Structure and relationships within global manufacturing virtual networks

Abstract

Global Manufacturing Virtual Networks (GMVNs) are dynamically changing organizations formed by Original Equipment Manufacturers (OEMs), Contract Manufacturers (CMs), turn-key and component suppliers, R+D centres and distributors. These networks establish a new type of vertical and horizontal relations between independent companies or even competitors where it is not needed to maintain internal manufacturing resources but to manage and share the network resources. The fluid relations that exist within the GMVNs allow them a very permeable organization easy to connect and disconnect from one to each other as well as to choose a set of partners with specific attributes. The result is a highly flexible system characterized by low barriers to entry and exit, geographic flexibility, low costs, rapid technological diffusion, high diversification through contract manufacturers and exceptional economies of scale. Anyhow, there are three major drawbacks in the GMVNs that should be considered at the beginning of this type of collaborations: 1) the risk of contract manufacturers to develop their own end-products in competition with their customers; 2) the technology transfer between competitors OEMs through other members of the GMVN and 3) the lose of process expertise by the OEMs the more they outsource manufacturing processes to the network.