Global production planning process considering the supply risk of overseas manufacturing sites

Abstract

Although global manufacturers can produce most of their final products in local plants, they need to source components or parts from desirable overseas manufacturing partners at low cost in order to fulfill customer orders. In this global manufacturing environment, capacity information for planning is usually imprecise owing to the various risks of overseas plants (e.g., foreign governments' policies and labor stability). It is therefore not easy for decision-makers to generate a global production plan showing the production amounts at local plants and overseas manufacturing facilities operated by manufacturing partners. In this paper, we present a new global production planning process considering the supply risk of overseas manufacturing sites. First, local experts estimate the supply capacity of an overseas plant using their judgment to determine when the risk could occur and how large the risk impact would be. Next, we run a global production planning model with the estimated supply capacities. The proposed process systematically adopts the qualitative judgments of local experts in the global production planning process and thus can provide companies with a realistic global production plan. We demonstrate the applicability of the proposed process with a real world case.