Machine and labor flexibility in manufacturing networks

Based on numerical studies and the analysis of a stylized model, we demonstrate the impact of labor flexibility on the optimal levels of machine and labor capacity. We compare the benefits obtained by personnel transfers with those of temporary workers and find that temporary employment always decreases the number of permanent workers, while personnel transfers may even allow for a larger workforce. Our results further indicate that personnel transfers are more effective in larger manufacturing networks although these benefits are decreasing when most plants in the network are capable of producing more than one product (machine flexibility). Finally, we present evidence for the efficiency of a combined usage of personnel transfers and temporary workers.