Importance of Network Design in Business

by Vikrant G. Assignment help experts

Network design is a key business decision as well as a technological decision. Why? Provide an example of a company you believe has a good network design, providing supporting rationale on why that network is effective and what types of business decisions or reports can be made from its utility.

Levi Strauss, and Reebok, enlist Hong Kong-based Li & Fung to manage production and shipment of their garments. Li & Fung handles product development, raw material sourcing, production planning, quality assurance, and shipping. Li & Fung does not own any fabric, factories, or machines, outsourcing all of its work to a network of more than 7,500 suppliers in 37 countries all over the world.

(Essentials of Management Information Systems, 8th Edition. Pearson Learning Solutions p. 96).

Importance of Network Decision in Business

In today’s competitive business environment, the effective expansion of business in different international markets is the major challenges for an organization in order to take competitive advantage and increase business growth. In this way, good network design plays an important role in the process of distribution of products in different international markets (Laudon & Laudon, 2010). It is a key business as well as technological decision for a multinational firm, because it involves several supporting lines or channels of business related to product development, production planning, distribution network, supply network, and shipping. In addition, a good network design also enables the management to support fast movement of information or data across different platform of the organization (McNurlin, Sprague & Bui, 2009).

Along with this, network design plays a crucial role to design and create an effective supply chain network within the organization, because it has great implications on the quality and delivery of products or services to customers. In addition to this, network design focuses on the process, location, capacity, production facilities, and warehousing facilities that help the firms to meet customer demand by delivering products or services at the right locations at the right time due to effective supply chain network design (Laudon & Laudon, 2010). At the same time, network design is also a key business decision, because it is important, when two firms are merged to create a combined business firm.

Example of a Good Network and their Benefits

At present, there are many multinational companies like eBay, Amazon, Levi Strauss, Reebok, Wall-Mart, Microsoft, cell phones companies etc. that has a good or effective network design in their different business channels. In this context, Coco Cola Company is a good example that has a good network design in its production, supply, and distribution network. It has extensive, well organized, and world’s largest global distribution network in the beverage industry (Annual Report, 2010). The company has a good network of bottling and distribution operations, bottling distributors, distributors, wholesalers, and retailers in its current distribution network that helps the company to deliver their beverage products to consumers all across the world according to demand.

In this way, Coca Cola has signed agreements or legal partnership with bottlers all over the world to expand its distribution network in global market. The current distribution network of the company is effective, as it plays a major role to increase market share in global beverage industry as compared to others. Along with this, the network design of supply chain network of the company is also effective and efficient due to cost effectiveness, system effectiveness, and speed to deliver products in the market (Mühlbacher, Leihs & Dahringer, 2006). The global presence of Coca Cola brand’s, higher market share, annual sales revenue, and competitiveness also indicates the effectiveness of supply chain and distribution network of the company (Annual Report, 2010).

With the help of effective supply chain network design, there are several business decisions related to warehousing locations, distribution locations, price of products, distribution channels, distributors etc. It is because; the effective supply chain and distribution network can be helpful for the firm to make appropriate and effective decisions in order to attain competitive advantage in terms of effective distribution system in beverage industry (Laudon & Laudon, 2010). Along with this, there are some other important business decisions related to the selection of suppliers, contractors, and dealers as well as development of marketing and promotion program can be made by the usefulness of effective network design (Mühlbacher, Leihs & Dahringer, 2006).

References

Annual Report. (2010). The Coca Cola Company. Retrieved February 17, 2012, from

http://www.thecoca-colacompany.com/investors/pdfs/form_10K_2010.pdf

Laudon, K. C & Laudon, J.P. (2010). Essentials of Management Information Systems (9^th ed.). USA: Prentice Hall.

McNurlin, B.C., Sprague, R.H & Bui, T. (2009). Information System Management Practice (8^th ed.). South Africa: Pearson Education.

Mühlbacher, H., Leihs, H & Dahringer, L. (2006). International marketing: a global perspective (3^rd ed.). London: Cengage Learning EMEA.