Site Selection Processes in Global Production Networks

Production-related location choices are long-term, complex, difficult to reverse, and based on uncertain information. They constitute a high risk for a company as they are crucial for its long-term financial strength and performance. International Manufacturing Networks have become very complex as most companies have production sites all over the world. The increasing interconnectedness between these sites leads to even more factors that need to be taken into account when deciding on where to locate another production site. Only one in five companies succeeds in this process. This chapter gives an overview of this topic. In the first part, a short introduction to the importance of a meaningful site selection process is given. Afterward, an analysis of important selection criteria, motives, and factors influencing the choice of location will be shown. To illustrate what an optimal process should look like, the second part presents a dedicated process model for location planning. Further, different valuation methods are elaborated. As a wrap-up, an example of a representative choice process, examples of best/bad practices as well as a prospect on the future are given.