A Mathematical Programming Model for Global Plant Location Problems: Analysis and Insights

In this paper, we study the design of global facility networks. We present a mixed integer programming model that captures essential design trade-offs for such networks and explicitly incorporates government subsidies, trade tariffs and taxation issues. The resulting formulation can be solved for reasonable size problems with commercially available mathematical programming software. Focusing on special cases of the problem enables us to provide useful insights on preferable international facility networks for various environments. We demonstrate the pervasive, and often dominating, effects of subsidized financing, tariffs, regional trade rules and taxation in shaping the manufacturing and distribution network of global firms.