Cost modelling as decision support when locating manufacturing facilities

Authors

  • Christina Windmark Lund Univesity
  • Carin Andersson Lund Univesity

DOI:

https://doi.org/10.4995/ijpme.2016.4177

Keywords:

Cost analyse, Production cost, Location decision

Abstract

This paper presents a methodology for cost estimation in developing decision supports for production location issues. The purpose is to provide a structured work procedure to be used by practitioners to derive the knowledge needed to make informed decisions on where to locate production. This paper present a special focus on how to integrate cost effects during the decision process. The work procedure and cost models were developed in close collaboration with a group of industrial partners. The result is a structure of cost estimation tools aligned to different steps in the work procedure. The cost models can facilitate both cost estimation for manufacturing a product under new preconditions, including support costs, and cost simulations to analyse the risks of wrong estimations and uncertainties in the input parameters. Future research aims to test the methodology in ongoing transfer projects to further understand difficulties in managing global production systems. In existing models and methods presented in the literature, cost is usually estimated on a too aggregated level to be suitable for decision support regarding production system design. The cost estimation methodology presented here provides new insights on cost driving factors related to the production system.

Downloads

Download data is not yet available.

Author Biographies

Christina Windmark, Lund Univesity

Production and Materials Engineering

Carin Andersson, Lund Univesity

Production and Materials Engineering

References

Andersson, C., Bellgran, M., Bruch, J., Rösiö, C., Wiktorsson, M., Windmark, C. (2013) Production location handbook – Forming Your Strategic Manufacturing Footprint , Lund, Sweden: Media-Tryck.

Aspelund, A., Butsko, V. (2010), Small and middle-sized enterprises’ offshoring production: A study of firm decisions and consequences, Tijdschrift voor Economische en Sociale Geografie , 101(3): 262-275. doi:10.1111/j.1467-9663.2009.00585.x

Bell, J., McNaughton, R., Young, S., Crick, D. (2003). Towards an integrative model of small firm internationalisation. Journal of International Entrepreneurship , 1(4): 339-362. doi:10.1023/A:1025629424041

Bellgran, M., Burch,J., Rösiö, C., Wiktorsson, M. (2013). Decision support for production localization: Process activities and location factors, Proceedings of the 20th EUROMA conference, 7th-12th June, 2013, Dublin.

Bjelkemyr, M., Wiktorsson, M., Rösiö, C., Bruch, J., Bellgran, M. (2013). Production Localization Factors: An Industrial and Literature Based Review. In Proceedings of the 11th International Conference on Manufacturing Research (ICMR2013) 489-494.

Boloori Arabani, A., Farahani, R. Z. (2012). Facility location dynamics: An overview of classifications and applications. Computers & Industrial Engineering, 62(1): 408-420. doi:10.1016/j.cie.2011.09.018

Boston Consulting Group. (2011). Made in America, again. Report Boston Consulting Group Inc. Brouwer, A. E., Mariotti, I., Van Ommeren, J. N. (2004). The firm relocation decision: An empirical investigation. The Annals of Regional Science, 38(2): 335-347. doi:10.1007/s00168-004-0198-5

Brynjolfsson, E., Hitt, L. M. (2000). Beyond computation: Information technology, organizational transformation and business performance. The Journal of Economic Perspectives, 14(4): 23-48. doi:10.1257/jep.14.4.23

Burns, L. D., Hall, R. W., Blumenfeld, D. E., Daganzo, C. F. (1985). Distribution strategies that minimize transportation and inventory costs. Operations Research, 33(3), 469-490. doi:10.1287/opre.33.3.469

Christodoulou P., Fleet ́s, D., Hanson, P., Phaal, R., Probert, D., Shi, Y. (2007). Manufacturing the right things in the right places – A structured approach to developing and exploiting manufacturing footprint strategy, University of Cambridge Institute for Manufacturing.

Cooper, R., Kaplan, R. S. (1998). Cost and effect. Harvard Business School Press, Boston.

Dogan, I. (2012). Analysis of facility location model using Bayesian Networks. Expert Systems with Applications, 39(1): 1092-1104. doi:10.1016/j.eswa.2011.07.109

Ellram, L. M., Tate, W. L., Petersen, K. J. (2013). Offshoring and reshoring: an update on the manufacturing location decision.

Journal of Supply Chain Management, 49(2): 14-22. doi:10.1111/jscm.12019

Fang, D., Weng, W. (2010). KPI evaluation system of location decision for plant relocation from the view of the entire supply chain optimization. In Automation and Logistics (ICAL), 2010 IEEE International Conference on Automation and Logistics, Hong Kong and Macau, pp. 659-663. doi:10.1109/ICAL.2010.5585366

Yang, J., Lee, H. (1997). An AHP decision model for facility location selection. Facilities,

(9/10): 241-254. doi:10.1108/02632779710178785

Kinkel, S. (2009). Erfolgskritische Standortfaktoren ableiten–eine erfahrungsbasierte Auswahlhilfe. In Erfolgsfaktor Standortplanung, 57-80. Springer Berlin Heidelberg. doi:10.1007/978-3-540-88471-2_4

Kinkel, S., Lay, G., Maloca, S. (2007). Development, motives and employment effects of manufacturing offshoring of German SMEs. International Journal of Entrepreneurship and Small Business, 4(3): 256-276. doi:10.1504/IJESB.2007.013251

Latino, R. J., Latino, K. C., Latino, M. A. (2013). Root cause analysis: improving performance for bottom-line results. CRC press.

MacCarthy B.L., Atthirawong, W. (2003). Factors affecting location decisions in international operations – a Delphi study, International Journal of Operations & Production Management, 23(7): 794-818. doi:10.1108/01443570310481568

Nordigården, D. (2007). Outsourcing in the Wood Product Manufacturing Sector A Combined Customer and Supplier Perspective. PhD

thesis, Linköping University.

Platts, K.W., Song, N. (2010). Overseas sourcing decisions: the total cost of sourcing from China, Supply Chain Management: An International Journal, 15(4): 320–331. doi:10.1108/13598541011054689

Rusten, G., Bryson, J. R. (2010). Placing and spacing services: towards a balanced economic geography of firms, clusters, social networks, contracts and the geographies of enterprise. Tijdschrift voor economische en sociale geografie, 101(3): 248-261. doi:10.1111/j.1467-9663.2009.00584.x

Simons, R., Dávila, A., Kaplan, R. S. (2000). Performance measurement & control systems for implementing strategy. Upper Saddle River, NJ: Prentice Hall.

Stål C., Andersson, A., Gabrielson, P., Ståhl, J.-E. (2012). A production performance analysis regarding downtimes and downtime pattern, 22nd International Conference on Flexible Automation and Intelligent Manufacturing, FAIM 2012, 10-13 June, Helsinki, Finland.

Ståhl, J.-E., Andersson, C., Jönsson, M. (2007). A basic economic model for judging production development, Paper presended at 1st Swedish Production Symposium, 28–30 August. Gothenburg, Sweden.

Whitten, D., Leidner, D. (2006). Bringing IT back: An analysis of the decision to backsource or switch vendors. Decision Sciences, 37(4): 605-621. doi:10.1111/j.1540-5414.2006.00140.x

Windmark, C., Andersson, C. (2012). Business case as a decision support when relocating manufacturing, presented at 5th Swedish Production Symposium 2012, 6th-8th November, Linköping

Windmark, C., Andersson, C. (2014). A Business Case Tool as Decision Support in Early Production Location Project Stages. In The 6th International Swedish Production Symposium 2014.

Windmark, C., Andersson, C. (2015). Cost models of inbound logistics activities: supporting production system design. International Journal of Supply Chain and Operations Resilience, 1(2): 181-200. doi:10.1504/IJSCOR.2015.069927

Downloads

Published

2016-01-15

Issue

Section

Papers