Sourcing patterns and product configuration as a mean to identify technology gaps
Abstract:
In the era of globalization companies seem to be rootless showing an expertise of transferring production lines or complete factories across borders. These activities go beyond the initial strategic goals of what market to serve and where it is cheaper to produce; there are complex operational challenges such as finding the right source in the location, being able to develop a technological capability, accomplish local legislation, facing logistic and infrastructure patterns altogether with attaining the corporate strategy. This paper aims to propose a methodology to undercover technology gaps within the Mexican automotive industry based on an Operations Management perspective through which products configuration and sourcing patterns are analyzed. Bills of materials of products with highest production volumes per brand were decomposed on its components in order to find the sourcing rationale of each component responding to the product complexity and manufacturing cost issues.
Introduction:
In the era of globalization companies seem to be rootless showing an expertise of transferring production lines or complete factories across borders. These activities go beyond the initial strategic goals of what market to serve and where it is cheaper to produce; there are complex operational challenges such as finding the right source in the location, being able to develop a technological capability, accomplish local legislation, facing logistic and infrastructure patterns altogether with attaining to the corporate strategy. It is probably because of moving operations abroad or sourcing from an overseas supplier is a decision usually made by headquarters, that most of academic research on this matter is oriented on macroeconomic terms and leaded by economists; the result of this academic pattern is the wide literature about the rationale of why to move operations abroad which is based on ‘countries’ profiles’ that can easily become stereotypes: ‘Chinese labour is cheap’, ‘Engineers from former communist countries are good’, ‘Mexican manufacturers are responsive’, ‘there is world-class manufacturing in the UK’; however, it is a fact that companies face nowadays higher manufacturing cost in developed Chinese locations than what it is usually claimed; there is not a significant advantage of the availability of labour in transition economies; poor logistics infrastructure in Mexico neutralizes its proximity advantage; manufactures in the UK have to source from abroad because practically all production of goods has flown overseas. Hence, although it is broadly accepted that motives of why to move operations abroad are: resource seeking, market seeking and efficiency/strategic seeking (Narula & Dunning, 2000), decisions won’t be linked to each specific business reality if they depend on macroeconomic, generic, government published, consultants/ negotiorum gestors provided information. Operations management researchers have attempt to influence the research on overseas operations since it was highlighted that functional strategies such as manufacturing can provide a distinctive advantage (Skinner, 1969), proposing strategic roles of plants that explain in operational terms why to produce abroad (Ferdows, 1997) and explaining types, approaches, procedures for location decisions (Vos, 1991; Bartmess, 1993; Vos, 1997; Grant & Gregory, 1997) however they are all still depending on countries profiles. In consequence, the purpose of this paper is not claim invalid previous research on overseas operations but to propose a method to identify technology gaps under an operation management perspective.
Type: Academic Paper
Author: Salgado, Omar (2009)
Repository: Production & Operations Management Society