Page 272 - DMGT545_INTERNATIONAL_BUSINESS

Unit 14: International Production and Logistics Management

There are two ways of organising materials management as a business process: notes

l z To separate out materials management as a function and give it equal weight in
organizational terms, with other more traditional functions such as manufacturing,
marketing and R&D. According to materials management specialists, purchasing,
production, and distribution are not separate activities but three aspects one basic
task: controlling the flow of materials and products from sources of supply through
manufacturing and distribution into the hands of customers.
l z Despite the apparent cost and quality control advantages of having a separate materials
management function, all the firms do not operate with such a function. In such an
organization, purchasing, production planning and control, and distribution are not
integrated. Planning and control are part of the manufacturing function, while distribution
is part of the marketing function. Such companies will be unable to establish materials
management as a major strength and consequently may face higher costs.
The next dilemma is determining the best structure in a multinational enterprise. In practice,
authority is either centralized or decentralized. Under a centralized solution, most materials
management decisions are made at the corporate level, which can ensure efficiency and adherence
to overall corporate objectives. This is the case at Dell Computer, for example. In large complex
organizations with many manufacturing plants, however a centralized materials management
function may become overloaded and unable to perform its task effectively. In such cases a
centralized solution is needed.
A decentralized solution delegates most material management decisions to the level of individual
manufacturing plants within the firms, although corporate headquarters retains responsibility
for overseeing the function. The great advantage of decentralizing is that it allows Plant – level
materials management groups to develop the knowledge and skills needed for interacting with
foreign suppliers that are important to the respective plant, this can lead to better decision
making. The disadvantage is that a lack of co-ordination between plants can result in less than
optimal global sourcing. It can also lead to duplication of materials management efforts.

role of information technology and the internet

Web-based information systems play a crucial role in modern materials management by tracking
component parts as they make their way across the globe to word and assembly plant, information
systems enable a firm to optimize its production scheduling based on time, components are
expected to arrive by locating component parts in the supply change, good information systems
allow the firm to accelerate production when needed by pulling key component out of the regular
supply chain and having flown them to the manufacturing plant.

Firms increasingly use electronic data interchange to co-ordinate the flow of materials into
manufacturing, through manufacturing and out to customers. EDI systems require computer
links between a firm, its suppliers and its shippers. These Electronic links are then used to place
orders with suppliers, to register parts, leaving a supplier, to track them as they travel toward
a manufacturing plant and to register their arrival. Suppliers use an EDI link to send invoices
to the purchasing firm. The major advantage of an EDI system is that supplies, shippers, and
the purchasing firm can communicate with each other with no time delay, which increases the
flexibility and responsiveness of the whole supply chain. A second advantage is that major
paperwork between suppliers, shippers, and the purchasing firm is eliminated Good EDI
systems can help affirm decentralize materials management decisions to the plant level by
giving corporate-level managers the information they need for coordination and control of the
decentralized materials management groups.
Before the emergence of the Internet as a major communication medium, firms and their suppliers
were required to buy expensive proprietary software solutions to implement EDI systems. The
ubiquity of the Internet and the availability of Web based applications have made most of these

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