Global production relocation mapping

Abstract

To exploit global growth and cost saving opportunities companies have built up global production networks. Originally the primary motivation of companies to globalize production was to take advantage of low-cost labor and the need to meet local-content requirements. Nowadays globalization of production is more and more driven by a dramatic shift in global demands to the emerging markets. In response to the ever increasing cost pressure, strengthened localization requirements and increasing global growth opportunities, also automotive suppliers relocate production from saturated to emerging markets. As a result global networks are created with value creation fragmented in global multi-organizational networks. The impact of relocated global production networks on flexibility, quality and logistics cost is often underestimated. This master thesis researches the problem how automotive suppliers can optimize their global production networks to grow their business, reduce cost and fulfil customer responsiveness requirements. In the first part of the research, global production network stereotypes and methods to optimize global production networks are described. The traditional production network theory proposes a periodic strategic process to optimize global production networks. The lean production network theory proposes to follow lean production network principles and to use extended value stream mapping to optimize value-streams from the suppliers to the customer. In the second part of the research the lean production network orientation of global production network stereotypes and of the global production network of an automotive supplier are assessed. The "Region for Region" model is identified as a network type with the target to enable global growth and to fulfil the lean production network principles: value stream concentration, customer proximity and optimization of total cost of ownership. The last part of the research introduces Global Production Relocation Mapping as lean method to visualize, analyze, simulate and optimize the impact of global production relocations on lead-times, inventories, transportation requirements and logistics costs. The method defines a direct production cost saving target that must be met to compensate increased logistics costs. Summarizing the method supports companies to take the right relocation decision and to optimize the global production network to ensure that the relocation will deliver sustainable financial benefits.