Global Supply Chain Design Research Articles

A proprietary component manufacturer’s global supply chain design: The impacts of tax and organizational structure

This paper studies the supply chain structure design for a proprietary component manufacturer (PCM) in a global environment. The PCM, producing component with patent protection and/or superior quality, chooses to enter into an overseas market to enhance revenue. There are three supply chain structures available to the PCM: (1) monopoly where the PCM establishes a downstream manufacturing subsidiary to produce and sell the end product, (2) component supplier where the PCM supplies component to a local original equipment manufacturer (OEM), and (3) dual distributor where the PCM supplies component to the OEM but also produces a competing end product. Our analysis suggests that two important features in a global environment, i.e., the global tax disparity and the organizational structure, have significant impacts on the PCM’s supply chain structure design and profits. If the downstream has a tax advantage, it is optimal for the PCM to directly enter into the downstream market with the structure of monopoly. As the downstream tax rate increases, the other two structures, i.e., component supplier and dual distributor, become more attractive. We show that centralization makes the dual distributor and monopoly structures more desirable. However, the OEM may be driven out of the market and the dual distributor structure is infeasible when the downstream tax rate is high enough. Contrary to our traditional wisdom, decentralization may benefit the PCM under certain circumstances.

The geography of suppliers and retailers

In the last decades, supply chains have increasingly transcended national boundaries developing into global supply chains. Along with the many opportunities arising from international sourcing and the extended commercial presence over the world, the management of a globally dispersed supply chain is highly complex. A key issue to consider when dealing with the global supply chain design is the location of facilities, not only with respect to firms' owned facilities but also the supply and distribution side as factors that affect supply chain complexity and operational performance. This paper sets out a methodological framework to characterize the geographical configuration of a firm's suppliers and retailer networks. Quantitative indexes of network spatial concentration and relative proximity measures based on a nonparametric kernel density estimator are developed to identify both intra- and inter-firm patterns between the supply and point of sales' distributions. The method is first described by means of a series of theoretical-illustrative examples and exemplified by analyzing the geographical dispersion of four practical cases from the fashion-textile industry (i.e., Adidas, Benetton, C&A, and Puma). Subsequently, managerial implications and potential use of the metrics are discussed, showing how the proposed approach can support researchers and practitioners to improve supply chain location decisions and logistic integration, and evaluate changes in either the purchasing or distribution strategy.

A regional information-based multi-attribute and multi-objective decision-making approach for sustainable supplier selection and order allocation

Abstract Although extant studies proposed various models and frameworks for sustainable supplier selection problems, they paid limited attention to the incorporation of regional economic, social, and environmental factors simultaneously for global supply chain design due to the difficulty in reflecting various dimensions of the global business environment and their associated risks in a decision model. Existing supplier selection models also tend to focus on the formulation of a simplified supply chain structure rather than considering more realistic supply chain operations under multiple sourcing and product designs. To facilitate the complex decision-making process of global supplier selection problems, this study proposes an integrated approach that consists of two phases to effectively reflect the multi-perspectives of global supply chain design for sustainability. The first phase identifies sustainable supplier regions through multi-attribute utility theory, considering four regional sustainability indices for economic and social factors in global business and logistics, to reflect the decision maker's risk attitudes on global business opportunities. In the second phase, a multi-objective integer linear programming model for multiple sourcing and multiple product designs that minimizes economic and environmental objectives is applied to find optimal suppliers and their order quantities in the regions selected from the first phase. The proposed approach is illustrated through a bicycle supplier selection case study. The results show that the multi-objective sustainable decision under a multiple sourcing strategy for different product designs leads to a supply chain that is significantly different from the single-objective non-sustainable decisions. The case study under different decision scenarios shows that a decision maker should hold a balanced perspective under the multi-objective decision environment for sustainable supply chain design.

Spatially Differentiated Sustainability Assessment for the Design of Global Supply Chains

Supply chains of modern products are often characterized by globally dispersed activities that have ecological, economic, and social impacts. Life cycle-oriented sustainability assessment methods usually aim at compiling the total impacts of a product without explicitly considering their spatial distribution. This may be problematic because regional characteristics of technology and environment are ignored and opportunities for tradeoffs between local and global sustainability measures are hidden. This paper proposes a framework for spatially differentiated sustainability assessment to support the design of global supply chains. The framework comprises a resource flow model that links production processes to specific locations, multi-scale impact assessment to derive regional and global sustainability indicators, and multi-criteria evaluation balancing the preferences of different stakeholders. An illustrative example shows that the application of this framework to a simplified supply chain of beer production leads to different results when alternative supply chain structures are compared.

Logistical Support of Interstate Trade and Economic Cooperation

Background: Globalization processes led to the development of international economic integration in the world economy, where logistical issues of trade and economic cooperation have gained particular scientific significance in the last ten years. Methods: In the study the data showing the current state of the world trade were analyzed, as well as the features of regional logistical capabilities and tendencies of trade policy of the Eurasian Economic Union (EEU) were discussed. In order to rationally use geo-economic resources of integrated formation, the need to create a common logistical space, including regional logistical centers, objects of near-customs, transport and other infrastructures, logistical informational systems, etc., was defined by general scientific and special methods of structural-functional analysis and organizational design. Findings: The article focuses on the key objectives of unification of the countries into international trade and economic blocs: The total economic and social development, provision of favorable conditions for the development of bilateral trade and strengthening of competitive geopolitical advantages. According to the author’s opinion, the regional economic integration allows member countries to use economic, logistic and natural-resource potential of the macroregion according to the principles of synergy. Due to the fact that the international cooperation involves the creation of a common customs and economic space, where the free movement of goods, labor and capital takes place – the formation of a common logistical space is becoming an integral part of regional trade and economic system, ensuring the needs of international business structures. The uniqueness of the author’s proposals relates to strengthening of the integration processes in the regional cross-border area, where one of the most urgent tasks is to create an efficient infrastructure base for the organization of export-import and transit goods movement. In this article the author reviews the prerequisites for the formation of the Eurasian Economic Union (EEU), special aspects of integration processes development in the post- Soviet space, the key trends of EEU trade policy and the specificity of EEU logistical potential implementation in terms of resource constraints. Application/Improvements: The obtained research results can be applied in the framework of trade policy of regional integrated union, as well as be taken into account in the design of global supply chains of business entities.

Integration of the profit-split transfer pricing method in the design of global supply chains with a focus on offshoring context

This paper presents an optimization model for the design of global supply chains where the emphasis is made on transfer pricing for both tangible and intangible elements. We adopt the profit split transfer pricing method which is dictated by OECD guidelines and may be accepted by fiscal authorities. The proposed model is particularly suited for the offshoring context. In addition to transfer pricing, the model integrates several relevant decisions such as the location of tangible and intangible activities. Intangible activities refer to R&D and supplier management. Experimental analyses are conducted in order to prove the feasibility and the solvability of the model and to show the impacts of transfer pricing on supply chain decisions and profits.

Modelagem do projeto da cadeia de suprimentos global: considerações teóricas e perspectivas futuras

Este artigo teórico objetiva apresentar e discutir características de modelos matemáticos de otimização do projeto da cadeia de suprimentos global, a fim de sugerir perspectivas de pesquisas futuras. A pesquisa bibliográfica foi realizada nos mais importantes periódicos internacionais de pesquisa operacional, compreendendo, predominantemente, artigos publicados entre 2000 e 2013. Dos 111 artigos selecionados, 22 foram analisados em profundidade, considerando aspectos referentes à modelagem da cadeia de suprimentos global e os fatores internacionais abordados. Através da discussão teórica, identificaram-se questões emergentes, indicando oportunidades e necessidades de desenvolvimento de novos modelos matemáticos e técnicas de solução.

Global supply chain design considerations: Mitigating product safety and security risks

Supply chain disruptions pose an increasingly significant risk to supply chains. This research develops a framework to examine the threat of potential disruptions on supply chain processes and focuses on potential mitigation and supply chain design strategies that can be implemented to mitigate this risk. The framework was developed by integrating three theoretical perspectives—normal accident theory, high reliability theory, and situational crime prevention. The research uses a multi-method approach to identify key safety and security initiatives (process management, information sharing, and supply chain partner and service provider relationship management) that can be implemented and the conditions under which each initiative is best suited. The research results illustrate that the depth and breadth of security initiatives depends on top management mindfulness, operational complexity, product risk, and coupling.

Modèles d'optimisation pour la conception des chaînes logistiques internationales

This paper presents a two-phase optimization approach for the design of global supply chains. The first phase is concerned with the strategic planning level while the second phase deals with the tactical level. We consider several international factors such as transfer prices of tangible and intangible activities. To model the transfer price, we adopt a realistic profit-based approach. The proposed model is finally illustrated by a case study.

A two-stage stochastic programming method for designing multi-stage global supply chains with stochastic demand

This paper encompasses the design of a multi-stage global supply chain with stochastic demand. The network consists of manufacturing sites, distribution centres and retail zones situated at both domestic and international locations. Tactical level decisions to be made are the selection of international outsourcing partners, transportation modes and the capacity of each facility. To provide a practical decision support tool for the design of global supply chains, we consider the existence of exchange rate variations and the presence of economies of scale in production which lead to different capacity expansion and outsourcing policies. We formulate the problem as a mixed-integer programming (MIP) model with the objective of minimising the overall costs and maximising the expected average service level. A two-stage stochastic programming method is used to handle the stochasticity in demand. Finally, the proposed model is applied to various cases to demonstrate its applicability in facilitating decision making for managers.

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

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.

Optimizing the design of global supply chains at Dow AgroSciences

The design of the underlying supply chain network can have a tremendous impact on the profitability, manageability, and level of risk of a global supply chain. Taxes, duties, and tariffs vary from country to country as well as trading bloc to trading bloc and can consume as much as 10% of the revenues of certain products. In the highly regulated business environment of agricultural chemicals, the country of origin of an active ingredient can determine where the final product can be marketed and the amount of taxes and duties applied to the product, making it necessary to trace all batches of product through many layers of the supply chain to their sources. This article presents a mixed integer linear programming model in use at Dow AgroSciences LLC that simultaneously optimizes the network design underlying global supply chains and the monthly production and shipping schedules for maximum profitability. This work contributes to the supply chain design literature by demonstrating a novel method of tracing products to their source for inventory valuation, taxation, and duty computation in a production environment where the products change into other products as they pass through nodes in the network. It also demonstrates an iterative scheme for determining unit fixed costs for fixed cost allocation for the same purposes. Finally, it provides a case study of a supply chain design initiative in a global enterprise.

Modeling supplier selection and the use of option contracts for global supply chain design

As supply chains become more and more dependent on the efficient movement of materials among facilities that are geographically dispersed there is more opportunity for disruption. One of the common disruptions is the loss of production capability at supplier sites. We formulate a two-stage stochastic program and a solution procedure to optimize supplier selection to hedge against these disruptions. This model allows for the effective quantitative exploration of the trade-off between cost and risks to support improved decision-making in global supply chain design. A realistic case study is explored.

A fractional programming model for international facility location

This paper presents a new mixed integer non-linear fractionalprogramming model for multi-commodity, multi-period, budgetconstrained and capacitated global supply chain design problem. Ourmodel simultaneously optimizes the facility location, capacityacquisition, and production-distribution decisions so as to maximizethe profitability of the total investment over a planning horizon.The model is also compared with the profit-maximization model andthe cost-minimization model. A branch-and-bound method and arounding heuristic algorithm are developed to tackle the problem athand. The computational results of solving 30 instances generatedrandomly show that our proposed model differs fundamentally from theother models and the rounding heuristic algorithm provides anefficient solution.

Global supply chain design: A literature review and critique

In this paper, we review decision support models for the design of global supply chains, and assess the fit between the research literature in this area and the practical issues of global supply chain design. The classification scheme for this review is based on ongoing and emerging issues in global supply chain management and includes review dimensions for (1) decisions addressed in the model, (2) performance metrics, (3) the degree to which the model supports integrated decision processes, and (4) globalization considerations. We conclude that although most models resolve a difficult feature associated with globalization, few models address the practical global supply chain design problem in its entirety. We close the paper with recommendations for future research in global supply chain modeling that is both forward-looking and practically oriented.

Global Supply Chain Design

I review principles and methods of global supply chain design, especially from two viewpoints, in this paper. The first perspective is focused on the practitioner who is interested in an overview of the key concepts and applications of supply chain design within a global context. The second theme of this paper is to assess opportunities for research to extend supply chain design in useful directions, particularly into closely related areas such as supply chain operations and information systems.