Capacitated location and logistics decisions under stochastic demand and exchange rate movements: A simulation study

This research is motivated by an emerging environment of disappearing trade barriers and levels of competition. Foreign exchange rates and differing market growth rates are the two international location factors addressed in this research. Exchange rates have a significant impact on the performance of firms. Market growth rates affect the location decisions with respect to the timing of the decision, and the decision of whether to open or close facilities.; Managing global logistics is a difficult endeavor. Facility location is a critical decision that is related to the logistics problem. The location decision affects the transportation costs, and inventory carrying costs. Therefore, facility location decisions should be integrated with the logistics decisions.; Global supply chain management factors in relation to location and logistics decisions are determined through an extensive review of the literature. Structured interviews are conducted with an international electronics firm to analyze the relevant system parameters and data for locating capacitated final assembly plants. This information, along with the cohesive review of the literature, led to the development of a simulation model. The model analyzed the effect of the decision rules in relation to location, capacity planning, demand allocation, and lot-sizing on the net present value of the cash flows and service levels.; The results confirm the trade-offs between the net present value of cash flows and service levels--which is in line with what has been reported in the literature. More importantly, the results show that the effects of exchange rates and demand growth rates are particularly important in global location and logistics decisions.; Based on the results, managers should: (1) integrate location and logistics decisions in order to improve overall performance, (2) forecast market growth rates and utilize this information in their location and logistics decisions, and (3) respond to exchange rate movements in determining location and logistics decisions.