Alternative Strategies for Dealing with Idle Capacity in Global Supply Chains

Abstract

This paper considers a global supply chain strategy consisting of a host market strategy where three manufacturing plants are located in three regions and each plant covers demand in a region. The case considered is a global blood sugar manufacturing company. Manufacturing plants are designed considering layered cellular design approach under stochastic demand. This approach allows three cell types; a) dedicated cells where each dedicated cell can be used only by one family, b) shared cells where a cell can be shared by two product families, and c) remainder cells where a cell can be used by three or more families. Later, we focus on how to fill idle capacity in manufacturing facilities based on demand and future potential markets. Increasing utilization of resources is important as long as it improves profits. We consider two options; 1) lowering the selling price of the product to increase the overall demand, 2) looking into new potential markets for the product itself. Considering the GDP and other economic attributes of new regions, we want to investigate if introducing our product to the new market will be beneficial for the overall good of the company. The main focus of this paper is to compare these two strategies considering labor cost, machine investment, and transportation of the product using heuristics and the results are then translated into potential profits that the company could achieve under two supply chain strategies.