Facility Location

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QUESTION: How do duties and exchange rates affect decisions about facility location in a supply chain? Please select two countries where facilities are located and then respond to this question.

1. Japanese car makers setting assembly plants in the US and other parts of the world 2. Blue Skies Fruits Company from the UK have built a factory in the Free-Trade-Zones enclave of Ghana Duties or tariffs and exchange rates form part of the macroeconomic factors that impact facility location in the supply chain and invariably the success or failure of supply chain networks. Duties must be paid when goods or services enter foreign countries outside the origin of the goods and services. The higher the tariffs in a country, the less attractive is the location for facility location for investors whose basic aim is to save on duties and increase returns on investment. A higher duty promotes the establishment of more facility locations whiles limiting the production capacity to be able to control the cost of duties or tariffs in locations where they are high. A reduction in tariffs allows for establishment of fewer facility locations with higher production capacities. Tax incentives and Free-Trade-Zones (FTZ) are ways governments create the environment (reduced tariffs) to attract facility locations in supply chains to their countries. Blue Skies Fruits Co. Ltd, supplies fresh tropical fruits and fruit juices to M&K in the UK. The company is financed by investors from the UK who have taken advantage of the FTZ in Ghana and the availability of the raw materials (fruits) to locate in Ghana. Exchange rates across the globe fluctuate impacting the returns of facility owners in the affected locations. These fluctuations are managed using financial instruments and financial hedging methods. The fluctuations have encouraged the Japanese car makers to locate their manufacturing facilities in strategic locations across the globe to help manage the risks that the...
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