Managing international manufacturing at plant and plant network levels – insights from five case studies

Abstract

In this study, we develop understanding of management of international manufacturing by a combined analysis of manufacturing firms’ plant networks and roles of individual plants within them. We elaborate the framework of Ferdows (1989 Ferdows, K. 1989. “Mapping International Factory Networks.” In Managing international manufacturing, edited by K. Ferdows, 3–21. Amsterdam, The Netherlands: Elsevier Publishers. [Google Scholar]) at plant and network levels by analyzing data collected from five plant networks of global manufacturing companies and propose an enhanced framework consisting of four main role types with eleven plant roles, which have implications on the network level. The findings give interesting and novel insights into management of international manufacturing; we conclude that plant roles are more complex than conventionally considered and understanding of international manufacturing requires elaborated analysis at both plant and network levels.     

Technical innovation and international competitiveness in the television industry

The television industry has undergone significant changes in competitive structure internationally. In the past the industry was characterised by rapid growth as first black and white and then colour television diffused throughout developed countries. More recently, recessions and market saturation have constrained growth and competition has grown more intense. Competition has intensified further with the introduction of new television-based products, such as video recorders, dises and home information systems. All the major Japanese consumer electronics firms have invested in the US and Europe in both component manufacture and set assembly. This has threatened the established US and European manufacturers. Innovation has played a major role in international competitiveness. Innovation in products and manufacturing processes has changed the nature of competition in the industry. Japanese firms have been the most successful innovators. By applying advanced automation in assembly, testing and handling to large production volumes, the Japanese have achieved dramatically superior performance in terms both of productivity and of quality. European and US firms have only responded to the challenge belatedly.     

The management of international manufacturing networks: a missing link towards total management of global networks

Abstract

The purposes of this article are to provide a brief overview of the research on international manufacturing networks (IMNs), identify corresponding gaps and provide background for the papers published in this special issue. First, this article shows the importance of addressing the management of IMNs, especially in times of global turbulence as a result of new economic, political and technological trends. Second, it highlights research into the management of IMNs as a missing link in the Operations Management (OM) discipline, as most of the current OM research neglects the fact that the internal structures and relationships of multi-plant organizations inside firms play a critical role in how a supply chain/network operates and relies mostly on scholars in other fields for insights into high-level and strategic issues in the management of global operations. Finally, this article argues there is still a lot to do in order to develop new theories towards the total management of global networks that can holistically analyze different global (intra- and inter-firm multi-functional) networks and address the complex interdependencies between them.     

Lead factory operationalisation and challenges

Abstract

This paper deepens the understanding of the lead factory concept by examining how the lead factory role is operationalised and what challenges are associated with it. The research is based on an explorative case study of eight Swedish lead factories in the manufacturing industry. The empirical findings suggest that the understanding of the lead factory concept should be extended as it is not restricted to one type of set-up. The findings show a spectrum ranging from an entire manufacturing plant, parts of a plant, to a virtual plant considered to be the lead factory. The research also shows a broad range of challenges experienced by lead factories. Several of these are related to and originate from unclear role, responsibility and mandate of the lead factory. The lack of dedicated resources for lead factory activities, specifically long-term development and difficulties in measuring the benefits of the role, were other challenges faced.     

Clustering of small agro-processing firms in Indonesia

Small-scale industries in Indonesia provide more than 65% of total manufacturing employment. Sixty-three percent of small-scale firm employment is in firms that are clustered. A cluster is defined statistically in Indonesia as at least 20 firms in a village. For some agro-processing industries, such as bamboo plaiting, clustering does not involve interaction among firms; for others, notably the furniture industry, clustering firms make joint marketing efforts, subcontract each other, and share large orders. This article uses two recent case studies in the agro-processing sector—the furniture and the palm sugar industries—in Central Java. We argue that the target market of the industry (local or international) influences the nature of the contracts and other forms of interaction in the clusters. Targeting an international market requires formal contracts, more focus on marketing, and separate roles for finishing firms and subcontracting firms. Policy should be directed at enabling clusters to shift to the international market by improving contract enforcement regulations, vocational training, and providing opportunities for group lending.     

产业链下游企业转型升级影响因素研究——基于不同最终产品市场的视角

在国际竞争加剧和国内工业经济放缓的背景下,中国制造业企业生存压力日益加剧,制造业企业如何转变发展方式、实现转型升级,值得深入研究。本文通过构建寡头博弈模型,发现处于产业链下游的一国企业,在面对国外垂直一体化的企业的竞争时,实现转型升级所需掌握的核心技术水平受到最终产品市场类型、最终产品相对质量以及最终产品差异化程度等多种因素的影响。此外,最终产品市场类型还会影响最优研发政策的稳健性：最终产品市场位于国外时,政府不应对企业研发行为进行干预;而当最终产品市场位于国内时,实施研发补贴政策不仅会促进社会福祉,而且可以促进企业转型升级。     

Startups internationalizing in quest of a business model: The global prospecting of process niche firms

This paper examines technology startups whose initial offering is not a tangible product or service, but rather a technology used in the production process of goods and services of other firms. These “process niche firms,” as we call them, represent an emerging and increasingly common feature of the digitized economy. As part of their search for a suitable business model – be it products, services, and/or outright licensing of intellectual property – process niche firms engage in early internationalization in order to gain relevant market knowledge and identify possible business partners. A framework is derived to examine the internationalization pattern of such firms. The paper draws on four illustrative case studies providing insight into how such process niche firms “prospect” in foreign markets prior to deciding on the business model that suits them best. Early in their life cycle, process niche firms may decide to locate their headquarters in a different country in closer proximity to relevant markets and partners, as their high knowledge intensity and dearth of tangible assets makes them highly movable. Later in their development, process niche firms will likely evolve into other types of firms, depending on the business model they ultimately choose and the process that they follow.     

Engineering network operations for international manufacturing: strategic orientations,influencing factors and improvement paths

Abstract

Engineering operations contribute to international manufacturing networks (IMN) capabilities and thus improving their performance in an international context. The literature has recognized engineering networks (EN) with different strategic orientations (e.g. efficiency, innovation and flexibility); explored IMN capabilities in four key areas (i.e. accessibility, thriftiness ability, manufacturing mobility and learning ability); but provided diverse views on their possible connections. Especially, the received wisdom offers less guidance on how EN may enhance IMN capabilities. At the same time, the challenges of making effective decisions at the EN-IMN interface are compounded by a large number of influencing factors that are interrelated in a very complex manner. To cope with these challenges, the article reveals four ways that EN may contribute to IMN capabilities, identifies 15?key influencing factors and suggests optimal paths to enhance IMN capabilities based on the interpretive structure model (ISM) method.     

Organizational Networking in UK Biotechnology Clusters

Differences in growth patterns between regional clusters are often attributed to the extent to which they benefit from agglomeration, defined as the advantages that derive from being proximately located with other companies and institutions in the same industry. Foremost among these supply‐side externalities are the knowledge ‘spillover’ effects that can result from firms interacting extensively in both horizontal (complementary equivalent firms) and vertical (value chain) directions. The paper presents evidence from two surveys, one national and one regionally based, of networking patterns in UK biotechnology, focusing on how firms engage with other small firms, with large pharmaceuticals, and with research centres, and how far these interactions are regional, national or international in character. It suggests that where companies do collaborate, there is a tendency for the intensity of activity to increase as the location of the partner moves from the local to the international space. We evaluate the obvious interpretation that local linkages may be satisfactory for idea generation and early product development, but that national and international connections are more important for manufacturing, marketing and distribution activities. However, we conclude that a broader set of largely industry factors account for the networking patterns – namely, the science‐technology base, research funding, firms' business models, and competitor strategies in evolving markets – and that these matter more to clustered UK biotechnology firms than the cluster itself. These findings suggest a rethinking of cluster policy and the theoretical basis for clusters.     

The effects of international diversification on the link between product diversification and performance in a boom and bust cycle: Evidence from Spanish firms (1994–2014)

This study examines the individual effects of product diversification on performance and the moderating effects of international diversification on the product diversification–performance link in the context of a boom and bust cycle. Most prior research on firm strategies largely neglect the business cycle. We use data on a large sample of Spanish manufacturing firms from 1994 to 2014. In this period, the Spanish economy experienced a boom period (1994–2008) and a bust period involving a severe economic crisis (2009–2014). Our study highlights the important role of each stage of the economic cycle. Specifically, with respect to product diversification, our findings show that in a boom, moderate diversifiers obtain better profitability levels than their highly diverse or limited diversification counterparts do. In contrast, during an economic downturn, moderate and high diversifiers can be equally effective up to some point of optimization. Our findings also reveal a negative and significant effect of internationalization on profitability, independent of the stage of the economic cycle. Product and international diversification are complementary strategies during a period of economic growth when firms opt for moderate levels of product diversification. Meanwhile, when firms choose high levels of product diversification, both types of strategies are complementary during the boom cycle, but substitutive during the bust cycle.     

How market entry order mediates the influence of firm resources on new product performance

Building from the resource-based view of the firm and the first-mover advantage literature, this paper asserts that the entry order in a new product-market affects how the firm's resources and capabilities influence the product's performance. This proposition is tested on a sample of 136 product launches by Spanish manufacturing firms. The empirical analysis reveals that firms with superior managerial and R&D resources achieve superior new product performance when an early-entry strategy is adopted. Manufacturing resources also contribute positively to the success of new products, but this effect is weakened by the difficulties and inconveniences that firms with advantages in operations face when they attempt to pioneer a new market. The results regarding the influence of marketing resources on new product performance are not conclusive.     

International new ventures and governance structures—are international entrepreneurs strategic or entrepreneurial?

Born Global firms have attracted significant research interest over the past decade and one of the recurring research questions is how Born Global firms are able to overcome resource limitations to establish effective international sales and marketing channels so rapidly. Several qualitative studies have been performed in order to investigate this question and most conclude that Born Global firms do it by using entrepreneurial hybrid structures to govern their international activities. This study offers a quantitative analysis on whether there are significant differences between the international activities of small international firms and seeks to determine whether Born Global firms are more ‘entrepreneurial’ in terms of governance of their international activities and resources than other small international firms. The study adopts Aspelund and Moen’s (2005) classification of small international firms according to their time to internationalization and share of foreign sales and investigates differences in characteristics and governance of international activities. As expected, the study found differences in a broad range of characteristics between the firms that had adopted the different internationalization strategies. More surprisingly, the study fails to identify any differences between the firms on international governance structures for international operations. This a very intriguing result as it opposes a lot of qualitative work over the past decade and it also implies that Born Global firms are strategic in deciding their governance structures for international marketing activities regardless of their resource situation. Implications of the findings are discussed and alternative venues for further research are proposed.     

Measuring management quality in the factory

The last decade has seen a growing consensus that manufacturing matters. The factory as the producing unit is the core of the firm's manufacturing activities. However, even now, it is not agreed on or even fully understood what constitutes a well-managed factory. This article attempts to create a causal model of management quality in the plant, identifying key managerial levers for improving plant performance. The model is based on an integrated view of three core processes: supply chain, product and process development, and strategy deployment. We postulate that the joint performance of the three processes is determined by the quality with which they are managed. Management quality is operationalized as consisting of six types of action: delegation (or decentralization), integration (or coordination), measurement, employee participation, communication, and employee development.This management quality model has been applied to the design of the Top Usine 1995 Best Factory Award administered in cooperation with the French weekly L'Usine Nouvelle. Data collected from participating plants do substantiate our view that plant performance is substantially driven by management quality: the six management quality dimensions are shown to be statistically linked to performance improvement rates in the plant, and we provide further evidence of this link by detailing the case example of the award winner. Our survey also shows that supply management appears to be a common problem area for the factories participating in the Top Usine award, including the best ones.     

反应型和先动型市场导向对产品创新和经营绩效的影响研究

探讨了反应型和先动型市场导向是否影响以及如何影响利用式创新和探索式创新,进而影响企业的经营绩效。对227家制造型企业的问卷调查研究结果显示:①反应型和先动型市场导向及利用式和探索式创新量表在我国制造业环境下具有良好的信度和效度;②2种类型市场导向对2种程度的创新均具有正向影响,其中,先动型市场导向对组织创新和企业绩效的促进作用更为明显;③2种类型的创新都有助于改善企业绩效;④创新均衡对企业绩效的改善也有显著作用。此外,研究为我国制造企业在何种程度上采纳市场导向战略管理工具来改善组织创新和经营绩效,提供了管理上的启示。     

Additive Manufacturing and Production Internationalization: An Internalization Perspective

Additive manufacturing (AM) has been touted as a transformative technology that alters the way production is organized across geographical and organizational boundaries, yet little is known what this means for firms' internationalization of production. In this paper, we take an internalization theory perspective to hypothesize how the adoption of AM technology influences a firm's propensity to have an international production subsidiary, the number of foreign production subsidiaries that it operates, and the number of countries in which it has foreign production subsidiaries. To test our hypotheses, we rely on European Patent Office data to identify firms with AM-related patents and match this information to firm-level data of international production subsidiary networks from Bureau Van Dijk. Using both propensity score matching and zero-inflated negative binomial regressions, we find that AM firms are more likely to have a foreign production subsidiary than non-AM firms and operate them in more countries. We find partial evidence that AM firms have more foreign production subsidiaries than non-AM firms, in particular as compared to comparable innovative firms.     

时间窗口约束下基于改进蚁群算法的协同制造调度研究

与传统调度模式不同，协同制造模式下企业之间的调度模式极其复杂。协同企业间的加工工序路线并不固定，且不同类型产品具有不同的加工路线网络。为此本文针对平衡型、瓶颈型、跳跃型、混合型四类具有典型特点的协同制造网络G_p进行分析和设计；考虑制造企业同类产品合并加工策略，构建基于连续加工量的分段生产成本函数；通过设计合理的订单最早交货时间和最晚交货时间，对订单交货进行时间窗口约束，并在此基础上构建了由制造商生产成本W_c^m、订单等待W_s^k（Q_k， T'_k）和提前完工库存成本W_s^k（Q_k， T″_k）、延期惩罚成本构成W_l^k（Q_k， T'″_k）的目标函数。为求解该模型，创新性将蒙特卡洛思想引入蚁群算法，提高蚂蚁选择合理性，避免局部最优；同时，采用移动窗口[min， max]奖励机制，并且对信息素奖励乘以平衡系数k（N）提高奖励可信度，加快搜索速度并提高求解性能。仿真结果表明，本文构建调度模型合理，可以获得优化的调度结果；同时，本文提出的蚁群改进寻优算法具有良好的求解速度和收敛性，算法具有较好的稳定性。     

Hedging through index-based price contracts in commodity-based supply chains

This paper studies the optimal hedging strategy of risk-neutral firms in supply chain settings. We model a retailer procuring goods through index-based price contracts from two commodity processors. The processors’ input commodity prices are random and correlated. The retailer faces price-sensitive demand curves; therefore, it controls product demand through retail pricing in the final product market. We characterize the optimal contracting terms for the processors and show that they prefer to hedge part of their exposure to the commodity price risk. The optimal contract for processor comprises a processing margin independent of the commodity price volatility and a hedge ratio that is a function of the commodity price volatility and the products substitution factor. We uncover a new rationale for hedging in settings where downstream firms have pricing power; both processors and the retailer benefit from the retailer’s pricing power when their margins are linked to input prices; an index-based price contract is a means to link the processors’ and the retailer’s margins. We further investigate how different market parameters affect the optimal hedge ratios and extend our model to settings with random market sizes and asymmetric substitution for final products.     

Managing Supply Risk for Vertically Differentiated Co‐Products

The manufacturing complexity of many high‐tech products results in a substantial variation in the quality of the units produced. After manufacturing, the units are classified into vertically differentiated products. These products are typically obtained in uncontrollable fractions, leading to mismatches between their demand and supply. We focus on product stockouts due to the supply–demand mismatches. Existing literature suggests that when faced with product stockouts, firms should satisfy all unmet demand of a low‐end product by downgrading excess units of a high‐end product (downward substitution). However, this policy may be suboptimal if it is likely that low‐end customers will substitute with a higher quality product and pay the higher price (upward substitution). In this study, we investigate whether and how much downward substitution firms should perform. We also investigate whether and how much low‐end inventory firms should withhold to strategically divert some low‐end demand to the high‐end product. We first establish the existence of regions of co‐production technology and willingness of customers to substitute upward where firms adopt different substitution/withholding strategies. Then, we develop a managerial framework to determine the optimal selling strategy during the life cycle of technology products as profit margins shrink, manufacturing technology improves, and more capacity becomes available. Consistent trends exist for exogenous and endogenous prices.     

Design for the Environment: Life‐Cycle Approach Using a Newsvendor Model

Introducing environmental innovations in product and process design can affect the product's cost and demand, as well as the environmental impact in different stages of its life cycle (such as manufacturing and use stages). In this article, we advance understanding on where such design changes can be most effective economically to the firm and examine their corresponding environmental consequences. We consider a profit maximizing firm (newsvendor) deciding on the production quantity as well as its environmentally focused design efforts. We focus our results along the two dimensions of demand characteristics and life‐cycle environmental impact levels, specifically functional vs. innovative products, and higher manufacturing stage environmental impact vs. higher use stage environmental impact. We also discuss the environmental impact of overproduction and how it relates to the different types of products and their salvage options. We find that although the environmental impact per unit always improves when firms use eco‐efficient or demand‐enhancing innovations, the total environmental impact can either increase or decrease due to increased production quantities. We identify the conditions for such cases by looking at the environmentally focused design efforts needed to compensate for the increase in production. We also show that the environmental impact of overproduction plays an important role in the overall environmental impact of the firm. We conclude by applying our model to different product categories.     

The effect of new product development acceleration approaches on development speed: A case study

This study investigates the impact of nine new product development (NPD) acceleration approaches on development speed. Our findings from 233 manufacturing firms show that 5 approaches (supplier involvement, lead user involvement, speeding up activities and tasks, training and rewarding of employees, and simplification of organizational structure) increase development speed, whereas 2 approaches (implementing support systems and techniques and stimulating inter-functional coordination) decrease development speed. Two approaches (i.e., reduction of parts and components and emphasizing the customer) have no effect on development speed. Our results further show that firms developing different types of new products should use different NPD acceleration approaches, as the speed impact of six out of nine approaches is dependent upon the degree of product innovativeness.