Global plant capacity and product allocation with pricing decisions

Global plant capacity and product allocation with pricing decisions

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Article ID: iaor20061764
Country: Netherlands
Volume: 165
Issue: 1
Start Page Number: 157
End Page Number: 181
Publication Date: Aug 2005
Journal: European Journal of Operational Research
Authors:
Keywords: programming: nonlinear
Abstract:

Trade-offs in global manufacturing decisions involve markets, resource costs, trade-barriers, currency exchange rates, joint ventures and investments. We develop a model that optimizes plant investment decisions, while ensuring that the plant investment overhead is optimally absorbed by products produced from that plant. The model also, simultaneously, determines prices by products and countries. The special structure of the model is exploited to construct a fast solution procedure. The model is used to study the implications of labor cost, transportation cost, demand, and import tariff on production quantities, investment, and overhead absorption pattern. Implications of changes in other global parameters such as local-content rule, local taxes, size of the market in a country, and long-term exchange rates are also studied.

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