Temporal elements in the spatial extension of production networks

Journal article, 2006

The spatial extension of production networks presents a significant challenge to managers accustomed to reducing lead times by geographically contracting supply chains. This paper extends the theory on time in transportation by defining the elements of transport time, order time, timing, punctuality, and frequency and elaborating on their characteristics. Structured along these elements, it analyses the consequences of extending production networks from within a mature economic region, mainly the EU-15, U.S., and Japan, first to adjacent and then to nearby and finally distant low-cost regions. Distance obviously affects the transport quality in all time dimensions. Except for air parcel services that globally match what road transport offers within an economic region, the longer the distance, the lower the time-related performance. Distant, low-cost regions, meaning China and India, also imply a polarisation between air and sea transport at opposite ends of the time, cost, and capacity scales. This supply gap restricts the types of products traded. The conceptual framework is illustrated in the setting of a global vehicle manufacturer spatially extending its sourcing. It demands that sequenced sub-assemblies and small, cheap, and generic components are delivered from the vicinity of each assembly plant. Batched components can be sourced from adjacent regions, but deliveries from longer distances imply storage at pick-up points to fulfil their time requirements. Hence, the suppliers must offer the manufacturing firm deliveries as if they produce relatively close to the assembly plants.