Essays on International Engineering Management - KHS GmbH Relocation of the Production Plant Case Study

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The paper "International Engineering Management - KHS GmbH Relocation of the Production Plant" is a good example of a case study on management. KHS GmbH is a company located in Dortmund Germany where its history dated back in 1868. Spending over 145 years in the market, manufacturing filling, and packaging system to the beverage companies, food, and non-food industries have their dual market mainly in Germany. It local market in recent days has been experiencing a drop in their profit due to production cost. The shareholders thereby have discovered that production cost could be lowered if the company would relocate its manufacturing country where factors such as cheap labor, customs would reduce the production cost of their product. The suggestion thereby has seen a place of interest to be Indonesia where relocation of the processing plant has, in turn, attracted more other cost elements evaluations that are yet to be valued whether will contribute to increasing the production cost to the designated threshold.

Therefore, for the company to relocate its processing plant the distance cost has been the current determined to gauge whether it will raise the production cost above the stranded threshold or not.

Through examining the resultant factors of production in Indonesia such as transport cost and labor ought to be analyzed and related to the production cost in the near market which is Germany. This essay will, therefore, assess whether the relocation of the KHS GmbH production plant to Indonesia would reduce the production cost or the transport cost would undercut the cheap labor advantage in reducing the production cost. In a given country county, the countries government policies are directly determined by the country’ s economy were also, in turn, dictates the labor minimum wage.

While holding other factors at constant, this means that if a company A wants to establish a production plant in two given countries with the different economy, it would be cheaper just looking at the big picture of both countries economy and therefore if two countries differ in their economy whereby country A has a high economy-level than country B, it would be there cheaper to establish a processing plant ion country B than in-country A.

since the economy of a given country will be determined by the measuring factors such GDP growth, unemployment rate, DINI among other economic growth measuring elements, Germany is ranked fourth in the world with a GDP of USD 3.36 trillion while Indonesia has USD 862 billion which is ranked 16th in the world Patunru et al. , 2009). Basing assumptions on the hypothetical model developed to determine the production cost in the countries A and B, and the brief indicators of the economic growth dictated by the GDP values of Germany and Indonesia in the year 2015, the KHS GmbH shareholders perception of reduction of cost production result would yield a positive result.

However, in this hypothetical model, would be applicable only in substantial numbers of assumption while some of the vital prediction value would be held at constant. Thereby, in order to prove the presented suggestion by the stakeholders is true, some of the factors have to be considered. Reducing the levels of generalization and assumption will enable the analysis to know exactly the value that is likely to be reduced while relocating the production plant from Germany to Indonesia bearing in mind the fact that the targeted market is in Germany.

References

Coordinating Ministry for Economic Affairs (2011), ‘Masterplan for Acceleration and Expansion of Indonesia Economic Development 2011–2025’, May.

Patunru, A.A., McCulloch, N. and Von Luebke, C., 2009. A Tale of Two Cities: The Political Economy of Local Investment Climate in Solo and Manado, Indonesia1. IDS Working Papers, 2009(338), pp.01-43.

Aswicahyono, H., Hill, H. and Narjoko, D., 2010. Industrialisation after a deep economic crisis: Indonesia. The Journal of Development Studies, 46(6), pp.1084-1108. The World Bank Policy Note no. 3, http://siteresources.worldbank.org/EASTASIAPACIFICEXT/Resources/226300-

1349835451376/Full-PN3-Manufacturing.pdf.

Mietzner, M., 2015. Indonesia in 2014: Jokowi and the Repolarization of Post-Soeharto Politics. Southeast Asian Affairs, 2015(1), pp.117-138.

Goh, E., Fealy, G. and Supriyanto, R.A., 2015. A Strategy Towards Indonesia.

Goeltom MS (2007), ‘Economic and Fiscal Reforms: The Experience of Indonesia, 1980–1996’, Essays in Macroeconomic Policy: The Indonesian Experience, PT Gramedia Pustaka, Jakarta, pp 489–506.

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