A Typology - Plants in Global Manufacturing Networks

In today’s complex global manufacturing environment, managers face tough questions. What’s the best way to implement integrative strategies for plant networks? How is know-how created and transferred? Drawing on in-depth case studies, Professors Ann Vereecke, Roland Van Dierdonck, and Arnoud De Meyer create a typology of plants in global manufacturing networks, offering both technical analysis and practical advice.

by Arnoud De Meyer, Ann Vereecke,Roland Van Dierdonck
Last Updated: 23 Jul 2013

As firms go global and business environments grow ever more complex, managing an integrated international network has become an increasingly important task. However, point out Ann Vereecke (Assistant Professor, Vlerick Leuven Gent Management School, Belgium), Roland Van Dierdonck (Professor, Vlerick Leuven Gent Management School, Belgium), and Arnoud De Meyer (Akzo Nobel Fellow in Strategic Management and Professor of Technology Management, INSEAD), the field is still at a relatively early stage of development.

In this recent working paper, they consider the management of international networks of facilities, suppliers, and markets. They focus on the implementation of integrative strategies for manufacturing plant networks and also how know-how is created and transferred within networks. What, they ask, is the role of the plants themselves within this process?

The authors studied eight manufacturing companies headquartered in western Europe and operating in a variety of industries: food, textile goods, plastic and leather products, primary metal, fabricated metal and electrical goods. Each company had between four and ten plants.

The companies international operations were diverse, thus better allowing the authors to explore the link between a firm’s international environment and its plant configuration. The cases, therefore, are distributed over global, transnational and multi-national environments.

The authors examined the manufacturing networks in terms of information and people, giving special consideration to the flows of innovation, the use of coordinators, and the communication between the plants and the manufacturing managers based at companies’ headquarters.

They measured the transfer of product, process or managerial innovation through interviews with headquarter managers and questionnaires sent to plant managers. And with other questionnaires, they measured the presence of plant coordinators and communication issues.

They consider the age, size, and product and market focus of the plants, as well as supplier/user relationships within plant networks. They also take into account investment levels, plant autonomy, plant capabilities, and the performance of a plant relative to a set target. Four different clusters of plant characteristics emerged, allowing the authors to develop a typology of plants and their strategic roles in global manufacturing networks:

  • Cluster A plants are relatively young and market focused, with little inflow and outflow of components and semi-finished goods. They have a relatively low level of strategic autonomy in plant design but a high level of managerial investment.

  • Cluster B plants are relatively young, with relatively a low level of managerial investment and capabilities.

  • Cluster C plants are relatively old and serve a broad market. They have a relatively high inflow of components and semi-finished goods and a relatively low level of managerial investment.

  • Cluster D plants have a high outflow and inflow of components and semi-finished goods with relatively high levels of strategic autonomy in plant design, process investment, and investment in planning systems.
In terms of innovation, they find that exchanging know-how is beneficial for both parties—plants contributing to the network also receive from it—and that once such a relationship has been established, it works in both directions. They also note that there is a strong link between the position of a plant in the intangible network of ideas and in the tangible network of goods.

There was also no significant difference in performance observed between the different plant types, indicating that there is not a unique optimal network position for a plant. The authors suggest that managers of international networks of plants should aim to achieve a portfolio of plant types and try to balance long-term know-how development with medium-term flexibility.

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