Relative Importance of Plant Location Factors: A Cross National Comparison Between Singapore and Malaysia

Abstract

During the last decade, two strategies -globalization and time-based competition -have fundamentally altered the way companies do business. Globalization has created a "borderless organization" in which production and distribution facilities and even the supply base is geographically dispersed while time-based competition (defined as the speed with which products are manufactured, delivered to market, and serviced) has led to exacting customer demands for a wide variety of products with short lead times.In such a complex environment of global scope and short product life cycles, the ability to manage global supply chains efficiently is considered as a vital source of competitive advantage. In this paper, we define supply chain as a network of production and distribution facilities that link material, information, and money flows, from raw material supply to customer delivery in order to deliver a product to the final customer (Jones and Riley 1985).A critical decision faced by supply chain managers is the optimal location of production facilities. This decision has a profound impact on firm competitiveness. In making this decision, the external factors described earlier -globalization and time-based competition -often impose opposing influences on the firm, and these influences are not readily apparent when the initial plant location decision is made. For example, a firm that sets up a manufacturing plant in a third world country to take advantage of lower labor costs may find its time-based performance eroded because of poor infrastructure or non-availability of skilled personnel. The location decision is thus a strategically important managerial challenge that significantly impacts the long-term performance of global firms, and in particular, long-term operational performance of global supply chains.Prior models reported in the literature to resolve the tradeoffs associated with the plant location decision fall into two distinct categories. The first set of models predominantly focuses on quantitative analyses based on assumed costs of land, labor and transport, scale economies, and other JOURNAL

Production Relocation: Choice Versus Satisfaction Factors: A Preliminary Study

“…Other country structural characteristics and government incentives also attract export-oriented investments. Similarly, some researchers tested location factors of production in different less developed countries (Bhatnagar et al, 2003;Woodward & Rolfe, 1993;Zhang, 2001). Results of these studies have formed a rich base for further research.…”

“…The identified factors affecting the choice of production relocation include costs (e.g., cost of labor, land), labor (e.g., availability of labor and engineer, efficient labor and technical support, etc. ), government policy issues, and national characteristics (e.g., tax incentives, political stability, government efficiency, market size, and cultural factors) (Bhatnagar et al;Bunyaratavej et al, 2008;Kumar;Li & Hu, 2002;Rugman & Oh, 2008;Urata & Kawai, 2000;Woodard & Rolfe;Zhang). These factors provide a comprehensive coverage of major operating costs of production in a foreign location.…”

“…The evaluation of total operating costs of a new location is important, particularly when the selected location is outside firm's home country. With the inclusion of country specific factors, literature shows a more comprehensive analysis on plant location choice (see Bhatnagar, Jayaram, & Phua, 2003). However, less attention has been paid to understand management's satisfaction after operating in the new location and the factors affecting their satisfaction.…”

Hybrid Supply Chains in Emerging Markets: The Case of the Mexican Auto Industry

“…As Thun and Hoenig [15] argue 'The trend towards lean supply chains results in low inventories achieved by close collaboration with customers and suppliers on the one hand, but leads to high vulnerability on the other hand since turbulences in the supply chain can barely be compensated without safety stocks'. Other authors as Bhatnagar et al [16], Bhatnagar and Sohal [17], Bowersox and Closs [18], Ferdows [19] or Khurana and Talbot [20] consider from a multidimensional approach that the performance of a supply chain is affected by regional factors, beginning with the responsiveness of production systems of local suppliers with which production sites are operating.…”

Proximity matters: synergies through co-location of logistics establishments

“…Hale and Moberg, 2003;Melo et al, 2009, for overviews). Besides the availability of many different optimization models that primarily focus on cost factors, there is a trend to incorporate qualitative variables in these location decisions models (Bhatnagar et al, 2003). However, due to the complexity and dynamics of location-decision processes, many of these processes, in practice, are still based on simple rules of thumb, rough estimates, or history (Porter and Rivkin, 2012).…”