A framework for designing efficient value chain networks

Strategic interorganizational networks aid organizations in gaining competitive advantages and improving production efficiencies. Network organizations, virtual corporations, and value-adding partnerships are envisioned by many experts as the epitome of interorganizational networks for the 21st century. These multi-organizational structures are viewed as a solution for rapid introduction of products while maintaining high quality and minimal costs. One common key issue in designing these new forms of organizations is the partner selection process. The business processes, owned by organizational partners, must be efficient both individually and as a collective group. This paper proposes a two-phase quantitative framework to aid the decision making process in effectively selecting an efficient and a compatible set of partners. Phase 1 identifies efficient candidates for each type of business process (e.g. design, manufacturing, distribution, etc.) utilizing data envelopment analysis. Phase 2 involves the execution of an integer goal programming model to determine the best portfolio of efficient partners based on a number of compatibility objectives. Model application and insights are evident through an illustrative example.