Operating Networks

1
Operating Networks

• Henry C. Co
• Technology and Operations Management,
• California Polytechnic and State University

2
Strategic Choices

• Structure (p.142-150)
• Number of operating units (plants)
• Location
• Scope of operation (what each plant does)
• Degree of specialization
• Infrastructure (p.150-158)
• Degree of centralization
• Policies
• Incentives
• Measures and controls
• Ownership and Governance
• Who owns which facilities/units.

3
Rationale for Multifacilities Networks

• Cons
• Economies of scale
• Centralization enables a company to make use of
  the unique capabilities and skills developed in
  the original site.
• Avoids logistical complexity associated with
  coordinating production and information flows
  across sites.
• Pros
• As a given site is assigned responsibility for
  more and more activities and as it expands its
  geographic coverage, managing the operation
  becomes increasingly complex.

4
Single-Facility Manufacturing

• Facilities choices are limited
• Plant managers and their subordinates alone can
  usually resolve operating issues.
• Corporate manufacturing staffs are seldom
  necessary.

5
Multifacilities Manufacturing

• New set of problems
• How to match products with plants?
• What relationship to establish among facilities?
• The basis for comparing the performance of
  dissimilar organizations.
• Operating decisions become more complex, and a
  corporate staff is frequently required to
  coordinate activities across plants.

6
Multifacilities Networks
7
Facilities Choices

• Companies may choose to compete with a few large
  plants or many small ones.
• Companies may locate plants
• Close to markets,
• Close to raw materials,
• Close to suppliers, or
• Close to RD laboratories.

8

• Companies may focus facilities by product lines
  or production processes.
• Individual factories can be integrated into a
  plant network.

9

• For example, large single product plants offer
  efficiency and economies of scale, but sacrifice
  responsiveness and flexibility.
• Locating a plant within a market sometimes
  provides a competitive edge at other times it
  does not.
• Deciding how a factory should be focused-the
  range of products to include, and the variety of
  production processes-has important links to
  competitive positioning.

10
Measurement and Control Issues
11

• How should the performance of plants with
  different missions be compared?
• Does the use of a single measuring system or a
  single yardstick such as labor productivity
  unfairly penalize some plants at the expense of
  others?
• How should plant managers be evaluated if some
  factors, such as plant size and scale economies,
  are outside their control?

12

• Some measurement systems can be scaled to adjust
  for differences in plant size or product mix
• Yield targets can be set for small, medium, and
  large facilities.
• Failure rates can be compared with industry norms
  rather than other plants in the system-many
  cannot.

13

• Managers must learn to be sensitive to
  differences in plant mission and strategy when
  assessing performance.
• A plant that specializes in prototypes and new
  product introductions is unlikely to be as
  productive as one that focuses on a small number
  of mature, high volume products for that reason,
  it should be judged by different criteria.