Strategic capacity planning in automotive production networks under duties and duty drawbacks

Benders decomposition for a strategic network design problem under NAFTA local content requirements

“…In context of global automotive production network design, two recent publications by Mariel and Minner [12] and Haentsch and Huchzermeier [13] study the impact of duty drawbacks. Similarly as LC-requirements, also duty drawbacks may have a signicant impact on the global production footprint.…”

“…In this case, duties are refunded, if the imported materials are used for export manufacturing. Mariel and Minner [12] present a model that simultaneously considers strategic capacity adjustments and duties and duty drawbacks for multi-stage, multi-product production processes. Similarly, Haentsch and Huchzermeier [13] present a case study where the impact of possible future duty rate changes or FTA, like between the European Union and the United States, is investigated.…”

Correct accounting for duty drawbacks with outward and inward processing in global production networks

“…In their paper, Mariel and Minner [22] present a model for calculating duties and duty drawbacks for unlimited stages, sourcing options, products, and markets; this model also exploits product flexibility at each stage. The authors demonstrate their model using a solution method that they developed for a select case study.…”

“…It can fairly be said that -with the exception of Mariel and Minner [22] -models in the literature either do not properly account for duty drawbacks with inward and outward processing, calculate (import) duties on only an aggregated basis, or control material flow tightly with just a few stages in a convergent supply chain. It should also be noted that (static) tariff values, and not the actual value added, are the basis for any correct calculation and crediting of drawbacks.…”

“…Multiplication by the binary decision-making variable f actOpen f 1 t also ensures that, for a nonopen factory, the capacity limit is zero. Condition (22) ensures that a product cannot be manufactured unless the required resource (RESREQ r1 p1 ) is in place -that is, unless resAvail…”