Global plant capacity and product allocation with pricing decisions |
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| Affiliation: | 1. Department of management, information and production engineering, Universitá degli Studi di Bergamo, Dalmine (BG), 24044 Italy.;2. Mechanical Engineering Department, California Polytechnic State University, San Luis Obispo, CA 93407 USA;1. Faculty of Chemistry and Chemical Engineering, University of Maribor, Smetanova ul. 17, Maribor, Slovenia;2. Department of Chemical Engineering, University of Salamanca, Salamanca, Spain;3. Department of Chemical Engineering, Carnegie Mellon University, Pittsburgh, USA |
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| Abstract: | Trade-offs in global manufacturing decisions involve markets, resource costs, trade-barriers, currency exchange rates, joint ventures and investments. We develop a model that optimizes plant investment decisions, while ensuring that the plant investment overhead is optimally absorbed by products produced from that plant. The model also, simultaneously, determines prices by products and countries. The special structure of the model is exploited to construct a fast solution procedure. The model is used to study the implications of labor cost, transportation cost, demand, and import tariff on production quantities, investment, and overhead absorption pattern. Implications of changes in other global parameters such as local-content rule, local taxes, size of the market in a country, and long-term exchange rates are also studied. |
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