The New Dynamics of Global Manufacturing Site Location

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Manufacturing site location has received limited exposure in strategic planning literature. Approaches often emphasize quantitative data such as transport costs, exchange rates, taxes, labor rates, and other cost-based variables. Yet location decisions based primarily on cost underestimate the importance of qualitative factors that are more likely to provide long-term advantages. This article examines the impact on location of recent trends in the global trading environment, new production systems, and new technologies. These suggest that global corporations of the future will develop a manufacturing network of decentralized plants based in large, sophisticated, regional markets. Each plant will be smaller and more flexible than is typical today. The location of such plants will be based more on regional infrastructure and local skill levels than on purely cost-based factors.

Alan David MacCormack is an associate at Booz-Allen & Hamilton's London office. Lawrence James Newman III is a senior engineer at Analog Devices, Inc. Donald B. Rosenfeld is a senior lecturer and director of the Leaders for Manufacturing Fellows Program, MIT Sloan School of Management.

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