Global production networks

Global production networks (GPNs) are organizational structures created through the coordination of multiple organizations, entities, and countries that are connected by global supply chains. GPNs are distinguished by the creation of virtual organizations which enable global coordination and collaboration of different actors in the production process. GPNs enable the integration of production processes across borders as well as the sharing of information and resources. GPNs create a more efficient and cost-effective production process while also reducing the risks associated with production. GPNs are an integral part of the global economy, as they enable organizations to capitalize on the different capabilities of different countries and to improve their competitiveness in the global market.

Example of global production networks

• Automotive Industry: The automotive industry is a prime example of a global production network. Automotive companies, such as Ford and General Motors, have production facilities in multiple countries, such as the United States, Mexico, Brazil, and Germany. These companies coordinate their production processes across the different countries in order to produce their cars. Through this global production network, they are able to access different resources and expertise from the different countries, while also reducing costs and improving the quality of their cars.
• Electronics Industry: The electronics industry is another example of a global production network. Companies in the electronics industry, such as Samsung and Apple, have production facilities in countries such as China, South Korea, and the United States. Through the global production network, these companies are able to integrate their production processes and collaborate with different entities in order to produce their products. The global production network also enables them to share resources and expertise from the different countries, while also reducing costs and improving the quality of their products.
• Pharmaceutical Industry: The pharmaceutical industry is also an example of a global production network. Pharmaceutical companies, such as Pfizer and Merck, have production facilities in multiple countries, such as the United States, India, and China. These companies coordinate their production processes across the different countries in order to produce their drugs. Through this global production network, they are able to access different resources and expertise from the different countries, while also reducing costs and improving the quality of their drugs.

When to use global production networks

Global production networks (GPNs) are organizational structures created to facilitate the coordination of multiple organizations, entities, and countries in the production process. GPNs enable the integration of production processes across borders as well as the sharing of information and resources. They are an integral part of the global economy, as they enable organizations to capitalize on the different capabilities of different countries and to improve their competitiveness in the global market.

Global production networks can be used in a variety of applications:

• Cross-border production - GPNs enable organizations to outsource production to other countries, allowing them to take advantage of lower production costs, access to new markets, and a more efficient supply chain.
• Global sourcing - GPNs provide access to a larger and more diverse pool of suppliers, enabling organizations to find the best sources of materials or components at the best prices.
• International collaboration - GPNs facilitate collaboration between organizations in different countries, enabling organizations to share resources, knowledge, and expertise.
• Risk management - GPNs can help organizations manage risks associated with production, such as currency exchange rate fluctuations and supply chain disruptions.
• Product innovation - GPNs enable organizations to access new technologies and capabilities from around the world, allowing them to develop innovative products and services that can be competitive in the global marketplace.

Types of global production networks

Global production networks encompass a range of different organizational structures, including:

• Global Value Chains (GVCs) which involve the coordination of the production process across multiple countries and the sharing of information and resources;
• Global Sourcing Networks (GSNs) which involve the sourcing of raw materials, components and services from multiple countries around the world;
• Global Manufacturing Networks (GMNs) which involve the coordination of the production process across multiple countries to produce finished goods;
• Global Logistics Networks (GLNs) which involve the coordination of transportation and delivery of raw materials and finished goods around the world;
• Global Supply Chain Networks (GSCNs) which involve the integration of supply chain activities across multiple countries, such as the coordination of inventory management and order fulfillment;
• Global Business Networks (GBNs) which involve the coordination of activities across multiple countries, such as the coordination of marketing and sales activities; and
• Global Innovation Networks (GINs) which involve the coordination of research and development activities across multiple countries.

These networks facilitate the integration of production processes across borders as well as the sharing of information and resources, enabling organizations to capitalize on the different capabilities of different countries and to improve their competitiveness in the global market.

Advantages of global production networks

Global production networks (GPNs) are organizational structures created through the coordination of multiple organizations, entities, and countries that are connected by global supply chains. GPNs offer numerous advantages, including:

• Increased global efficiency and cost-effectiveness: GPNs enable organizations to leverage the strengths and capabilities of different countries in order to reduce costs and increase efficiency.
• Improved resource sharing: GPNs enable the sharing of resources across borders, allowing for the leveraging of resources from all countries involved in the production process.
• Reduced risk: By connecting all actors in the production process, GPNs reduce the risks associated with production, such as production delays and quality issues.
• Increased competition: GPNs enable organizations to better compete in the global market, as they allow for the creation of highly efficient production processes.
• Greater collaboration: GPNs foster collaboration and coordination between different actors, creating an environment that encourages innovation and creativity.

Limitations of global production networks

Global production networks (GPNs) have several limitations. These include:

• Social and cultural implications: GPNs can have a negative impact on social and cultural norms, as they often involve the relocation of production processes to countries that have lower labor costs, or to countries with less stringent environmental regulations. This can lead to a decrease in job opportunities in the countries where production is relocated, as well as a decrease in wages and worker rights.
• Risk management: GPNs involve a great deal of complexity and can be difficult to manage. As GPNs involve multiple countries and organizations, there is a high risk of disruption in the production process due to political or economic changes. GPNs also increase the risk of cyber-attacks, which can have a major impact on the production process.
• Regulatory and legal environment: GPNs often involve the crossing of international borders, which can make it difficult to comply with local regulations and laws. This can lead to delays in production, as well as increased costs due to compliance issues.
• Logistics: GPNs require a great deal of coordination between different countries and organizations, which can be difficult to achieve. This can lead to delays in production, as well as increased costs due to logistics issues.

Other approaches related to global production networks

In addition to global production networks (GPNs), there are other approaches to global production coordination and collaboration. These include:

• Offshoring: This is the practice of relocating production activities to a foreign country in order to take advantage of lower labor costs, better tax incentives, or other economic benefits.
• Outsourcing: This is the practice of contracting production activities to a third-party organization in order to reduce costs and gain access to specialized expertise.
• Global sourcing: This is the practice of sourcing goods and services from suppliers located in different countries in order to gain access to different markets, materials, and technologies.
• Strategic alliances: This is the practice of forming partnerships with other organizations in order to expand the scope of operations and gain access to resources.

Global production networks — recommended articles

Trade liberalization — Importance of international business — Global value chains — Offshoring and outsourcing — International joint venture — International competitiveness — Economies of scale — International division of labor — Global supply chains

References

• Henderson, J., Dicken, P., Hess, M., Coe, N., & Yeung, H. W. C. (2002). Global production networks and the analysis of economic development. Review of international political economy, 9(3), 436-464.
• Coe, N. M., Dicken, P., & Hess, M. (2008). Global production networks: realizing the potential. Journal of economic geography, 8(3), 271-295.
• Yeung, H. W. C., & Coe, N. (2015). Toward a dynamic theory of global production networks. Economic geography, 91(1), 29-58.