Global offshoring has increased the need for transport of half-finished goods and components, along with finished goods. The auto-parts industry in Korea has also entered the global market as Korean car manufacturers have started to build overseas factories. Maintaining cost competitiveness by minimising total logistics costs will thus be a critical strategy for the industry. This research compares the total annual costs of four feasible transport routes from Korea to the US using the inventory theoretic model, which encompasses direct transport costs, in-transit carrying costs, and warehouse inventory costs. We apply this model to real transport data collected from a Korean auto-parts company. A static analysis shows that inventory costs can play a decisive role in altering the cost competitiveness of different routes. In addition, sensitivity and scenario analyses with changes in variables and the market situations reveal that the cost structure of each route plays an important role in determining their relative cost competitiveness in varying market conditions.
Bibliographical noteThis is an Accepted Manuscript of an article published by Taylor & Francis in Maritime Policy and Management on 26th June 2017, available online: http://www.tandfonline.com/10.1080/03088839.2017.1344783
- Auto-parts industry
- transport route choice
- inventory-theoretic model
- scenario analysis