Computational Perspectives IV

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Information Can Reduce Number Of Bad Handoffs

Imagine a car factory divided into specialized production units. Suppose, furthermore, that the unit responsible for making wheels does not know how many engines are manufactured by the engine-producing unit. In this case, the production numbers are likely not to match up. As a result, the company ends up with wasted resources, in the form of extra wheels (or engines).

On the other hand, if the wheel-making section were to find out the expected engine output, they would produce just the right number of wheels, thus maximizing the factory's overall efficiency. Clearly, this is yet another example of information transfer that may have a positive effect on organizational productivity.

Van Alstyne and Bulkley crystallize such observations as follows:

Hypothesis 7c: Coordinating information improves the efficiency of existing processes by reducing the number of bad handoffs and improving resource utilization rates.

Bad handoffs resulting from poor coordination don't have to exist only at the level of a single firm. Often an entire supply chain is plagued by the problem. In the following slides we explore the mechanisms behind such inefficiencies in organizational behavior.

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