* Stages or levels of effectiveness in the strategic role of manufacturing operations to support overall corporate objectives

* Internally neutral

* Externally neutral

* Internal support

* External support

* References

Keywords: strategic levels of excellence, the role of Production & Operations;

Job Type: Theoretical (Journalistic)

Stages or levels of effectiveness in the strategic role of manufacturing operations to support overall corporate objectives

In the competitive environment that exists today, no company can afford not to use all its resources. If not allowed to contribute operations function (or not expected to contribute) to the development of company objectives are not very good possibilities for long-term success (Chase & Aquilano, 1994). The manufacture can play several roles and / or strategic roles in the context of business growth. Robert H. Hayes & Steven C. Wheelwright (1985) have described four sequential stages or levels in the strategic role of manufacturing operations to support overall corporate objectives (see Table 1).

Source: Adapted from R.H. Hayes & S. C. Wheelwright (1985, pg. 58).

Internally neutral .- At this level of strategic performance, the system of production and operations function in general, contribute little to the success of the organization. Top management sees this role as neutral, that is considered inert in the level of skills and therefore do not expect a positive contribution, in fact, tends to suppress it.

Manufacturing is only a necessary evil and the basic attitude is negative, consisting of: “How can we avoid problems”. Seek to minimize the negative impact on its manufacturing business. Invest in the area of personnel management to avoid strikes and undesirable unforeseen problems. They managed to remove less reliable suppliers who deliver late, with inadequate amounts or poor quality. Direct manufacturing plants so as to avoid irregularities in the supply and production flow. This is the kind of companies that prefer to operate without manufacturing processes. In many cases these companies subcontract much of the production and not develop their own systems of production.

Companies at this level generally considered the potential of manufacturing operations as a direct result of a few structural decisions on capacity, facilities, location, technology and vertical integration. Generally, top management makes these decisions, supported by consultants. Are given little or no importance to infrastructure problems such as manpower policies, planning systems, measurement systems and process improvement. The production staff of the company only takes over the daily decisions of “every day”, and drawing production. Both workers and management operations are characterized by not having a lot of training and professional development.

There are constant measurements and detailed checks of the results aimed at analyzing the short-term productivity because you realize the senior management promptly of any change in order to take corrective action. Address, usually runs very little risk of investments in the manufacturing area. In short, companies are at this level consider the production department as a low-tech section that does not require high skills and sophistication or the goal is not to maximize value for the competitiveness of the function, but to avoid problems detrimental to the company’s position in the market.

Externally neutral – The second level is also a kind of neutrality of the manufacturing function, but in this case, they seek a ‘competitive neutrality or external, “or what is, a parity with major competitors in the industry. Typical examples, but not only are the traditional industrial sectors as steel making, automobiles and heavy equipment. These companies seek competitive neutrality essentially following industry practices either in labor issues, equipment acquisition and planning and adjustment of capacity increases. Consider the capital investment in new equipment and facilities as the most effective in achieving a temporary position and competitive advantage of economies of scale related to the production rate as the most important factor of production efficiency.

As in Tier 1 firms resort to external sources for technological improvements in the process, being more common to buy to develop its own technology. Top management here believes that the resource allocation decisions are the most effective means to solve the major strategic issues of manufacturing. These companies manufacturing qualitative capacity of the industry average, maintain some stability when there is a stable set of competitors and a growing market, but are insufficient when new competitors or appreciates overcapacity in the sector.

In short, companies belonging to the strategic level are characterized by pursuing a strategy based on constant minimizing performance differences found with the competition. Attitude is largely based on a fan. But it should be noted that although constituting a higher level of activity related to level 1, this strategy is almost doomed to failure. If the ambitions are limited simply to minimize the differences, there is potential that differences remain as the leading competitors continue ahead. Trying to achieve the best often leave behind companies who try (De Meyer & Wittenberg-Cox, 1994).

Domestic support – Companies at this level of strategic action expect the production function actively support and strengthen the competitive position of the organization. Consider manufacturing as an internal support in achieving their objectives by providing processes that fully support the company’s strategic decisions. This step represents a significant departure from neutrality of the above and are used all decisions of manufacturing operations. The production staff has the authority to make decisions that are considered relevant as long as they are consistent and coherent with the overall business strategy. The corporate strategy is translated into terms that make sense for production and takes a view of creativity and long-term operations, all the investments and changes in the production system must be adjusted to support the achievement of the mission and corporate objectives and / or business.

Level three is the natural consequence of the success in developing an effective strategy, based on a formal planning process and the desire to support this strategy across all functional departments. You want to be creative and production management takes a long view. Manufacturing makers seek at all times have a broader view of their role trying to understand the overall strategy and key objectives to meet, but the heads of production only to support the competitive strategy, and not to actively engage in formulating the same.

External support – In this stage, not only is expected to manufacture and system operations ‘support’ corporate strategy, but to contribute actively in the formulation and development of it. Manufacturing thus becomes a key element of business strategy. This condition does not mean that production strategy, but the company began to fully utilize the core competencies of manufacturing to create sustainable competitive advantages. An example of such firms could be Hewlett-Packard has actively used its strengths in manufacturing on a general (De Meyer & Wittenberg-Cox, 1994, Schonberger, 1994). The same could be said of another set of excellent companies like Toyota has built its success largely based on the quality and efficiency of its development and manufacturing processes, like other German manufacturers of machine tools have survived thanks to its excellent manufacturing processes.

Decisions and plans are made here are long term, and investments are intended to systems and the workforce on equal opportunities with capital resources. This means giving equal importance to the structural (facilities and equipment) to infrastructure (standards, systems and procedures) as possible sources of continuous improvement and build competitive advantage. In a company of this level, manufacturing plays an equally important role than other organizational functions (marketing, engineering or finance). There is an active horizontal communication, both formal and informal, between departments where no one dominates over another. The direct involvement of the manufacturing function in formulating the overall strategy and enhances this functional interaction, as well as other areas, the production function becomes a valuable source of management staff across the organization.

The Level Four companies generally fall into two strategic categories. To the first belong those companies seeking a balance between all its activities and intend that each of the integrated functions satisfy the role of external support to serve the corporate strategy. In the second category are those companies with a business strategy that relies heavily on the skills, resources and manufacturing expertise. These companies give much importance to the manufacturing functions as a means of achieving competitive advantage, in fact, other functions relegated to a secondary or accessory, a measure that can be so dysfunctional as to give the production function with a reactive role .

The four levels or stages described above are part of a process that indicates the path and pace that a company must follow in their quest to enhance the contribution of the manufacturing function. According to Hayes & Wheelwright, the inertia of large firms – their attitudes and habits rooted – favors the gradual, systematic and cumulative level of development to the next, rather than trying to skip a level by allocating additional resources to solve problems. The transition from one level to another, stand, or is it simply a matter of unlimited resource allocation, completion of the change is for most companies a major task and often very difficult.

In analyzing this model, Whybark (1986) believes that the four stages reflect the increased participation of the production function of the planning process, from being internally neutral, which means not spoil things to the last external support where production acts as an active partner in the strategic planning process and seeks ways to improve their ability to support the objectives of the company.

For our part, coinciding with Conca Flower & Molina (1998), we believe that until a company has not reached level three (3) can not claim to have a manufacturing strategy, at least in the sense that part of any how the company’s strategic process. Until then, we consider production operations are there, as inevitable and just expects them to not disturb and interfere in the strategic deliberations of senior management. Thus, the role is completely passive and reactive from a strategic standpoint, since their configuration and evolution is reduced to the inevitable, or by the requirements of the product (level 1) or competition (level 2). This situation can support the company while in possession of clear advantages in other areas, and involves taking in the best case, the follower role in production. But remember that this strategy does not have much chance of success in the future, and to pursue a strategy to minimize the differences, means accepting that always stay ahead of competitors. The excellent companies they do is parameterize and quantify the differences and at least overcome.

Nevertheless, we can postulate that firms located in levels 1 and 2 do not necessarily have production systems obsolete. In fact, it is usual, especially at level two, imitate successful strategies and update the production area, taking some of the new technologies and management techniques that have proved useful in leading companies. Process innovations that most often contribute to this change are the JIT, MRP, CAD / CAM or CIM.

All this is positive within a framework of assessment, but also have important disadvantages as we reveal Mills, Platts & Gregory (1995) and Martinez (1992): first, is that they are imitating or doing something that other companies have already done before, the second is to assume that while imitating competitors, they have not made further improvements, the third, that by imitating the best practices, it is very unlikely to develop the skills needed in the manufacturing area to develop and understand their own strategies, especially if you buy packaged solutions from external consultants, and fourth is that the strategy to imitate not usually cover all strategic areas of production, so if this is so and not running into a global strategic context can fail.

In the last two levels and includes operations in the thoughts of business leaders, at this point, you can talk about real manufacturing strategy, and even founded to support competitive advantage. The production is no longer a technical problem of minimizing costs to become a foundation of business strategy (Fernandez Casariego, 1990). Although, as claimed Mills, Platts & Gregory (1995), the lowest level studied in the literature have been the three (3), the growing interest in issues such as organizational learning, core skills and competence based on skills, intellectual capital and intangible resources management, etc., are causing increased concern for the last level.

The performance of the production function at level four (4) is generally associated in literature with the concept of world-class manufacturing (WCM: World Class Manufacturing), an approach that is used to define the overall objective of the company’s operations . However, take note that this perspective is not the only one that exists and there has to be the best for the entire company.

As evidenced by Chase & Aquilano (1994, pg. 961) “although it is unlikely that production can generate a lot of support if not involved (stages 1 and 2) it is not always desirable to assume an offensive position representing strong manufacturing investment capital to be world class or more Japanese than the Japanese. In fact, maybe you can best spend money to improve marketing, product design or simply to put in place the current manufacturing operations, through methods continuous improvement. ”

Here, and in summary chart (see Figure 1) represent the four phases or stages of performance of manufacturing operations in the overall business strategy.

To view the graph select the “Download” top menu

Figure 1. Developmental stages of the strategic role of manufacturing within the company.

Source: Prepared from Martinez (1992) and Miltenburg (1995).

References

Chase, R.B. & Aquilano, N.J. (1994). Management and Administration of Production and Operations. 6 th editions. McGraw Hill – Irwin.

Conca, F.J. & Molina, H. (1998), Operations Management and Business Competitiveness, Instituto de Cultura Juan Gil-Albert, Alicante.

De Meyer, A. & Wittenberg-Cox, A. (1994), New Approach to Production Function, Folio, Barcelona.

Casariego Fernandez, Zulima (1990), “The production as a strategic variable,” Economics, No.7, p. 22.

Hayes, R.H. & Wheelwright, S.C. (1985), “Competition and the role of manufacturing”, Harvard Deusto Business Review, 4 th quarter, no. 24, pp. 57-70.

Martinez, A. (1992) ‘The manufacturing strategy and competitiveness of the company. ” Senior Management, no. 162, pp. 151-160.

Miltenburg, J. (1995). Manufacturing Strategy. Productivity Press, Portland, Oregon.

Schonberger, R.J. (1994), World-Class Manufacturing: The Next Decade, Prentice-Hall, Mexico.

Whybark, D.C. (1986), “Manufacturing Strategy Management”, Irmis Working Paper, School of Business, Indiana University, cited in Conca, FJ & Molina, H. (1998), Operations Management and Business Competitiveness, Instituto de Cultura Juan Gil-Albert, Alicante.

Mills, J., Platts, K. & Gregory, M. (1995), “A Framework for the Design of Manufacturing Strategy Processes. A Contingency Approach”, International Journal of Operations & Production Management, Vol 15 No. 4, pp. 17-49.

Santiago Ibarra Myron

Department of Industrial Engineering

Universidad Central de Las Villas (UCLV)

Industrial Engineering from the Universidad Central de Las Villas (UCLV).

European Diploma in Business Administration.

Masters (MSc) in Creative, Strategy and Business Management from the Autonomous University of Barcelona, Spain.

Doctor (PhD) in Technical Sciences from the Universidad Central de Las Villas (UCLV).