Approach for the cause-fair allocation of costs in location decisions in global production networks

Global production networks are subject to dynamic change. In order to manage growth, conquer new markets or to seize regional cost or skill advantages companies constantly adjust the number of production sites. However lots of companies do not experience the expected positive results from a location decision while a certain number of companies need to revoke their location decision and back-shift products and processes to initial sites. This paper analyzes challenges and deficits in the location decision process today. The research focuses on the preparation and evaluation part of the decision process, specifically on one of the most striking criteria: production costs. A pragmatic approach is presented which identifies decision relevant costs on a generic level and gives a first indication on the cause-fair allocation of the relevant costs. Special attention is paid to the impact of the potential increase in number of sites on existing locations.