Knowledge Based System for Manufacturing's investment by Using Multi-criteria Analysis

PhD student: 
External supervisors: 

N. Chapitak (Chiang Mai University - Thailande)

Starting date: 
September 2008
Defense date: 
Tuesday 04 January 2011
Host institution: 
Other institution: 
Chiang Mai University - Thailande

Investment by foreign manufacturers in developing countries has resulted in rapid and increasing economic growth within host countries. Contributions include the creation of new jobs, increased use of multinational distribution networks, and support of research and development for national projects. These contributions have led to higher productivity through increased capital, which has in turn led to higher living standards. Consequently, several developing countries have recognized the benefits gained from foreign investment and attracted funds into manufacturing businesses. However, these foreign investors face many critical challenges linked to economic turbulence, for example, increasing labor costs, an ineffective supply chain and infrastructure. These economic crises created problems that cause cost increases and profit reduction in Foreign Direct Investments (FDIs). As a result, new and existing foreign investors are reluctant to invest or expand their businesses. Several approaches to investment decisions are taken by foreign investors. Relocation to cheaper laboring countries or ceasing operations are possible strategies for them to consider. However, these decisions will impact not only the internal dynamics of an organization, but also the local and global economy. The crises can affect people’s income, intensify economic problems, and ultimately lead to social issues in an area. To improve industrial trade and attract new FDI, this research aims to help manufacturers understand the existing crises affecting their business and make the right investment decision by providing them with a tool to validate their future investment. Providing useful information on FDI also contributes to attracting new investors. Accordingly, this research will focus on the following research questions: What are the potential factors affecting decision making while FDIs are facing crises and what system can support their decision in the overall FDI context? How can this study assist manufacturers in making the right decision during their manufacturing crises? In order to make a decision on relocation, transfer or divestment of plants, are there any specific factors that should be considered? How can relevant organizations and the government participate in preventing the crises generated by offshore or plant divestment? To address these research problems, this thesis proposes an integrated framework, which is based on three main aspects: the supply chain and infrastructure; workers skill and performance; as well as the financial situation associated with relevant stakeholders. The relevant stakeholders are identified as foreign investors, local industrial estate stakeholders, and manufacturers. The strategies analyzed in the research framework can be categorized into static and dynamic analyses. In terms of static analysis, the Risk Knowledge Matrix decision is represented as a knowledge-based system used to evaluate the occurrence of existing risks in businesses. This analysis also helps investors or manufacturers to evaluate risks relating to their existing businesses. With regards to dynamic analysis, the modeling of the supply chain simulation is constructed according to the Supply Chain Operations Reference (SCOR) model. Supply chain modeling and analysis on the future cost of investment is presented in this context. The research also applies metrics and attributes based on Supply Chain Operations Reference (SCOR) to the measurement of supply chain performance. Finally, a knowledge management system as a supporting tool for manufacturers’ decisions is presented and developed. The system is constructed by integrating both static and dynamic analyses to make a decision regarding the entrepreneurial status of plant. Supporting FDI information is also provided to the decision maker and includes, for example, a comparison of transportation costs, the cost of public utilities and infrastructure, or the cost of labor and inflation rate among three developing countries; Vietnam, China and Thailand. The implementation of a Knowledge Based Decision Support System (KBDSS) is applied to a real case study in an electronics manufacturing plant located in Lumphun, north Thailand. The case study validates the proposed FDI decision and proposes a set of strategies which should be considered by future FDIs.