Stability And Profit Allocation In Networked Manufacturing System

Networked manufacturing system is architected in the virtual form and therefore the governance relationship among cooperating companies is usually informal and dynamic. This unique relationship enables networked manufacturing systems quick response and resource-integrating capabilities, but at the same time cast instability to the system. Stability is necessary for the networked manufacturing system to achieve competitive advantages and superiority, and proper distribution of profits within the system is believed to be the most important factor in maintaining stability.Looseness of governance structure makes it possible for the networked manufacturing system to aggregate resources across time and space constraints, and thus to generate operational effectiveness and quick response. However, to help due to the lack of control, the cooperating companies might choose to quit the system on behalf of their best interests and therefore endanger the organic composition of the networked manufacturing system. The paper reviewed the managerial foundation and schools of thoughts of enterprise structures, and we concluded that the networked manufacturing system is an "open system". Based upon networked manufacturing theories and practices, profit distribution theories, and the behaviors of cooperating companies, we concluded the key factors influencing the stability of networked manufacturing system. The study found that cooperating company’opportunistic behaviors are the sources of instability to the networked manufacturing system. By employing transaction cost theories, this study proposed that low asset specificity of cooperating companies and high switching costs of the core company motivate opportunistic behaviors. Therefore, asset specificity and switching costs are applied in the probability of opportunism behaviors, which directs the adjustment of profit distribution to achieve stability of the networked manufacturing system. The governance structure in networked manufacturing systems is both market and society based, which called for a hybrid model of profit allocation mechanism between market and society. In consideration of the stability of networked manufacturing systems, a profit allocation model is modified to incorporate the stability factors. Given the nature of cooperation based networked manufacturing system, both of market and society shape the governance structure of networked manufacturing system. Therefore, in the hybrid model of profit allocation, fairness represents society and competitiveness contribution represents market. As a new form of open system, networked manufacturing systems incorporate stability factors in the hybrid model of profit allocation, which offers insights for building an effective as well as stable networked manufacturing system.Profit distribution model based on social and market, fair and reflects the social attributes, while the core competitiveness of market properties. Network of manufacturing as a new open system, its stability is the key to networked manufacturing advantage to play an important role, but difficult to achieve due to various factors, based on asset specificity and switching costs to measure the opportunism of the participating enterprises behavior of probability, and the development of corporate profits allocation strategies, and build a networked manufacturing projects to consider the stability of the profit distribution mechanism, and hope that through our research can contribute to the development of networked manufacturing theory and practice.