Advantages and Disadvantages of Locating a Manufacturing Facility

Nonetheless, upon close examination of the production line, it was concluded that there were a lot of disadvantages associated with the outsourcing of production some of which includes and is not limited to:

It also requires more of an investment and commitment by the international company which creates a higher risk. There is also the down side of having difficulty managing local resources.

The large initial capital investment needed for new entrants is another major barrier. The cost of machinery and manufacturing is expensive. It is hugely important and costly to have a global presence in manufacturing as it is extremely expensive to ship machinery to clients around the globe.

What are the strategic risks and benefits of outsourcing production of the Temecula plant to contract manufacturers in China?

There are many things that would prevent an American company to outsource to these countries but one of the main ones is that it would simply be cheaper to produce it in America. There are many products that are just easier and more cost efficient to produce here instead of in a foreign nation. Another reason that could prevent an American company from outsourcing with a foreign country are tariffs and taxes.

The company also should consider other factors in choosing the location of the plant including:

A newly formed firm must decide on a plant location. There are two alternatives under consideration: locate near the major raw materials or locate near the major customers. Locating near the raw materials will result in lower fixed and variable costs than locating near the market, but the owners believe there would be a loss in sales volume because customers tend to favor local suppliers. Revenue per unit will be $185 in either case.

In today’s business world, production cost was an increasing concern for companies working to stay competitive in the global marketplace. The top management must search for a global solution to drive down costs and reduce difficult activities associate with inventory management and production management. Global sourcing aimed to exploit global efficiencies in the delivery of services and goods across geopolitical boundaries, including low cost skilled labor, low cost raw materials, tax benefits, and price breaks. Whelan Pharmaceutical was the best example to illustrate how the company chose the best manufacturing site for global sourcing from different perspectives.

The disadvantages are higher outbound transportation costs. Even with a strategic warehouse location, such as Kentucky, there will bound to be retail outlets farther than others, such as San

To evaluate the alternatives, the key factors would be costs of setting up in other cities within Canada and if it will generate more sales by setting up there. If by expanding, more sales, more market shares and profits are generated then it is better to expand in that specific city but if the costs of setting up there are more than the amount of sales you will make in that city then it is better not to set up there.

The high cost of energy is making it impossible for many U.S. companies to remain competitive here and is driving them to relocate their plants overseas. . . Plant relocations have been a major factor in the loss of nearly five million manufacturing jobs in the past 20 years. (Offshore)

Labor costs in the United States are much higher than in many parts of the world. Consequently, the costs of production for labor-intensive manufacturing can be significantly reduced by moving factories overseas mainly to third world countries this is a common practice of Nike who outsource there manufacturing to other companies in countries such as Thailand and Indonesia.[ ]

In order to have higher profit margin, one of the most effective ways is to cut down production costs. In view of the low labor cost in developing countries, global sourcing seems to be a good choice to reduce costs. With the development of global production networks and the increasing competition, fast all fashion clothing firms have shifted their manufacturing operations to low lost locations over the past decades.

There are also several disadvantages to outsourcing agreements, which include becoming dependent on an outside supplier for services, failing to realize the purported cost savings from outsourcing, locking into a negative relationship, losing control over critical functions, and lowering the morale of permanent employees.

Locations for outsourcing jobs is very important as companies need to decide what is going to be the cheapest option but also the most beneficial in terms of maintaining their remaining clients and customers, there tends to be quite high volume complaints when it comes to outsourcing jobs, problems can arise often due to language barriers, so choosing the best location