The Different Types of Manufacturing Systems - Term Paper Example

Name Tutor Title: Manufacturing Systems Institution Date Introduction Relocation is the movement of a company or business from one location or region to another. As a result of modern globalization and immense competition, companies usually establish new business units on a new location or into other another subsisting unit. For the rationalization reasons, business units have been combined together into bigger units or manufacturing units have been moved to low cost nations in other regions of the globe. The relocation has also been aimed to support domestic markets as a result of changes in custom conditions and markets. Companies also move so as to be closer to a consumer base or to a location with a greater pool of available, skilled workers. Being in the correct location is a major ingredient to the success of a business. If a corporation chooses the right location, it might have adequate access to workers, customers, materials and transportation and thus lead to the overall success and profit of the company. Therefore, when relocating, a company should use a location strategy to obtain the optimal location through identifying company objectives and needs, and search for a location with offerings that are well suited with these objectives and needs. Definition of terms related to relocation Outsourcing refers to any operation, job, process, or task that could be performed by workers within a company, but is instead contracted out to a third party. It is the subcontracting or contracting of noncore business activities to free up personnel, cash, facilities and time for activities in which a firm holds competitive advantage. Off shoring is a form of outsourcing that entails the relocation of a firm’s business processes to a foreign nation. It may entail shifting product manufacturing, operations or service centers to a different nation. On shoring is the act of employing white collar employees from abroad. It is an overseas investment a local firm or overseas affiliate that is consequently reinvested back into domestic marketplace. Nearshoring, which also known as Nearshore outsourcing is the act of getting services performed or work done by individuals in neighboring countries other than your personal country. Off shoring is generally used to minimize the cost of business, with the firm seeking to relocate parts of operations to nations with highly favorable economic conditions. Globalization refers to the procedure of increasing the interdependence and connectivity of the world’s businesses and markets while global sourcing is a procurement strategy where a business seeks to get the most cost effective location for manufacturing a product, even if the site is in an overseas country (Willocks, 2009). Reasons why companies move to new locations Need to expand facilities When a firm finds gets itself in undersized or outmoded facilities, this is another cause to look at relocating. Several businesses begin in a small facility and but later the business outgrows this location or starts to find fault in services, infrastructures, facilities and utilities making it to move to a new location. For instance, Alcoa Composites in Santa Ana relocated its headquarters to Texas because it wants to expand, though it continues to make aircrafts parts at California plants. The other reasons for relocating are high cost of labor and cost of pollution abatement. For numerous businesses possessing low margins, regulations on the environment are adequate to make a company to relocate. Alcoa has cited several reasons of relocating such as housing prices, utility costs, commercial space cost, and high compensation rates of workers and great unemployment insurance taxes. Pollution abatement regulations are the greatest obvious culprit for several businesses. The fight against pollution other than pollution itself is assisting companies to make a decision to move to a new location. Cost and quality of living Cost is a concern in any company’s decision to move. Companies usually relocate to areas where cost of living is low. The cost of living widely varies among cities. For instance, in Little City, Arkansas, the cost of living is 13% below the national average while the cost of living in New York City is more than double the national average. Theoretically, movement of a company from Manhattan in New York to Little Rock in Arkansas could yield considerable savings for the company. However, costs involve more than living costs and diversities in geographic costs have been leveled out in recent years. Companies usually get themselves compelled to compromise between remaining close to target markets and selecting the lowest cost facility. This is a major reason for the exodus of workers from central cities to the nearby reasons, which in accordance to the United States Census Bureau led in three million individuals leaving the central cities, and the suburbs attaining 2.8 million people in the recent year. Depending on the circumstances, companies might have other location issues to put into consideration. An intangible issue is the quality of life in the new location. Companies assessing relocation usually look at education facilities, recreational facilities, health care, crime rates and climate factors. Security is a significant consideration when relocating. A company along with its employees will spend a quality amount of time in the new building and if the neighborhood possesses a reputation of being unsafe, then the company is likely to have problems hiring quality workers (Henricks, 2009). Search of labor force Several companies relocate in search of cheap and qualified labor force. The company may have a shortage of qualified employees for several occupations particularly those needing technical expertise and thus if the company is requiring specialized workers, it is finds it worth to relocate to a region where it can easily get these forms of employees. Companies usually relocate in search of cheap and skilled labour if labor cost in their current locations is high. This enables them to cut on operation costs and thus increase profitability and business growth (Watt, & Keune, 2008). For instance, Caterpillar, manufacturer of heavy machines is looking for a location in the United States to establish a new factory for construction excavators. This will replace production work that is currently being performed in Illinois and Japan and is following a ballyhooed decision by General Electric company to onshore production of numerous of its water heaters. If Caterpillar establishes a production plant in United States it will take advantage of the depressed dollar, get job incentives from Washington and shorten distribution and supply chains for its products. The firm expects United States demand for its construction machinery to pick up after a period of economic crisis. Tax evasion and search of markets Search of markets and tax evasion is another reason why companies relocate. Companies like the Benedict Arnold companies have moved some of their business activities from the United States to other countries. The U.S Manufacturers have outsourced operations to other countries like China so as to reduce wage costs and evade high taxes, intransigent unions and burdensome government regulations at home. International information technology providers such as Accenture, EDS and IBM have relocated from their original locations and established offices in nations like India thereby, utilizing the worldwide network to perform information technology services at the most appropriate locations. As a result of their strong competitive position in international market, these providers do not fear competition posed by classical IT offshore providers (Hill, 2005). In order for classical IT service providers to strengthen competition position within Europe, offshore providers such as NIIT Technologies have attempted to penetrate the German service market. In this context, nevertheless, offshore providers recognized that several German companies had considerable problems with directly relocating their information technology services to nations like India. As a consequence, several offshore providers created offices of acquired information technology service providers in Germany. For instance, NIIT Technologies acquired AD Solutions which is based in Mannheim in 2002, in an effort to enter the German market. Offshoring is beneficial because it reduces IT costs and companies relocate their interior information technology to low wage nations because of this cost benefit. The cost advantage of overseas service providers mainly emerges from the lower costs of labor in their nations (Wiener, 2006). Need to reach customers Companies relocate with the aim of reaching their target customers. Rieple & Haberberg (2008) argues that relocation of business is a wise choice if it puts the company closer to people who are highly likely to use its services or purchase the products provided by the company. On the contrary, relocating a business can place the company too far from its customers and cause the business to lose. If a company have a unique service or product, customers might be willing to travel the additional distance to do business with the company. However, if the target audience are customers who have difficulty travelling to where the business is located, or if there exists other identical businesses closer to their homes and places of work, then the company should relocate in order to gain greater access to customers or else the business will lose. Recent trends in the location of manufacturing companies Manufacturing in the twenty-first century is a main technological challenge that companies are tackling in order to remain competitive in marketplace since engineering is ever changing and advancing and products are becoming more greatly complex and integrated. The novel manufacturing enterprise is globally distributed and knowledge intensive and is closely collaborating with a wide range of partners across technological and geographical boundaries. (Roger, 2004). Manufacturing is viewed from an enterprise perspective which encompasses a wide range of operations in the manufacturing business, entailing product design, customer requirements manufacturing engineering, product control and product scheduling. Therefore manufacturing countries have constantly relocated to places where there are resources that enable them to meet their business needs and objectives. The process of decision making include several steps that starts with a firm deciding to invest in a new manufacturing facility. The initial step of the process entails selection of a geographic area that will optimize product markets production input supply. Once a location has been selected, the company identifies a particular location that will reduce the cost of production. According to Deaton, (2002), sub regions entail cities, states or other regions that meet the criteria considered vital in influencing cost of production. Selection of a precise site in the sub region is based upon cost factors that involve labor costs and availability, agglomeration economies, human capital, access to product markets and production inputs and the willingness of the domestic community to support industrial development( Eldon, &. Kelch, 2000). Labour force size, unemployment rate, labour productivity and wages rate are variables have been recently linked with manufacturing firm’s locations. As manufacturing facilities emerge to be more capital intensive, a properly trained labour force is increasingly significant factor in decisions of firm location. Site services and locations are significant factors in location of manufacturing firms. Site quality, ownership and service attributes affect location decisions. Companies consider cost implications of operating at locations having several desired attributes and then choose a location that will provide the lowest operating cost. Ownership of the location is significant since the cost of a publicly owned site more stable or fixed that a site held by a private developer. Local taxes are also are significant factor in decisions of location. When companies consider local industrial tax to be highly, they consider reduction of costs through negotiating for locations that have law tax imposition (Timothy, 2005). Education services, local public services and safety measures have shown to affect location decisions. Before deciding moving to new locations, companies are considering the availability and quality of public services such as education and health care facilities. Thus a manufacturing firm decision to relocate is based on assessments on how well particular development sites meet the minimum cost and other site criteria. Conclusion Location is an important business factor that every company must consider because being in the right location is a major ingredient of the profitability and overall success of the company. By selecting the right location a company is able to have sufficient access to customers, workers, appropriate facilities and markets. Therefore companies relocate when a change of location looks like the most promising path to business growth. If a company is experiencing a shortage of qualified labour force, its relocation to an area where it can get the type of employees it needs enable it to meet its business needs and objectives. Need to expand facilities, reduce cost of operations, and need to reach customers are other reasons why companies move their businesses from one location to another. Bibliography Wiener, M, 2006, Critical Success Factors of Offshore Software Development Projects, DUV, California. Henricks, M, 2009, Enterpreneur magazine’s growing your business: a step by step guide to success. Pennyslvania State University, Pennysylvania. Watt, A, & Keune B, 2008, Jobs on the move: an analytical approach to relocation and its impact on employment, Peter Lang, New York. Hill, C, 2005, International business: competing in the global marketplace, McGraw-Hill/Irwin, New York. Rieple, A, & Haberberg, A, 2008, Strategic management: Theory and Application, Oxford University Press, Oxford. Roger, S, 2004, Making Business Location Decisions. Prentice-Hall, Inc., Ney Jersey. Willocks, L, 2009, The Handbook of Global Outsourcing and offshoring, Palgrave Macmillan, New York. Deaton, B, 2002, Manufacturing Location: The Impact of Human Capital Stocks and Flows, Review of Regional Studies, 18(1):42-48. Timothy B, 2005, Business Location Decisions: Estimates of the Effects of Unionization, Taxes, and Other Characteristics of States, Journal of Business and Economic Statistics, 3(1):14-22. Eldon, S, &. Kelch, D, 2000, Location Determinants of Manufacturing Industry in Rural Areas. Southern Journal of Agricultural Economics, 10, 23-32. Read More