What are the benefits of standardization of global operations?

Question

What will be an ideal response?

Answer 1

Answers may vary but could have elements such as the following: Standards help ensure that materials, products, processes, and services are appropriate for their purpose. In most countries, standards have been developed across product lines and for various functions. In Europe, the most used standard for quality is ISO 9000. This is a set of five universal standards for a quality assurance system. The intention is that ISO 9000 standards will be applicable worldwide, avoiding technical barriers to trade attributable to the existence of nonharmonized standards between countries. If a product or service is purchased from a company that is registered to the appropriate ISO 9000 standard, the buyer will have important assurances that the quality of what was received will be what was expected. Indeed, registered companies have reported dramatic reductions in customer complaints as well as reduced operating costs and increased demand for their products and services. Although it has been widely adopted as a standard for quality, not all quality "experts" agree that ISO 9000 is superior to other alternatives. The focus of the standards is to establish quality management procedures, through detailed documentation, work instructions, and record keeping. These procedures say nothing about the actual quality of the product-they deal entirely with standards to be followed. The standardization of production processes and procedures simplifies the manufacturing organization at headquarters because their replication enables the work to be accomplished with a smaller staff of support personnel. Fewer labor hours in plant design are involved because each new plant is essentially a scaled-up or scaled-down version of an existing one. The permanent group of experts that international companies maintain to give technical assistance to overseas plants can be smaller. Extra technicians accustomed to working with the same machinery can be borrowed from the domestic operation as needed. Worldwide uniformity or standardization in manufacturing methods also increases headquarters' effectiveness in keeping the production specifications current. Every firm has hundreds of specifications, and those specifications are constantly being changed because of new raw materials or manufacturing procedures. If all plants, domestic and foreign, possess the same equipment, notice of a change can be given with one indiscriminate notification (e.g., an e-mail); there is no need for highly paid engineers to check each affiliate's list of equipment to see which ones are affected. Companies whose manufacturing processes are not unified have found that maintaining a current separate set of specifications for each of 15 or 20 affiliates is both more costly (larger staff) and more error-prone. Management has become increasingly aware that greater profits may be obtained by organizing all of its companies' production facilities into one logistical supply system that includes all the activities required to move raw materials, parts, and finished inventory from vendors, between enterprise facilities, and to customers. The standardization of processes and machinery provides a reasonable guarantee that parts manufactured in the firm's various plants will be interchangeable. This assurance of interchangeability enables management to divide the production of components among a number of subsidiaries in order to achieve greater economies of scale and take advantage of the lower production costs in some countries. Manufacturing rationalization involves a change from a subsidiary's manufacturing only for its own national market to its producing a limited number of components for use by all subsidiaries. For manufacturing rationalization to be possible, the product mix must first be rationalized; that is, the firm must elect to produce products that are identical worldwide or regionwide. Once this has been done, each subsidiary can be assigned to produce certain components for other foreign plants, thus attaining a higher volume with a lower production cost than would be possible if it manufactured the complete product for its national market only. Obviously, this strategy is not viable when consumers' tastes and preferences differ markedly among markets. For less differentiated products, however, manufacturing rationalization permits economies of scale in production and engineering that would otherwise be impossible. When foreign subsidiaries are unable to purchase raw materials and machinery locally, they generally look for assistance from the purchasing department at headquarters. Because unified processes require the same materials everywhere, buyers can handle foreign requirements by simply increasing their regular orders to their usual suppliers and passing on the volume discounts to the subsidiaries. However, when special materials are required, purchasing agents must search out new vendors and place smaller orders, often at higher prices. When production equipment is similar, home office control of quality in foreign affiliates is less difficult because management can expect all plants to adhere to the same standard. The home office can compare the periodic reports that all affiliates submit and quickly spot deviations from the norm that require remedial action, such as a large number of product rejects. Separate standards for each plant because of equipment differences are unnecessary. A single standard also lessens the task of maintenance and production control. The same machinery should produce at the same rate of output and have the same frequency of maintenance no matter where it is located. In practice, deviations will occur because of the human and physical factors (dust, humidity, temperature), but at least similar machinery permits the home office to establish standards by which to determine the effectiveness of local managements. Furthermore, the maintenance experience of other production units in regard to the frequency of overhauls and the stock of required spare parts will help plants avoid costly, unforeseen stoppages from sudden breakdowns. When a new plant can be built that is a duplicate of others already functioning, the planning and design will be both simpler and quicker because they are essentially a repetition of work already done. In other words, the duplication of existing plants greatly reduces the engineering time required in planning and designing the new facilities and eliminates many of the startup difficulties inherent in any new operation. Just how important the savings from plant duplication are was emphasized in a study of the chemical and refining industries that indicated that the cost of technology transfer was lowered by 34 and 19 percent for the second and third startups, respectively.