CF-E7a

FIN 6301, Corporate Finance 1

Course Learning Outcomes for Unit VII Upon completion of this unit, students should be able to:

4. Compare short- and long-term financing. 4.1 Calculate days of working capital. 4.2 Analyze how supply chain management plays a role in working capital management.

Course/Unit Learning Outcomes

Learning Activity

4.1

Unit Lesson Chapter 16, pp. 656-682 Chapter 17, pp. 707-713 Video Segment: “Working Capital” Unit VII Essay

4.2

Unit Lesson Chapter 16, pp. 656-682 Chapter 17, pp. 707-713 Video Segment: “Working Capital” Unit VII Essay

Required Unit Resources Chapter 16: Supply Chains and Working Capital Management, pp. 656–682 Chapter 17: Multinational Financial Management, pp. 707–713 In order to access the following resource, click the link below TV Choice Ltd. (Producer). (2011). Working capital (Segment 3 of 6) [Video]. In Accounting & finance clips 4:

Cash flow and working capital. https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=http://fod.infobase.com/PortalPla ylists.aspx?wID=273866&xtid=128756&loid=450728

The transcript for this video can be found by clicking the “Transcript” tab to the right of the video in the Films on Demand database.

UNIT VII STUDY GUIDE

Managing Global Operations

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Operations Management Operations management pertains to the administration of business practices in order to achieve the highest level of organizational efficiency. The concern of operations management is to convert materials and labor into services and goods using the most efficient method in order to maximize profits. Teams who are responsible for operations management make an effort to balance the costs and revenue in order to generate the most net profit. Operations management includes the utilization of various organizational resources such as the staff, materials, equipment, and technology. Operations managers deliver what the client wants based on the ability of the company. The specific responsibilities involved in operations management include handling various strategic issues such as determining the size of the manufacturing capacity, the methods for project management, and the implementation of information technology. Other important tasks assigned to operations management include the handling of the inventory (including work-in-process and the acquisition of new materials), quality control, materials, and policies for maintenance. Operations management also includes the strategic determination of how raw materials can be used with only minimal waste. Utilizing numerous formulas, such as the economic order quantity formula, operations managers can determine the time and quantity for the processing of a large inventory, including how much inventory is needed to hold on-hand. To further demonstrate the nature of the job of an operations manager, consider the following example. Henry has been an operations manager for the company NitroTech for more than 5 years. One of his jobs is to ensure that the system of production is efficient and productive. He ensures this system is efficient by reading daily reports and statistics in order to spot irregularities or any possible problems. Henry also coordinates with different managers in order to understand current issues and problems within the company. If he spots a problem, he will make the necessary strategic decisions to make the changes to correct the issue.

Global Operations Management Global operations management involves the management of operations in a global context, focusing on contemporary issues such as effective collaboration with supply chain partners in order to remain globally competitive. This global competitive advantage is based on the strategic ability of a company, particularly the global operations manager, to compete based on differentiation, cost, and timely response based on flexibility, reliability, and quickness. Management of global operations is important in order to reduce cost, reduce risk, secure supply sources, attract new markets (i.e., expansion through new customers in other countries), learn improvements in the operations and customer services, and attract talent globally— particularly those who are not available locally.

(Ivanov, n.d.)

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Manufacturing in the Global Market Manufacturing is the transformation of new material/inputs into goods/services. When an internationally based company has the technological ability to manufacture goods and services, a sound operation strategy is important in order to be competitive in the global market. Globalization has led to improvements in infrastructure due to the presence of international treaties and regulations that support globally sustainable manufacturing operations (Bhattacharya, Cheffi, & Dey, 2016). Management, procurement, logistics, technology transfer, and marketing are some of the most important operations management issues facing a global manufacturing company. Management: International manufacturing gives companies the opportunity to grow and boost competitiveness. Huge potentials can be gained by strategically restructuring—or rethinking—traditional structures of manufacturing. Global manufacturing is accelerated when there is a large difference in factor costs, high potential growth in emerging markets, and lower transaction costs. Some of the main issues in the global management of a manufacturing company include geographic dimensions, regulatory factors, working conditions and processes, location, and cost of production. Procurement: Global procurement or source pertains to activities wherein buyers acquire goods or services from other companies globally. The global procurement of commodities is a common practice for many industries, particularly in the manufacturing and agriculture sectors because of the economic benefits (i.e., lower cost, higher profits) that can be gained from this strategy. Global procurement will be enabled when the following factors are present:

• an expanding availability of very skilled resources,

• facilities that are technologically advanced,

• highly advanced telecommunications,

• highly improved tools and platforms for collaboration, and

• mature models for delivery. Operations managers should have a strong understanding of global trends when making strategic decisions about the procurement of materials that are both cost-effective and time efficient. They are responsible for finding suppliers that can provide reasonable prices for goods and are able to deliver these products when needed. Consider the following example of a global procurement. Jodie is the operations manager of an international company focusing on consulting services. In order to cut costs, Jodie decided to outsource the call center agents who are responsible for helping clients address basic questions and needs regarding their services. In addition to the benefit of lower costs because of lower currency value, Jodie also recognized the 12-hour difference in the time zone of her target country of procurement, which meant that she could have a 24-hour call center service available to her clients at a lower cost. Because the global procurement of services is 100% through online means, she would be able to save a considerable amount of the operating costs. Given these benefits, Jodie decided to procure a significant number of call center positions in the other country. Logistics: The management of logistics involves the planning, implementation, and controlling of the flow and storage of goods and services starting from the origin to the consumption of these goods and services in another country. The management of logistics globally is more complex compared to operations logistics in a single country. This is because of the higher level of collaboration and involvement needed when multiple countries are involved. Some of the components of global logistics are international transportation and insurance, packaging, means of payment between countries, teams needed for the trade, border crossing, and inventory. Some of the decisions that an operations manager may encounter include the management of warehouses, packaging and inventory management, handling of materials, information systems, and transportation. In the apparel industry, lower costs are the main motivation for global outsourcing (Aksoy & Öztürk, 2016). To illustrate how global logistics work within the context of a global operations manager, consider the following example. Barbara is the operations manager for an international manufacturing company of printed shirts. Her source of materials (i.e., the plain shirts) is China. She handles all of the transportation arrangements so the shirts will reach the United States from China (including the tax, fees, method of transfer, border permits, and other regulatory documents). Barbara is responsible for hiring all of the teams and individuals needed for this

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transaction to work efficiently. She is also responsible for ensuring that payments are made to the suppliers involved in the process. Once the shirts arrive in the United States, Barbara’s team is responsible for bringing the shirts to the local artists who provide the designs for the plain shirts. Once the shirts have been designed, she ensures that the products are packaged properly and stored in a warehouse. Technology transfer: Technology transfer is the sharing of skills, knowledge, technology, and manufacturing methods that allow multiple institutions to facilitate scientific and technological developments in order to make the development of new products, services, or materials possible. Companies engage in technology transfer in order to profit from technology, gain advantage in terms of location and logistics, gain competitive edge, acquire grants, address limitation of the home country, and enhance competence. Some of the methods used in the transfer of technology include foreign direct investment, licensing and franchising, contracts, joint ventures, and joint research and development projects. Engaging in technology transfer is important in order to encourage technology use, acquire competitive advantage, support research and development, facilitate innovative ideas and services, and leverage the business environment. Marketing: The management of marketing involves conducting analysis, setting goals, predicting sales and profits, developing strategies and procedures, evolving appropriate mixes of marketing strategies, organizing activities and resources, participating in the planning of products, managing supply chains, and engaging in after-sales activities. Marketing internationally is beneficial because of the optimal use of resources and surplus production, fast industrial growth, ability to conduct comparative cost, international cooperation, cultural exchange, and expansion of tertiary sectors. Some of the major activities in global marketing are market assessment, product decisions, promotions, pricing, and distribution strategies (Douglas & Craig, 2010).

Conclusion Even though global operations are primarily used for various beneficial reasons (e.g., save costs, market expansion, technology improvements), they are not without their problems and complications. These issues include geopolitical and logistical barriers such as unpredictable weather, quality of infrastructure, and government stability. Some of the risks involved in managing a global operation are the delay in the delivery of products due to problems in border crossing, damaged products because of the longer route in the process of delivery, and the volatility of international currency. A global operations manager usually analyzes these problems and issues an order to maintain smooth transactions in various aspects of the company’s operations.

References Aksoy, A., & Öztürk, N. (2016). Design of an intelligent decision support system for global outsourcing

decisions in the apparel industry. The Journal of the Textile Institute, 107(10), 1322–1335. Bhattacharya, A., Cheffi, W., & Dey, P. K. (2016, February 1). Recent advances in manufacturing operations

management. Journal of Manufacturing Technology Management, 27(1). https://www.emeraldinsight.com/doi/full/10.1108/JMTM-12-2015-0109

Douglas, S. P., & Craig, C. S. (2010, December 15). Global marketing strategy: Perspectives and

approaches. https://onlinelibrary.wiley.com/doi/full/10.1002/9781444316568.wiem06013 Ivanov, K. (n.d.). Operations management business and technology concept on virtual screen (ID 113918450)

[Graphic]. Dreamstime. https://www.dreamstime.com