Available online at www.sciencedirect.

com

Omega 31 (2003) 29 – 39
www.elsevier.com/locate/dsw

Manufacturing networks and supply chains: an operations

strategy perspective
Martin Rudberga , Jan Olhagerb;∗
a Department of Industrial Engineering and Management, School of Engineering, Jonkoping University, PO Box 1026,
SE-551 11 Jonkoping, Sweden
b Department of Production Economics, Linkoping Institute of Technology, SE-581 83 Linkoping, Sweden
Received 15 January 2001; accepted 3 October 2002

Abstract
The purpose of this paper is to analyze manufacturing networks and supply chains from an operations strategy perspective.
These two areas have traditionally been treated as separate research tracks, but with the ongoing globalization of markets and
operations there is a need to integrate these complementary disciplines to study networks of facilities. In this paper we ex-
amine the two research areas based on two structural decision categories in an operations strategy, viz. facilities and vertical
integration. We present a typology for the analysis of network systems resulting in four basic network con/gurations. Coor-
dination of activities within the network is contingent upon the con/guration, thus resulting in four coordination approaches.
The con/guration and coordination analyzes can be used as a foundation for further research in the context of integrating
manufacturing network and supply chain theory.
? 2002 Elsevier Science Ltd. All rights reserved.

Keywords: Global manufacturing; Logistics; Operations management; Operations strategy; Supply chain management; Value network

1. Introduction As a result of globalization, the vast majority of manufac-

The fact that business today is international is indis-
putable. During the last decade there has been an explosive
increase in both international trade and foreign direct in-
vestment, and many markets are now truly global. The role
of manufacturing companies has changed from supplying
domestic markets with products, via supplying international
markets through export, to supply international markets
through local manufacturing. Hence, the research on inter-
national issues in manufacturing has evolved from global
sales and marketing into global manufacturing. Except from
making competition even /ercer, the trend of globalization
has changed the ways of providing customers with products
and therefore also the objects that are analyzed, be it the
company, the manufacturing network, or the supply chain.
∗ Corresponding author. Tel.: +46-13-281000; fax: +46-13-
288975.
E-mail address: jan.olhager@ipe.liu.se (J. Olhager).
turing in large companies is carried out in value networks.
We regard a value network as a network of facilities, possi-
bly owned by di@erent organizations, where time, place or
shape utility is added to a good in various stages such that
the value for the ultimate customer is increased. However,
the manufacturing related activities and issues in the net-
work are viewed from di@erent angles. This can be exempli-
/ed by two major research tracks—manufacturing network
research and supply chain research—both focusing on the
value network, but using di@erent approaches. Manufactur-
ing networks theory stems from the operations management
/eld whereas the logistics management perspective domi-
nates supply chain theory. The aim of this paper is to an-
alyze how the structure of value networks is treated in the
two research tracks respectively.
The history of each track a@ects how the network is
viewed upon and which activities that are analyzed. Re-
search on manufacturing networks has its roots in the man-
ufacturing management of the single factory, resulting in

0305-0483/03/$ - see front matter ? 2002 Elsevier Science Ltd. All rights reserved.
PII: S 0 3 0 5 - 0 4 8 3 ( 0 2 ) 0 0 0 6 3 - 4
30 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39

”Internal” ”External” of globalization of markets, the idea of scale economies pre-

networks networks
vailed and products were manufactured at the home mar-
Manufacturing Network / Supply Chain / ket and exported to international customers. If business was
Operations Management Logistics Management
Perspective
good, sales oKces were normally established around the
Perspective
world.
Focus on the nodes Focus on the links During the late 1970s and the early 1980s more schol-
Value network ars noticed the need to manage not only the single factory,
but also multi-plant organizations. However, the literature
Fig. 1. Di@erent points of view on the value network. review in Shi and Gregory [2] shows that the research dur-
ing this period mainly was concerned with location-based
criteria. When the multi-plant structure was set, each fac-
that scholars tend to study the network as a wholly owned
tory was basically treated as a separate single facility and
and internal network where all facilities are under full /nan-
networking issues were ignored (see e.g. [3]). Furthermore,
cial control. Conversely, research on supply chains from a
even though markets had become global, manufacturing was
logistics perspective tends to analyze the network as an ex-
still fairly geographically concentrated, which also explains
ternal network with facilities owned by di@erent organiza-
why most operations management research still could focus
tions. Logistics research furthermore sets out from its roots
on the single factory and not on the network.
in physical distribution and materials management and focus
Nevertheless, during the late 1980s and 1990s it was
on the links between the nodes (and to some extent distribu-
impossible for manufacturing to withstand the trend of glob-
tion nodes), whereas manufacturing network research tend
alization, and companies established more and more facto-
to focus on the (manufacturing) nodes themselves. These
ries on a wider international basis. Research on operations
di@erent points of view are visualized in Fig. 1.
management was extended from multi-plant to network
Companies operating on a worldwide basis with dis-
issues. Shi and Gregory [2] view a manufacturing network
persed value networks have realized that it is not enough
as a factory network with matrix connections, where each
to just master the manufacturing and logistics activities in
node (i.e. factory) a@ects the other nodes and hence cannot
isolation, but rather that they must integrate the two. Hence,
be managed in isolation. Khurana and Talbot [4] emphasize
there is a value in merging the knowledge from the two re-
that each factory both inEuence, and is inEuenced by, the
search tracks. This paper sets out to analyze manufacturing
entire manufacturing network.
networks and supply chains to establish a foundation that
Concerning research on manufacturing networks, it is pos-
can be used to integrate parts of the two research areas. The
sible to identify two dominating areas—research on con/gu-
following two sections brieEy describe how the two research
ration issues and research on coordination issues. The former
tracks have evolved from the 1960s up to the present. There-
has its origins in the multi-plant research, and location-based
after we devote one section to the operations strategy per-
criteria (in various sorts) dominate (see e.g. [5,6]). The
spective, which is the perspective we use as means for our
latter is mainly concerned with technology transfer and dif-
analysis, focusing on two so-called decision categories;
fusion, as well as within-network learning (see e.g. [7,8]).
facilities and vertical integration. Manufacturing network
However, in some instances attempts have been made to
and supply chain theory are then compared from an opera-
integrate the two issues to get an overall view of the
tions strategy perspective. Finally, we show how the two
manufacturing network (see e.g. [2,9,10]).
research tracks complement each other by introducing a
It is noteworthy that although research on operations
typology for con/guration of and coordination in a value
management has been extended to govern manufacturing
network. We also provide management implications of the
networks, almost no attention is paid to the physical dis-
typology, some concluding remarks, and ideas for future
tribution to and from the manufacturing facilities, or on
research.
warehousing. Skinner [11] argues that manufacturing today
comprise “the value chain of product realization”, including
2. Manufacturing networks from an operations R&D, procurement, production, distribution, customer ser-
management perspective vice, and warranty repairs. However, in spite of Skinner’s
broad de/nition of manufacturing, most manufacturing
The research on manufacturing networks has its origin in network researchers ignore the supply chain management
the operations management of the single facility. The prac- issues that are so important for the total e@ectiveness of a
tice of operations management as a discipline with strategic network organization (see e.g. the demarcations in [2]).
implications started with the Skinner [1] paper, discussing
how to con/gure and organize manufacturing operations 3. Supply chains from a logistics management
within the well-de/ned factory entity. The research on oper- perspective
ations management during the 1970s followed in Skinner’s
footsteps and was dominated by issues such as “the focused The research on supply chains has its origin in logistics
factory” and “economies of scale”. With the increasing trend management. The practice of logistics as a formal business
 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
management discipline is only a few decades old, and some
logistics scholars uphold that Drucker [12] was the one who
triggered the evolution of the logistics concept. The cur-
rent interest in logistics evolved out of concern with traf-
/c management and transportation on the one hand, and
marketing concepts on the other [13]. Practitioners and aca-
demics were therefore predominantly interested in the man-
agement of material Eows and storage of goods [14,15].
The evolution of business logistics can be divided into three
phases [16]: functional management (1960 –1970s), internal
integration (1980s), and external integration (1990s). Kent
and Flint [17] provide a similar description of the logistics
evolution.
During the /rst phase logistics was divided into two func-
tions. Materials management, which principally concerned
the Eow of materials into the organization, included issues
such as purchasing, inbound transportation, raw material in-
ventory, and inventory control. Physical distribution, on the
other hand, concerned the movement of /nished products
from the end of the production line to the customers. It
included issues such as freight, warehousing, materials
handling, packaging, and inventory control. Later, the two
functions were integrated into logistics management with
a focus on internal integration of the total material Eow
within the organization. Logistics management emphasized
an increased customer focus and besides the traditional
responsibilities of materials management and physical dis-
tribution, also demand forecasting, customer service and
order processing were often included in the logistics cur-
riculum. The Council of Logistics Management (CLM)
de/nes logistics in the following way [18]:
Logistics is that part of the supply chain process that
plans, implements, and controls the eKcient, e@ective
Eow and storage of goods, services, and related infor-
mation from the point of origin to the point of con-
sumption in order to meet customers’ requirements.
The external integration that took place during the third
phase not only focused on materials and information Eows
within the organization, but extended the focus to 1st tier
suppliers, the downstream customer, and third-party agen-
cies. Globalization, with possibilities for low-cost sourcing
and customers spread around the world, required a holistic
view on the value network. The explosive development of
information and communication technology turned out to
be the facilitator for further external integration. The term
supply chain management arose, which included not only
the suppliers’ suppliers but also the customers’ customers.
Some scholars have broadened the supply chain concept
to include the general integration of all functions and busi-
ness processes throughout the total supply chain, including
marketing, manufacturing, distribution, etc. (see e.g. [19–
21]). Cooke [22] de/nes supply chain management in the
31
following way:
[Supply Chain Management is] the coordination of all
those activities associated with moving goods from
the raw materials stage through to the end user, for
sustainable competitive advantage. This includes ac-
tivities like system management, sourcing and pro-
curement, production scheduling, order processing,
inventory management, transportation, warehousing,
and customer service.
Logistics scholars still treat manufacturing as somewhat
of a “black box”. They have not been able to integrate
the knowledge from operations management into the sup-
ply chain management curriculum; rather the main focus is
still on inventory management, distribution, and information
Eows.
4. Operations strategy
The essence of an operations strategy could be charac-
terized as consisting of a pattern of decisions a@ecting the
ability to meet the long-term objectives, market require-
ments, and the manufacturing task. The so-called decision
categories covered in an operations strategy di@er somewhat
between authors, but there seems to be an essential agree-
ment on the areas that really matter. The categories, gener-
ally ranging from six to ten in number, are usually divided
into structural and infrastructural decision categories, as pro-
posed by Hayes and Wheelwright [23]. A summary of pro-
posed frameworks is presented in Table 1, which updates
the comparison by Leong et al. [24].
Within each decision category a number of policies need
to be addressed when formulating an operations strategy.
The content and characteristics of these policy areas within
each decision category are discussed in the references found
in Table 1. The categories that have the greatest impact on
the design of manufacturing networks and supply chains are
facilities and vertical integration, two structural decision
categories. These will serve as a point of reference for our
analysis of manufacturing networks and supply chains and
for our attempt to create a typology for the integration of
these two perspectives.
4.1. Facilities
The traditional policy areas related to facilities are size,
location, and specialization [23]. Size basically deals with
capacity issues. Hayes and Wheelwright [23] discuss size in
terms of economies and diseconomies of scale. They iden-
tify the notion of a minimal and a maximal size of a facility;
the maximal being the limit where diseconomies of scale
starts to more than o@set the economies of scale. Somewhere
in between the minimal and maximal size is the optimal
size of a facility, a size that is very diKcult to determine.
Attempts to analyze performance based on the size and
32 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39

Table 1
Di@erent perspectives on decision categories within an operations strategy

Hayes et al. [23,25] Fine and Hax [26] Samson [27] Miltenburg [28] Skinner [29] Hill [30]

Structural categories
√ √ √ √ √ √
Process technology
√ √ √ √ √ √
Capacity
√ √ √ √ √ √
Facilities
√ √ √ √ √
Vertical integration

Infrastructural categories
√ √ √ √ √ √
Human resources
√ √ √ √
Organization
√ √ √ √
Quality
√ √ √ √ √
Production planning and control
√a √ √
New product development
√a √ √
Performance measurement systems
a Added in [25].

focus (specialization) of facilities are provided by Brush and
Karnani [31]. Location deals with the general question of
how to design the network of facilities, irrespective of the
type of interdependence between facilities. In some cases,
facilities operate in sequence and are therefore dependent
upon one another for inputs or outputs, whereas other facil-
ities are fully equipped to manufacture a complete product
or product range at one location, from where it is distributed
to the various markets. Obviously, manufacturing location
decisions cannot be formed in a vacuum; they must be taken
together with marketing and logistics decisions. Facility
specialization, or focus, can be of two basic types; product
focus or process focus [25,30,32]. The concept of focus was
introduced by Skinner [33], arguing that (i) there are many
ways to compete besides by producing at low cost, (ii) a
factory cannot perform well on every yardstick, and (iii)
simplicity and repetition breed competence. He discussed
/ve key characteristics of the focused factory: process
technologies, market demands, product volumes, quality
levels, and manufacturing tools. Hayes and Wheelwright
[23] discussed six ways of focusing plants: market, product,
volume, process, product/market, and geographical focus.
Later, in Hayes et al. [25] the list was condensed to two:
product and process focus. Today, these two are considered
the two generic choices. Product focus means that the facil-
ity is designed for the manufacturing of a single product or
a narrowly de/ned set of products. A process focus implies
that one or a few manufacturing processes form the produc-
tion competence of the /rm and that many products can be
produced, provided that they suKce with the type of manu-
facturing that the system can provide. Hill [30] suggests that
the focus should be changed during the product life cycle in
order to concentrate on the manufacturing task at all
times, i.e. using a process focus when product volumes are
small and a product focus when product volumes are large.
4.2. Vertical integration
Vertical integration is the degree to which an organization
owns the network of processes which together give goods
their value [34], and is normally discussed in terms of direc-
tion, extent and balance, as suggested by Hayes and Wheel-
wright [23]. The fundamental concerns of direction and
extent treat the boundaries of the /rm and whether the
organization should broaden or narrow the span of its opera-
tions. If increasing the span, the direction can be either
forward—towards the consumer—or backward—towards
the initial stages of the value network. The competencies
required and the characteristics associated with forward in-
tegration di@er from those of backward integration. There-
fore, the choice of extending the span of operations ought
to be carefully analyzed. Narrowing the span means that
some operations are outsourced at the upstream end of the
span of operations. Tannous and Mangiameli [35] deal with
the issue of determining the extent of the internal span of
operations, by contrasting full integration (i.e. fully owned)
and complete focus (i.e. only one manufacturing step) as
endpoints along a continuum. Given that the boundaries
of the /rm are established, the next perspective on inte-
gration is the relationships with other /rms—suppliers and
customers—“outside” its boundaries. Even though individ-
ual facilities are focused, value network relationships with
/rst tier suppliers and customers are addressed here. Bal-
ance deals with the resulting vertically linked activities, in
terms of how dependent the suppliers and customers are on
the /rm, relative how dependent the /rm is on its suppli-
ers and customers. In this context Hayes and Wheelwright
[23] refer to “perfect balance” as depicting the situation
where one captive supplier produce 100 percent of a /rm’s
requirements for a given part while the /rm, in turn, con-
sumes all of the supplier’s output. The question of balance
 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
applies not only to outside customers and suppliers but also
to internal customers and suppliers along the various stages
of production.
5. A comparison of manufacturing networks and supply
chains
In previous sections we have brieEy depicted the recent
evolution of manufacturing network and supply chain the-
ory, as well as the concept of operations strategy. This sec-
tion describes the characteristics of manufacturing networks
and supply chains in view of the operations strategy frame-
work.
We have noticed that the traditional perception of policy
areas within the facilities and vertical integration decision
categories seem somewhat restricted when applied to man-
ufacturing networks and supply chains—involving multiple
sites with various relationships. In essence, the traditional
approach is that decision categories and policy areas deal
with individual facilities. Therefore, in order to capture the
characteristics of a broader value network, we must widen
the perspectives of facilities and vertical integration. An ini-
tial reEection can be made that facilities is closely related to
the design of manufacturing networks, and vertical integra-
tion addresses much of the supply chain structure issues.
Table 2 shows the key operations strategy issues related
to manufacturing networks and supply chains. As mentioned
earlier, there are distinct di@erences as to how manufac-
turing network theory and supply chain theory view site
ownership. The vast majority of the manufacturing network
research assumes fully owned facilities (see e.g. [2] and
[36]). Research on supply chains often regards inter-/rm
supply chains, where relationships between the various sites
are analyzed (see e.g. [19,20]). Consequently, we assume
an intra-/rm focus concerning manufacturing networks and
Table 2
Key operations strategy issues related to manufacturing networks and supply chains
Manufacturing network theory
(intra-/rm focus)
Facilities
Size No. of sites (No. of nodes)
Location Corporate decision within the network
Specialization/Focus Vertical and/or horizontal
Vertical integration
Direction Both forward and backward, but mainly intra-/rm
perspective
Extent Narrow—only intra-/rm manufacturing
Balance External interfaces with 1st tier supplier and 1st
downstream customer
33
an inter-/rm focus concerning supply chains. The key oper-
ations strategy issues noted in Table 2 are further explained
in Sections 5.1 and 5.2.
5.1. Facilities
The three policy areas within the facilities category, viz.
size, location, and focus, are treated di@erently in each re-
spective research track. As mentioned earlier, manufactur-
ing network theory has a locus on the nodes in the network,
whereas the focal point of supply chain theory is the links
between the nodes. In this sense, the two research areas com-
plement each other and are both needed for the management
of value networks.
5.1.1. Size
The traditional interpretation of size is hard to employ on
manufacturing networks and supply chains, and the search
for an optimal network size is likely to fail. When discussing
the size of a value network it is more about /nding a relevant
way to measure the size, than to /nd an optimal size of the
network.
Manufacturing networks are often discussed in terms of
the number of sites that the network comprises. This is of
importance when capacities, the Eow of material and infor-
mation, product and process allocation, etc., are taken into
consideration in the planning and execution process. In a
network terminology, intra-/rm networks have a focal point
on the nodes when the size of the network is examined. Sup-
ply chains, or inter-/rm networks, are in this sense more
focused on the links between the nodes, and then especially
links between di@erent organizational units. Therefore, the
size of a supply chain is, from a structural perspective,
analyzed in terms of the number of di@erent organizations
that the system holds (cf. [20]).
Supply chain theory
(inter-/rm focus)
No. of organizations (No. of links)
Decision based on which collaborative partners to
include in the supply chain
Mainly vertical
Both forward and backward including inter-/rm
manufacturing
Wide-focus on coordinating inter-/rm relationships
Collaborative interfaces between sets of suppliers
and customers
34 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
5.1.2. Location
The major distinction between manufacturing network
theory and supply chain theory concerning the location
policy area is the level of control concerning the actual
decision. In an intra-/rm network a site’s location can
be decided upon at the company’s corporate headquarters
in an “optimal” way relative the rest of the network. There
are also possibilities to rearrange the network to adjust for
the changes in the dynamic environment. Arntzen et al. [37]
exemplify how Digital Equipment Corporation (DEC) re-
designed its network and decisions concerning site location
were taken upon a corporate level. Another example is Proc-
ter & Gamble as described in Camm et al. [38]. Both /rms
use the term “supply chain” even though it relates to the
internal span of operations, which in our structure would be
classi/ed as an intra-/rm focus, and thereby as a manufac-
turing network. Cooper et al. [20] support the notion that a
supply chain by de/nition assumes inter-/rm relationships.
Ferdows [6,39] analyzes the strategic reason for a site’s
location within a manufacturing network. In a study of eight
international companies from the computer and electronics
industry, he /nds that access to low-cost production, access
to skills and knowledge, and proximity to markets are the
major areas to consider when determining a site’s location.
Vereecke and Van Dierdonck [10] extend this research and
study the location rationale over time. They examine the ini-
tial reason for establishing or acquiring a plant, as well as
the major advantages the plant’s location provides a couple
of years after it was established. They /nd that proximity
to market is by far the most important factor concerning a
site’s location; both as a primary driver and as the main ad-
vantage provided once it’s running. Availability of low-cost
production and skills are also found to be of great impor-
tance. Worth mentioning is that socio-political drivers such
as taxes, trade barriers, exchange rates, etc., are often re-
garded as important aspects in the initial location decision.
However, location decisions based on socio-political factors
are not regarded to provide any main advantage when the
plant is up and running.
Actual location decisions are much harder to execute in
an inter-/rm supply chain, since the sites within the system
are owned by di@erent (collaborative) organizations. The
only way to determine, or change, the location of a site
outside a speci/c organization’s control, is by choosing one
or another supplier or customer that the organization wishes
to collaborate with. If this is not a possibility, the location
must be taken as a given.
5.1.3. Specialization/focus
Skinner [33] introduced the concept of focus for a man-
ufacturing factory, but the specialization/focus variable is
distinctly di@erent for a network than it is for the single
plant. Basically, the specialization/focus policy area can be
described as a continuum, where the two endpoints are verti-
cally focused and horizontally focused. The choice between
the two is not of a simplistic “either-or” type decision, but
the two options can, to varying degrees, co-exist within one
network. Further discussions concerning focus are presented
in [40–42], amongst others.
There are no direct contingencies determining if a man-
ufacturing network should be vertically or horizontally
focused—it can be of any type. The DEC example men-
tioned above [37] is a vertically focused manufacturing
network, whereas SKF has more of a horizontally focused
network [43]. In general a horizontal focus tends to be
present when market proximity is important, whereas a ver-
tical focus is more frequently found in networks focusing
on low cost and hence getting access to low cost produc-
tion [40,42,44]. As opposed to manufacturing networks, the
very nature of inter-/rm supply chains leads to the major
focus being vertical.
5.2. Vertical integration
Since vertical integration as a decision category in an op-
erations strategy treats the ownership of, and the relations
between, successive stages in the value network, be it inter-
nal or external to an organization, it applies to both intra-/rm
and inter-/rm environments. The policy areas (direction, ex-
tent and balance) are described in more detail below.
5.2.1. Direction
The direction of expanding vertically can be both forward
and backward in both manufacturing networks and supply
chains. In the former environment, the considerations are
mainly intra-/rm, since the vertical actors are constituted
by the various stages of production plus the immediate sup-
pliers and customers. Consequently, the internal production
stages are likely to dominate in number. An issue of concern
with respect to direction is whether the value-adding ac-
tivities should be re-distributed vertically; see e.g. [45,46].
In a supply chain, inter-/rm relations include the coordi-
nation of manufacturing activities between di@erent sets
of /rms. Then, the issue of vertical direction relates to the
distribution of value-adding activities between organi-
zations—a question that may be dealt with between two
parties along the supply chain or from an overall supply
chain perspective, provided that the /rms cooperate in or-
der to maximize the e@ectiveness of the entire chain. In
such cases, Pareto-optimal or win-win solutions need to be
found. In essence, both forward and backward integration
initiatives can be applied to both manufacturing networks
and supply chains, the di@erence being that internal op-
erations dominate in manufacturing networks, whereas
external relations dominate in supply chains.
5.2.2. Extent
The extent of the vertical integration ranges from one
manufacturing stage to ownership of all operations along
the entire value network. Tannous and Mangiameli [35] deal
with the issue of determining the extent of the internal span
of operations and its impact on the /rm’s risk and value. If
 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
one organization owns the entire chain, which corresponds
to full integration, the issue of extent dominates the deci-
sion category of vertical integration, since the /rm cannot
integrate either forwards or backwards, nor can it balance its
relationships with external suppliers. In a manufacturing
network governing the facilities of one organization, the ex-
tent is concerned with intra-/rm manufacturing. This con-
cern is narrower in perspective when compared to the supply
chain, which by de/nition would include both upstream and
downstream operations. In a supply chain perspective, all
operations (procurement, production and distribution) con-
stituting the supply chain need to be considered simulta-
neously.
5.2.3. Balance
The relationships with other /rms—suppliers, distribu-
tors, and customers—di@er between intra-/rm focused net-
works and inter-/rm focused supply chains. Porter [47]
makes a distinction between linkages within a /rm’s value
network and those between a /rm and suppliers and cus-
tomers. The latter type is termed vertical linkages. Further-
more, he distinguishes between supplier linkages (upstream)
and so-called channel linkages (downstream), arguing that
there are di@erences as well as similarities. For example,
supplier linkages are a function of suppliers’ bargaining
power and are reEected in suppliers’ margins [47]. In the
intra-/rm network, vertical linkages are typically bi-party
arrangements or contracts. The external interfaces are lim-
ited to 1st tier suppliers and 1st downstream customers.
The literature on supplier-buyer relationship is vast, for both
the manufacturing network/operations management and the
supply chain/logistics theory streams; see e.g. Waters-Fuller
[48] and Ellram and Carr [49]. In a supply chain, the real
challenge and opportunity is to create balance among all
parties along the chain, e.g. by using frameworks and plat-
forms for collaboration and cooperation.
6. Con$guration and coordination
Value networks are often analyzed using two dimen-
sions: the con/guration and the coordination of the network
[2,5,9,20,50,51]. In the following we will discuss con/gura-
tion and coordination in a general manner and show how the
two schools of thought, manufacturing network/operations
management and supply chain/logistics management, are
complementary.
6.1. Con<guration
The literature discussing con/guration issues in value net-
works (see e.g. [2,9]) typically examine con/guration in
terms of geographical dispersion. Stock et al. [52] also use
a measure of geographical dispersion to depict the structure
of a network, but adds another dimension, namely channel
governance. This dimension describes the relationship be-
35
tween the di@erent parties in a supply chain (i.e., organi-
zational interfaces in the system) in terms of a network, a
hierarchy, or a market relationship.
Section 5 indicated that the manufacturing network theory
assumes ownership of the facilities within the network, i.e.
intra-/rm, whereas the supply chain theory has a focal point
on inter-/rm networks, i.e. more than one organization have
to be considered. Therefore, to enable the study of a general
value network, there is a need to determine the number of
organizations involved in the analyzed system. Another im-
portant feature of a network’s con/guration is the number
of sites that each organization controls. The actual planning
and execution of material and information Eows between
sites are dependent on site ownership. The transactions be-
tween sites di@er between inter-/rm networks and intra-/rm
environments. Hence, we have found it useful to examine
value networks based on two dimensions: the number of
organizations within the system analyzed, and the number
of sites within each organization in the system (see Fig. 2).
Based on these two dimensions, four di@erent types of net-
works are de/ned. These typical networks are discussed in
the following.
We have termed the type 1 network (single-organization,
single-site) Plant. A Plant is the simplest form of a
value-adding entity and the traditional operations strategy
theory concerning facilities and vertical integration ap-
plies (see e.g. [23]). However, when we turn to the type 2
network—the Intra-<rm network—multi-site planning is
viewed as the development of a set of facilities that will
provide the speci/c capabilities required by the organization
over the long term. Since there is only one organization,
but with many sites this type is very similar to the theory
developed in the manufacturing network area. Hence, the
attributes listed under the facilities and the vertical inte-
gration category, respectively, in Table 2 are relevant to
this kind of network. In some instances vertically focused
intra-/rm networks are labeled “Supply Chains” [36–38].
The supply chain theory attributes listed in Table 2 are, on
the other hand, more related to the type 3 network, termed
Supply Chain. Here, there is basically only one (or a few)
site(s) per organization, and the ownership of the sites is
Multiple 3 4
Supply Chain Inter-firm network
(multi-organization, single-site) (multi-organization, multi-site)
No. of
organizations
in network 1 2
Plant Intra-firm network
(single-organization, single-site) (single-organization, multi-site)
Single
Single Multiple
No. of sites per
organization
Fig. 2. Classifying the analyzed system into di@erent types of
networks.
36
distributed among a number of organizations. Finally, the
type 4 network, which can be seen as a combination of types
2 and 3, is termed Inter-<rm network. For this type of net-
work the attributes in each respective column in Table 2
have to be combined to describe the two decision categories
for the network. Both the number of organizations and the
total number of sites within the system determine the size of
the network. The location of the sites within each respective
organization can be decided by the organization’s corporate
headquarters, but the location of collaborative partners’ sites
have to be taken into consideration. The focus of the com-
plex network is most likely a combination of vertical and
horizontal focus, resulting in an “unfocused” network. Con-
cerning vertical integration issues, the extent is both narrow
and wide; narrow for the part of the system that is under di-
rect control, and wide on a collaborative basis. Depending
on how the system is set up, an internal interface, external
interface, or combinations of both can be present. The ac-
tual balance is determined by the “collaborative maturity”
of the inter-/rm network system.
In summary we have identi/ed four typical kinds of value
networks, each containing varying degrees of complexity.
It can also be noticed that the networks of types 1 and 2
emphasize the issues contained in the facilities decision cat-
egory, contrary to the type 3 network that puts an emphasis
on the vertical integration category. This is expected, since
we found that types 1 and 2 are more concerned with the
nodes in the network, while type 3 concentrates on the links.
However, type 4 is a combination of types 2 and 3, and
hence must consider both nodes and links jointly.
6.2. Coordination
The next step in our analysis is the coordination of the
system. It is clear that the type of coordination required is
contingent upon how the network is con/gured in terms of
the number of sites per organization and the number of orga-
nizations. In Fig. 3, we categorize the level of coordination
that is characteristic to each respective con/guration.
In the type 1 network (single-organization, single-site
environment) the need for coordination is extremely limited.
Rather it is a question of utilizing the existing resources.
Multiple 3 4
Synchronize
(multi-organization, single-site)
No. of
organizations
in network 1 2
Utilize
(single-organization, single-site)
Single
Single
No. of sites per
organization
Fig. 3. Coordination is contingent upon the network con/guration.
M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
Thus, it is a special case of optimization, reduced to the uti-
lization of a single facility. This quadrant is also applicable
to individual plants that treat its manufacturing facility as a
complete system and where its environment is considered
peripheral to the system. This is one extreme of the focused
plant/vertical integration continuum analyzed in Tannous
and Mangiameli [35], e.g. addressing run sizes.
In a multi-site environment for a single organization, the
term optimization is more appropriate. Multiple sites that
cooperate in sequence or in parallel, with a vertically or hor-
izontally focused network, need to be optimized in order for
the intra-/rm network to reach its true competitive poten-
tial, i.e. to be fully productive. Questions that need to be
addressed include the allocation of products and volumes to
plants, and the production and distribution of products and
orders within the network. Examples that seek to optimize
a multi-site production environment include e.g. DEC [37]
and Thomson [53].
Coordination is an important issue in a supply chain with
multiple organizations, each participating with a single site.
The typical coordination approach to such supply chains is
synchronization; see cases such as Hyundai [54] and Camp-
bell [55]. In the literature dealing with the term supply chain
optimization the focus is almost exclusively on internal op-
erations only, placing this literature in the type 2 network in
Fig. 3.
In the most complex environment, dealing with multiple
organizations with multiple sites, the coordination problems
are “beyond” optimization, and even synchronization. The
level of coordination in such an inter-/rm network is typi-
cally reduced to harmonization; see e.g. Stevens [56] deal-
ing with the coordination of the use of facilities, people,
/nance, and systems. This is especially true in an unfocused
network, containing both horizontal and vertical focuses.
In general, multiplicity of sites and organizations adds
complexity to the network, leading to di@erent types of co-
ordination problems, contingent upon the con/guration of
the value network. The coordination has to be dealt with
within a single organization or by a set of organizations.
The possibility to optimize the coordination of the value
network is better in the single-organization environment,
whereas multi-organization environment focus on collabo-
ration and feasible, but not optimal, ways to coordinate the
network.
The possibility to e@ectively manage a value network is
Harmonize also dependent on the quality of the available information
(multi-organization, multi-site) presented to the decision-makers. As such the recent evolu-
tion of information systems (IS) and information technol-
ogy (IT) greatly impact the e@ectiveness of the coordination
Optimize within each quadrant of Fig. 3. For example, enterprise re-
(single-organization, multi-site)
source planning (ERP) systems are regarded to be a struc-
tured approach to optimizing a /rm’s internal value chain
Multiple
[57], i.e. the intra-/rm network. If the purpose is just to es-
tablish maximal utilization of a plant, ERP systems without
multi-site functionality, is suKcient. However, to integrate
a /rm’s external value network, ERP systems in isolation is
 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
normally not enough. In recent years the Internet has gained
attention as a facilitator to align ERP systems to enable
inter-enterprise integration. The purpose is thus to provide
relevant information so as to enable synchronization of sup-
ply chains and harmonization of inter-/rm networks. Yet,
even though the continual evolution of IS/IT o@ers improve-
ment in coordination of value networks, it does not change
the basic types of coordination required for each respective
type of con/guration. The possible type of coordination re-
mains the same since coordination is still dependent upon
the underlying con/guration of the value network.
6.3. Company examples
In the following we provide some company examples to
describe how the con/guration and coordination matrices
can be used in real life situations. We start with a large
European sub-contractor that is part of a number of supply
chains, but manages its facilities as plants. The most typical
example is a supply chain where the sub-contractor acts as
both 1st tier and 3rd tier supplier of the /nal assembly man-
ufacturer. Still each facility is managed as separate plants
where the respective plant manager tries to maximize uti-
lization, instead of taking active part in the synchronization
of the whole supply chain in a collaborative manner. Other
examples of companies employing the plant/utilization com-
bination are SKF and Electrolux. Both companies do control
intra-/rm networks but employ a “one product, one facility”
approach [58]. Hence they manage their networks as plants
with little or no coordination between the facilities. Instead
they try to utilize each plant to reach scale economies for
the di@erent product lines.
Ericsson Radio Systems AB (ERA) is an example of
a company running its network as an intra-/rm network
[59]. ERAs facilities are organized with a combined verti-
cal and horizontal focus and the need for coordination is
high. Since they mainly focus on internal operations there
is a possibility to optimize the coordination of the facilities.
Information sharing with external parties is limited, where-
fore synchronization and harmonization issues are left aside.
Other examples of companies that have been reported to
focus on internal operations to optimize the intra-/rm net-
work are, DEC [37], Procter & Gamble [38], Thomson [53],
Hewlett-Packard [60].
In the previously mentioned cases of Hyundai [54] and
Campbell [55], both companies view themselves as taking
part in a supply chain made up of di@erent organizations.
They have also realized that this forces them to abandon the
goal of optimizing the network, and instead focus on ways
to facilitate information sharing between the di@erent orga-
nizations and to try to synchronize the actions taken in the
supply chain. The case of Campbell shows that by establish-
ing structured methods of bi-party information sharing and
price negotiations, it was possible to synchronize the supply
chain to the bene/t of the organizations involved. Still, each
organization was responsible for managing its own opera-
37
tions, wherefore the coordination of the supply chain was
not optimized as a whole.
The /nal assembly manufacturer in the sub-contractor
case described in the introduction of this section strives
to harmonize all parties taking part in the value network,
i.e. it strives to manage the system as an inter-/rm net-
work. However, since other organizations, like the described
sub-contractor, do not have the same level of ambition there
is a mismatch between the di@erent organizations taking part
in the value network. As such, it would be impossible to
arrange bi-party links as in the case of the supply chain;
rather, alternative ways to share information and manage the
value network to the best of all participants must be found.
To do this it is important to understand how the di@erent
participants view their systems and how they thereby try to
coordinate the network. The con/guration and coordination
matrices can thus be of great help to the organizations in
managing the value network.
6.4. Strategic and managerial implications
Some issues concerning strategic and managerial impli-
cations can be raised, with respect to the design and control
of the value network. From the perspective of the individual
plant, it must be easier to operate in one quadrant only; thus
avoiding mixed Eows from di@erent types of networks and
with di@erent coordination approaches. Mixing the Eows in
one plant will lead to problems of how to prioritize between
di@erent products belonging to di@erent networks. This can
potentially be solved with a plants-within-a-plant approach;
see e.g. [30], separating the Eows from di@erent quadrants
into physically separated manufacturing entities, i.e. di@er-
ent plants within the plant. These issues are closely related
to the structural decision categories of capacity and process
technology (cf. Table 1); see e.g. [61,62].
In choosing the type of control mechanism, it is impor-
tant to acknowledge the level of coordination that typically
can be reached. However, the coordination approaches in
Fig. 3 are rather of a descriptive than prescriptive nature. A
proactive approach would therefore strive for a higher level
of coordination than the one depicted for the value network
at hand. The important question is then: How far can we
go—from harmonizing to synchronizing to utilizing to
optimizing?
Furthermore, Figs. 2 and 3 shed some light on the con-
cept of outsourcing parts of an operations network. The out-
sourcing of a manufacturing stage in a previously internally
controlled chain of operations implies a move from quad-
rant two to three. What was previously an intra-/rm network
is now an inter-/rm chain or network. When handing over
parts of the network to an external party, the coordination
problem is no longer “owned” by the /rm. Consequently,
the ambition regarding the level of coordination is reduced
from optimizing to synchronizing, i.e. a certain level of co-
ordination imperfection is expected. Thus, it is likely that
one or more competitive priorities, such as quality, delivery
38 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
speed and reliability, cost and Eexibility will experience re-
duced performance. Even though a contract manufacturer,
taking care of the outsourced operations, may o@er improve-
ments in some areas up front relative the /rm, a holistic ap-
proach would imply that the total solution would not be as
good as if the /rm itself could improve its own operations
and maintain an intra-/rm network, since outsourcing per
se leads to a reduction in the level of coordination.
7. Concluding remarks
This research has analyzed manufacturing network theory
and supply chain theory from an operations strategy per-
spective. A di@erence in locus of each respective perspec-
tive was identi/ed. Research on manufacturing networks
has used an intra-/rm operations management perspective,
focusing on con/guration and coordination of manufactur-
ing sites in terms of general strategy, process technology,
information systems, transfer of knowledge, etc. Suppliers
and customers are only considered with an external interface
concerning material and information Eows. In other words,
manufacturing network research is mainly interested in the
manufacturing nodes in the network and not necessarily in
the transactions between them. Logistics research on supply
chains has, on the other hand, mainly focused on managing
material and information Eows, as well as /nancial Eows,
between sites. Technology transfer, parallel production and
product allocation are seldom regarded. In this sense, sup-
ply chain research is mainly interested in the links between
the nodes in the value network.
In our analysis of di@erences and similarities between
manufacturing network and supply chain theory, we take
an operations strategy perspective, focusing on two struc-
tural decision categories; facilities and vertical integration.
The facility issues are closely related to the manufacturing
network theory and the con/guration of networks, whereas
vertical integration policy areas correspond to supply chain
theory and the coordination issues of the network. The coor-
dination of the network is contingent upon the network
con/guration. We exempli/ed this relationship with two
matrices, one showing typical con/gurations of value
networks and the other showing the corresponding type of
coordination.
In summary, we have highlighted the di@erences between
manufacturing network and supply chain theory, and have
suggested a way to integrate the two research areas. Inter-
esting areas for future research are, for example, to further
analyze the issues of con/guration and coordination of net-
works, to analyze network hierarchies (networks, organi-
zation, sites, plants, production processes), and to develop
inter-/rm network strategies.
References
[1] Skinner W. Manufacturing—missing link in corporate
strategy. Harvard Business Review 1969;49(3):136–45.
[2] Shi Y, Gregory M. International manufacturing networks—to
develop global competitive capabilities. Journal of Operations
Management 1998;16(2,3):195–214.
[3] Schmenner RW. Multiplant manufacturing strategies among
the Fortune 500. Journal of Operations Management
1982;2(2):77–86.
[4] Khurana A, Talbot B. Plant missions in global manufacturing
networks: A resource-based view with evidence from the
global color picture tube industry. Working Paper 99-0005.
University of Michigan Business School, Ann Arbor, MI,
1999.
[5] DuBois FL, Toyne B, Oli@ MD. International manufacturing
strategies of U.S. multinationals: A conceptual framework
based on a four-industry study. Journal of International
Business Studies 1993;24(2):307–33.
[6] Ferdows K. Making the most of foreign factories. Harvard
Business Review 1997;75(2):73–88.
[7] Gailbraith CS. Transferring core manufacturing technologies
in high-technology /rms. California Management Review
1990;32(4):56–70.
[8] Flaherty MT. Global operations management. New York, NY:
McGraw-Hill, 1996.
[9] Porter ME, editor. Competition in global industries. Boston:
HBS Press, 1986.
[10] Vereecke A, Van Dierdonck R. Design and management of
international plant networks: Research report. Gent: Academia
Press, 1999.
[11] Skinner W. Manufacturing strategy on the ‘S’ curve.
Production and Operations Management 1996;5(1):3–14.
[12] Drucker PF. The economy’s dark continent. Fortune, April
1962.
[13] Farris MT. Evolution of academic concerns with transportation
and logistics. Transportation Journal 1997;37(1):42–50.
[14] Langley Jr. JC. The evolution of the logistics concept. Journal
of Business Logistics 1986;7(2):1–13.
[15] LaLonde BJ. Evolution of the integrated logistics concept. In:
Robeson JF, Copacino WC, editors. The logistics handbook.
New York, NY: The Free Press, 1994.
[16] Masters JM, Pohlen TL. Evolution of the logistics profession.
In: Robeson JF, Copacino WC, editors. The logistics
handbook. New York, NY: The Free Press, 1994.
[17] Kent Jr. JL, Flint DJ. Perspectives on the evolution of logistics
thought. Journal of Business Logistics 1997;18(2):15–29.
[18] CLM, Council of Logistics Management. http://www.org1.
clm/index.asp. October 3, 2000.
[19] Robeson JF, Copacino WC, editors. The logistics handbook.
New York, NY: The Free Press, 1994.
[20] Cooper MC, Lambert DM, Pagh JD. Supply chain manage-
ment: More than a new name for logistics. The International
Journal of Logistics Management 1997;8(1):1–14.
[21] Christopher M. Logistics and supply chain management, 2nd
ed. Pearson Education Ltd., 1998.
[22] Cooke JA. In this issue. Supply Chain Management Review
1997;1(1):3.
[23] Hayes RH, Wheelwright SC. Restoring our competitive
edge—competing through manufacturing. New York, NY:
Wiley, 1984.
[24] Leong GK, Snyder DL, Ward PT. Research in the process and
content of manufacturing strategy. Omega 1990;18(2):109–
22.
[25] Hayes RH, Wheelwright SC, Clark KB. Dynamic
manufacturing. New York, NY: The Free Press, 1988.
 M. Rudberg, J. Olhager / Omega 31 (2003) 29 – 39
[26] Fine CH, Hax AC. Manufacturing strategy: A methodology
and an illustration. Interfaces 1985;15(6):28–46.
[27] Samson D. Manufacturing and operations strategy. Sydney:
Prentice-Hall, 1991.
[28] Miltenburg J. Manufacturing strategy: How to formulate and
implement a winning plan. Portland, OR: Productivity Press,
1995.
[29] Skinner W. Three yards and a cloud of dust: Industrial
management at century end. Production and Operations
Management 1996;5(1):15–24.
[30] Hill T. Manufacturing strategy: Text and cases, 2nd ed.
Hampshire: Palgrave, 2000.
[31] Brush T, Karnani A. Impact of plant size and focus
on productivity: An empirical study. Management Science
1996;42(7):1065–81.
[32] Stonebraker PW, Leong GK. Manufacturing strategy—
focusing competitive excellence. Boston, MA: Allyn and
Bacon, 1994.
[33] Skinner W. The focused factory. Harvard Business Review
1974;52(3):113–21.
[34] Slack N, editor. The Blackwell encyclopedic dictionary
of operations management. Cambridge, MA: Blackwell
Publishers, 1997.
[35] Tannous GF, Mangiameli PM. A microeconomic model of
the focused factory—vertical integration strategic decision
problem. Decision Sciences 1993;24(1):209–17.
[36] Cohen M, Mallik S. Global supply chains: Research
and applications. Production and Operations Management
1997;6(3):193–210.
[37] Arntzen BC, Brown G, Harrison TP, Trafton LL. Global
supply chain management at Digital Equipment Corporation.
Interfaces 1995;25(1):69–93.
[38] Camm JD, Chormann TE, Dill FA, Evans JR, Sweeney
DJ, Wegryn GW. Blending OR/MS, judgment, and GIS:
Restructuring P&G’s supply chain. Interfaces 1997;27(1):
128–42.
[39] Ferdows K. Mapping international factory networks. In:
Ferdows K, editor. Managing international manufacturing.
Amsterdam: North-Holland, 1989.
[40] Hayes RH, Schmenner RW. How should you organize
manufacturing? Harvard Business Review 1978;56(1):105–
18.
[41] McGrath ME, Hoole RW. Manufacturing’s new economies of
scale. Harvard Business Review 1992;70(3):94–102.
[42] Caves RE. Multinational enterprise and economic
analysis, 2nd ed. Cambridge: Cambridge University Press,
1996.
[43] Collis DJ. A resource-based view of global competition: The
case of the bearings industry. Strategic Management Journal
1991;12:49–68.
[44] Mathews JA, Snow CS. A conversation with the Acer Group’s
Stan Shih on global strategy and management. Organizational
Dynamics 1998;27(1):65–74.
39
[45] Harrigan KR. Vertical integration and corporate strategy.
Academy of Management Journal 1985;28(2):397–425.
[46] Campbell A. Vertical integration: Synergy or seduction? Long
Range Planning 1995;28(2):126–8.
[47] Porter ME. Competitive advantage. New York, NY: The Free
Press/Macmillan, 1985.
[48] Waters-Fuller N. Just-in-time purchasing and supply: A
review of the literature. International Journal of Operations &
Production Management 1995;15(9):220–36.
[49] Ellram LM, Carr A. Strategic purchasing: A history and
review of the literature. International Journal of Purchasing
and Materials Management 1994;30(2):9–18.
[50] Davidson WH, delaTorre J. Managing the global corpora-
tion—case studies in strategy and management. Singapore:
McGraw-Hill, 1989.
[51] Oli@ MD, Arpan JS, DuBois FL. Global manufacturing
rationalization: The design and management of international
factory networks. In: Ferdows K, editor. Managing inter-
national manufacturing. Amsterdam: North-Holland, 1989.
[52] Stock GN, Greis NP, Kasarda JD. Enterprise logistics and
supply chain structure: The role of /t. Journal of Operations
Management 2000;18(5):531–47.
[53] Fletcher P. Performing a multiplant ballet. Industry Week
1997;246(23):19–21.
[54] Hahn CK, Duplaga EA, Hartley JL. Supply-chain synchro-
nization: Lessons from Hyundai Motor Company. Interfaces
2000;30(4):32–45.
[55] Fisher M. What is the right supply chain for your product?
Harvard Business Review 1997;75(2):105–16.
[56] Stevens GC. Successful supply-chain management. Manage-
ment Decision 1990;28(8):25–30.
[57] Norris G, Dunleavy JR, Hurley JR, Balls JD, Hartley KM.
E-business and ERP: Transforming the enterprise. New York,
NY: Wiley, 2000.
[58] Rudberg M. Manufacturing strategy: Linking competitive
priorities, decision categories, and manufacturing networks.
PhD dissertation, PROFIL 17, LinkVoping Institute of
Technology, 2002.
[59] Rudberg M, West BM. The bright light: Ericsson’s way
to transnationality. Working paper WP-265. Department of
production economics, LinkVoping Institute of Technology,
LinkVoping, 2001.
[60] Lee HL, Billington C. The evolution of supply-chain-
management models and practices at Hewlett-Packard.
Interfaces 1995;25(5):42–63.
[61] Olhager J, Rudberg M, Wikner J. Long-term capacity
management: Linking the perspectives from manufacturing
strategy and sales and operations planning. International
Journal of Production Economics 2001;69(2):215–25.
[62] Olhager J, Rudberg M. Linking manufacturing strategy
decisions on process choice with manufacturing planning and
control systems. International Journal of Production Research
2002;40(10):2335–52.