Abstract

Global markets are increasingly demanding organizations to collaborate and coordinate efforts for coping with distributed customers, operations, and suppliers. An important aspect of the collaboration process of distributed, often remote organizations is the coordination cost. The coordination equipment and operating costs limit the benefit attainable from collaboration. In certain cases, this cost can turn the interaction among distributed organizations non-profitable. Previous research investigated a distributed manufacturing case, operating under a job-shop model with two distributed collaborating centers, one for sales and one for production. A new model incorporating the communication cost of coordination has been developed and yields the net reward of the total system, determining the profitability of the coordination. Two alternative coordination modes are examined: (1) distributed coordination by the two centers; (2) centralized coordination by a third party. The results indicate that distributed and centralized coordination modes are comparable up to a certain limit; over this limit distributed coordination is always preferred. A key conclusion is that distributed coordination should always be preferred (to centralized coordination) when the hardware costs for the distributed system are less than or to half the hardware costs of the centralized system.