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Impacts of Business Environment Change Essay

IP/MIP techniques have been used most often to aid supply chain configuration decisions and there have been many successful applications [9]. Two recent articles [9; 11] made comprehensive reviews about facility location models relevant to global manufacturing operations. This review section focuses on optimization models which are closely related with impacts of business environment cost parameters on the design of manufacturing networks. Cohen and Lee [12] developed a MIP model for a global manufacturing and distribution network. It demonstrated significant impacts of changes in the foreign exchange rate. Cohen and Moon [13] used a MIP model to analyze impacts of changes in a firm’s cost environment. It was found that scale economies, scope economies, and transportation costs could alter optimal facility network design strategies. Vidal and Goetschalckx [14] analyzed impacts of uncertainties on global supply chains through a MIP model.

Foreign exchange rate was identified to be influential on global supply chain configurations. Using a two-stage optimization model, Kulkarni et al. [15] evaluated trade-offs between risk pooling and logistics costs in a multi-plant network with commonality. Their analyses showed that impacts of operational cost parameters may be significant and non-intuitive. All these models suggested that cost parameters have significant impacts on manufacturing facility location decisions, and may even alter supply chain configuration strategies. However, they only considered a single objective of profits or costs.

The consideration of both costs and responsiveness was seen in the reconfiguration of global manufacturing and distribution network at Digital Equipment Corporation. It used a bi-objective model to minimize total costs and activity days. The model was implemented successfully with savings over $100 million [10]. However, the application did not explore impacts of changes in cost parameters. Overall, there is a lack of using a bi-objective approach to analyze impacts of business environment changes on the configuration of GMNs.

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