Location decisions are a basic determinant of profitability in international logistics. Decisions on where to manufacture, to assemble, to store, to transship and to consolidate can make the difference between profit and loss. Because of international differences in basic factor costs and because of exchange rate movements, location decisions are very important. Also, these decisions involve substantial involvement in fixed assets in the form of facilities and equipment. Location decisions, therefore, can have a continuing impact over time on the company’s financial and competitive position. As movement towards global manufacturing increases, organizations should consider location decisions through total cost analysis which includes activity related costs such as manufacturing, transportation and handling as well as inventory holding costs, tariffs, and taxes.
Source: Christopher, M. (1998). Logistics and Supply Chain Management: Strategies for reducing cost and improving service, (2nd Ed.). New York: Prentice Hall.