Chapter 10 - Global Logistics & International Trade
Global Location Decisions
- Facility location must be a part of firm’s supply chain strategy and decision involves:
1. Define each facility’s strategic role
2. Determine location for each facility
3. Identify market that each facility serves
Global Facility Types
- In order from basic to complex:
1. Offshore Factory: manufacturing/assembly in country with cheap labor/material
- Local management just supervises, no mgmt decisions
2. Source Factory: low cost manufacturing but with skilled workers
- Like offshore factory PLUS supplier selection, production planning
3. Server Factory: factory take advantage of govt incentives (less tax/tariff barriers)
4. Contributor Factory: focused product development and engineering
- Server factory PLUS production planning, product development, procurement
decisions, and supplier development
5. Outpost Factory: many advanced suppliers, competitors, and research facilities available
6. Lead Factory: competitive advantage across entire organization; “Go to” factory
Global Location Factors
- Competitiveness
- Taxes and Incentives
- Currency and Stability
- Access and Proximity to Markets
- Labor Issues
- Right to Work Laws
- Access to Supplier and Cost
- Utility Availability and Cost
- Environmental Issues
- Land Availability and Cost
- Quality of Life Issues
- Education, economy, natural and social environment, culture, healthcare,
govt/politics, mobility, public safety, and recreation
- Business Clusters
- Trade Agreements: EU, NAFTA, MERCOSUR, ASEAN, COMESA
- WTO (world trade organization - 164 countries)
Location Evaluation Techniques
- Weighted-Factor Rating Model: assign factors, weights, scores → highest score wins
- Break Even Model: determine FC, VC, make TC line, find BE points for lowest cost
Global Location Decisions
- Facility location must be a part of firm’s supply chain strategy and decision involves:
1. Define each facility’s strategic role
2. Determine location for each facility
3. Identify market that each facility serves
Global Facility Types
- In order from basic to complex:
1. Offshore Factory: manufacturing/assembly in country with cheap labor/material
- Local management just supervises, no mgmt decisions
2. Source Factory: low cost manufacturing but with skilled workers
- Like offshore factory PLUS supplier selection, production planning
3. Server Factory: factory take advantage of govt incentives (less tax/tariff barriers)
4. Contributor Factory: focused product development and engineering
- Server factory PLUS production planning, product development, procurement
decisions, and supplier development
5. Outpost Factory: many advanced suppliers, competitors, and research facilities available
6. Lead Factory: competitive advantage across entire organization; “Go to” factory
Global Location Factors
- Competitiveness
- Taxes and Incentives
- Currency and Stability
- Access and Proximity to Markets
- Labor Issues
- Right to Work Laws
- Access to Supplier and Cost
- Utility Availability and Cost
- Environmental Issues
- Land Availability and Cost
- Quality of Life Issues
- Education, economy, natural and social environment, culture, healthcare,
govt/politics, mobility, public safety, and recreation
- Business Clusters
- Trade Agreements: EU, NAFTA, MERCOSUR, ASEAN, COMESA
- WTO (world trade organization - 164 countries)
Location Evaluation Techniques
- Weighted-Factor Rating Model: assign factors, weights, scores → highest score wins
- Break Even Model: determine FC, VC, make TC line, find BE points for lowest cost
