IMVP News | L3 Project to Improve Global Location

Choosing where to locate new plants or design operations is a high-risk decision for automotive suppliers. A new International Motor Vehicle Program (IMVP) effort – the Lean Locational Logic (L3) project – is partnering with suppliers to gather information on current choices, then to create a model to help companies improve their chances of a profitable decision.

IMVP's lean approach will extend the classic make/buy choice to a smarter way to decide whether to make/design here or elsewhere. The L3 project is developing a series of case studies that will factor in types of risk from competition to politics as well as manufacturing specifications such as product complexity, capital and labor intensity, and logistics.

"Since IMVP is a leader in thinking about lean, we hope to find some creative ways to make sure that lean priorities are given the proper weight in the decision process," said IMVP Co-Director John Paul MacDuffie, an L3 principal investigator (PI).

One early finding is that risks and costs are often calculated in separate departments so they are not directly compared. "The finance group tends to have responsibility for assessing the level of risk in a given country – capital investment, political risk – and that goes into a formula," said MacDuffie. "Everybody else is looking at different issues and they know that the risk formula will be applied at the end. So they don’t look at how difficult it will be to get parts from one end of China to the other, for example. They are not thinking carefully about this risk at all. [IMVP PI] Francisco Veloso is doing a nice job of showing that if you take comparable decisions and apply risk calculations directly to the stages, as opposed to at the end, the decision choice may look different."

Other early findings:

Companies lack a way to prioritize the flood of information involved in the decision.
Easy-to-quantify variables like wages tend to dominate lean considerations such as the value of proximity.
Companies tend to routinely opt for large-scale plants even though a smaller plant closer to customers may ultimately be more profitable.

Participating suppliers, as IMVP sponsors, will benefit from access to the resulting decision model as well as receiving direct feedback on their own decision process. A workshop gathering participants from several companies will consolidate the findings and introduce a preliminary decision model. The model and working papers will be available to sponsors on the IMVP website.

To learn more about participating in the L3 project, contact IMVP Executive Director John Moavenzadeh, (tel: 215.898.3464; email: moavenza@wharton.upenn.edu)

MIT | SOE | ESD | CTPID

IMVP is a global research program based at the
Center for Technology, Policy, and Industrial Development
MIT E40-207, 1 Amherst Street, Cambridge, MA 02139-4307
phone:617.253.8973, fax: 617.253.7140, email:ctpidcom@mit.edu

MIT \| SOE \| ESD \| CTPID
IMVP is a global research program based at the Center for Technology, Policy, and Industrial Development MIT E40-207, 1 Amherst Street, Cambridge, MA 02139-4307 phone:617.253.8973, fax: 617.253.7140, email:ctpidcom@mit.edu