Analysis of Design for Global Manufacturing Guidelines

Globalization is motivated by the potential for cost reduction through access to lower labor costs, as well as by the potential for increased sales through access to new markets. A review of cost data indicates the potential savings related to labor as compared to the potential additional costs related to raw materials, shipping, and tariffs. A logistics cost model is then presented that considers purchase cost, shipping cost, inventory holding cost, order cost, and stock out cost subject to demand uncertainty. Four different design for manufacturing and assembly (DFMA) guidelines are then analyzed for a single product case study: 1) minimize total shipping costs, 2) source components globally, 3) standardize product platforms and modularize options; and 4) regionalize final assembly. The analysis of these guidelines indicates that global sourcing of components led to the most significant cost reductions, but that all guidelines were significant when considering logistics subject to uncertain demand.