Determinants of the Optimal Network Configuration and the Implications for Coordination

University of Zurich Institute for Strategy and Business Economics Working Paper No. 152

39 Pages Posted: 27 Dec 2011

See all articles by Patricia Deflorin

Patricia Deflorin

University of Applied Sciences HTW Chur - Swiss Institute for Entrepreneurship (SIFE); University of Zurich - Department of Business Administration (IBW)

Helmut M. Dietl

University of Zurich - Department of Business Administration (IBW)

Markus Lang

University of Zurich - Department of Business Administration (IBW)

Eric Lucas

University of Zurich - Department of Business Administration (IBW)

Date Written: December 25, 2011

Abstract

This paper develops a simulation model to compare the performance of two stylized manufacturing networks: the lead factory network (LFN) and the archetype network (AN). The model identifies the optimal network configuration and its implications for coordination mechanisms. Using an NK simulation model to differentiate between exogenous factors (configuration) and endogenous factors (coordination), we find low complexity of the production process, low transfer costs and high search costs, as well as a larger number of manufacturing plants benefit LFN compared to AN. Optimally coordinating the chosen network configuration of LFN might require to fully transfer knowledge in the short run but to transfer nothing in the long run. Moreover, a late knowledge transfer from the lead factory to the plants increases the pre-transfer performance of LFN but results in a larger performance drop, yielding a lower short-run but a higher long-run performance of LFN.

Keywords: Manufacturing network, manufacturing plant, global operations management, lead factory, knowledge transfer

Suggested Citation

Deflorin, Patricia and Dietl, Helmut M. and Lang, Markus and Lucas, Eric, Determinants of the Optimal Network Configuration and the Implications for Coordination (December 25, 2011). University of Zurich Institute for Strategy and Business Economics Working Paper No. 152. Available at SSRN: https://ssrn.com/abstract=1976815 or http://dx.doi.org/10.2139/ssrn.1976815

Patricia Deflorin

University of Applied Sciences HTW Chur - Swiss Institute for Entrepreneurship (SIFE) ( email )

Chur
Switzerland

HOME PAGE: http://www.sife.ch

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Helmut M. Dietl

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Markus Lang (Contact Author)

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

Eric Lucas

University of Zurich - Department of Business Administration (IBW) ( email )

Hottingerstrasse 10
Plattenstrasse 14
Zurich, 8032
Switzerland

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