Configuration of International Supply Networks and their Operational Implications: Evidences from Manufacturing Companies in Indonesia

In this paper, we attempt to investigate how the value chain is configured in several international supply networks and identify the implications that supply network configuration decisions bring to the operation of the network. The aspects of configuration investigated here including allocation of value chain activities including: research and development, procurement, manufacturing, distribution, sales and marketing and demand management and geographical span among suppliers, manufacturers and markets. Results form empirical study involving six manufacturing companies in Indonesia belonging to international supply networks show that one of the main value activities handled by the companies in Indonesia is, not surprisingly, manufacturing activities. In all cases research and development activities are centralised and handled directly by corporate headquarters. Most cases are characterised by supply network flexibility where capacity can be switched from one subsidiary to another. There is only one case (shoe manufacturer), where the network is structured based on process while the rest of the networks are structured based on products. Looking at the geographical span of the supply networks, all the case companies use a European supply base to a great degree while the manufacturing process are conducted in Indonesia to serve regional or global markets. In most cases, this practice not only adds complexity to the global network, but also puts additional lead-time in the global pipeline, which makes the supply network less responsive to any changes happening in the business environment.