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Sourcing Implications of the North American Free Trade Agreement
Author(s) -
Nichols Ernest L.,
Taylor John C.
Publication year - 1995
Publication title -
international journal of purchasing and materials management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.75
H-Index - 92
eISSN - 1745-493X
pISSN - 1055-6001
DOI - 10.1111/j.1745-493x.1995.tb00200.x
Subject(s) - free trade agreement , business , industrial organization , economic integration , total cost , international trade , economics , free trade , microeconomics
This research examines the effects of the North American Free Trade Agreement (NAFTA) from the perspective of a hypothetical firm operating in the household appliance industry. The location of the lowest cost source of components and the effects on the total systems cost to manufacture and distribute finished products are examined under different levels of economic integration. The research utilizes a network simulation to model optimum supplier sources, purchased item flows, and associated costs to meet total North American demand. The study's results, while highly dependent on the data utilized, indicate that the NAFTA could result in significant changes in supply location and total systems cost for firms with integrated North American operations.