Recession Leading To Companies Restructuring Their Businesses Commerce Essay

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The recession has lead companies to restructure their businesses, rethink their business and corporate strategies. As a result companies have been forced to change their manufacturing strategies as well. How these changes are made and how different aspects of the supply chain are reconfigured to get that necessary competitive advantage over other competitors makes all the difference between success and failure. In order to improve the efficiency of 'supply chains' various actions are taken, among which one of the methods used is the adoption of 'best practices'. Adoption of Best practices are a popular choice because these actions have already been tried and tested and have rendered proven results. 'Best Practices' are essentially action programs i.e. practices carried out by organizations, which are deduced from the experience of leading successful companies (Schonberger 1982, Hanson and Voss, 1993). Examples of 'Best Practice Action Programs' include World Class Manufacturing, Total Quality Management, Six Sigma and Lean Manufacturing etc (Farooq et al., 2010). These action programs are the tools for continuous improvement within the supply chain. As these action programs have been implemented by various other organizations before and have rendered favourable results the chance of failure is minimized. However, it should be noted that whatever is best for one organization is not necessarily going to work for another one as well. The question of 'Fit' arises in this case. One size does not fit all in this case and organizations need to understand what works best for them, in order to do so Organizations should have a thorough understanding of its operations, the cost of operations, the level of customer satisfaction it wishes to achieve and the return on investment i.e. the benefit the organization is looking to get if and when such best practices are adopted within their supply chain. The adoption and success of best practice action programs depends on their fit with the supply chain design characteristics and contingency factors (Farooq et al., 2009). In summary, 'Best Practice Action Programs' have to be tailored according to the operational requirements of the company. The research presented here examines closely the adoption of best practices in manufacturing supply chains by using a case study approach.

The literature reviewed endorses this observation that there exists a gap between linking best practices to performance.

The criteria identified for the selection and adoption of best practices is very GOOD..lol.

Aims and Objectives:

The aim of the research is to have a better understanding of the Best Practices that are adopted in Manufacturing Supply Chains at an operational level and to determine if there can be viable criteria for the selection and adoption of best practices for manufacturing supply chains.

The research carried out here is driven by the following overlapping objectives:

To understand manufacturing supply chains and their operational aspects by using a single case study.

To understand 'Best Practices' and their adoption in manufacturing supply chains using a case taken from the manufacturing industry.

To understand the concept of Lean Manufacturing and its implementation as an example of adoption of 'Best Practices'.

To determine if there can be a viable criteria for the selection and adoption of best practices for manufacturing supply chains.

Research Questions:

In order to fulfil the research objectives that are laid down above the following two research question have been put together.

How are Manufacturing Organizations adopting 'Best Practice' Action Programs within their supply chains for improving them?

What performance measures do companies employ on the shop floor and how is the performance measured in terms of meeting strategic goals?

Scope of the Research:

Research Process:

The research has been carried out using a case study approach. The approach has made it possible to understand the operational aspects of the manufacturing supply chain more fully and has enabled to answer the posed research questions with much better understanding of manufacturing supply chains.

The research was carried out in two phases. In the first phase of the research relevant literature has been reviewed and a general criterion for the selection and adoption of best practices has been identified.

In the second phase of the research a company was contacted and a project was implemented for reducing the inventory levels and implementing a logistics delivery system so as to improve the flow of raw materials within the manufacturing facility, which was part of the company's lean strategy. At various points structured and semi structured interviews were carried out, along with that observational data was collected so as to complement the research.

Structure of the Research:

The Research presented here has been divided in to the following six chapters. A brief overview of each has been given here:

Chapter 1 is the introduction. It gives the overall structure of the research and the background of the company in focus.

Chapter 2 is the Literature Review. The chapter discusses important themes such as Best Practices, manufacturing strategy and the link between adoption of best practices and performance measurement.

Chapter 3 discusses the Case Study approach that was employed as the methodology to carry out the research.

Chapter 4 describes the background of the company and the case in detail

Chapter 5 presents the actual project that was carried out in collaboration with the company and is the actual case study.

Chapter 6 proposes recommendations in light of the findings and the analysis, which was carried out in the same chapter.

Chapter 7 is a discussion and conclusions part.

Chapter 2

Manufacturing Strategy & Best Practice and the link with Performance a Literature Review

Introduction:

This chapter critically reviews the existing literature on 'Manufacturing Strategy' and the adoption of 'Best Practices'. The Literature tries to explain important themes related to the scope of the research and creates a link between the concept of manufacturing strategy and best practices and the adoption of best practices with performance measurement.

Concept of Manufacturing Strategy:

It is important to have a good idea of 'Strategy' before explaining the concept of manufacturing strategy. Strategy is a set of plans and policies by which a company aims to gain advantages over its competitors (Skinner 1969). Strategy denotes actions or patterns of action intended for the attainment of goals (Swamidas and Newell 1987). How those goals are achieved within a manufacturing facility on an operational as well as strategic level is derived by what is called a 'Manufacturing Strategy'. Wright (1984) suggests that there are five characteristics to 'Strategy'. Namely the time horizon, the impact, the concentration of the effort and the pattern of decisions and pervasiveness. Table 1 expands on these characteristics.

Time Horizon

Generally, Strategy is used to describe activities that involve a long-term time horizon, both with regard to the to the time it takes to accomplish such activities and the time it takes to observe their impact.

Impact

Although the consequences of pursuing a given strategy will not be clear until considerable amount of time has elapsed, the ultimate impact will be relatively greater than the impact of short term tactics of operating activities.

Concentration of Effort

The concept of strategy usually implies concentrating one's activity, effort, or attention on fairly narrow range or dimension of pursuits. Implicitly, focussing on certain activities means that one must reduce the effort in other directions.

Pattern of Decisions

Although sme companies need to make only a few major decisions in order to implement an entire strategy, most strategies require a pattern of decisions across a variety of subareas. Certain types of decisions must be repeated over time and a number of secondary or supporting decisions are needed to implement the strategy.

Pervasiveness

An organisation's strategy embraces a wide breadth of resource allocation processes and day-to-day operations. In addition the need for depth requires that all levels of an organisation act instinctively in ways that reinforce the strategy.

Table 1-Characteristics of Strategy (Wright 1984)

There are three levels of strategy i.e. Corporate, Business and Functional level strategies (Wright 1984). Corporate strategy deals with the selection of product markets or industries in which the Corporation would compete. Second each 'Strategic Business Unit' (SBU) or as put forward by Wright, Strategic Planning Unit (SPU), could have its own tailored business strategy designed to cater for the businesses unique competencies and competitive advantage (Swamidas and Newell 1987). The business level strategy serves two critical purposes one is to set the jurisdictions of the business unit itself in a way that operationally links the business to the corporate strategy if and the second is to specify how would the business achieve and maintain its competitive advantage (Wright 1984). It is important that different business units functioning under the same umbrella are not competing against one another and thus the importance of setting the scope of the business through the business strategy. In order to deliver the goals of the business strategy, the third level of functional strategy comes in to play which must be developed and pursued if each function is to support the business strategy. (Wright 1984). The number of functional strategies an organisation might be different from one another depending on the nature of the business. A business unit which is part of the manufacturing supply chain might have four functional strategies namely, the manufacturing strategy, a sales/marketing strategy, a research & development strategy and a financial strategy. Figure 1, gives a hierarchal view of the different levels of strategies.

Business A Strategy

Corporate Strategy

Business B Strategy

Business C Strategy

Marketing Strategy

R & D Strategy

Financial Strategy

Manufacturing Strategy

Figure 1- Levels of Strategy (Wright 1984)

Voss (2005) argues that there are three distinct paradigms in manufacturing strategy, each having its own pros and cons. These are competing through 'manufacturing', competing through 'strategic choices in manufacturing' and 'best practice'.

Competing through manufacturing

Strategic Choices in manufacturing

Best Practice

Competing through Manufacturing

According to the author, the first approach to manufacturing strategy proposes that the company should compete on the basis of its manufacturing capabilities. In doing so it should make sure that these capabilities are aligned with the key success factors, the corporate and marketing strategies of the company and the marketplace. The manufacturing being one of the functional strategies needs to deliver the objectives of the wider business/corporate strategies of the company which is a concept supported by Hayes and Wheelwright (1984). The authors have proposed a manufacturing strategy framework, which defines business objectives such as growth, profit and return on investment. For achieving these business objectives certain manufacturing objectives have to be laid down i.e. cost, quality, delivery and to meeting these objectives certain structural (capacity, facility, technology) and infrastructural (workforce, quality, production planning and organisation) decisions have to be made. The frame work has been given in figure 1.

Significant amount of literature on manufacturing strategy has been written on competing criteria. Cost, quality, dependability and flexibility have become synonymous with measuring competitiveness in manufacturing. Hill (1993) puts forward the theme of 'order winning' criteria and 'qualifying' criteria for products. As the name implies order winning criteria are the distinct features of a particular product that persuade the customer to buy it. On the other hand the Qualifying Criteria is one which all products should meet to survive in the market place even if they are not able to win orders e.g. hygiene as pointed out by (New 1992). Similar criteria has been identified by Platts and Gregory (1990) where they define delivery lead time, reliability, features, quality, flexibility of the design, volume and price as the competitive criteria. With the evolution of the customer and customer needs criteria which could be termed as order winning is now only the qualifying criteria (Corbett, C and Van Wassenhove, L. 1993), thus making it difficult for manufacturing companies to compete.

Structural Decisions

Capacity

Facilities

Technology

Vertical IntegrationCorporate /Business Objectives

Return on Investment

Growth

Profit

Manufacturing Objectives

Cost

Quality

Dependability

Flexibility

Infrastructural Decisions

Workforce

Quality

Production Planning /Materials

Organisation

Figure : Hayes and Wheelwright Manufacturing Strategy Framework (1984)

With such changes occurring in the customer needs and customer demands it is imperative to have the customer to be included in the manufacturing loop which was first mentioned by Hill (1993) in his work. He suggests that the customer should be given due importance and consideration in making decisions related to manufacturing as success of the end product depends on the customer's choice of buying or not buying a particular product.

Manufacturing Strategy literature consists of a wide variety of literature on the choice of competitive priorities. International comparisons of different countries and the choice of competitive priorities have been studied in depth by De Meyer (1992). Porter (1980) has much in common with such approaches. Porter's Cost Leadership, differentiation and focus strategies can be considered as business priorities which direct manufacturing strategy. Stobaugh and Telesio (1983) derived three groups empirically: cost, technology and market-driven strategies in an attempt to define generic manufacturing strategies. Similar work has been carried out by Miller and Roth (1994) who developed taxonomy of manufacturing strategies. Manufacturing strategies can be grouped together as done by various authors in to generic forms but implementation of the strategy depends strongly on the pattern of decisions that is undertaken regarding manufacturing and that is the actual manufacturing strategy of a company, as also pointed out by Hays and Wheelwright (1984).

Voss (2005) has argued that aligning manufacturing capabilities with the key success factors of the company would maximize the competitiveness of the company greatly. Examples of developing manufacturing capability can be from choosing manufacturing technology to achieve desired results, or developing capabilities to launch new products in to the market much quicker, or capabilities to produce the same products at a cheaper cost, or developing capabilities to improve delivery times within the internal and the external supply chains etc. Hays and Wheelwright (1984) suggest that companies should go beyond looking to align their manufacturing strategies with the market place and seek to influence the corporate and business strategies proactively to use manufacturing capability as a competitive weapon.

Considerable work has also been done in identifying, developing and measurement of manufacturing capability. For example, technologies and capabilities required for time based competition by Stalk and Hout (1990), such as new product introduction Clark and Fujimoto (1991). The role of flexibility in manufacturing has been studied by Slack (1983) and Upton (1994). The use of flexible manufacturing systems and the lack of use of it has been studied by Jaikumar (1986) and the use of flexible assembly robots by Tidd (1991).

To summarize this paradigm

Strategic Choices in Manufacturing

This paradigm evolves from the need to achieve internal and external consistency between choices in manufacturing strategy (C. Voss 1995). One of the first one to suggest key choice areas in manufacturing was Skinner (1969). He identified plant and equipment, production planning and control, labour & staffing, product design & engineering, and organisation and management as the key choice areas in manufacturing strategy. Hays and wheelwright (1984) have further expanded to this list by adding structural and infrastructural decisions and Hill (1993) confines these choices to merely two areas of process and strategy.

These approaches are arguably contingent approaches which stress the fact that any strategy or plan of action is strongly based on the circumstances of a particular company and decisions related to manufacturing strategy have to be taken in context to the whole scenario. For instance implementing a pure pull production system might not be a feasible option for a company that has an unstable customer demand and there might be a need to introduce some forecasting in to the way demand is assessed within the supply chain.

Best Practices

Best Practice is the most recent to have sprung to the scene of manufacturing strategy literature according to Voss (2005). In recent times the term 'Best Practice' has become a buzz word in academia and the industrial world alike (Davies and Kochhar 2002). The concept of best practice is synonymous with that of world class manufacturing, which was first brought to the manufacturing strategy scene by Hays and Wheelwright (1984). World Class Manufacturing is commonly taken to be an aggregation of all best practices in a wide range of areas of manufacturing according to Voss (2005). A summary of the key points presented by Voss (2005) has been given in Table 2.

Table - Three Paradigms of Manufacturing Strategy (C. Voss 1995)

Concluding his paper Voss (2005) draws some important conclusions where the author asserts that the three paradigms of manufacturing have their own weaknesses and strengths, at the same time each of them overlap one another partially. If a company were to ignore any one of these completely it would run the risk of losing its competitive strength in manufacturing. The author proposes a continuous loop where he proposes that a company pursuing a strategy to compete through manufacturing would have to make key strategic choices. These strategic choices would require the development of world class performance and doing this would require developing best in class practices. The choice of these practices and what part of the business do they focus on improving would be partly decided by the previous approaches. This is a continuous iterative process of improving process and performance that ultimately would lead to developing the company's capabilities. This may change the way the company competes through manufacturing and thus starting of the cycle once again (Figure 3).

Figure - The overlapping cycle of Manufacturing Strategy (C. Voss 1995)

From here on in the concept of Best Practice has been explored.

What are Best Practices?

'Best Practices' as discussed are one of the three manufacturing strategy paradigms but what exactly are best practices? In recent years, there has been a wide spread desire for adopting what are called 'best practices' but as Hughes and Smart (1994a) suggest that the chances are low for all industrialists to have a good understanding of what 'best practice' actually means and how it can be determined.

There have been various definitions of best practice in the literature. Davies and Kochhar (2002) assert that caution must be exercised while using the word 'best' and quote the international quality survey (1993) as defining best practices as those that have aided lower performing organisations to improve to medium performance, medium performers to improve to higher performers and higher performers to stay on top and achieve further benefits. Camp (1989) defines best practices as those that would lead a company to superior performance. Hughes and Smart (1994b) propose that a best practice is an activity or an action which is performed to a standard better or equal to the one achieved by other companies, in circumstances that are sufficiently similar to make meaningful comparison possible. It is worth noting that best practices may be 'best' for one company and their adoption would result in achieving higher performance but quite possibly they would not deliver the same results for another company operating in a different environment and in a different context. Hence, best practices are context specific (Heibeler et al., 1998). The adoption and success of best practice action programs depends on their fit with the supply chain design and characteristics and contingency factors (Farooq et al., 2010). Hence, if the operational aspects of the supply chain are not kept in mind while adopting best practices, they can become counterproductive.

The basic principle of best practice thinking is that operations philosophies, concepts and techniques should be driven by competitive benchmarks and business excellence models to improve organisations competitiveness through the development of people, processes and technology (Greswell, Childe and Mull 1998). The best practice approach to manufacturing encapsulates Wold Class Manufacturing and benchmarking and is based on the assumption that "the continuous improvement of best practice in all areas of the organisation would lead to superior performance capability leading to increased competitiveness" (C. Voss 1995). Thus there exists a relation between performance of companies and adoption of best practices.

Link between Best Practice and Performance

It is an established fact that, the implementation of new practices in manufacturing is normally associated with expected benefits in terms of improved performance (Voss and Blackmon, Practice performance relationship in the UK Manufacturing Industry 1994). It seems logical to expect performance improvement in some operational aspect whilst committing resources to it as described by Flynn et al.,(1995a) practices are "approaches used by the management and workers with the goal of achieving certain types of performance".

The term 'best practices' has evolved for the concept of World Class Manufacturing, which was first introduced by Hays and Wheelwright (1984) where he describes it as a set of practices including quality management, continuous improvement, training and investment in technology. The implementation of these 'best practices' would lead to superior performance according to Flynn et al. (1999). A very good analyses of World Class Manufacturing and Best Practices Literature has been put forward by Laugen et al.,(2005). Table 2 presents the summary of the works in this field.

Researchers

Key Concept to Best Practice

Results regarding practice-performance relationships

Swamidass and Newell (1987)

Cross functional co-operation, design for manufacturability

Corporate performance is positively related to the role of manufacturing managers in strategic decisions

Voss (1995)

World Class Manufacturing, bench-marking, business process re-engineering, TQM, learning from the Japanese, Continuous Improvement

Implementation of best (world class) practices leads to superior performance and capability

Ahmed et al,. (1996)

TQM,JIT,FMS,CE, benchmarking

When practices(operations strategies) are examined individually , companies using any of seven practices (FMS, CE, benchmarking, TQM, JIT, manufacturing cells and computer networking) have higher performance than those not using them

Bolden et al,. (1997)

WCM, employee development

The classification of manufacturing practices of individual practices, implementation and outcomes

Flynn et al. (1997)

WCM, CI, JIT

The best users of unique TQM practices, combined with common infrastructure practices, are capable of solving problems to improve production processes

Harrison (1998)

WCM, CI

WCM appears to facilitate operator commitment to continuous improvement, but leaders become more frustrated because they expected to achieve more. Cellular manufacturing in a UK-based company proved to be a powerful change agent, which has led to more in terms of manufacturing improvement than previous initiatives, such as MRP II.

Flynn et al. (1999)

WCM, JIT, CI, TQM

The use of the WCM alone and together with other new practices, leads to improved competitive performance

Kathuria and Partovi (1999)

Cross-functional co-operation

Better performing manufacturing managers strongly demonstrate relationship-oriented practices, such as team building and support, participative leadership and delegation, especially when the emphasis is high on flexibility

Rondeau et al. (2000)

Work system practices, time-based competition

Time based manufacturing practices tend to lead to standardisation, formalisation as well as integration

Davies and Kochhar (2002)

Best Practices, Performance, manufacturing planning and control

A structured approach used to identify direct qualitative relationship between practice and performance

Graver (2003)

Benchmarking, CI

Integrating customer performance measures with internal performance measures (internal quality, productivity etc.) to identify improvement opportunities is found to be critical

Ketokivi and Schroeder (2004)

TQM,JIT, WCM, contingency

There are only few best practices contributing to competitive manufacturing performance in multiple dimensions

Table - Main Theoretical contributions to links between best practices and performance (Laugen, et al. 2005)

The summary presented above of the various contributions made to the field of best practice and world class manufacturing seems quite useful but the research suffers from three weaknesses according to Laugen et al,. (2005):

There are numerous articles related to studying either one or a limited set of practices, while the reasons why these practices are best are not known (B. Flynn, et al. 1997). Why certain practices are selected for study and others are not is not known according to the author. WCM and Best Practices do not take in to consideration that some other practices might be more useful than others, merely because of how the terms are defined.

The second aspect pointed out by the author is more serious where it is asserted that best practice studies rarely link the practices investigated to company performance. The most that is done in this regard is that an assumption is made that the adoption of such practices would lead to higher performance (C. Voss 1995). Only a few studies confirm that the use of best practices leads to improved performance e.g. Hanson and Voss (1995) and Voss et al., (1997). However, if an explicit link is made between best practice and performance it is done so only for a limited set of performance criteria. An example is Davies and Kochhar (2002) who showed that the implementation of quality programs leads to quality performance. In addition, there is limited possibility for generalization as these studies are based mostly on one or a few single case studies.

The third thing Languen et al 2005, mentions is the fact that best practices are considered to be generic, i.e. best for all companies always. The effect of factors such as the type of industry, company, size, processes and products are not considered and neither is the fact that practices, become obsolete after a while.

In order to go through the above mentioned problems , the author rather than taking the view that best practices are sure to deliver high performance, poses the question that what practices to high performing companies adopt? Conducting the research using the International Manufacturing Strategy Survey (IMSS-III) database, this contains data, from 474 manufacturing companies in 14 countries. The respondents represent five industrial sectors i.e. metal manufacturing, machinery, electrical equipment, automotive and professional measurement equipment. Using various data analysis techniques they have come up with a list of best practice action programs. The term action programs have been used by Languen et al., 2005 for two reasons. One is it represents bundles of practices. Pull production for instance is an action program; Kanban and single-minute exchange of dies (SMED) are practices underpinning pull production. The second reason is following Davies and Kochhar's (2002) recommendations the authors are interested very much in performance improvements and thus , changes in practices (i.e. action programmes) rather than practices in place.

List of whatever the performances are and so on from over here….

Chapter 3

Research Methodology

3.1 Introduction

In this chapter the Research Methodology to carry out the research has been discussed in detail. Considering the objectives of the research 'Case Study' research has been chosen as the most appropriate methodology. A brief discussion related to the various other research methodologies which are used in Operations Research, has also been presented in the chapter. Last but not least a thorough justification of the 'Case Study' approach has been presented at the end.

3.2 Research Methodology; an Overview:

The way in which research is carried out is known as the research methodology.

3.3 Case Research Methodology:

3.3.1 What is Case Research?

3.3.2 Types of Case Research:

3.3.3

3.4 Research Design:

The starting point of Case Research is the Research Framework and the Research Questions.

3.4.1 Initial Research Questions: Types of Research Questions

3.4.2 Single Case Research:

3.5 Development of Research Instruments and Protocols:

Primary source of data in case research is structured interviews....

3.5.1 Case Research in Operations Management vs Social Sciences:

3.5.2 Single or Multiple Respondents:

3.6 Conducting Field Research:

3.6.1

Chapter 4

Background of the Company and the Case

Assa Abbloy and Darson Rubber Industries

Assa Abbloy is one of the leading manufacturers of Locks, keys and Door Solutions.

The two companies that have been chosen have a long standing history of manufacturing. The background and the history of both the companies has been given in this section.

Assa Abloy:

Assa Abloy is by far the leading Lock Making companies of the world. The Company has a number of sites around the world, which manufacture different types of locks and door solutions for its customers. The Portobello site is the largest and the main site in the UK. This site has around 200 shop floor workers and managerial staff of 40 to 50 people.

The annual turn over

The recession has forced the company to re-devise its manufacturing strategy like many other companies over the world.

(Ahmed, Montagno and Firenze 1996)

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