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Linking strategy to production management structures and systems
production economics ELSEVIER
Int. J. Production
Economics
34 (1994) 293-304
Linking strategy to production management structures and systems A.S. Carriea, *, R. Macintosha, aDepartment q/Design
Manyfacture
A. Scotta, G.A. Peoplesb
and Engineering Management, Uniwrsity qf Strathcl.vde, 75 Montrose bClvde Blowers Ltd., Clydebank, GlasgowI, G812XD. UK
St., Glasgmc. GI IXJ,
UK
Abstract This paper describes an approach being developed by the authors to link strategy to both the production management structures and systems. A variety of existing approaches have been examined and from these a framework and supporting methodology are being defined to help manufacturing companies, and in particular SMEs, link these vital areas. Examples of the work performed to date are included, in the form of a number of tables.
1. Introduction
In order to compete more effectively a great many firms are strenuously reorienting themselves so that their structures and systems more effectively support their revised strategy. Integrated manufacture requires that production management structures and systems are aligned with the manufacturing strategy, and that the manufacturing strategy is correctly aligned with the business strategy. At present there is a lack of systematic methods for ensuring this integration; most approaches are purely verbal and descriptive, often step-by-step checklists, and are limited in scope. The triangular interactions between strategy, structures and systems have been highlighted by
*Corresponding
author
0925-5273/94/$07.00 (0 1994 Elsevier Science B.V. All rights reserved SSDI 0925-5273(94)00013-Z
Pascale and Athos [l]. They define these terms as fol1ows. (1) Strategy: the plan to reach goals, (2) Structures: the characteristics of an organisation’s management, (3) Systems: the routines for processing and communicating. In the context of this paper, the organisation concerned is the production management organisation. A review of the literature reveals a virtual absence of integrated methodologies for the chain of decisions linking business strategy to production management systems. As stated by Kim and Lee, [2]: “Integration of relevant literature such as business strategy research and consistent definition about manufacturing strategy concepts and terminology have yet to be done.” The literature on business strategy is very wide. Most relates closely to organisation theory and marketing. Several contributions relate to the
company’s general stance in the marketplace and to aspects of internal organisation, Miller [3, 43, Miles and Snow [S], but make virtually no reference to manufacturing, although they do include pointers for product development policies. Some, such as Porter [6, 71, focus on competitive criteria, leading to order winning criteria which provide a link to manufacturing strategy at a rather superficial level. The organisation theory literature, Handy [S], Miller et al. 133, too usually makes little direct connection to manufacture, Woodward [9]. By contrast there are significant contributions relating new technology to organisation, Forrester et al. [9], Whiston [ll], although these generally concern CAD, CAM and FMS rather than production management systems. The literature on munefircturing strateyy is now extensive, in which major UK contributions have been made by Hill [ 121, Voss [ 133, Platts and Gregory [14] and Frizelle [15]. These generally have strong linkages with business strategy, and deal with manufacturing issues such as product life cycles, volume-variety trade-offs, make to order versus make to stock, GT and FMS. Their contributions to production management system design are usually restricted to discussions of typical structures such as MRP, JIT or OPT. These works relate to technological aspects of production management structures, such as GT and FMS, but generally disregard the structural issues of production management system design, such as the arrangement of production management processes and decisions into functional activities. There have been many major contributions in the field of design of production management
systems.
Barber and Hollier [ 161 worked on a classification of variables, but had little reference to strategy as such. Maull. Hughes, et al. [17, 181 have worked on designing production management systems in which the first step is the identification of the manufacturing strategy, however, this aspect of the work is rather rudimentary. Kochhar 1191 has also made a significant contribution to production management systems design, classifying requirements in terms of complexity, uncertainty and flexibility, but without direct connection to business strategy.
2. Review of relevant research Whilst much has been written about strategy, little has been written about translating these ideas down to the level of company operations. Also there seems to be reluctance to define how to integrate manufacturing systems with strategy. Writers tend to recommend a panacea such as M R P, JIT or OPT, more for its promise of improvements than as the best fit to strategy, Berry and Hill [20]. Perhaps there is a clue in studies by Lindberg [21] who shows that timescales for planning technological change are much longer than for planning work organisation changes. As a result, work organisation changes are often an afterthought implemented by operations management where major technology changes have their roots in strategy and are seldom integrated. Since manufacturing systems are the means of adding value and generating profit they must be designed to accomplish the strategic intent and not just to satisfy some misguided notion of strategy conceived and gestated in a corner of the business. The imponderable seems to be how much of any manufacturing system is designed and how much is evolved by chance, or depends on someone to champion it through (of course much the same thing applies to strategy). Even though each firm and manufacturing system is different, none will be so unique that it does not share some basic characteristics and problems with others. The main premise therefore is, that it should be possible to identify a suitable taxonomy to describe firms which find themselves in, or plan their way towards, similar strategic configurations so that operating conditions can be generalised. Suitable manufacturing strategies and systems can then be prescribed as being the most likely to succeed in contributing to achieving the firm’s goals. However, when faced with a search for secondary information on the total integration of a business system through strategic configuration and direction with goal achievement supported by manufacturing strategy through a successful manufacturing system, one is faced with a bewildering range and volume of books, journal publications and papers. Most are set in a particular context and are not susceptible to generalisation outside the
A.S. Carrie et al.llnt.
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differentiating factors their authors favour. They deal with criteria which are obviously salient to the observer and are often aligned at extreme ends of a continuum, e.g., too broad a taxonomy or too narrow; totally devoted to top-down strategic models or to system panaceas. The emerging truth is that most contributions are generally disconnected and truncated views on corporate strategy, business strategy, manufacturing strategy and production management systems. The search for attempts to define and illustrate integration reveals a paucity of models which are integrated and reiterative through the various levels of business. An initial search and scan of readily available papers and books, identified literally hundreds of further references to support aspects of the authors’ cases. Indeed authors seemed to vie with each other to find support for their ideas and thesis. Many were singular references and not cross referenced over several related publications, although some authors seemed to be regularly referred to, e.g., Hill, Miller and Porter. Without detailed study it could be suspected that, as with integration through a business, links to references are very tenuous indeed. This feeling of lack of sufficient publications on integration is even borne out by comments of the authors themselves with publications attacking the lack of integration between the levels. The problem of toppdown verbal models is also identified by Amar [22] who considers that formulation of strategy is normally top down starting with environmental scanning and the firm ignoring to some extent its internal environment. This can lead to relegating manufacturing strategy and hence systems to an aid, not an integral part of strategy. The corollary is that research can take this view, where there is a tendency to provide top down verbal models with a paucity of integrative structured models. Some writers suggest remedies which seem to begin to address the problem. Berry and Hill [20] suggest that corporate strategy and marketing strategy must be linked to process choice and infrastructure through order winning criteria and that the whole process is iterative from the top down, on what needs to be achieved, and from the bottom up, on what can be achieved. This leads
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onto the idea of developing key success factors from viable strategy models and developing the key order winning criteria which, if supported by the key manufacturing production system criteria, will achieve success (perhaps this also holds the clue to performance measurements). This is mirrored by Beer’s viable systems model [23] which links 5 subsystems, e.g., environment scanning and internal information/control, allowing the policy level system to be operated and in turn be supported by the key operating core system through the coordinating system. While there is an academic need for more data and information, SMEs left alone with the growing morass of information are unlikely to be able, on their own, to evolve the means needed to support strategy through integration of operating systems and manufacturing systems. Also at present many large corporate firms are restructuring to find synergies within the organisation, forming strategic alliances and developing new and innovative ventures as discussed by Kanter [17]. SMEs will therefore, increasingly find themselves facing competition from home and abroad. SMEs will only survive if they can ensure all activities efficiently, economically and effectively combine to achieve strategic goals which are derived from a viable strategy. Miller et al. [3] discuss the transitions which are frequently found to occur in businesses, especially to transform a failure type into a success type. In his most recent work, Miller [4] discusses transitions from successful businesses to failures. The idea of transitions is important since an organisation’s real world is not static its environment is constantly changing. However, the manner in which strategies change is open to conjecture, as pointed out by Johnston [25] who considers change as being normally in incremental steps and seldom in great leaps. The main reason for this being that, although strategic frameworks can change, organisations retain their tried and tested strategic formulas. This view is supported by Marshall and McLean [26] who make the point that although cultures can make for excellence, unless the culture is understood, organisations can be just as much a prisoner of culture and unable to implement substantial changes. Miller [4] makes similar points, where the
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organisation’s salient key success factor can in its extreme form ruin a firm. Such diversity in research is understandable, Handy [S] for instance cites 60 variables which affect an organisation and concedes many more. According to Lindberg [21] strategy can be divided into two categories, reactive in a stable environment, or proactive in a turbulent environment such as against competition. A manufacturing firm facing competition must therefore be proactive. There is an analogy between business transitions and firing a rocket at the moon: you must first calculate where the moon will be when the rocket meets it. When targets were slow-moving and predictable master gunners could calculate firing trajectories in their heads; nowadays when targets are swift and unpredictable, powerful computer systems may be required to assist in tracking targets. Several models of strategic configuration are frequently referred to in the literature, although it is difficult to integrate them into a consistent framework. As previously stated, they tend to be broad top down verbal descriptions and a more structured model could be useful. This problem is illustrated by reference to Miller [4] who states Porter’s [6] 3 strategies of cost leadership, differentiating and focus are too encompassing to be totally useful, then proceeds to identify 5 configurations and reduces these to 4 in seeking to demonstrate how successful corporations become victim of their own success. Previously, Miller [3] had identified 10 archetypes for organisations. He does, however, align his latest to those of Miles and Snow [S]. Kim and Lee [2] propose a typology of production systems by technical complexity and technical flexibility, developing towards a contingency view. In this way they place systems on a two-dimensional chart similar to the three dimensions employed by Grunwald [27] and Schmitt [28]. Thus while there tends to be agreement in broad terms between writers, Peoples and Carrie [29] point out that each description is so broad it could contain a set of very different manufacturing organisations. This demonstrates the need for closer classification of companies within each configuration and is why further research at the strategic level is required as well as a comprehensive integration model.
Economics
34 (19941
3. Developing
2Y3-304
a linking framework
A survey of enterprise classification techniques has been undertaken. In addition to Miller’s configuration archetypes [3], the survey considered Beer’s viable systems model [23], Wild’s input/output method [30], Burbidge’s 4-group input/output classification [31], VAT analysis [ 151, the approaches by Miles and Snow [S], Ingham [32], Barber and Hollier 1161, as well as techniques proposed by Grunwald 1271 and Schmitt [28]. None of these techniques was found to embrace the range of parameters or the level of detail required for manufacturing control systems design. However, it was considered that a combination of the work of Miller, Beer, Miles and Snow and Ingham yielded a useful classification system, based upon both business strategy and manufacturing characteristics. Miller showed that any organisation may be classified as one of ten organisation archetypes, of which six are success types and four are failures. Beer’s viable systems model shows that any system consists of five sub-systems, ranging from policymaking down to production operations. As part of the work on the Manufacturing systems integration projects [33], Blenkinsop and Burns [34] have combined these approaches and developed a model of the five systems required within a successful manufacturing business. Table 1 summarises Miller’s ten configurations in terms of Beer’s sub-systems. Miles and Snow classify companies into four types according to their entrepreneurial strategy, their engineering and administrative activities and their philosophies. The four types are defenders, prospectors, analyzers and reactors, as described in Table 2. Ingham examined the problems of coordinating the potentially conflicting interests and activities of marketing and production. He classified companies into eight types according to marketing strategy, the nature of the production policies, the origins of the product designs and some characteristics of the products. Table 3 shows the Ingham types. The types defined by Miles and Snow have been found to correlate with those proposed by Ingham, although some combinations are possible while
1
Very fragmented
High differentiation, meddled with by system 5
F(3) Headless giant
F(4) Aftermath
_./_
Internal focus on production efficiency
F(2) Stagnant bureaucracy
_
Highly differentiated, unintegrated
F( 1) Impulsive
_IIrnLm._-
Integration high & communications good
Autonomy and considerable authority
S(5) Innovator
market
~-_..ylI._
Lacking, does not listen to experience within organisation.
_-_-..*
Ineffective
.
.
-
-
Minimal scanning, not adequately resourced
None
--
_
Little, as no policy (5) exists
None
None
Lack of motivation for middle managers
Poor
by leader
Bypassed
Poor
None
Heavy scanning for acquisitions rather than to assess customer requirements
based,
stance,
Market research very competitive environment
Aggressive leader
R&D based, more concerned with innovation than competitor activity
Much emphasis on performance measurement. Elaborate control & information processing to unite effort
Very good
not always
Tend to be primitive very
Planning groups with flexible communication routes
Autonomy
S(4) Entrepreneurial conglomerate
achieved
Coordination via 3
Delegated authority, autonomous, decentralised areas
and
>
.
.
~
_
_
.
.
-
No clear strategy, piecemeal changes the norm
None
/,>
to change
by leader Reluctance strategy
Formed
Niching strategy, based on leader’s experience
Strategy making very dependent upon leader
Conservative, policies rational & thorough
Proactive, innovative, tendency to extrapolate past strategies
Complex adequate
Good
integration
Long planning horizons, vertical & horizontal integration to solve problems,
Substantial Innovation
Elaborate accounting systems, sensitive management controls of cost centres
Integration high, standing committees & task forces to facilitate collaboration
effort, vital
Clear strategy, lower levels of management involved in its development
Informal but effective scanning, lead-time main competitive advantage, strategies are responsive
to cost control
Vigilance
System 5 (Policy)
Integration high, leader heavily involved in communication activities
S(3) Giant under fire
-.-
5 interferes
S(2) Dominant periodically
Controlled autonomy, good communications
S( IB) Adaptive firm in very challenging environment
firm
Good communications, low differentiation, with unity from leader’s directives
and Burns [34])
System 4 (Development)
(from Blenkinsop
System 3 (Control)
System 2 (Coordination)
in terms of Beer’s sub-systems
System 1 (Implementation)
Sub-system
summarised
S( 1A) Adaptive firm under moderate challenge
Configuration
Miller’s configurations
Table
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J. Production
others are not. For example, the reactor type has not been further considered because it is an unstable form, doomed to failure or, perhaps following a change in management, to develop into one of the other types. As a result, 13 possible industrial situations have been identified, as shown in Table 4. Each of these combinations may be considered to represent a feasible manufacturing situation in which a company may have to operate. Combining these concepts, each of the 13 industrial situations from Ingham/Miles and Snow (IMS) can be described in terms of the 5 systems which constitute Beer’s viable systems model. Table 5 has been developed to illustrate this. A full description of these types is beyond the scope of this paper, but may be illustrated with three short examples. (1) Type 1 dtlfrnder. Type I companies are only suitable for defender strategies. They tend to develop dedicated production facilities to produce relatively large volumes. They produce a small range of products with only limited numbers of variants. They require good forecasting programmes to assess future demand in terms of volume and product specifications. If
Table 2 Miles and Snow’s company
Eomvnics
(2)
34 i 1994)
293-304
they cannot predict changes in desired product specifications at an early date this type of company may be left with large stocks of slowmoving finished goods. They may also be unable to retool their manufacturing facility in order to meet the new requirement. Type II prospector. These require good marketing departments to provide close contacts with customers. Active marketing and research and development departments lead the company’s efforts to exploit broad and continuously changing domains. This implies sound policy making procedures and direction is provided by senior management. Typically people will be used within the manufacturing area to provide flexibility rather than advanced, complex machinery. Manufacturing activities must be wellcoordinated and controlled to allow for the complexity and rapidity of response required from their customers. Any problems caused by these changes must be resolved very quickly. This will usually involve cross-functional groups working harmoniously, and at short notice. “Short-looped horizontal information systems” utilised to resolve problems within manufacturing area.
types [S]
Type name
Description
Defenders
These are orgamsations which have narrow product-market domains. Top managers in highly expert in their organisation’s limited area of operation but do not tend to search new opportunities. As a result of this narrow focus, these organisations seldom need to their technology, structure, or methods of operation. Instead, they devote primary efficiency of their existing operations
Prospectors
These are organisations which almost continually search for market opportunities, and they regularly experiment with potential responses to emerging environmental trends. Thus, these organisations often are the creators of change and uncertainty to which their competitors respond. However. because of their strong concern for product and market innovation, these organisations usually are not particularly efficient manufacturers
Analyzers
These are organisations which operate in two types of product-market domains, one relatively stable, the other changing. In the stable areas, these organisations operate routinely and efficiently through use of formalised structures and processes. In their more turbulent areas, top managers watch their competitors closely for new ideas. and then they rapidly adopt those which appear to be the most promising
Reactors
These are organisations in which top managers frequently perceive change and uncertainty occurring in their organisational environments but are unable to respond effectively. Because this type of organisation lacks a consistent strategy-structure relationship, it seldom makes adjustment of any sort until forced to do so by environmental pressures. No company should strive to be a reactor
this type of organisation outside of their domains make major adjustments attention to improving
are for in the
AS.
Table 3 Ingham’s
company
Carrie et al.lInt. J. Production
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34 (1994) 293-304
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types [32]
Type
Description
Characteristics
I
Manufacturer’s of a small range of standard products
Type I companies market intensively. They must know their customer’s needs very well and strive to satisfy them. The products they manufacture are assumed to have good current demand. The company will spend considerable efforts forecasting to determine future production levels. However, many short term decisions must be taken to transform these forecasts into actual production schedules. These companies will tend to operate flow or mass production systems and enter into long-term supplier agreements. They will have accurate costing systems utilising standard costs. They will generally have good internal information systems, especially with respect to tracing movements of stock. This operational approach has the potential to build large stock, especially of finished goods. They will also have to invest large amounts of capital in inflexible plant
II
Manufacturers specialising in making large quantities to the specification of their quantity producing customers
Type II companies attempt to operate flow production systems but this depends on their having a sufficient number of large orders, existing and forecast, to survive in the near future. Such systems are aimed at lowering unit costs. By virtue of the volumes involved, long term agreements with suppliers regarding both material delivery schedules and stock holding are established. Close contacts are required with the marketplace to determine future trends and identify potential opportunities. Stock-holding, for all categories, should be kept to an absolute minimum. some finished products may be made to stock but this is only done where there is a lot of confidence that the material will be required
III
Wide range manufacturers producing to customers’ orders
Type III companies only produce goods after confirmed orders have been received from customers. This allows them to offer a wide range of products without having to hold huge amounts of stock. Good co-ordination is required between production and sales functions to allow Production Planning to control the large number of small orders for diverse components that this approach incurs. Standard processes are utilised as frequently as possible with emphasis placed on minimising set-up times and developing multi-purpose, quick-change tooling. Type III companies may develop into Type IIIa, then IIIb and finally 111~ companies
IIIa
Wide range manufacturers producing to customers orders but making some FINISHED products for stock
These are similar to Type III companies but have highly developed forecastmg ures which gives them the confidence to make finished goods to stock
IIIb
Wide range manufacturers producing to customers orders but making some STANDARD COMPONENTS for stock
In Type IIIb, companies sale of products manufactured from standard components represent a high percentage of total sales. This implies that production may be planned more economically than say a Type III company. Such companies require good production engineering and design for manufacture functions. The emphasis on using standard components may be seen as a limitation on the range of products offered. Again forecasting is vital to ensure that the standard components, which the tooling has been developed for, will have a long enough commercial life to justify the investment
IIIC
Wide range manufacturers producing to customers orders, but making some STANDARD COMPONENTS and some FINISHED GOODS for STOCK
Type 111~ companies may be considered as combinations of Types III, IIIa and IIIb. Because of the range and volume of materials made for stock. the forecasting, marketing and material control (internal and external to the company) must operate very well
IVa
Manufacturing capital goods
Type IVa companies manufacture long lead-time products, of relatively high value and considerable complexity. Production operations will tend to be run on a Project Management basis. Each product manufactured will typically constitute a unique project. Production will only commence after receipt of a firm customer order. However, planning, and perhaps even a degree of material sourcing will be undertaken prior to receipt of the order. Such companies require good co-ordination and control to allow resources to be
contractors-
proced-
300
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Economics
34 (1994)
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Table 3 (Continued) Type
Description
Characteristics best utilised. Manufacturing resources will tend to be shared across several projects. may or may not be involved in the design of the product itself
IVb
General
Table 4 The 13 possible Ingham
manufacturing
combinations
firms
of the Ingham
Type IVb companies will produce smaller orders of a more varied products than Type II companies. The products will tend to have a relatively short manufacturing lead-time. Such companies will usually not have extensive drawing office, estimating and general design facilities because they will normally produce to the customer’s design and specification Like Type IVa companies they will not begin production until they receive a confirmed customer order, minimising the fear of holding unsalable stock. This is very important as these companies may supply a very wide range of products which may be only required for one order and never again. These companies will have good potential for developing niches for themselves, especially if they have active and effective marketing departments
and the Miles & Snow classifications Miles & Snow type
Type
Defender I II 111 IlIa IlIb IIIC IVa IVb
They
Make to Make to Make to Make to stock Make to Make to standard Jobbing Jobbing
stock, stock, order order
X narrow range of own design products narrow range of products designed to customers spec. wide range of products wide range of products, with some standard products made to
order wide range of products, order wide range of products, components contractor capital goods contractor
with some standard with both standard
(3) Type II analyzer. The major difference between the Type II prospector and the analyzer is the fact that the analyzer operates in a domain that has both stable and changing elements.
4. Four level framework Peoples and Carrie [29] proposed a four level reference framework for designing production management systems which would be correctly aligned with the company strategy and structure. This is illustrated in Fig. 1. The top two levels are based upon the classification system mentioned above. The first level
components products and
Prospector
Analyzer
X X X
X
Y
X X
X X
X X
X
represents a strategic view of the organisation being studied, based on Miller and Beer. The second level classifies the manufacturing situation within the organisation according to its general marketing policy and its operating philosophy, based upon Ingham and Miles and Snow. At the third level reference models, based on GRAI-Grids [35], are used to reflect best business practice in manufacturing decision support systems for that type of business. These grids would show the key decisions and information flows which will be required within the manufacturing system, but without quantitative or company-specific detail. At the fourth level the reference model is tailored to suit the company’s situation using customisation
A.S. Carrie et al.lInt. J. Production
Table 5 IMS manufacturing Situation
situations
expressed
Economics 34 (1994)
301
293.-304
in the five systems defined by Beer
Sub-system System 1 (Implementation)
Type I defender
System 5 (Policy)
System 2 (coordination)
System 3 (Control)
System 4 (Development)
Good
Good
Good
Relatively
Good; marketing & R&D prominent
As per 4, broad & continuously developing domain
Good; marketing more than R&D, complex customer requirements.
Stable & changing
rigid
Type II prospector
Autonomous divisions
Good
Type II analyzer
Stable areas
Complex system
Type III prospector
Autonomous divisions
Good. Must plan many small & complex orders
Good (must develop “Catalogue”)
Marketing & R&D prominent. Broad & continuously developing domain
Type IIIa prospector
Autonomous divisions
Good
Very good
Continually looking for opportunities. Marketing and R&D both active here
Type IIIa analyzer
Stable areas
Complex system
Very good
Split operations & flexible
Type IIIb prospector
Efficient autonomous divisions
Good
Good
Marketing & R&D prominent, broad & continuously developing domain
Type IIIb analyzer
Stable areas
& flexible
Complex system
hybrid
Good
Stable & changing
domains
Type 111~ analyzer
Stable areas
& flexible
Complex system
hybrid
Good
Stable & changing
domains
Type IVa prospector
Autonomous divisions
Good, must work well with 3
Must work well with 2
Good
Marketing & R&D prominent, broad & continuously changing domain
Type IVa analyzer
Stable areas
Good, must work well with 3
Must work well with 2
Good
Stable & changing
Type IVb prospector
Autonomous divisions
Good
Good
Marketing & R&D prominent, broad & continuously changing domain
Type IVb analyzer
Complex due to runners/repeaters & strangers
Complex system
Good
Stable & changing
& flexible
& flexible
& flexible
hybrid
hybrid
hybrid
features, and compared to a model of the organisation’s current material and information flow system. The results of this comparison allow the development of an implementation plan for achieving the desired transition.
domains
into 2; stable
domains
domains
5. An emerging methodology SMEs are faced with an increasingly turbulent marketplace where the pace of change is increasing. Often they lack the resources and expertise to
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110 possible; select one)
(a subset of the 13 possible situations is defined for each Level I
OPERATIONS REFERENCE MODEL (set of models for each of the 13 possible Level II models)
REFERENCE MODEL (customise Level III model using standard routines from databasethese are identified by Customisation Features)
Fig.
1. Four level framework
proposed
by Peoples
and Carrie
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A.S. Carrie et al./Int. J. Production
assess the ability of their current strategy, structure and systems to meet their changing needs. New methods of analysis are needed to help these organisations plan for and shape their future. This research is aimed at producing a new set of aids to help SMEs to choose the best transition and fit between strategy and manufacturing operations, in the face of the need to integrate all levels of business to ensure all activities contribute to achieving strategic goals. The authors are developing a methodology which will provide support in the three areas of strategy, structures and systems. Libraries of reference models are being constructed to allow comparisons between a company’s present situation and alternative strategies and production management systems. The methodology also considers the transitions required to get from the current situation to the desired state. In this way, the methodology will allow companies to identify, select and implement solutions.
Conclusions This paper has presented the current status of an on-going project seeking to establish an integrated methodology for linking production management structures and systems to business strategy and organisation configuration. A brief overview of the extensive literature in this area has been given and it has been shown that certain approaches from this literature can be combined to form an effective framework for building reference models which relate to manufacturing situations.
References Cl1 Pascale, R.T. and Athos, A.G., 1982. The Art of Japanese Management.
Penguin,
London.
121 Kim, Y. and Lee, J., 1993. Manufacturing
strategy and production systems: An integrated framework. J. Oper. Mgmt., 11: 3-15. 131 Miller, D., Friesen, P. and Mintzberg, H., 1984. Organizations A Quantum View. Prentice-Hall, Englewood ClilTs, NJ. Harper Business, c41 Miller, D., 1990. The Icarus Paradox. New York.
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Strategy, c51 Miles, R.E. and Snow, CC., 1978. Organizational Structure and Process. McGraw-Hill, New York. C61 Porter, M.E., 1980. Competitive Strategy. Free Press, New York. Advantage. The Free c71 Porter, M.E., 1985. Competitive Press, New York. Organisations, 4th ed. PI Handy, C.B., 1993. Understanding Penguin, London. Theory and c91 Woodward, J., 1965. Industrial Organisation: Practice. Oxford University Press, Oxford. P., Hassard, J., Hawksley, C. and Nang, T., Cl01 Forrester, 1992. Social and organisational change in CIM development. 2nd Asia Pacific Industrial Automation Conf., Singapore. T.G., 1992. Managerial and Organisational Cl11 Whiston, Integration. Springer, London, UK. Strategy. 2nd ed. Macmillan, 1121 Hill, T., 1993. Manufacturing New York. Strategy Process and [I31 Voss, C., 1992. Manufacturing Content. Chapman & Hall, London. au[I41 Platts, K.W. and Gregory, M.J., 1990. Manufacturing dit in the process of strategy formulation. Int. J. Oper. Prod. Mgmt., 10: 5526. and Measurement Cl51 Frizelle, G.D.M., 1989. A Classification Structure for Manufacturing Plants. Internal report, Cambridge University, Engineering Department. Cl61 Barber, K.D. and Hollier, R.H., 1984. The use of numerical analysis to classify companies according to production control complexity. Int. J. Prod. Res., 24: 2033222. Cl71 Maull, R., Hughes, D., Childe, S., Weston, N., Tranfield, D. and Smith, S., 1990. A methodology for the design and implementation of resilient CAPM systems. Int. J. Oper. Prod. Mgmt., 10: 27-36. Cl81 Hughes, D., Tranfield, D., Smith, S., Maull, R., Childe, S. and Weston, N., 1990. The CAPM Methodology Workbook. University of Plymouth, Sheffield Business School, UK. B., 1992. Identification of Cl91 Kochhar, A.K. and McGarrie, the key requirements of manufacturing control systems: A key characteristics approach. Integrated Manuf. Systems, 3. cw Berry, W.L. and Hill, T., 1992. Linking systems to strategy. Int. J. Oper. Prod. Mgmt., 12: 3315. P., 1990. Strategic management: A proactive Pll Lindberg, approach. Int. J. Oper. Prod. Mgmt., 10: 944106. strategic topology. c221 Amar, D.A., 1992. Manufacturing-led Prod. Inv. Mgmt. Quart. J., 33: 32-37. c231 Beer, S., 1984. The Brain of the Firm. 2nd ed. Wiley, Chichester, UK. ~241 Kanter, R.M., 1989. When Giants Learn to Dance. Simon & Shuster Ltd, London, UK. G., 1985. Strategic management in action, in: 1251 Johnston, V. Hammond (Ed.), Current Research in Management. Frances Pitner, London, UK. WI Marshall, J. and McLean, A., 1985. Exploring organisational culture as a route to organisational change, in: V. Hammond (Ed.), Current Research in Management. Frances Pitner, London, UK.
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[28]
[29]
[30] [31]
A.S. Currir et ul.~Int. J. Production Grunwald, H., Striekwold, P.E.T. and Weeda, P.J., 1989. A framework for quantitative comparison of production control concepts. Int. J. Prod. Res., 27: 281-292. Schmitt, T.G., Klastorin, T. and Shtub, A., 1985. Production classification system: Concepts models and strategies. Int. J. Prod. Res., 23: 5633578. Peoples, G.A. and Carrie, AS., 1993. A method for translating strategy into integrated actions. Int. Conf. on Industrial Engineering and Production Management, Mons, Belgium. Wild, R., 1992. Mass Production Management. Wiley, London, UK. Burbidge, J.L., 1989. Production control: The future choice, in: J. Chandler (Ed.), Advances In Manufacturing IV. Kogan Page, London, UK.
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H., 1971. Balancing Sales and Production: ~321 Ingham, Models of Typical Business Policies, Management Publications. R., 1992. UK research in 1331 Carrie, AS. and Macintosh, manufacturing systems integration, in: Pels and Wortmann (Eds.), Integration in Production Management Systems. Elsevier, Amsterdam, pp. 3233336. c341 Blenkinsop, S.A. and Burns, N.D., 1992. Does your organisation get a clean bill of health?. J. General Mgmt. G., 1989. GRAI approach to designing c351 Doumeingts, and controlling advanced manufacturing systems in a CIM environment, in: S. Nof and C.L. Moodie (Eds.), Advanced Information Technology for industrial Material Flow Systems. NATO AS1 Series, Vol. 53, Springer, Berlin.
Int. J. Production
Economics
34 (1994) 293-304
Linking strategy to production management structures and systems A.S. Carriea, *, R. Macintosha, aDepartment q/Design
Manyfacture
A. Scotta, G.A. Peoplesb
and Engineering Management, Uniwrsity qf Strathcl.vde, 75 Montrose bClvde Blowers Ltd., Clydebank, GlasgowI, G812XD. UK
St., Glasgmc. GI IXJ,
UK
Abstract This paper describes an approach being developed by the authors to link strategy to both the production management structures and systems. A variety of existing approaches have been examined and from these a framework and supporting methodology are being defined to help manufacturing companies, and in particular SMEs, link these vital areas. Examples of the work performed to date are included, in the form of a number of tables.
1. Introduction
In order to compete more effectively a great many firms are strenuously reorienting themselves so that their structures and systems more effectively support their revised strategy. Integrated manufacture requires that production management structures and systems are aligned with the manufacturing strategy, and that the manufacturing strategy is correctly aligned with the business strategy. At present there is a lack of systematic methods for ensuring this integration; most approaches are purely verbal and descriptive, often step-by-step checklists, and are limited in scope. The triangular interactions between strategy, structures and systems have been highlighted by
*Corresponding
author
0925-5273/94/$07.00 (0 1994 Elsevier Science B.V. All rights reserved SSDI 0925-5273(94)00013-Z
Pascale and Athos [l]. They define these terms as fol1ows. (1) Strategy: the plan to reach goals, (2) Structures: the characteristics of an organisation’s management, (3) Systems: the routines for processing and communicating. In the context of this paper, the organisation concerned is the production management organisation. A review of the literature reveals a virtual absence of integrated methodologies for the chain of decisions linking business strategy to production management systems. As stated by Kim and Lee, [2]: “Integration of relevant literature such as business strategy research and consistent definition about manufacturing strategy concepts and terminology have yet to be done.” The literature on business strategy is very wide. Most relates closely to organisation theory and marketing. Several contributions relate to the
company’s general stance in the marketplace and to aspects of internal organisation, Miller [3, 43, Miles and Snow [S], but make virtually no reference to manufacturing, although they do include pointers for product development policies. Some, such as Porter [6, 71, focus on competitive criteria, leading to order winning criteria which provide a link to manufacturing strategy at a rather superficial level. The organisation theory literature, Handy [S], Miller et al. 133, too usually makes little direct connection to manufacture, Woodward [9]. By contrast there are significant contributions relating new technology to organisation, Forrester et al. [9], Whiston [ll], although these generally concern CAD, CAM and FMS rather than production management systems. The literature on munefircturing strateyy is now extensive, in which major UK contributions have been made by Hill [ 121, Voss [ 133, Platts and Gregory [14] and Frizelle [15]. These generally have strong linkages with business strategy, and deal with manufacturing issues such as product life cycles, volume-variety trade-offs, make to order versus make to stock, GT and FMS. Their contributions to production management system design are usually restricted to discussions of typical structures such as MRP, JIT or OPT. These works relate to technological aspects of production management structures, such as GT and FMS, but generally disregard the structural issues of production management system design, such as the arrangement of production management processes and decisions into functional activities. There have been many major contributions in the field of design of production management
systems.
Barber and Hollier [ 161 worked on a classification of variables, but had little reference to strategy as such. Maull. Hughes, et al. [17, 181 have worked on designing production management systems in which the first step is the identification of the manufacturing strategy, however, this aspect of the work is rather rudimentary. Kochhar 1191 has also made a significant contribution to production management systems design, classifying requirements in terms of complexity, uncertainty and flexibility, but without direct connection to business strategy.
2. Review of relevant research Whilst much has been written about strategy, little has been written about translating these ideas down to the level of company operations. Also there seems to be reluctance to define how to integrate manufacturing systems with strategy. Writers tend to recommend a panacea such as M R P, JIT or OPT, more for its promise of improvements than as the best fit to strategy, Berry and Hill [20]. Perhaps there is a clue in studies by Lindberg [21] who shows that timescales for planning technological change are much longer than for planning work organisation changes. As a result, work organisation changes are often an afterthought implemented by operations management where major technology changes have their roots in strategy and are seldom integrated. Since manufacturing systems are the means of adding value and generating profit they must be designed to accomplish the strategic intent and not just to satisfy some misguided notion of strategy conceived and gestated in a corner of the business. The imponderable seems to be how much of any manufacturing system is designed and how much is evolved by chance, or depends on someone to champion it through (of course much the same thing applies to strategy). Even though each firm and manufacturing system is different, none will be so unique that it does not share some basic characteristics and problems with others. The main premise therefore is, that it should be possible to identify a suitable taxonomy to describe firms which find themselves in, or plan their way towards, similar strategic configurations so that operating conditions can be generalised. Suitable manufacturing strategies and systems can then be prescribed as being the most likely to succeed in contributing to achieving the firm’s goals. However, when faced with a search for secondary information on the total integration of a business system through strategic configuration and direction with goal achievement supported by manufacturing strategy through a successful manufacturing system, one is faced with a bewildering range and volume of books, journal publications and papers. Most are set in a particular context and are not susceptible to generalisation outside the
A.S. Carrie et al.llnt.
J. Production
differentiating factors their authors favour. They deal with criteria which are obviously salient to the observer and are often aligned at extreme ends of a continuum, e.g., too broad a taxonomy or too narrow; totally devoted to top-down strategic models or to system panaceas. The emerging truth is that most contributions are generally disconnected and truncated views on corporate strategy, business strategy, manufacturing strategy and production management systems. The search for attempts to define and illustrate integration reveals a paucity of models which are integrated and reiterative through the various levels of business. An initial search and scan of readily available papers and books, identified literally hundreds of further references to support aspects of the authors’ cases. Indeed authors seemed to vie with each other to find support for their ideas and thesis. Many were singular references and not cross referenced over several related publications, although some authors seemed to be regularly referred to, e.g., Hill, Miller and Porter. Without detailed study it could be suspected that, as with integration through a business, links to references are very tenuous indeed. This feeling of lack of sufficient publications on integration is even borne out by comments of the authors themselves with publications attacking the lack of integration between the levels. The problem of toppdown verbal models is also identified by Amar [22] who considers that formulation of strategy is normally top down starting with environmental scanning and the firm ignoring to some extent its internal environment. This can lead to relegating manufacturing strategy and hence systems to an aid, not an integral part of strategy. The corollary is that research can take this view, where there is a tendency to provide top down verbal models with a paucity of integrative structured models. Some writers suggest remedies which seem to begin to address the problem. Berry and Hill [20] suggest that corporate strategy and marketing strategy must be linked to process choice and infrastructure through order winning criteria and that the whole process is iterative from the top down, on what needs to be achieved, and from the bottom up, on what can be achieved. This leads
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onto the idea of developing key success factors from viable strategy models and developing the key order winning criteria which, if supported by the key manufacturing production system criteria, will achieve success (perhaps this also holds the clue to performance measurements). This is mirrored by Beer’s viable systems model [23] which links 5 subsystems, e.g., environment scanning and internal information/control, allowing the policy level system to be operated and in turn be supported by the key operating core system through the coordinating system. While there is an academic need for more data and information, SMEs left alone with the growing morass of information are unlikely to be able, on their own, to evolve the means needed to support strategy through integration of operating systems and manufacturing systems. Also at present many large corporate firms are restructuring to find synergies within the organisation, forming strategic alliances and developing new and innovative ventures as discussed by Kanter [17]. SMEs will therefore, increasingly find themselves facing competition from home and abroad. SMEs will only survive if they can ensure all activities efficiently, economically and effectively combine to achieve strategic goals which are derived from a viable strategy. Miller et al. [3] discuss the transitions which are frequently found to occur in businesses, especially to transform a failure type into a success type. In his most recent work, Miller [4] discusses transitions from successful businesses to failures. The idea of transitions is important since an organisation’s real world is not static its environment is constantly changing. However, the manner in which strategies change is open to conjecture, as pointed out by Johnston [25] who considers change as being normally in incremental steps and seldom in great leaps. The main reason for this being that, although strategic frameworks can change, organisations retain their tried and tested strategic formulas. This view is supported by Marshall and McLean [26] who make the point that although cultures can make for excellence, unless the culture is understood, organisations can be just as much a prisoner of culture and unable to implement substantial changes. Miller [4] makes similar points, where the
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organisation’s salient key success factor can in its extreme form ruin a firm. Such diversity in research is understandable, Handy [S] for instance cites 60 variables which affect an organisation and concedes many more. According to Lindberg [21] strategy can be divided into two categories, reactive in a stable environment, or proactive in a turbulent environment such as against competition. A manufacturing firm facing competition must therefore be proactive. There is an analogy between business transitions and firing a rocket at the moon: you must first calculate where the moon will be when the rocket meets it. When targets were slow-moving and predictable master gunners could calculate firing trajectories in their heads; nowadays when targets are swift and unpredictable, powerful computer systems may be required to assist in tracking targets. Several models of strategic configuration are frequently referred to in the literature, although it is difficult to integrate them into a consistent framework. As previously stated, they tend to be broad top down verbal descriptions and a more structured model could be useful. This problem is illustrated by reference to Miller [4] who states Porter’s [6] 3 strategies of cost leadership, differentiating and focus are too encompassing to be totally useful, then proceeds to identify 5 configurations and reduces these to 4 in seeking to demonstrate how successful corporations become victim of their own success. Previously, Miller [3] had identified 10 archetypes for organisations. He does, however, align his latest to those of Miles and Snow [S]. Kim and Lee [2] propose a typology of production systems by technical complexity and technical flexibility, developing towards a contingency view. In this way they place systems on a two-dimensional chart similar to the three dimensions employed by Grunwald [27] and Schmitt [28]. Thus while there tends to be agreement in broad terms between writers, Peoples and Carrie [29] point out that each description is so broad it could contain a set of very different manufacturing organisations. This demonstrates the need for closer classification of companies within each configuration and is why further research at the strategic level is required as well as a comprehensive integration model.
Economics
34 (19941
3. Developing
2Y3-304
a linking framework
A survey of enterprise classification techniques has been undertaken. In addition to Miller’s configuration archetypes [3], the survey considered Beer’s viable systems model [23], Wild’s input/output method [30], Burbidge’s 4-group input/output classification [31], VAT analysis [ 151, the approaches by Miles and Snow [S], Ingham [32], Barber and Hollier 1161, as well as techniques proposed by Grunwald 1271 and Schmitt [28]. None of these techniques was found to embrace the range of parameters or the level of detail required for manufacturing control systems design. However, it was considered that a combination of the work of Miller, Beer, Miles and Snow and Ingham yielded a useful classification system, based upon both business strategy and manufacturing characteristics. Miller showed that any organisation may be classified as one of ten organisation archetypes, of which six are success types and four are failures. Beer’s viable systems model shows that any system consists of five sub-systems, ranging from policymaking down to production operations. As part of the work on the Manufacturing systems integration projects [33], Blenkinsop and Burns [34] have combined these approaches and developed a model of the five systems required within a successful manufacturing business. Table 1 summarises Miller’s ten configurations in terms of Beer’s sub-systems. Miles and Snow classify companies into four types according to their entrepreneurial strategy, their engineering and administrative activities and their philosophies. The four types are defenders, prospectors, analyzers and reactors, as described in Table 2. Ingham examined the problems of coordinating the potentially conflicting interests and activities of marketing and production. He classified companies into eight types according to marketing strategy, the nature of the production policies, the origins of the product designs and some characteristics of the products. Table 3 shows the Ingham types. The types defined by Miles and Snow have been found to correlate with those proposed by Ingham, although some combinations are possible while
1
Very fragmented
High differentiation, meddled with by system 5
F(3) Headless giant
F(4) Aftermath
_./_
Internal focus on production efficiency
F(2) Stagnant bureaucracy
_
Highly differentiated, unintegrated
F( 1) Impulsive
_IIrnLm._-
Integration high & communications good
Autonomy and considerable authority
S(5) Innovator
market
~-_..ylI._
Lacking, does not listen to experience within organisation.
_-_-..*
Ineffective
.
.
-
-
Minimal scanning, not adequately resourced
None
--
_
Little, as no policy (5) exists
None
None
Lack of motivation for middle managers
Poor
by leader
Bypassed
Poor
None
Heavy scanning for acquisitions rather than to assess customer requirements
based,
stance,
Market research very competitive environment
Aggressive leader
R&D based, more concerned with innovation than competitor activity
Much emphasis on performance measurement. Elaborate control & information processing to unite effort
Very good
not always
Tend to be primitive very
Planning groups with flexible communication routes
Autonomy
S(4) Entrepreneurial conglomerate
achieved
Coordination via 3
Delegated authority, autonomous, decentralised areas
and
>
.
.
~
_
_
.
.
-
No clear strategy, piecemeal changes the norm
None
/,>
to change
by leader Reluctance strategy
Formed
Niching strategy, based on leader’s experience
Strategy making very dependent upon leader
Conservative, policies rational & thorough
Proactive, innovative, tendency to extrapolate past strategies
Complex adequate
Good
integration
Long planning horizons, vertical & horizontal integration to solve problems,
Substantial Innovation
Elaborate accounting systems, sensitive management controls of cost centres
Integration high, standing committees & task forces to facilitate collaboration
effort, vital
Clear strategy, lower levels of management involved in its development
Informal but effective scanning, lead-time main competitive advantage, strategies are responsive
to cost control
Vigilance
System 5 (Policy)
Integration high, leader heavily involved in communication activities
S(3) Giant under fire
-.-
5 interferes
S(2) Dominant periodically
Controlled autonomy, good communications
S( IB) Adaptive firm in very challenging environment
firm
Good communications, low differentiation, with unity from leader’s directives
and Burns [34])
System 4 (Development)
(from Blenkinsop
System 3 (Control)
System 2 (Coordination)
in terms of Beer’s sub-systems
System 1 (Implementation)
Sub-system
summarised
S( 1A) Adaptive firm under moderate challenge
Configuration
Miller’s configurations
Table
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et al.iItzt.
J. Production
others are not. For example, the reactor type has not been further considered because it is an unstable form, doomed to failure or, perhaps following a change in management, to develop into one of the other types. As a result, 13 possible industrial situations have been identified, as shown in Table 4. Each of these combinations may be considered to represent a feasible manufacturing situation in which a company may have to operate. Combining these concepts, each of the 13 industrial situations from Ingham/Miles and Snow (IMS) can be described in terms of the 5 systems which constitute Beer’s viable systems model. Table 5 has been developed to illustrate this. A full description of these types is beyond the scope of this paper, but may be illustrated with three short examples. (1) Type 1 dtlfrnder. Type I companies are only suitable for defender strategies. They tend to develop dedicated production facilities to produce relatively large volumes. They produce a small range of products with only limited numbers of variants. They require good forecasting programmes to assess future demand in terms of volume and product specifications. If
Table 2 Miles and Snow’s company
Eomvnics
(2)
34 i 1994)
293-304
they cannot predict changes in desired product specifications at an early date this type of company may be left with large stocks of slowmoving finished goods. They may also be unable to retool their manufacturing facility in order to meet the new requirement. Type II prospector. These require good marketing departments to provide close contacts with customers. Active marketing and research and development departments lead the company’s efforts to exploit broad and continuously changing domains. This implies sound policy making procedures and direction is provided by senior management. Typically people will be used within the manufacturing area to provide flexibility rather than advanced, complex machinery. Manufacturing activities must be wellcoordinated and controlled to allow for the complexity and rapidity of response required from their customers. Any problems caused by these changes must be resolved very quickly. This will usually involve cross-functional groups working harmoniously, and at short notice. “Short-looped horizontal information systems” utilised to resolve problems within manufacturing area.
types [S]
Type name
Description
Defenders
These are orgamsations which have narrow product-market domains. Top managers in highly expert in their organisation’s limited area of operation but do not tend to search new opportunities. As a result of this narrow focus, these organisations seldom need to their technology, structure, or methods of operation. Instead, they devote primary efficiency of their existing operations
Prospectors
These are organisations which almost continually search for market opportunities, and they regularly experiment with potential responses to emerging environmental trends. Thus, these organisations often are the creators of change and uncertainty to which their competitors respond. However. because of their strong concern for product and market innovation, these organisations usually are not particularly efficient manufacturers
Analyzers
These are organisations which operate in two types of product-market domains, one relatively stable, the other changing. In the stable areas, these organisations operate routinely and efficiently through use of formalised structures and processes. In their more turbulent areas, top managers watch their competitors closely for new ideas. and then they rapidly adopt those which appear to be the most promising
Reactors
These are organisations in which top managers frequently perceive change and uncertainty occurring in their organisational environments but are unable to respond effectively. Because this type of organisation lacks a consistent strategy-structure relationship, it seldom makes adjustment of any sort until forced to do so by environmental pressures. No company should strive to be a reactor
this type of organisation outside of their domains make major adjustments attention to improving
are for in the
AS.
Table 3 Ingham’s
company
Carrie et al.lInt. J. Production
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34 (1994) 293-304
299
types [32]
Type
Description
Characteristics
I
Manufacturer’s of a small range of standard products
Type I companies market intensively. They must know their customer’s needs very well and strive to satisfy them. The products they manufacture are assumed to have good current demand. The company will spend considerable efforts forecasting to determine future production levels. However, many short term decisions must be taken to transform these forecasts into actual production schedules. These companies will tend to operate flow or mass production systems and enter into long-term supplier agreements. They will have accurate costing systems utilising standard costs. They will generally have good internal information systems, especially with respect to tracing movements of stock. This operational approach has the potential to build large stock, especially of finished goods. They will also have to invest large amounts of capital in inflexible plant
II
Manufacturers specialising in making large quantities to the specification of their quantity producing customers
Type II companies attempt to operate flow production systems but this depends on their having a sufficient number of large orders, existing and forecast, to survive in the near future. Such systems are aimed at lowering unit costs. By virtue of the volumes involved, long term agreements with suppliers regarding both material delivery schedules and stock holding are established. Close contacts are required with the marketplace to determine future trends and identify potential opportunities. Stock-holding, for all categories, should be kept to an absolute minimum. some finished products may be made to stock but this is only done where there is a lot of confidence that the material will be required
III
Wide range manufacturers producing to customers’ orders
Type III companies only produce goods after confirmed orders have been received from customers. This allows them to offer a wide range of products without having to hold huge amounts of stock. Good co-ordination is required between production and sales functions to allow Production Planning to control the large number of small orders for diverse components that this approach incurs. Standard processes are utilised as frequently as possible with emphasis placed on minimising set-up times and developing multi-purpose, quick-change tooling. Type III companies may develop into Type IIIa, then IIIb and finally 111~ companies
IIIa
Wide range manufacturers producing to customers orders but making some FINISHED products for stock
These are similar to Type III companies but have highly developed forecastmg ures which gives them the confidence to make finished goods to stock
IIIb
Wide range manufacturers producing to customers orders but making some STANDARD COMPONENTS for stock
In Type IIIb, companies sale of products manufactured from standard components represent a high percentage of total sales. This implies that production may be planned more economically than say a Type III company. Such companies require good production engineering and design for manufacture functions. The emphasis on using standard components may be seen as a limitation on the range of products offered. Again forecasting is vital to ensure that the standard components, which the tooling has been developed for, will have a long enough commercial life to justify the investment
IIIC
Wide range manufacturers producing to customers orders, but making some STANDARD COMPONENTS and some FINISHED GOODS for STOCK
Type 111~ companies may be considered as combinations of Types III, IIIa and IIIb. Because of the range and volume of materials made for stock. the forecasting, marketing and material control (internal and external to the company) must operate very well
IVa
Manufacturing capital goods
Type IVa companies manufacture long lead-time products, of relatively high value and considerable complexity. Production operations will tend to be run on a Project Management basis. Each product manufactured will typically constitute a unique project. Production will only commence after receipt of a firm customer order. However, planning, and perhaps even a degree of material sourcing will be undertaken prior to receipt of the order. Such companies require good co-ordination and control to allow resources to be
contractors-
proced-
300
A.S. Carrie et al./Inr. .I. Production
Economics
34 (1994)
293-304
Table 3 (Continued) Type
Description
Characteristics best utilised. Manufacturing resources will tend to be shared across several projects. may or may not be involved in the design of the product itself
IVb
General
Table 4 The 13 possible Ingham
manufacturing
combinations
firms
of the Ingham
Type IVb companies will produce smaller orders of a more varied products than Type II companies. The products will tend to have a relatively short manufacturing lead-time. Such companies will usually not have extensive drawing office, estimating and general design facilities because they will normally produce to the customer’s design and specification Like Type IVa companies they will not begin production until they receive a confirmed customer order, minimising the fear of holding unsalable stock. This is very important as these companies may supply a very wide range of products which may be only required for one order and never again. These companies will have good potential for developing niches for themselves, especially if they have active and effective marketing departments
and the Miles & Snow classifications Miles & Snow type
Type
Defender I II 111 IlIa IlIb IIIC IVa IVb
They
Make to Make to Make to Make to stock Make to Make to standard Jobbing Jobbing
stock, stock, order order
X narrow range of own design products narrow range of products designed to customers spec. wide range of products wide range of products, with some standard products made to
order wide range of products, order wide range of products, components contractor capital goods contractor
with some standard with both standard
(3) Type II analyzer. The major difference between the Type II prospector and the analyzer is the fact that the analyzer operates in a domain that has both stable and changing elements.
4. Four level framework Peoples and Carrie [29] proposed a four level reference framework for designing production management systems which would be correctly aligned with the company strategy and structure. This is illustrated in Fig. 1. The top two levels are based upon the classification system mentioned above. The first level
components products and
Prospector
Analyzer
X X X
X
Y
X X
X X
X X
X
represents a strategic view of the organisation being studied, based on Miller and Beer. The second level classifies the manufacturing situation within the organisation according to its general marketing policy and its operating philosophy, based upon Ingham and Miles and Snow. At the third level reference models, based on GRAI-Grids [35], are used to reflect best business practice in manufacturing decision support systems for that type of business. These grids would show the key decisions and information flows which will be required within the manufacturing system, but without quantitative or company-specific detail. At the fourth level the reference model is tailored to suit the company’s situation using customisation
A.S. Carrie et al.lInt. J. Production
Table 5 IMS manufacturing Situation
situations
expressed
Economics 34 (1994)
301
293.-304
in the five systems defined by Beer
Sub-system System 1 (Implementation)
Type I defender
System 5 (Policy)
System 2 (coordination)
System 3 (Control)
System 4 (Development)
Good
Good
Good
Relatively
Good; marketing & R&D prominent
As per 4, broad & continuously developing domain
Good; marketing more than R&D, complex customer requirements.
Stable & changing
rigid
Type II prospector
Autonomous divisions
Good
Type II analyzer
Stable areas
Complex system
Type III prospector
Autonomous divisions
Good. Must plan many small & complex orders
Good (must develop “Catalogue”)
Marketing & R&D prominent. Broad & continuously developing domain
Type IIIa prospector
Autonomous divisions
Good
Very good
Continually looking for opportunities. Marketing and R&D both active here
Type IIIa analyzer
Stable areas
Complex system
Very good
Split operations & flexible
Type IIIb prospector
Efficient autonomous divisions
Good
Good
Marketing & R&D prominent, broad & continuously developing domain
Type IIIb analyzer
Stable areas
& flexible
Complex system
hybrid
Good
Stable & changing
domains
Type 111~ analyzer
Stable areas
& flexible
Complex system
hybrid
Good
Stable & changing
domains
Type IVa prospector
Autonomous divisions
Good, must work well with 3
Must work well with 2
Good
Marketing & R&D prominent, broad & continuously changing domain
Type IVa analyzer
Stable areas
Good, must work well with 3
Must work well with 2
Good
Stable & changing
Type IVb prospector
Autonomous divisions
Good
Good
Marketing & R&D prominent, broad & continuously changing domain
Type IVb analyzer
Complex due to runners/repeaters & strangers
Complex system
Good
Stable & changing
& flexible
& flexible
& flexible
hybrid
hybrid
hybrid
features, and compared to a model of the organisation’s current material and information flow system. The results of this comparison allow the development of an implementation plan for achieving the desired transition.
domains
into 2; stable
domains
domains
5. An emerging methodology SMEs are faced with an increasingly turbulent marketplace where the pace of change is increasing. Often they lack the resources and expertise to
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34 (1994)
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110 possible; select one)
(a subset of the 13 possible situations is defined for each Level I
OPERATIONS REFERENCE MODEL (set of models for each of the 13 possible Level II models)
REFERENCE MODEL (customise Level III model using standard routines from databasethese are identified by Customisation Features)
Fig.
1. Four level framework
proposed
by Peoples
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assess the ability of their current strategy, structure and systems to meet their changing needs. New methods of analysis are needed to help these organisations plan for and shape their future. This research is aimed at producing a new set of aids to help SMEs to choose the best transition and fit between strategy and manufacturing operations, in the face of the need to integrate all levels of business to ensure all activities contribute to achieving strategic goals. The authors are developing a methodology which will provide support in the three areas of strategy, structures and systems. Libraries of reference models are being constructed to allow comparisons between a company’s present situation and alternative strategies and production management systems. The methodology also considers the transitions required to get from the current situation to the desired state. In this way, the methodology will allow companies to identify, select and implement solutions.
Conclusions This paper has presented the current status of an on-going project seeking to establish an integrated methodology for linking production management structures and systems to business strategy and organisation configuration. A brief overview of the extensive literature in this area has been given and it has been shown that certain approaches from this literature can be combined to form an effective framework for building reference models which relate to manufacturing situations.
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