A mixed integer programming model to evaluate the impact of business factors on global manufacturing relocation decisions

In recent years, dramatic changes in business factors have triggered a trend of manufacturing relocation out of 'The World's Factory', which is the Pearl River Delta (PRO), China. Global manufacturers in PRO have been facing unprecedented operating cost pressure, due to RI1B currency appreciation, rising labor cost, highly volatile oil price, tax rebate adjustment and industry policy changes. This paper presents a Mixed Integer Programming (MIP) model, to evaluate the impact of business factors on global manufacturing relocation decisions. Objective function of the MIP model is to minimize Total Landed Cost (TLC) for international markets. Application of the MIP model is illustrated through a case study with a hypothetical footwear manufacturer. Managerial implications on supply chain dynamics and regional economy are derived from modeling results and analysis.