global+manufacturing

=**Global Manufacturing**= toc

**1. Introduction**
According to competition in global market has growth rapidly, hundred and hundred companies choice to cooperate with other companies which located in difference countries. This is a strategy to maintain their competitiveness in the market in the broadest sense of the term. Additionally, there are also include the consideration which the companies’ purpose move into the new countries to gather the new market. Whatever the factors like tariff barrier, policies and so on, each of those can be the boundary between the companies who located in different countries. Since last decades, developing countries had significant improvement which is stepped out to strive for the space in the entire world. Cheaper labour market is one of adapted operation when companies cooperate with other companies which located in developing countries. Global manufacture is one piece of value-chain strategy. On the other part, developing countries are looking forward to attract the foreign investment come into their countries. Palmer and Hartley (2012) argued the trend towards a global business environment is express as ‘going global’. More and more companies involve the part of globalized business environment are achieving successfully. Outstanding economy has established by developed countries such as America and Britain. Instantly, the ‘BRICs’ countries (Brazil, Russia, India and China) had been drastic run after them. Global manufacture is the strategy for each of companies which interaction between the nations.

**2. The reason for Going Global**
For one company who desires to explore a new market that located overseas. There is attractiveness from many reasons. According to the ‘push and pull’ factors, the oversea market possesses the attraction elements and local market are saturation at the same time (Palmer and Hartley, 2012). The purpose of companies which strive to gain the more market share in different countries. The oversea market is totally new for them and it not expose to the risks of expanding with product range and market coverage. In the other part is original domestic market had saturation. Particular in a saturated market evolve competition and the specific product’s life cycle is decay in the country. Therefore finding a new market which located without the nation is appropriate way. Seeking the perspective of oversea market (the companies’ target market), the lack of economic of scale would impel the foreign investment come to here and bring new energy for economy. Local government may offers reasonable policies to multinational companies and companies can create more job positions for local labour.

Additionally, the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) possesses one major purpose is remove the trade barrier between the nations (Palmer and Hartley, 2012; Daniel et al., 2013). However, the GATT is predecessor to the WTO, and fight for the issue of non-tariff barrier in terms of industrial standards, government procurement, subsidies and countervailing duties, licensing, and customs valuation (Daniel et al., 2013). This is reduce the tariff barrier to multinational companies.

**3. Global Manufacture Strategy**
Daniels et al. (2013) mentioned the manufacture is a part of supply-chain strategy. It is preceded by sourcing inputs from suppliers and followed by distribution of the final product to consumer. The successful global manufacture strategy was depends on four key factors: compatibility, configuration, coordination and control. Accenture had explain the global manufacture strategy in high performance by this video below: media type="custom" key="25422480"([])

**3.1 Compatibility**
In Daniels et al. (2013) further argument has identify the compatibility is the degree of consistency between the foreign investment decision and the companies’ competitive strategy. The follow strategies are considerable by each of companies which desires gain the advantages: l Efficiency/cost—reduction of manufacturing costs l Dependability—degree of trust in a company’s products, its delivery and reliable product maintenance l Innovation—ability to develop new products and ideas l Flexibility—ability of the production process to make different kinds of products and adjust the volume of output

**3.1.1 Efficiency/cost Strategy**
Daniels et al. (2013) said the cost-minimization strategy was taking adapted by multinational companies which share out the work and cooperate with foreign companies, particular in developing countries, there were cheaper labour than developed countries. In addition, raw material procurement from cheaper area and maintain the quality as well. There was reason for why multinational companies had established the facilities and hire native employees in Asia and somewhere else. This is a specific characteristic foreign direct investment as offshore manufacture plants. Hill (2000) argued the foreign manufacturing plants had established for a significant benefit of tariff, cheaper labour costs, and subsidies from government and reduced logistic costs. For example, China is recent has become the famous manufacturing area. There are many multinational companies move into Chinese market to find a partners, they has share the work with local companies or purchase raw material. Such as Apple, every Apple’s products has assembled in China and printed on external packing, headquarter just responded for research & development, design; Nike as well, brand authorizing to Chinese sport products manufacturer, make the product in China and shipping the products to anywhere in the world.

**3.1.2** **Dependability Strategy**
Beside the costs factors, there are many factors should be consideration. According to the increasing customer demand for dependability and reduce the deliver time between manufacturer and customer. Maybe some companies choose the areas which located near to their marketing area rather than the low-wages areas. In the other part, long supply chain can gain the more risks otherwise short distance can improve the dependability. Additionally, Hill (2000) had explained the specific the type of supplier relations. The relationship between the suppliers should reconsider by each of them: l Trawling the market—computerized interaction has through the business completed among the suppliers. It is aim to reduce the costs. l Ongoing relationship—these is established a medium-term contracts between the suppliers. They share the information on required and developing their relations during this period. l Partnerships—these is long-term contract had involvement between suppliers. They share the information and cultivate trust each other. l Strategic alliances-- suppliers have agreement which on a project or share the information, resources during long-term collaborate. l Backward integration—the last process is to change from relationship to ownership. This leads to the full sharing of information and the transfer of goals and culture.

**3.1.3** **Quality Strategy**
This strategy help plants maintain their products’ quality and ensure their product rolling in innovation. Daniel et al. (2013) described the plants keep operating their business in low-cost countries. However, some Japanese companies relocating production back to their own country. In 2003, Japanese companies registered to build 844 factories in Japan and 434 abroad; in 2006, the number were 1782 and 182. This figure directing the trend of Japanese companies prefer to ‘go home’. One major part is supply the job positions to native workers, and engage high-tech engineers, parts suppliers, and decision makers. These can make sure the innovation and quality improvement. Another part is strong currency also forced Japanese companies rethink to stay in home country, in additional, offshore is no longer take advantage with weak currency.

**3.1.4** **Innovation Strategy**
Bradbury (1989) said the innovation is put the new ideas, invention, design and development into a process of product manufacturing Innovation. Innovation strategy is very important for each companies. However, as first mover which is invested abroad has taken advantage by cheap labour costs, and ignore the innovation for early period (Daniel et al., 2013). As times goes on, the multinational companies had established the research and development facilities abroad. The simplex manufacture abroad is not existence so far. As the quality strategy mentioned, the manufacturing development has operating at multinational companies wherever in abroad or which companies own countries.

**3.1.5** **Flexibility Strategy**
Flexibility strategies is face the national market difference may result in regional manufacturing to service local market. It may not possible to produce in one location and delivery in other areas. As Daniel et al. (2013) stated that the Wall’s Unilever which produced the ice cream in China, and they can supplies other countries as well. However, in winter, Wall’s Unilever has discover that it can produce ice cream in China and shipping to Africa and Australia. Consider the winter is lowest demand in China and African and Australian weather are totally opposite with China. So, uninterrupted production by Wall’s Unilever are flexibility in difference in measurement systems, time zone, and problem-solving approaches can influences supply chain. (Daniel et al., 2013)

**3.2** **Manufacturing Configuration**
Three basic configurations are multinational companies has had considering in establishing the global manufacturing strategy. (Daniel et al., 2013) there are include the centralized manufacturing, regional manufacturing and multidomestic manufacturing.

**3.2.1 Centralized Manufacturing**
Daniel et al. (2013) argued centralized manufacturing was based on manufacture-and-export strategy, which is making products in one area and shipping them to abroad. This strategy supplies a standard to select. In additional, the companies when starting exports their product combines with low-price are pervasive way has move into other market. The area which important at manufacturing is economic scale also need expensive goods for consumption in different market, and it is need to consider the localization. Such as when iPhone had assembled in China and shipping back to America, and them exporting to around the world.

**3.2.2** **Regional Manufacturing**
Daniel et al. (2013) explained the regional manufacturing is facilities serve customers within a specific region. Multinational companies had established the facilities in a specific area, and producing the same product as headquarter as well. It is help the multinational companies reduce the supplies chain which include the logistic charge and taxation by nation. For example, Toyota established the factory in Southeast Asia, and sell their products at here; Dell computer assembled in Brazil and export them to different area in South America.

**3.2.3** **Multidomestic Manufacturing**
Since the companies striving to move into an individual countries, there were the barrier of trade consist in the market expansion. When the market has significant demand by companies’ products, and decrease the barrier between the target countries-market and the companies should depend on the using the country-specific manufacturing facilities to face the local demand (Daniel et al., 2013). For example, Chinese automotive market, BMW had cooperated with Chinese Brilliance Automotive Ltd. in 2003 (Brillianceauto, nd). This joint venture had manufacture the BMW 3-Series, 5-Series and X1 model automobile and sell them in Chinese market only. The reason for Chinese government had policies which expensive taxation to against the BMW vehicle export to China with same sell price in Europe. The appropriate way to reduce the barrier is follow the strategy which using the Chinese Brilliance facilities. However, BMW also has direct investment to establish the new technique to maintain the Chinese market. Because, the country side may influence the companies’ decision. (Daniel et al., 2013)

**3.3** **Coordination and Control**
Once the activities that global supply chain had established, the //coordination// is difficult by harmonize the suppliers’ relationship and logistic problem. The activities include the purchasing to warehousing to shipment. In the other hand, //control// should fit with coordination. Once the company determines the manufacturing configuration it will use, to operating company’s strategies can make sure the control system adoption. There is control through measurement which reflect the company’s performance and respond appropriate change in further. (Daniel et al., 2013)

**4. The Impact of Globalization on Supply Chain**
Chopra and Meindl (2013) posted the definition of Globalization was offered an opportunity to companies had simultaneously grow revenues and decrease costs. However, there are also existing tremendous risks in the development of supply chain. High-performance supply chain can take full advantages by globalization. Vice versa, several supply chain had discovered their uncertain risks within globalization. Chopra and Meidndl (2013) also mentioned the annual report by P&G in 2008, there were sales growth by a third of the company from the sales profits of developing countries’ market than sales profits of developed countries’ market. From 2008 to 2010, the global sales had increased 34% in developing countries’ market by P&G. Similarity, China and India were the biggest target market to Nokia and they sales in these two countries were 21.5%, and the BRICs countries sales were 28% in 2009. So, P&G and Nokia had significant revenue enhancement opportunity by globalization. The opportunity from globalization also accompanied with risks. Consulting company which named Accenture had a survey to explain the risks had influence to supply chain. The force majeure factors can obstruct the supply chain, such as the hurricane, earthquake or traffic accident. The specific risks had conclude in Chart 1 below:

Chart 1: results of Accenture survey on sources of risk that impact global supply chain performance
 * Risk factors || Percentage of supply chains impacted ||
 * Natural disasters || 35  ||
 * Shortage of skilled resources || 24  ||
 * Geopolitical uncertainty || 20  ||
 * Terrorist infiltration of cargo || 13  ||
 * Volatility of fuel prices || 37  ||
 * Currency fluctuation || 29  ||
 * Port operations/custom delays || 23  ||
 * Customer/consumer preference shifts || 23  ||
 * Performance of supply chain partners || 38  ||
 * Logistics capacity/complexity || 33  ||
 * Forecasting/planning accuracy || 30  ||
 * Supplier planning/communication issues || 27  ||
 * Inflexible supply chain technology || 21  ||

Chopra and Meindl (2013) mentioned the globalization had significant improvement to apparel and consumer electronic. These were take advantages from developing countries. The cost reduction is the advantage within apparel and consumer electronic manufacturing. Apparel manufacture has high labour content and relevant lightweight for efficiency shipment. The companies which work on apparel manufacture have established a number of facilities in cheap-labour and low-cost countries. Similarity, the consumer electronic manufacture had exploited large economic of scale by consolidating production of standardized electronics components in a single location for use in multiple products across the globe.

**5. The Offshoring Decision and Total Cost**
Chopra and Meindl (2013) had explained the primary reason for supply chain become global was move into low-cost countries lead to cost reduction. Wherever the companies taking advantages though the offshoring. However, some of reality was far less than anticipate. Like the logistic cost much higher than before, since 2000 to 2011, the shipment is totally negative factor to influence the offshoring. Companies may lose the advantage by two reasons. Firstly, focusing exclusively on unit cost rather than total cost when making the offshoring decision. Second is ignoring critical risk factors. Chopra and Meindl (2013) also mentioned the dimension of total cost which was focusing on complete source process when offshoring. The supply chain which under offshoring environment has increase and continued to information, product and cash flow, these had to consideration by each companies which take the indication when the complexity and cost of managing each of those flows substantial existence. Ferreira and Prokopets (2009) had identify the key factors of total cost which is impact of offshoring had shown below: l Supplier price: should link to costs from direct materials, direct and indirect labour management, overhead, capital amortization, local taxes, manufacturing costs, and local regulatory compliance costs. l Terms: costs are affected by net payment terms and any volume discounts. l Delivery costs: include in-country transportation, ocean/air freight, destination transport, and packaging. l Inventory and warehousing: include in-plant inventories, in-plant handling, plant warehouse costs, supply chain inventories, and supply chain warehousing costs. l Cost of quality: includes cost of validation, cost of performance drop due to poorer quality, and cost of incremental remedies to combat quality drop. l Customer duties, value added-taxes, local tax incentives. l Cost of risk, procurement staff, broker fees, infrastructure (IT and facilities), and tooling and mold costs. l Exchange rate trends and their impact on cost.

It is critical that offshoring decisions are made accounting for total cost. Offshoring possess the cheaper labour and fixed costs. However, the risks had been raising and logistic costs and working capital had increasing. To managing the risks before offshoring, the supply chain design has full preparation. In additional, the company which taking adopt the offshoring strategy has evaluates the positive and negative effects.

 There are many advantages as to why companies would outsource its production globally. Firstly there are the cheaper labour costs that can be achieved when heading abroad. This is down to the laws and governments in different countries having different standards, some companies can then exploit this and use the very cheaper labour costs to produce garments and products very cheaply. Heading abroad also sees the benefit of cheaper raw materials, if someone would be using mass amount of steel in their production they would head to a country where the steel is much cheaper so they can produce that item and be very cost effective. Another benefit of organisations can have is the amble amount of skilled available workforce. Companies like to move to these countries to utilise this workforce, when they are there they can now compete with every other organisation. Some brands have been producing products for many years, they will be able to benefit for economy of sale but for new organisations wanting to enter a market it is better to try and produce their products abroad so they can enter the market and compete.  There are also disadvantages when it comes to relocating overseas. Security is a big factor to consider. In some countries the government and police can be bribed, its illegal in the US and in many other countries but in some it is easily overcome. Security is also much less certain overseas, you can never be as sure about the current economic climate in some countries due to history of, civil wars, crime in general, terrorism, corruption and political instability can all effect the security of your business being abroad.
 * Advantages and Disadvantages**

There is also the problem of control. When you are outsourcing to another countries it is hard to have people loyal to you over there, so because of this you would use a contractor. Using a contractor is the normal practise so you can have someone who is local and custom to that country, but their reliability is always in question. If there is not a strong enough control the number in production can also fall which can have a knock on effect as to whether it was the correct idea to outsource to another country.

Ensuring the staff are trained to the same standard as what your company has already been working at is very important. If you have been producing a product and are very in control of the staff working for you you know the standard of the product, however if you outsource this you cant guarantee the same quality.

**6. Conclusion**
For reduce the risk of investment and avoid the uncertain situation. There are many international brands share their work with partner which established at foreign areas. Many supply chain had going to mature in global distribution. According to the progress of globalization has rapidly growth in recent years, there are depth of cooperation between the high-tech companies and cheap-cost companies it popular combination in international business. Multinational companies had a number of reasons to move into the new market which can reduce the costs. To gain the bigger market share is their aims too. However, there are risks need considerate by companies before to export their products or offshoring. Such as force majeure factors and conflict between the cooperators. To avoidance these negative factors is the management skills which is help the multinational gain the successful in global market.

**7. Reference**
Bradbury, J.A.A. (1989) Product Innovation Idea to Exploitation. Chichester. John Wiley & Sons

Brillianceauto. (no date) Brand and Products [Online Source] http: www.brillianceauto.com/brands/bmw.html. [Assessed by 19 Mar 2014]

Chopra, S. and Meindl, P. (2013) Supply Chain Management Strategy, Planning, and Operation fifth edition. Essex. Pearson Education Limited

Daniels, J.D. and Radebaugh, L.H. and Sullivan, D.P. (2013) International Business Environments and Operations fourteenth edition. Essex. Pearson Education Limited

Farreira, J. and Prokopets, L. (2009) ‘Does Offshoring Still Make Sense?’—Supply Chain Management Review [20-27]

Hill, T. (2000) Manufacturing Strategy Text and Cases second edition. New York. PALGRAVE.

Palmer, A. and Hartely, B. (2012) The Business Environment seventh edition. Maidenhead. The McGraw-Hill Companies, Inc.