Delayering the global production network into congruent subnetworks

• Author: Kasra Ferdows,Ann Vereecke,Arnoud De Meyer
• DOI: http://doi.org/10.1016/j.jom.2015.11.006
• Date: 01 January 2016
• Published date: 01 January 2016

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Delayering the global production network into congruent

subnetworks

Kasra Ferdows

a

,

*

, Ann Vereecke

b

, Arnoud De Meyer

c

a

Heisley Family Professor of Global Manufacturing, McDonough School of Business, Georgetown University, Washington, DC 20057, USA

b

Vlerick Business School and Ghent University, Reep 1, 9000 Gent, Belgium

c

Singapore Management University, 81 Victoria Street, 188065, Singapore

article info

Article history:

Accepted 13 November 2015

Available online 18 December 2015

Accepted by Mikko Ketokivi

Keywords:

Global production networks

Congruent production networks

Manufacturing footprint

Rooted and footloose plant networks

abstract

The literature in operations management has not kept up with the growing complexity of and oppor-

tunities offered by global production networks. Managers need new tools to cope with this complexity.

We propose one that is based on a model that delayers the global plant network into a set of sub-

networks on the basis of complexity and proprietary information in the products they produce and

production processes they use to produce them. This allows examining whether each subnetwork is

congruentdi.e., has an appropriate manufacturing mission and the competencies that it would need to

carry it out. We apply this tool to analyze the global production networks of five companies and illustrate

its usefulness in performing periodic audit of the global production network and identifying potential

strategic anomalies that deserve attention.

©2015 Elsevier B.V. All rights reserved.

1. Introduction

The literature in operations management, on the whole, has not

kept up with the increasing complexity of global production net-

works. After years of intense offshoring, outsourcing, global pro-

curement, and expansion into new international markets, the

global production network of a typical multinational

manufacturing company today consists of plants dispersed around

the globe, each under increasing pressure to coordinate its opera-

tions with each other and with the rest of its supply chain, which

itself is becoming increasingly more global and fragmented.

Meanwhile, the multitude of factors outside the control of the

company or the plant, ranging from changes in foreign exchange

rates and new trade agreements to emergence of new competitors

and new technologies, continue to require adjusting the structure

of these networks constantly. In addition, changes due to the firm's

own decisionsesuch as introduction of new products, entry into

new markets, mergers and acquisitions, or a shift in strategyecan

rapidly turn a well-configured network into a poor one.

An important implication of this increasing complexity is the

need for expanding the focus of research in this field from

examining the role of individual plants in the network (Hayes and

Schmenner,1978; Collins et al., 1989; Ferdows, 1989, 1997a,b; Chew

et al., 1990) to assessing missions and capabilities of networks of

plants (Shi and Gregory, 1998; Jagdev and Browne, 1998; Karlsson

and Skold, 2007; Ferdows, 2008; De Meyer and Vereecke, 2009;

Friedli et al., 2014; Johansen et al., 2014). However, while many

scholars have recognized the growing complexity and importance

of these networks, the scholarly literature still does not offer many

tools for how to manage them. Filling this gap deserves attention.

Among the most useful tools, we believe, are those that reduce

the complexity of the network by delayering it into simpler and

more manageable subnetworks. We see a parallel between the

challenges that single plants were facing forty years ago and what

global networks of plants face today. In his seminal article, “The

Focused Factory”,Skinner (1974) observed that many plants were

trying to respond to too many manufacturing missions simulta-

neously, which made their design and management complicated

and resulted in poor compromises in achieving most of their mis-

sions. Today many global production networks are in a similar sit-

uation. They must respond to a wide range of strategic mandates,

which makes their design and management complicated, and this

complexity is exacerbated by the fact that many external factors

can impact their performance significantly or make them evolve in

unintended directions.

Skinner suggested that the key to simplifying the design and

*Corresponding author.

E-mail addresses: ferdowsk@georgetown.edu (K. Ferdows), ann.vereecke@

vlerick.com (A. Vereecke), arnouddemeyer@smu.edu.sg (A. De Meyer).

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

http://dx.doi.org/10.1016/j.jom.2015.11.006

0272-6963/©2015 Elsevier B.V. All rights reserved.

Journal of Operations Management 41 (2016) 63e74