Modular Network Design: Using Information and Communication Technology to Allocate Production Tasks in a Virtual Organization

The increased interest in customer service and the trend towards customization gives rise to new organizational forms such as the virtual organization. This paper introduces the Modular Network Design (MND) approach to complement Mowshowitz' (1997) theory of virtual organization. This theory focuses on metamanagement of the virtual organization and consists of four activities: (1) determine and analyze customer requirements, (2) track the possibilities for satisfying these requirements, (3) develop and allocate production tasks among the members of the virtual organization, and (4) assess and adjust tasks and allocation procedures. The MND approach elaborates on this theory by breaking down both the requirements and the production tasks into modular entities, and by measuring the performance of the resulting virtual network in terms of operating costs and throughput time. The major contribution of the MND approach lies in its ability to support the assessment of alternative allocations of production tasks among the members of a virtual organization, using Information and Communication Technology (ICT) as enabler. The assessment of such alternative designs is illustrated by an application of MND in the air cargo industry. The results show how the virtual organization and its members can realize significant improvements in operating costs and throughput times when applying ICT to link and reallocate their modular production tasks in response to customized orders.