Modeling global facility location decisions: integrating marketing and manufacturing decisions
| Pages | 110-118 |
| DOI | https://doi.org/10.1108/02635570210419654 |
| Published date | 01 March 2002 |
| Date | 01 March 2002 |
| Author | Cem Canel,Sidhartha R. Das |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Modeling global facility location decisions: integrating
marketing and manufacturing decisions
Cem Canel
Department of Information Systems and Operations Management,
Cameron School of Business, The University of North Carolina at Wilmington,
Wilmington, North Carolina, USA
Sidhartha R. Das
School of Management, George Mason University, Fairfax, Virginia, USA
Nomenclature
CAP
ft
= capacity of facility in country fin time
period t
D
ct
= the demand from customers in country
cin time period t
FC
ft
= the fixed cost associated with facility
in country fin period t
FI
ft
= host government incentives (financial)
IH
ft
= inventory holding cost per unit at
facility fin time period t
IC
ft
= investment cost for facility in country f
in time period t
MC
ft
= marketing cost in country fin time
period t
QI
ft
= quantity in inventory at facility fin
time period t
QS
ct
= quantity short in market cin time
period t
S
ct
= quantities sold in market cin time
period t
SC
ct
= shortage cost per unit at market cin
time period t
SP
ct
= selling price in country cin time
period t
TFC
fct
= transfer costs from facility fto
customer cin time period t
X
fct
= quantities shipped from facility fto
market cin period t
Y
ft
= 1 if facility in country fis opened in
time period t, in order to incorporate
fixed costs; 0 otherwise
Z
ft
= 1 if facility in country fis opened in
time period t, in order to incorporate
investment costs; 0 otherwise
W
ct
= 1 if sales take place in market cin time
period t, in order to incorporate
marketing costs; 0 otherwise
Introduction
In the twenty-first century's global economy
customers may be scattered around the world
but they still look for low cost, high-quality
products and services. This trend, in addition
to the political, trade, economic, and strategic
alliances among nations, is creating new
global markets. The changes in the global
markets are due to the following factors
(Walker et al., 1992, pp. 26-7):
.Previously self-contained national
markets being transformed into linked-
global markets.
.Overcapacity intensifying competitive
pressures by giving customers greater
bargaining power.
.New information technologies enabling
closer links between customers and their
suppliers and improving customers'
ability to evaluate the performance of
alternative suppliers.
.Competitive advantages becoming
difficult to sustain as product life-cycles
shorten and global competitors contest
more markets.
In these dynamic global markets, companies
continuously adopt new strategies to satisfy
the proliferating demands from their
customers. The constant pressure of
globalization has created new competitive
pressures on companies to engage in global
marketing, manufacturing and service
activities. Levitt (1983) has argued that
``Companies must learn to operate as if the
world were one large market ± ignoring
superficial regional and national
differences''. For example, many global
companies locate manufacturing facilities in
countries with low labor costs in an attempt
to be price competitive, thereby gaining a
competitive advantage in global markets
(Haug, 1985, 1992; Porter, 1985; Flores, 1988;
Day and Wensley, 1988; Ferdows, 1989, 1994;
Canel and Khumawala, 1996, 1997). There is
also a significant interface between locating
manufacturing facilities worldwide, entering
new markets, and maintaining existing ones.
Consequently, one of the key requirements
for the success of companies is the
recognition of the link between marketing
and manufacturing, which leads to the
importance of selecting the ``best''
The current issue and full text archive of this journal is available
at
http://www.emeraldinsight.com/0263-5577.htm
[ 110 ]
Industrial Management &
Data Systems
102/2 [2002] 110±118
#MCB UP Limited
[ISSN 0263-5577]
[DOI 10.1108/02635570210419654]
Keywords
Marketing, Manufacturing,
Location, Decision making
Abstract
Rapid changes in today's global
markets are forcing businesses to
re-examine and improve the ways
they compete. Integration of
facility location decisions in global
marketing and manufacturing
strategies provides an important
means for firms to compete in
global markets. This paper
proposes that manufacturing
utility can be related to marketing
utility through facility location
decisions. Consequently, it
presents a mathematical model
for global facility location that
integrates marketing and
manufacturing decisions in a
global context. It also presents a
four-stage evolutionary model that
can guide managers in making
global facility location decisions.
To continue reading
Request your trial