (2012)

Consider local tariff and non-tariff barriers

Duty on importsLocal content requirements

Quotas Anti-dumping regulations

A tax collected on imports and some exports by the customs authorities of a country. This tax is used to raise state revenue.

A minimum level of local content is requireed under

trade laws when giving foreign companies the

right to manufacture in a particular place.

A limited quantity of a particular product which

under official controls can be produced, exported, or

imported.

A company is dumping if it is exporting a product to the EU at prices lower than the normal value of

the product

How to manufacture?

Consider the 4 V model

Mass Production vs Mass Customisation

Mass Customisation in Action: Nike

Consider ‘Just in time’ operations

End of Workshop

Note: This recording is for your personal use only and not for further distribution or wider review.

© Pearson College 2013