Logistics and facility costs incurred within a supply chain change as the number of facilities, their location, and capacity allocation is changed. Companies must consider inventory, transportation, and facility costs when designing their supply chain networks. Inventory and facility costs increase as the number of facilities in a supply chain increase. Transportation costs decrease as the number of facilities is increased. If the number of facilities increases to a point where inbound. Economies of scale are lost, then transportation cost increase.
The goal when designing a supply chain network is to maximize the firm’s profits while satisfying customer needs in terms of demand and responsiveness. Toyota cares are priced differently in different country. Car cost remain the same across the world but the tax and transportation cost differ in different country. Toyota need to minimize their transportation cost by efficient plant. They have joint venture in India, they have also have plant in Thailand and Indonesia. They don’t need this all three plant, this plants increasing their cost.
As this countries distance are less and transportation facilities are good. They can build a plant in India and shutdown the others. Toyota can shut down their plant in Portugal, they can cover that country from Frances plant. Toyota can cover Mexico and Brazil market by holding their plant in Colombo. Colombo is middle of this two country, and Mexico don’t need any plant, the plant of USA can easily transport the products and Brazil or Portugal any one from this two country can shutdown and remain the other.