The network organisation
Refocusing on the core business and coordinating partners: outsourcing, subcontracting, franchising, alliance, joint venture, the make-or-buy trade-off, and the risks of dependence.
- 24 cards
- 4 topics
- Free
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Network organisation: what is it?
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A company refocused on its core business, which hands the rest to partners that it coordinates and links through its information system.
The company's boundary moves: what matters is no longer what it owns, but what it can organise.
What role does the information system play in a network organisation?
- It links partners to exchange orders, stock and lead times
- It replaces the contracts with partners and their amendments
- It mainly serves to store the company's archives
- It replaces the hub firm in coordinating the network
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It links partners to exchange orders, stock and lead times
Without real-time information exchange, coordinating a dozen partners becomes unworkable. The information system is the operational link, but it erases neither the contracts nor the coordination.
In …, the contracting company provides the specification and the provider makes or performs the work to those requirements.
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In subcontracting, the contracting company provides the specification and the provider makes or performs the work to those requirements.
The relationship is a repeated order: the contracting company keeps ownership of the design, the subcontractor that of its production tool.
Hub firm: what is it?
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The company at the centre of a network that defines the product, sets the rules and coordinates the other firms of the network.
It keeps design, brand and customer relations; its partners make or deliver to its specifications.
A fire at the plant of its only component supplier stops a manufacturer for six weeks. What is the probable cause and the remedy?
- Too low a transaction cost: renegotiate the price and delivery times
- Dependence on a single source: qualify a second supplier
- Too modest an outsourcing: also outsource the assembly
- A poorly monitored franchise: take over management of the network
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Dependence on a single source: qualify a second supplier
The gain of outsourcing comes with a risk of rupture: a single source exposes the whole chain to an incident at the supplier. Multiplying sources, or keeping safety stock, reduces that risk.