Logistics issues in global manufacturing strategy: Production sharing in maquiladora operations

Economic globalization and the trend toward establishing global operations should be expected to continue into the foreseeable future. Indeed, the intensification of competitive pressure that will come about as more and more countries seek to industrialize and as new markets are opened will only increase the incentives that already exist and promote global production sharing. Further, the increasing ability of firms to effectively coordinate rationalized productive activities that has come about through technological innovation and improved logistics capabilities will increase the firm's ability to take advantage of existing regional economies while establishing a competitive presence in even more diverse markets.;Mexico's maquiladora operations currently represent a very important aspect of an increasing number of firms' global production sharing operations. The devaluation of Mexico's currency and the existence of favorable tariffs have led to dramatic growth in the number and type of maquiladora operations. There are in excess of 1,600 maquiladora facilities in operation today involving industries from low-tech apparel assembly to high-tech electronics. Some interesting issues concerning the merits and problems associated with operating maquiladora facilities have surfaced with this growth and apparent prosperity. For example, several operating challenges including high labor turnover, a poor industrial infrastructure, and longer supply lines exist and should be carefully considered by firms before they set up maquiladora operations.;To develop a better understanding of the interaction between logistics and manufacturing considerations in the implementation of global manufacturing strategies, an empirical investigation of production sharing through maquiladora operations was performed. This investigation was carried out through the use of a self-administered survey questionnaire, which was satisfactorily completed by 228 managers familiar with both domestic and maquiladora operations. The 228 responses represented a 31% response rate. The information contained in these responses was used to explore five primary research questions associated with what is defined as a factor-input global manufacturing strategy.;The overall findings of the study suggest that some tradeoffs between reduced production costs and logistics performance are inherent in maquiladora operations. In fact, a significant portion of the production cost savings attained through production sharing are dissipated by the increased logistics costs required to support the maquiladora operations. Further, the presence of these cost and performance tradeoffs in maquiladora operations--which typically possess relatively simplified logistics requirements compared to more distant co-production locations--suggests the need to carefully evaluate all production sharing activities.