Critical Appraisal Report on Production Activity Harvard Case Solution & Analysis

Critical Appraisal Report for Round 4 on Production Activity

Introduction

This critical appraisal report attempts to analyze and interpret the production location decision for ABC manufacturing company. Manufacturing decisions and establishing the production facilities in specific countries is based upon a number of factors. This report attempts to make the production location decision for the ABC manufacturing company. The production location choices available to the company are two.

The company has the option to produce its two product lines which are product line 1 and product line 2, either in United States or within Asia. Along with this location decision, the firm will also have to make a decision regarding whether the firm needs to own production or it needs to meet the required demand of the market by contracting manufacturing. A number of factors will have to be considered in the location decision and simulation has been performed.

The most critical variables in the production location decision are the demand uncertainty, demand estimations, manufacturing costs per unit, capacity utilizations, and number of plant requirements in each of the production locations, the percentages of free capacity and the origin of the products sold. Global business simulation strategy has been applied in order to plan the future capacity and the plant requirements for the company and a final decision has been made.

Critical Review of Literature

The rapid changes in the production technologies and the low costs of producing a specific product in a particular county are impacting upon the production decisions of the manufacturing firms in a great manner. Manufacturing firms have to decide that whether they need to produce near shore, back shore or offshore (Cohen, 1989). These are the terms which are used to describe the range of the production decisions made by the manufacturing firms for instance whether they want to establish their production facilities near the fast growing global markets of the world, bring their production back to United States or establish production facilities in the low cost countries of the world.

For all the manufacturers today it is highly important for them to understand the economic realities, economic development and the implication of that for their firms. The production location choices have been recognized by international business literature. From the perspective of international business, the main configuration dimensions impacting upon the production decisions are internationalization (competitive advantage, protection) and market pressures (proximity, cost) (Devereux, 1998).

It has also been recognized by the operational management literature that the production department of a manufacturing company is basically working on the basis of a manufacturing strategy in order to create the most competitive weapon for the company. The investment of the firms in infrastructure and processes in order to supply and make the required quantities of the products is also dependent on a detailed evaluation of the fact that how the company would be able to win the orders and qualify those products in the market place.

Along with product quality, product features and its price, there are also many other important variables that impact upon the production decisions and the establishment of the distribution facilities in other locations. These factors might include the after-sales support service, the technical support, design, dependability, delivery and the speed of the production process. There are a number of other issues, problems and decisions that are faced by firms when deciding for the most suitable locations for their production facilities (Kemsley, 1998).

This could be summed in the functioning of the global operational value chain. It has been stated by De Toni et al. that the coordination among all the decentralized units of global value chain is a crucial factor in determining the feasibility of where the production should be located. International supply and demand management is another important factor and the inventory objectives, capacity utilization and the customer service must also need to be balanced internationally.................

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