Trying to resolve manufacturing performance trade-offs: The case of British contract electronics assemblers

Canadian Journal of Administrative Sciences, Sep 2000 by Isabelle Dostaler

Abstract

The changing nature of competitive pressure now requires companies to compete on several aspects of performance simultaneously. This reality departs from the traditional idea that organizations must find a specific area of competency and choose between objectives such as low cost, quality, or flexibility. Hence, the degree to which companies resolve manufacturing performance trade-offs, and the understanding of the processes whereby companies manage to achieve this, emerge as a set of research questions. This paper presents the results of a benchmarking study carried out to assess and compare the levels of manufacturing performance achieved by 16 British contract electronics assemblers. Case studies conducted in three of these companies highlighted structural and cultural aspects that may explain intercompany differences in the resolution of manufacturing performance trade-offs.

Resume

La nature changeante des regles de la competition oblige les entreprises a maitriser simultanement plusieurs aspects de la performance manufacturiere. Cette realite differe de Videe revue selon laquelle les organisations doivent choisir entre des objectifs tels la reduction des coats, la qualite, ou la flexibilite. Ainsi, L'evaluation du degre de resolution des arbitrages traditionnels entre les objectifs de performance manufacturiere et la comprehension des facteurs favorisant cette resolution constituent des themes de recherche pertinents. Les resultats d'une etude de benchmarking menees aupres de 16 sous-traitants electroniques britanniques et ayant pour but de comparer leur performance manufacturiere sont presentes dans cet article. Trois etudes de cas ont ensuite permis d'identifier differents aspects structurels et culturels qui semblent expliquer les differents niveaux de resolution des arbitrages operationnels.

In many industrial sectors, competitive pressure now requires companies to compete on several dimensions simultaneously. Rather than choosing between an ensemble of key performance criteria, manufacturers should aim at achieving them all. Indeed, from a customer's point of view, the obvious choice would be, for example, audio equipment offering both performance and ease of use or cars offering both speed and safety. Similarly, when given the choice, an original equipment manufacturer will opt for an electronics subcontractor that is able to offer high quality, short lead-time, and low price all at once.

These examples illustrate the perspective that has shaped into a critique of the traditional trade-off model in the manufacturing strategy literature. This is echoed in the field of competitive strategy where Porter's (1985) "stuck in the middle" prescription that is the argument that inherent contradictions exist between the generic competitive strategies, namely the cost leadership, cost focus, differentiation, and focused differentiation strategies, is questioned. Meanwhile, the concept of paradox in organizations, which presents interesting similarities with the new approaches to manufacturing and competitive strategies, is gathering momentum.

After reviewing the current debate in the field of manufacturing strategy, this paper will present the result of a benchmarking study carried out in the British contract electronics manufacturing industry to measure the level of trade-offs resolution in the industry. The paper also presents three case studies that were carried out to identify inter-company differences that might explain the resolution of manufacturing trade-offs.

New Approaches to Manufacturing Strategy

After Skinner's (1969) seminal article was published, the field of manufacturing strategy was for a long time dominated by the trade-off model: the manufacturing function should not try to be all things to all people and structural decisions (capacity, equipment, and processes, etc.) should be taken with a limited set of criteria in mind. As a result, a factory designed to achieve low cost could not be flexible and a lower quality could also be expected. The manufacturing strategy formulation process proposed by Skinner was in tune with Harvard Business School tradition and the SWOT (strengths, weaknesses, opportunities, and threats) framework. Moreover, manufacturing strategy was instrumental in character as part of a hierarchy of corporate, competitive, and functional strategies. The production function should select one or two competitive priorities and develop manufacturing capabilities accordingly, in order to support the choice between a cost and a differentiation strategy made at business level. Indeed, the trade-off model content is very much in line with Porter's generic competitive strategies. Interestingly, both were questioned in recent years (Hayes & Pisano, 1996).

"Stuck in the Middle" Revisited

Porter's (1985) "stuck in the middle" prescription has generated many debates. For example, although they recognize that high value and low cost are the only possible competitive moves, Gilbert and Strebel (1988) suggest that they are not mutually exclusive ones. Cronshaw, Davis, and Kay (1994) revisit Porter's prescription and their analysis is refreshing. They suggest that "stuck in the middle" is less a prescription than a way to analyze strategic outcomes. Companies who cannot achieve lower cost or differentiated products rarely succeed but, reciprocally, being stuck in the middle is a very good thing if a firm is good at both efficiency and differentiation. Interestingly, Porter's (1990) more recent discussion of the importance of distinct sources of advantage in order to sustain competitiveness is consistent with this. He gives the example of successful Japanese small copier manufacturers who combine advanced features, low costs, flexible automation, and high levels of reliability.