An integrated production–distribution optimization model for multinational manufacturing corporations

Abstract

ABSTRACT In proposing an integrated production–distribution model for multinational corporations (MNC), the current research undertakes a novel, simultaneous consideration of facility location, capacity acquisition/disposal, labor, manufacturing, purchasing, exchange rates, tariffs, and container and/or individual shipping factors. Unlike prior studies that examined some such factors. Based on real-world data from a window manufacturing MNC, a mixed integer linear programming model is developed and solved using CPLEX Solver. It reveals how the different features affect the base solution. Specifically, increased demand pushes more manufacturing to US and UK facilities rather than (low-cost) Chinese facilities; it helps meets some of China’s demand and leads to reduced total tariff costs. Decreased demand instead favors the Chinese facility, and the increase in tariff costs can be offset by savings in manufacturing and transportation costs. Changes to the factors have insignificant effects on the production and distribution mix, with little to no impact on total profits, because these costs are lower than capacity costs. The comprehensive proposed model provides firms with a framework for obtaining meaningful insights into how they can maintain their operations in sustainable, profitable ways. This research also should assist policymakers in making informed decisions regarding regulations on production and distribution strategies.