Control in the extended enterprise

Abstract

In recent years, manufacturing organizations have adopted distributed and decentralized manufacturing systems as a means of increasing flexibility and maintaining cost effectiveness in order to remain competitive now and in the future. Emergence of various next generation manufacturing ideas, such as lean manufacturing, agile manufacturing, the virtual organization, and world-class manufacturing reflect a major trend toward distributed and decentralized manufacturing systems. Although a number of researchers have suggested difficulties in controlling and coordinating different manufacturing activities across heterogeneous manufacturing units, there is a lack of research attention on the design of effective management control systems of these cooperative efforts. Therefore, this research examines control issues of heterogeneous manufacturing units within a framework of the extended enterprise.

Lack of research on inter-organizational control and management issues led us to build a novel framework for this study based in the widely accepted theories of intra-organizational control, such as the study of Burns and Stalker (1961) which identified two pure forms of management control -- mechanistic and organic. Based on these two models of control, we identified four types of basic interactions of the mechanistic and/or organic management control systems in an extended enterprise. Using this framework, we investigated the impact of the interactions of mechanistic and/or organic management control systems within an extended enterprise on organizational performance in both stable and dynamic environments. Using a contingent approach, we employed system dynamics (SD) simulation modeling as the instrument of this research. Experimenting with SD simulation models, helped to understand the interrelationships between multiple dependent (or contingent) variables (i.e. external environmental condition, interactions of mechanistic and/or organic management control systems, and structures of extended enterprises) and independent variables (i.e. organizational performance) in compressed time and space. Statistical analyses indicated that a perceived "sound" framework of management control systems (i.e. the all organic management control systems) does not always perform better in an extended enterprise.