Relocation in Production networks of a Multi-National-Enterprise

Abstract

This paper reports on a study of a relocation project in a multinational enterprise (MNE) production network. It is based on a research project running since 2007. A review of the state of the art and science of production relocation led to workshops and a survey which investigated and collected relocation project information within a MNE. The findings enabled the development of a relocation project reference framework which facilitates the refinement of relocation processes in a more systematic way. To avoid problems and ensure transparency in production relocation projects an approach was developed to connect various problem areas with typical production relocation characteristics. This paper presents a short overview of the approach; some details of the empirical method of the study and its data analysis, followed by a discussion of the findings and conclude with details of the project reference framework and its future uses/implications for MNEs. 1 INTRODUCTION MultiNational Enterprises have built up large networks of production facilities during the last decades [1, 2]. One part of this development is relocation: the movement of production capacities from one site to another. Many studies have shown that this is a dynamic process, driven by accessing new markets, lowering cost, especially wages and supplies [1, 3]. During such a relocation process new locations for production facilities or their expansion are chosen by considering several factors, usually in a longer evaluation process [4]. This paper and other studies show that the execution of such relocation decisions often fails to achieve company goals and exceeds project limits [5]. Some (new) facilities never reach their targets and finally a re-relocation occurs. Even though in total there are currently lower relocation activities in Germany, there are higher activities for relocation projects in companies with more than 1000 employees. Hence the handling of relocation projects needs further consideration (See figure 1) [3]. With the present trend towards globalisation, the focus of this paper on multinational enterprises (MNEs) is relevant to the current situation. Figure 1 Who relocates? Source: FHG [3] In this paper we will present an operation-oriented approach for managing relocation projects, which mind an MNE-optimal project management standardization level [6]. Before this description, the current literature review and a questionnaire which was conducted within an MNE, including the method of its analysis, will be briefly presented. 2 RELOCATION SCIENCE-STATE OF THE ART In the literature one finds various approaches to describe and implement production relocation. It is possible to cluster this literature into three categories: empirical researches, descriptive and strategic issues and operative guidelines. 2.1 Empirical Research The first part of the investigations into relocation focuses on the trends, goals, and target regions of relocation activities, so the research of Fraunhofer ISI [7] in manufacturing business shows that relocation activities (in Germany) decreased in the last few years (see Fig.2, please mind that the data presented in Fig. 2 shows finished relocation projects in the last two years before the named year). Nevertheless, relocation is still taking place: the three main reasons for relocation projects are lowering wages, locating closer to customers and accessing markets, as re-relocation reasons were named: quality, flexibility and (reduction of) personnel costs [8-11]. Figure 2: Relocation activities in German manufacturing industries FHG ISI [3]