Risk Efficient Migration Strategies for Global Production Networks

The global competitive environment forces companies to increase their production efficiency. In recent years, companies attempted to increase efficiency by operating in globally distributed production networks. But these networks often grew historically neglecting a future-oriented strategy. Hence, nowadays investments in the adaptation of the network configurations are a promising lever to increase the efficiency. Since multiple influencing factors affect the efficiency of a network configuration and interdependencies of the factors have to be considered as well, the decision-making process has become very complex. Furthermore, due to the short-term cyclical nature of these factors, the adjustment time of the network configuration is even more important within this complex decision-making problem. Combining a stochastic, dynamic optimization model with a portfolio theory approach, a method for risk-efficient migration strategies for global production networks is presented in this article. The method considers both, financial and time expenses for the adaptation of the network configuration. Using the proposed method strategies for proactive adaptations of the network configuration considering the risk aversion of the decision maker can be recommended.