To combat the economic downturn, many global manufacturers are closing factories or shrinking factories to quickly reduce operating costs. It is understandable to focus on reducing costs, and it is also necessary for some companies. But executives should not let cost-cutting priorities hide the long-term importance of other strategic factors when making factory closures, start-ups, or migration decisions, especially as factories develop innovation and spread innovation across the manufacturing network. The role played.
In fact, the strength of a multinational manufacturing company lies in its ability to leverage knowledge networks, disseminate process innovations and better practices, and ultimately generate innovative products and services. Therefore, when companies make decisions on production sites and scales, if they do not consider how each plant integrates into a broader knowledge network, it is possible to sacrifice long-term innovation momentum because of immediate interests. A deeper understanding of the ways in which factories create and disseminate knowledge enables executives to inspire creativity by balancing various types of plants, and to increase efficiency by appropriately configuring production resources. In addition, we can see from our research results that active participation in knowledge innovation is becoming more and more important for each plant. Factories that actively develop and share knowledge can increase the strategic flexibility of their companies, and their future seems to be more secure.
Four types of factories
To learn more about the role of knowledge in the entire manufacturing network, we conducted a longitudinal study of eight multinational manufacturers based in Europe. From the previous stage, from 1995 to 1996, we studied 59 factories that were owned by these companies all over the world. Our research efforts include in-depth conversations with executives responsible for production and supply chains, as well as surveys of senior managers and management teams at each facility. Between 2005 and 2006, we returned to the eight companies to understand how their networks have evolved over time.
In the early stages of research, we categorized these plants by their role in disseminating knowledge across all plants and corporate headquarters in the network. We consider both explicit knowledge (including innovations in products, processes, and management) and informal knowledge (for example, measured by the level of communication between plant managers). The factory is divided into four categories.
Isolated plants (22% of the total number of plants between 1995 and 1996) received little innovation from other plants in the network, and the factory's own innovations (if any) were rarely disseminated. There is very little exchange of visits between the production staff of each factory, and the level of communication between the employees of each factory and other factory managers is also very low. However, many isolated plants are highly efficient. One of the companies we produce to produce aluminum cans has many of these factories that supply goods to their local markets and improve their production processes on their own, usually with good performance. Some isolated plants are efficient, reliable, and independent new units.
Of the factories studied between 1995 and 1996, 53% were acceptance plants that received many innovative knowledge from other factories and/or headquarters in the network, but they did not transmit and transfer innovative knowledge. Some accepting factories have poor performance and need to rely on outside support. Some receiving plants are satellite plants that are regulated by neighboring factories. Other accepting factories need external support to keep up with the rapid changes in technology. The steel rope factory we studied is a model factory in the future, and it has received strong support from the company's development team and other factories.
What is different is the dissemination network factory (accounting for 16% of the total number of factories between 1995 and 1996). They have strong network relationships, proactively communicate and exchange innovative knowledge with other factories, often with other units and headquarters (communication). Colleagues of network factories are close to the headquarters in many cases. Many of these factories are called “centers of excellence†and engineers and staff from many other organizations are here to receive training.
Active network factories (accounting for 8% of the total number of factories between 1995 and 1996) communicate more frequently, sharing more innovative knowledge than dissemination network factories, and employees of all other types of factories we studied This type of factory employee is more likely to visit other factories frequently. For example, a bag manufacturer's active network factory is located near its European headquarters company's product design center, which is a pilot production center for new luggage design, and the advantage of a small number of new products with short delivery times makes up for its higher Labor cost. As these products mature, the plant will pass on its operations to low-cost plants in Eastern Europe.
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