Developing Global Manufacturing Operations - Issues, Challenges and Potential Solutions

 


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Introduction

Manufacturing companies have started venturing globally to take advantage of low cost manufacturing, geographical location, resource availability and so forth. Developing and managing global manufacturing operations have continuously been a challenging task for company’s world wide. This article attempts to explore 10 most significant issues of concern, challenges faced, and potential solutions for multi-national manufacturing organizations as they start operating globally.

1. Management Philosophy

Management philosophy guides the stakeholders of the organization in providing an understanding of what the Company’s operations are, where they are heading towards, and why they are in business. Companies need to provide a clear statement of their vision, mission and values to the stake holders. It becomes vital especially in a global company to dedicate thought and efforts in framing this philosophy, as individual companies may have slightly different focus, but the group as such should sail towards a focused destination. Equally important are the business policies and strategies by which the Company targets to achieve its vision. As the company’s grow and become multi-national, it becomes imperative to have a clear organizational structure at entity level and individual level. This would form the basis for better communication, development of collaborative operations, and effective decision making. Notably, organizations should adopt ways of proving its commitment to the strategies and philosophies, link their operational and tactical activities towards their vision, and continuously communicate them to their stakeholders.

2. Systems and Systems Thinking

Systems are procedural approach that channels the individuals, departments and the management in effective operations at all levels. An organization operating in different countries need to have a common system by which they deal with operations at same level in their entities. This provides a visibility for individuals from different entities in collaborating their work with each other. Also, a system gives the Company less dependency on a particular individual or group of individuals, which growing organizations will realize to be important in the long run. A system provides the multi-national organization a dynamic work culture, and easier adaptability to working procedure.

The concept of Systems Thinking evolved with the development of supply chain integration. Organizations that concentrate on the individual development of the entities often fail to notice the integrated links and the advantages they can extract off them. Systems Thinking would help look the whole network of entities as one organization, with one business and one objective, and focus on overall development across the supply chain.

3. Collaborative Operations

Collaborative operations help organizations take advantage in areas such as utilization of low operations cost, skilled labor, material availability, and so forth though it poses high demands on seamless business processes, interoperability, supply chain visibility, demand forecasting, and customer integration.

As the individual entities of the organization grow, they tend to develop functional expertise in specific disciplines. Often the companies that operate at multi national level concentrate less on getting trained in this expertise from their fellow entities, but involve in sourcing the specific activity to this expert entity of the group. This approach has to be assessed on case to case basis. In a typical organization where the entities do similar activities at different locations, it may not be suitable to source a particular activity to a location. Also an imbalance in a specific functional expertise level among the entities might grow to be a barrier in overall growth.

4. Branding

As companies go global, brand management becomes a key aspect. Customer’s perception for a product varies with the country in which it is manufactured. This urges Multi national companies to concentrate on development of brand and strongly commit to their offerings. This becomes an issue of concern especially for companies that go global before creating a niche brand in the market. Multiple brands and multiple product offerings are to be handled with appropriate concern.

5. Sigma Level

Sigma is a statistical term to express how much a process varies from the target. Sigma level allows comparison of process performance through out the entire organization, provides figures on overall yield, and DPMO. Though industries have risen to the level of six sigma targeting 3.4DPMO, a lot majority of the companies lie in 3 sigma level where they spend at least 30% of its revenue on defects, corrections, reworks, and rejects. Global companies should have a focused roadmap on improving the sigma level and link them to their business strategies.

6. Global Distribution and logistics

With the evolution of global supply chain management, organizations have centralized or decentralized distribution/procurement systems. Applications of appropriate principles of direct shipment, warehousing, or cross docking depending on the Manufacturing/customer locations, customer dispersion and concentration, and transportation involved have saved billions of dollars for multi-national corporations. Also appropriate push-pull systems are designed to their product and demand requirements. Many companies choose to maintain component level inventory of their standard products and some provide customized parts assembly at the final stages.

7. Human resource & Cultural Impacts in Global scenario

As globalization develops and boundaries shrink, growing economies have started accepting and developing multi-cultural working environments. Companies have already realized the need for greater majority of local employees in their established ventures overseas. These companies spend lot of efforts in understanding and promoting cross cultural communication and motivational activities.

Another vital factor would be the Company’s HR policies, and training and development. HR policies may vary according to the local human resource standards and their conformance to the international standards. Nevertheless companies must ensure a systematic training structure and curriculum for their employees. This will provide organization’s in maintaining balanced skills among employees multi-nationally.

8. Technology Development

Technology development is the process of research and development of technology. If companies fail to develop innovative technologies, the competitors take a lead. Technology development has become a continuously evolving activity. These technological innovations provide organizations specialization in product centric or process centric areas that help them differentiate in the market place. Growing companies need to concentrate on research and development on key processes that affect their business.

9. Leading Industry practices

Leading industry practices are methodologies and systems that have evolved over time out of continuous research and development. These industrial practices in technology, application, and service areas are growing in a tremendous pace. Organizations that failed to make efforts to move in tandem with these developments are facing difficulties in moving ahead. On the other hand, practicing leading practices provides organizations greater industry recognition, professionalism, cost savings, and also improves employee morale.

10. Exploring market

Companies need to do a market analysis on the trends of the business in their target countries for operations, target market, competitor analysis, government regulations, and so forth. This kind of analysis help companies choose to make an informed decision on whether to serve the local market or be an Export only Unit.

Conclusion:

These 10 development areas are just part of the extensive list of areas that companies need to concentrate on, nevertheless these would be the most significant ones. The article attempts to highlight some of the modern thoughts and approaches that would help manufacturing industries internationalize in a successful manner.

About the Author

Devanand Devarajan is a Executive in S. E. A. Hydropower and is involved in organizational development and productivity improvement projects. His field of interest and research areas includes Manufacturing Engineering, business development, Six Sigma, and project managment.

Deva graduated with a masters in Industrial & Systems Engineering from National University of Singapore. Additionally he holds Six Sigma Green Belt, Cambridge career award in marketing and Masters Diploma in Business Administration. He is a member of number of professional and social development associations.

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