Coherence of Risk and Cost in Global Production Networks
Globalization forces companies in the manufacturing industry to allocate their global production sites dependent on cost factors. These cost factors such as low labor costs, transport costs, and productivity effects are leading to complex decision situations for managers in charge of the production. Besides the cost factors also risk factors as another influence must be considered in this context. Like recent events in the past showed, risks are causing fundamental losses if not addressed sufficiently. Including the risk factor makes decisions even more complex and leads to the conflict of risk and cost minimization. A quantitative determination of risk could not be found in literature. Therefore, an integrated methodology has been developed to determine risks and costs of a global production network (GPN). It can be applied to investigate the coherence of risk and cost in global production networks. Furthermore, optimization limits within the given boundaries are identified and an optimal configuration within the area of tension between risk and cost minimization is identified. This methodology has been validated via an industrial based use case.
Index Terms- Management, Production, Networks, Risk, Cost