Manufacturing in Europe Vs. North America : A case study of a global manufacturer

Abstract: Abstract  Purpose – The purpose of this study is to investigate if it is more efficient and effective to manufacture in North America or supply from Europe. This will be calculated with the help of a tool created by the two authors. The tool created in this study will be the basis for future strategy and manufacturing decisions in Sweden or locally in the U.S. The study will thereby answer the following research questions to fulfill its purpose:  RQ1: What costs influence the transportation between Sweden and the U.S?  RQ2: What risks influence the transportation between Sweden and the U.S?  RQ3: What is an efficient and effective strategy to implement for a supplier in order to improve costs and decrease risks?  Method – A case study was carried out by the authors at a global manufacturer plant located in Fountain Inn, South Carolina, USA. The results have been found using methods including documentation studies and semi-structured interviews collecting both qualitative and quantitative data. An analysis of the empirical data combined with the literature theories was conducted thereafter.  Findings – It was found that the freight cost and the packaging cost were the most influential costs when calculating the total cost for the whole transportation between Sweden and the U.S. Moreover, was the risk of interruption of the transport during the freight overseas seen as the most influential risk that could influence the cost of the transportation. The developed tool and the simulated scenarios indicated that it would be more efficient to manufacture in North America than transport the goods from Europe. The developed tool can be used for future strategy and manufacturing decisions in Sweden or locally in the U.S.  Implications – Depending on which scenario due to the user's input, the study’s implications can differ. However, when comparing the two alternatives, the most common outcome was consistent being to manufacture in the U.S. This would, in most scenarios, be seen as cheaper than manufacturing the articles in Sweden and then shipping all these to the U.S by freight.   Limitations – Considering the purpose of this study is to investigate if it is more efficient and effective to transport the goods from Europe or manufacture in North America. Therefore, this thesis will not consider costs related to the assembly line and manufacturing. Neither will costs associated with the environment, such as carbon dioxide emission and air pollution. This also applies to the quality cost incurred because of scarcity and other factors related to quality control. These areas are not believed to affect the tool and its calculation, as the requirements for quality and the environment are high at the case company. The focus of this study will be on sea freight by cargo ship and road by truck.  Keywords – Supply chain, Logistics, ABC-calculations, Transportation calculations, risks