Multi -plant networks: Models and insight

The past decade has seen the emergence of a truly global economy and a fiercely competitive marketplace. One outcome of this has been the creation of global and domestic multi-plant networks. Firms operating with such networks are faced with unique challenges and opportunities. Strategic, tactical and operational level decisions become quite complex in multi-plant networks. The overall aim of this research is to gain managerial insight into a difficult strategic problem with the aid of simple mathematical models.;There are at least two types of decisions in multi-plant networks: configuration and coordination. Configuration decisions are typically strategic and long-term and involve capacity acquisition and plant focus. Coordination decisions are tactical and short-term, and involve the efficient allocation of configured capacity. Limited work has been done in the area of configuration and coordination of multi-plant networks. This research develops managerial insight into the strategic multi-plant configuration problem. To a limited extent, this research also investigates coordination issues in multi-plant networks.;Analytical models are developed to gain insight into the multi-plant configuration problem in the presence of demand uncertainty, logistics costs, and backorder penalty costs. The impact of economies of scale of capacity, component commonality and the sensitivity of configuration decisions to other key parameters is also investigated. Optimal policies are developed with the aim of minimizing capacity acquisition costs and long-term average operational costs.;A number of qualitative insights are derived based on analytical results and simple numerical examples. For instance, we find that flexibly configured product plant networks may be preferred over process plant networks even in the presence of large economies of scale. Also the consideration of average operational costs in the long-term configuration decision leads to more effective strategies. Further, the sensitivity of the configuration decision to key parameters is not always predictable and/or intuitive.;Multi-plant coordination is studied in conjunction with configuration. Insights are developed into the value of demand information in the context of the configuration-coordination problem. It is found that as marginal capacity acquisition costs increase, the advantage of having better demand information diminishes.