The dynamic management of manufacturing networks

The structure and organization of international manufacturing has changed over the past twenty years. It seems as if manufacturing is moving towards emerging countries e.g. China or India, often to take advantage of lower labour costs. Whilst production cost is an important consideration in choosing a location for the factory, we argue that one should not become victim of a herd effect and that other parameters, such as quality, flexibility, transportation and energy costs need to be taken into consideration in the determination of the optimal manufacturing network. Relocating a factory is changing the strategic architecture of the company’s manufacturing network and requires a long term view and a good model to design the architecture of the manufacturing network. Based on a longitudinal empirical study of eight European multinational companies we have gained an understanding of the dynamics of a company’s manufacturing architecture. We observed that market entry drives the creation of new factories more than mere production cost, and that skills and knowledge can be a ticket for a safe future of the factory. Over ten years, we observed an increase in the knowledge sharing role of factories. And we also learnt that it is important to keep a significant variety of factories in order to provide flexibility in reshaping the strategic architecture of your manufacturing.