Many firms are failing to establish effective global production networks and rely too heavily on short-term outsourcing and offshoring to countries such as India and China, (IfM) has warned.


Businesses need to establish a systematically designed global ‘footprint’ or network, attuned to the constantly changing business environment, rather than pursuing quick cost reductions, said Christodoulou, a Senior Industrial Fellow at the IfM and co-author of a recent IfM report “Making the right things in the right places.”

Speaking at Subcon 2008, the International Subcontract Manufacturing Show at the NEC in Birmingham, Mr Christodoulou argued that the real benefits in the long-term will come not from ‘quick fixes’, but from a systematic approach to developing production networks.

Many of the world’s biggest manufacturing firms could be missing out on “breathtaking” benefits, he said, because their production networks are not designed to be suitable for 21st century markets.

Many companies are using international networks they have inherited via mergers and acquisitions. The resulting legacy is a haphazard collection of plants which typically lacks global coherence and is more suited to serving yesterday’s customers than tomorrow’s, said Mr Christodoulou.

Companies need to define the role of individual factories clearly, rather than asking plants to be ‘jacks of all trades’. Specialised plants built into a strategically-informed network will perform more effectively, he said.

The constantly changing nature of the global environment means that it is essential these issues are continually addressed and adapted to meet evolving circumstances.