Supply chain competitiveness: measuring the impact of location factors, uncertainty and manufacturing practices Rohit Bhatnagar a , Amrik S. Sohal b, * a Division of IT/OM, Nanyang Business School, Nanyang Technological University, Singapore 639798 b Faculty of Business and Economics, Department of Management, Monash University, PO Box 197, Caulfield East, Vic. 3145, Australia Abstract Supply chain performance is impacted by several factors beginning with the plant location decision. Existing literature has tended to predominantly emphasize quantitative factors such as transport costs, exchange rates, labour rates and taxes. While there are existing models that capture qualitative variables, there is limited research linking these variables with measures of the firm’s operational competitiveness. In this paper, we propose a framework that includes qualitative factors concerning plant location decisions, supply chain uncertainty, and manufacturing practices. We argue that a joint consideration of such factors helps explain supply chain competitiveness. Data from a large sample study is used to test the model. Our results largely support the assertion that there is a significant relationship between qualitative plant location factors such as labour, infrastructure, business environment, political stability, proximity to markets, proximity to suppliers, key competitors’ location, supply chain uncertainty and broad manufacturing practices and the operational competitiveness of supply chains as measured by quality, flexibility, inventory turnover and responsiveness. q 2003 Elsevier Ltd. All rights reserved. Keywords: Supply chain management; Plant location; Globalization; Global operations management; Supply chain uncertainty 1. Introduction One of the most important and far reaching decisions faced by operations managers is deciding where to locate new manufacturing facilities. This is a strategic decision involving irreversible allocation of the firm’s capital, and often has a crucial impact on key measures of the firm’s supply chain performance such as lead time, inventory, responsiveness to demand variability, flexibility, and quality. With the emergence of efficient supply chain management as an important frontier of competition, the facility location decision becomes even more significant. An imperative for an effective location decision is for managers to assess each potential location in terms of its impact on key operational performance measures like lead time, inventory, responsiveness etc., and not be swayed by cost savings alone. For instance, a firm that wants to implement total quality management programs in a new location must evaluate the competence of the local workforce and its impact on the quality of its products and services. Similarly, a firm setting up a manufacturing plant in a third world country to take advantage of lower labour costs, must assess if the poor infrastructure or the non- availability of skilled personnel may erode its capability to compete on time. Past research (MacCormack et al., 1994) suggests that the location decision framework used by managers predominantly emphasizes quantitative analyses that trade-off transport costs, scale economies, and other cost based variables. Such a focus, while yielding short term cost benefits maybe poor in terms of other measures of competitiveness like lead time, inventory, and responsive- ness. In this paper, we address the question of how effective past location decisions are enhancing the competitiveness of global supply chains. This question is of consequence to both practitioners and academics. The rest of this paper is organized as follows. In the next section, we review segments of literature focusing on the role of qualitative factors in plant location. The next two sections discuss the research framework and the methodo- logy. Analysis and findings are then presented and finally discussion of the results and conclusions are presented. 0166-4972/$ - see front matter q 2003 Elsevier Ltd. All rights reserved. doi:10.1016/j.technovation.2003.09.012 Technovation 25 (2005) 443–456 www.elsevier.com/locate/technovation * Corresponding author. Tel.: þ 61-3-9903-2033; fax: þ61-3-9903-2979. E-mail addresses: amrik.sohal@buseco.monash.edu.au (A.S. Sohal), arbhatnagar@ntu.edu.sg (R. Bhatnagar).