The Role of Integrating Relations, Inter-enterprise and Intra-enterprise Interaction

If the relations established by production enterprises are to be termed integration, the existence of the following condition is necessary: the supplier's delivery initiates the production process within the production phase preceding the main operation of the customer, i.e. enterprise as a whole. On the other hand, in extreme forms of classical subcontracting arrangements, the supplier starts production of the component much later; the production is completely transferred to a separate segment of the enterprise, whereas usually the role of the supplier is limited to order fulfilment, on the basis of the specification developed by the client i.e. the enterprise, resulting in idle time for which the responsibility is borne by the supplier. The production departments of the holding enterprise accept the scheme within which they develop dependence on the supplier, and the latter thus becomes the only source of deliveries. However, in the classical scheme, the producer uses a number of various sources of deliveries. On the basis of the aforesaid, it is possible to state what comprises the advantages of integrating relations in comparison with classical subcontracting arrangements. It is necessary to emphasize that the choice between the integrating relations and classical subcontracting depends on strategic factors in the relations between the production departments and the holding enterprise. Integration promotes increase in market share of the enterprise within the production sector to a significant extent; however, this system is exposed to strong influence of external and internal organisational and administrative factors. The larger the production departments and the enterprise itself, the more it controls various phases of production. Subcontracting relations are the alternative to integration. Unlike establishing integrating relations, the classical subcontracting arrangements can lead to undesirable consequences. The main targeted outcome of an exit from such a situation could be summarised as: decrease in production expenses, shortening the lead time in production, improvement in quality and decrease in quantity of stocks, and also effective use of technologies. Thus, the new form of the relations between suppliers and clients - interaction - is also built. This definition enables revealing characteristics of relationship between production departments and holding enterprises. It enables separating them from other forms of integration: interacting production departments and holding enterprises share information and profits. Transparency promotes establishment of climate of trust, and this factor distinguishes the inter-enterprise relations from traditional subcontracting arrangements.