This Presentation analyses the concepts of International Productions & Operations Management through a Case Z, Inc.

1. INTERNATIONAL PRODUCTIONS &
OPERATIONS MANAGEMENT
Z INC.

2. CASE OVERVIEW
• Z Inc. Multinational Conglomerate,
headquartered at Jackson, Michigan (USA)
• Produce Construction equipment and
Transmission system (diversification strategy)
• Problems
▫ 30 year old plant
▫ $ 500,000 loss per month

3. CASE OVERVIEW (Contd. )
• Reasons
▫ CEO: Overhead issue
▫ Finance VP: Operating
outside our core competency
▫ Operations VP: High labor
wage destroying performance
▫ Marketing VP: High defect
rate (15% as against industry
standard 2%)
▫ 60% of defects due to poor
vendor performance

4. CASE OVERVIEW (Contd. )
• Suggested Alternatives
▫ Sell of the plant
▫ Move the plant to Mexico

5. IPOM FRAMEWORK
STRATEGIC CONTEXT
1. DIFFERENTIATION
2. COST LEADERSHIP
3.FOCUS
STD VS CUSTOMISED
PRODUCTION
LOGISTICS &
ACQUISITION OF LOCATION
MATERAL
RESOURCES DECISIONS
MANAGEMENT

6. LOCATION STRATEGY
• Low Value to weight ratio vs. High Value to
weight ratio
• Cost
▫ Scale Economies
▫ Nature of assembly operations
▫ Taxes and Transport
• Logistical factors (port locations)
• Exchange rate variation

7. LOGISTICS & MATERIAL MANAGEMENT
• Fixed facilities location
• Inventory Management
• Order processing
• Material Management & Transportation costs

8. Moving to Mexico
• 6 months to build new facility
• Double the shifts to build a 6 month inventory
supply
• 2 months transfer all the machines from
Michigan to Mexico
• 1 month complete the Mexican setup and start
production

9. Moving to Mexico
Jackson, Michigan Mexico
Sales $9,500,000 Sales $9,500,000
Labor Expenses $2,000,000 Labor Expenses $120,000
Materials $4,000,000 Materials $4,000,000
Expense Expense
Equipment $1,000,000 Equipment $1,000,000
Expense Expense
Overhead $3,000,000 Overhead $3,000,000
Expense Expense
Net profit ($500,000) Net profit $1,380,000
Flaw: Logistics Cost (Inbound & Outbound), Overhead
Expense

10. Another Tequila Crisis?
• 2 months into the program
▫ Work at Mexico hasn’t started
▫ Shut down activity at Jackson underway
• Problems
▫ Increase in Inventory
▫ Revenue loss
▫ Plant plan in jeopardy
▫ Vendor support in Mexico?
▫ Labor union in Mexico?

11. SOLUTIONS
• Implement Change in production schedule
• Understand conditions in Mexico before
proceeding
• Validate the points made in support of local
labor
• Devise a Supply Chain (Value Chain) Strategy

12. STRATEGY TO BE ADOPTED
• Choose Generic Strategy
• Detailed Analysis of
▫ Facility setup
▫ Labor productivity
▫ Supply of raw materials
▫ Percentage of Defect
▫ Transportation of finished goods
• All of the above in Minimum Cost

13. THANK YOU
PRESENTED BY
KARTHICK – DM14123
MEENA – DM14161
VIJAY KRISHNAN – DM14257