Vlerick Leuven Gent Working Paper Series 2006/12 ... - Vlerick Public

More documents

Recommendations

Info

implemented by Samsung had the improvement of relations between groups of workersas a consequence. This system consisted of one Korean taking care of 3 German workersfor an in-depth visit of the Korean factory during 6 days.Another intriguing observation has been that, although effective networks have aconstant flow of technological knowledge, this flow was not steady and continuous. Infact we saw that knowledge was transferred in big bursts, alternated with periods ofconstant but relatively low flows of knowledge.AND WHAT ABOUT THE FACTORY MANAGER: HOW CAN SHE DEFENDHER FACTORY?Our research findings also include a warning signal for the factory manager,especially in those factories located in high labor cost countries. Such factories are at acost disadvantage, compared to their sister factories in the network, unless they cancompensate for the high cost of labor by reaching high productivity levels. For managersin network players, the tendency may exist not to share knowledge with others, so as tokeep the productivity improvements to the factory. Such a protective attitude will notonly hinder the network to improve its overall performance, it will also bring the factoryin an isolated position. As we have just shown, this will constrain the flows of knowledgethe factory may expect to receive in the future, and as such may in the long term reducethe innovative power of the factory. But even worse, it will change the role the factoryplays in the network. If sooner or later the company needs to reduce capacity, this factorywill be an easy victim. By downsizing this factory, the company will have accomplishedits objective to reduce capacity, without hurting the knowledge flows in the network. Atthe end of the trip, an attempt to protect the factory may well have turned into a scenarioof making the factory abundant.Managers in isolated or receiving factories should realize that the role of theirfactory is merely to provide capacity to the network. If, as argued above, capacity in thenetwork needs to be reduced because of a declining market, or if cost reductions can beobtained by relocating the factories, these factories may well be on the shortlist forclosure. In industries with low value density, where proximity to the market is an20
important issue, this is not likely to take place. However, if transportation distance is nota major criterion for factory location, the future of the factory may be at stake. From theperspective of headquarters, this is exactly the strategic flexibility that has purposely beenbuilt into the network. From the perspective of the factory management, this is hard toswallow, since it involves lay-offs and therefore has an impact on the life of theemployees and their families, as well as, in the long term, on the welfare in a region.This brings us back to the discussion on delocalization. While strategicallyimportant to safeguard and improve the competitiveness of the multinational, it is oftenperceived as unavoidable and yet unfair at the level of the factory. It is our belief thatindeed it is unavoidable for some of the isolated and receiving factories in high labor costcountries. Consequently, these factories may protect themselves, not by complainingwhen it is too late, but rather by anticipating through building network relationships. Thistakes time, it requires careful strategic planning, and the willingness of headquarters toinvest in these network relationships. Network players on the other hand shouldunderstand the importance of their role in the network, and should keep on investing intheir own innovation capability, as well as in the transfer of their knowledge to the otherplayers in the network. While sharing their knowledge may seem too generous in theshort term, it is precisely their reason for existence, and their guarantee for survival in thelong term.CONCLUSIONSSo what’s our advice to the senior management in multinational manufacturingcompanies? Let’s summarize it in a few short messages:• Do not follow the herds in the short term. You may need to relocate factoriesto low cost production countries and we all may have to go to China or India.But look beyond the cost of the manufacturing network: develop a trulystrategic view of the factory network. And remember: a network is more thanthe nodes, it is also about the flows and the ties these nodes have developedwith the local environment.21
Page 2 and 3: DO NOT FORGET THE STRATEGIC ARCHITE
Page 6 and 7: YOU NEED TO DEVELOP A STRATEGIC VIE
Page 9 and 10: Based on all these measurements we
Page 12 and 13: But let’s face it, network player
Page 14 and 15: countries? This, we are convinced,
Page 16: Hosting network players may require
Page 23 and 24: REFERENCESBARTLETT, C.A., and S. GH

Vlerick Leuven Gent Working Paper Series 2006/12 ... - Vlerick Public

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?