On integrating theories of international economics in the strategic planning of global supply chains and facility location

Abstract

This paper relates three theories of international economics (comparative advantage, competitive advantage, and competitiveness) and formulates the thesis that incorporating them in the form of readily available individual competitiveness indicators in OR/MS models offers promise to enhance decision-support for the strategic planning of global supply chains in general and for locating facilities in particular. The purpose of this paper is to relate these theories from the field of international economics, to give a roadmap of related measures that are provided by annual competitiveness reports, and to pose several research questions as challenges to the OR/MS community as it seeks to improve models to support the strategic planning process. Accordingly, specific objectives of this paper are to relate each of these theories and to describe their interrelationships; to describe measures provided by two well-known annual competitiveness reports; and to illustrate application of the theories as a means of supporting the thesis of the paper and justifying the research questions we pose for future research. While this paper discusses topics relative to the broader background of global supply chain design, it illustrates applications associated with facility location, a component of the global supply chain design, since it has a rich history within the OR/MS community and since it is central to strategic planning in the global economy.