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Design of international assembly systems and their supply chains under NAFTA

Author

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  • Wilhelm, Wilbert
  • Liang, Dong
  • Rao, Brijesh
  • Warrier, Deepak
  • Zhu, Xiaoyan
  • Bulusu, Sharath

Abstract

The purpose of this paper is to provide a decision support aid for the strategic design of an assembly system in the international business environment created by NAFTA. The strategic design problem is to prescribe a set of facilities, including their locations, technologies, and capacities, as well as strategic aspects of the supply chain, selecting suppliers; locating distribution centers; planning transportation modes; and allocating target levels (i.e., amounts) for production, assembly, and distribution. The objective is to maximize after-tax profits. This paper presents a mixed integer programming model that represents the complexities of the international design problem as well as relevant enterprise-wide decisions in the US-Mexico business environment under NAFTA. It deals with a broad set of design issues (e.g., bill-of-material restrictions, international financial considerations, and material flow through the entire supply chain) using effective modeling devices (e.g., linearizing non-linearities that arise in modeling transfer prices and allocating transportation charges). Examples demonstrate how managers might use the model as a decision support aid.

Suggested Citation

  • Wilhelm, Wilbert & Liang, Dong & Rao, Brijesh & Warrier, Deepak & Zhu, Xiaoyan & Bulusu, Sharath, 2005. "Design of international assembly systems and their supply chains under NAFTA," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 41(6), pages 467-493, November.
    • Handle: RePEc:eee:transe:v:41:y:2005:i:6:p:467-493
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    Citations

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    Cited by:

    1. Rosenthal, Edward C., 2008. "A game-theoretic approach to transfer pricing in a vertically integrated supply chain," International Journal of Production Economics, Elsevier, vol. 115(2), pages 542-552, October.
    2. Alumura, Sibel A. & Karab, Bahar Y. & Melo, M. Teresa, 2013. "Location and logistics," Technical Reports on Logistics of the Saarland Business School 5, Saarland University of Applied Sciences (htw saar), Saarland Business School.
    3. Elias Olivares-Benitez & José González-Velarde & Roger Ríos-Mercado, 2012. "A supply chain design problem with facility location and bi-objective transportation choices," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 20(3), pages 729-753, October.
    4. Li, Xiaopeng, 2013. "An integrated modeling framework for design of logistics networks with expedited shipment services," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 56(C), pages 46-63.
    5. Dong Liang & Wilbert E. Wilhelm, 2013. "Dual‐ascent and primal heuristics for production‐assembly‐distribution system design," Naval Research Logistics (NRL), John Wiley & Sons, vol. 60(1), pages 1-18, February.
    6. Nayeri, Sina & Sazvar, Zeinab & Heydari, Jafar, 2022. "A global-responsive supply chain considering sustainability and resiliency: Application in the medical devices industry," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    7. Zhu, Xiaoyan & Wilhelm, Wilbert E., 2007. "Three-stage approaches for optimizing some variations of the resource constrained shortest-path sub-problem in a column generation context," European Journal of Operational Research, Elsevier, vol. 183(2), pages 564-577, December.
    8. Melo, M.T. & Nickel, S. & Saldanha-da-Gama, F., 2009. "Facility location and supply chain management - A review," European Journal of Operational Research, Elsevier, vol. 196(2), pages 401-412, July.
    9. Melo, M.T. & Nickel, S. & Saldanha-da-Gama, F., 2012. "A tabu search heuristic for redesigning a multi-echelon supply chain network over a planning horizon," International Journal of Production Economics, Elsevier, vol. 136(1), pages 218-230.
    10. Hasani, Aliakbar & Khosrojerdi, Amirhossein, 2016. "Robust global supply chain network design under disruption and uncertainty considering resilience strategies: A parallel memetic algorithm for a real-life case study," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 87(C), pages 20-52.
    11. Mariel, Katharina & Minner, Stefan, 2017. "Benders decomposition for a strategic network design problem under NAFTA local content requirements," Omega, Elsevier, vol. 68(C), pages 62-75.
    12. Guoming Lai & Yixuan Liu & Wenqiang Xiao, 2021. "International Taxation and Production Outsourcing," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 402-418, February.
    13. Govindan, K. & Jafarian, A. & Khodaverdi, R. & Devika, K., 2014. "Two-echelon multiple-vehicle location–routing problem with time windows for optimization of sustainable supply chain network of perishable food," International Journal of Production Economics, Elsevier, vol. 152(C), pages 9-28.
    14. Lee, Chaehwa & Wilhelm, Wilbert, 2010. "On integrating theories of international economics in the strategic planning of global supply chains and facility location," International Journal of Production Economics, Elsevier, vol. 124(1), pages 225-240, March.
    15. Zhen, Lu, 2014. "A three-stage optimization model for production and outsourcing under China’s export-oriented tax policies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 69(C), pages 1-20.
    16. Martí, Joana M. Comas & Tancrez, Jean-Sébastien & Seifert, Ralf W., 2015. "Carbon footprint and responsiveness trade-offs in supply chain network design," International Journal of Production Economics, Elsevier, vol. 166(C), pages 129-142.
    17. Correia, Isabel & Melo, Teresa, 2016. "Multi-period capacitated facility location under delayed demand satisfaction," European Journal of Operational Research, Elsevier, vol. 255(3), pages 729-746.
    18. Zhang, Abraham & Luo, Hao & Huang, George Q., 2013. "A bi-objective model for supply chain design of dispersed manufacturing in China," International Journal of Production Economics, Elsevier, vol. 146(1), pages 48-58.
    19. Martin Steinrücke & Wolfgang Albrecht, 2016. "A flow-to-equity approach to coordinate supply chain network planning and financial planning with annual cash outflows to an institutional investor," Business Research, Springer;German Academic Association for Business Research, vol. 9(2), pages 297-333, August.
    20. Wenqiang Xiao & Vernon N. Hsu & Qiaohai (Joice) Hu, 2015. "Manufacturing Capacity Decisions with Demand Uncertainty and Tax Cross-Crediting," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 384-398, July.
    21. Vernon N. Hsu & Kaijie Zhu, 2011. "Tax-Effective Supply Chain Decisions Under China's Export-Oriented Tax Policies," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 163-179, November.
    22. Meisel, Frank & Kirschstein, Thomas & Bierwirth, Christian, 2013. "Integrated production and intermodal transportation planning in large scale production–distribution-networks," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 62-78.
    23. M. Melo & S. Nickel & F. Saldanha-da-Gama, 2014. "An efficient heuristic approach for a multi-period logistics network redesign problem," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 22(1), pages 80-108, April.
    24. Marius Häntsch & Arnd Huchzermeier, 2013. "Identifying, analyzing, and assessing risk in the strategic planning of a production network: the practical view of a German car manufacturer," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(2), pages 125-158, July.

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