Strengthening Competitiveness Through Production Networks

eGovernment articles

Helsinki, 11 November, 2005 — Strengthening Competitiveness Through Production Networks

Research is still too fragmented in Europe, including in the ICT for enterprise networking domain. Therefore, the European Commission is promoting a structural approach aimed at integrating collaborative relevant RTD at a pan-European level, thus contributing to the creation of a genuine and powerful European Research Area (ERA). One way to achieve this has been the clustering of research projects, intended to promote exchange between projects working in related topics, allowing their individual partners to come together and to share their knowledge and experiences for mutual benefit. Project clusters also provide a common basis for dissemination among and interaction with people interested in the domain.

Strengthening Competitiveness through Production Networks

The report ‘Strengthening Competitiveness through Production Networks’ is an initiative of the “Ambient Intelligence Technologies for the Product Lifecycle” (AITPL) cluster. It is an instrument to widely disseminate recent results obtained by projects from this cluster and by other projects in the ICT for Enterprise Networking domain. All these projects share the aim to tackle the challenge of pinpointing strategies for further research in new forms of dynamic networked co-operative processes, and of keeping Europe’s manufacturing industry not only alive, but fully competitive and in a strategically leading position.

The papers presented there outline some of the major challenges which face the community of European researchers in the e-business area. Although these papers are largely devoted to a single debate – is there such a thing as a new way to develop production networks in the knowledge-based economy? – they exemplify a range of innovations in the area of networked business. Such innovations include integrated enterprise modelling for supply business processes, Build-to-Order strategies for vehicle design in the automotive industry and co-operative SME networks. Other issues addressed by the authors are the interoperability of enterprise systems and applications, standardised business processes for effective collaboration across the full supply chain as well as cross industry and end-user involvement in RFID standardisation. Innovative projects also develop web-based services for cost engineering, or enhance ICT integration and simultaneous collaboration of companies in the entire supply chain aiming at ambitious goals such as the “5-day car”.

The AITPL cluster starts from the conviction that future products and services will be designed to offer customers more value and enable manufacturers to respond faster and in a flexible manner to changing market demands. Customers are demanding ever more advanced and sophisticated products, greater choice and shorter delivery times. To satisfy this demand for differentiated and customised products at competitive prices, companies with different expertise must collaborate. But they need to do so in ways which ensure that the value chain remains flexible, so as to realise the full benefits of rapid product innovation and open competition. In addition, manufacturers are looking to make their products “smarter” by designing in added-value services as part of the customer offering. This “extended product” approach combines a product with services and enhancements that improve marketability. The customer proposition may subsist more in the benefits of the value-added elements than in the physical product itself. Enhancements can incorporate tangible features that make the product more intelligent, customised or user-friendly, including embedded features like maintenance. Other aspects, such as services, engineering or software, are intangible and make the offering more information- or knowledge-intensive.

Secondly, the cluster believes that the strength of the European economy is increasingly based on relationships between many enterprises, which form agile networks in order to enable reacting to market demands in shortest time. These networks (sometimes developed as a virtual enterprise for a specific product) are still competing successfully on a global scale with enterprises from distant countries, with important labour cost advantages. This success can only be retained, if the networks establish and maintain smooth transaction and interaction throughout the complete life cycle of the product.

The challenge facing supply chain management is easy to define but less easy to run! It is to provide the right products in the right quantity at the right place and time. As the papers in the AITPL publication demonstrate, any supply chain strategy should address key themes, such as the growing gap between the financial performance of companies with disciplined supply chain management and the financial performance of those with ‘ad hoc’ supply chain management. Strategies should also focus on the development of end-to-end processes (rather than local/functional processes) and their integration beyond organisational boundaries to realise the benefits of vertical integration without integrating. Finally the management of uncertainty needs to be improved, through various techniques of forecasting (‘range forecasting’) and risk pooling (to build flexibility), and the capability of supply chains to evolve as business conditions change must be enhanced.

The report is available in pdf form.

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