challenge of manufacturing advantage
TRANSCRIPT
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 1/19
PRODUCTION AND OPERAT IONS MANAGEMENT
Vol. 5, No. I, Spring 996
Prmed in LLYA
THE CHALLENGE OF MANUFACTURINGADVANTAGE*
STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
Harvard Business chool, Boston,Massachusetts2163, USA
In spite of the significant progress made by a wide range of manufacturing companies over thepast decade, few senior executives in U.S. firms would point to manufacturing as a significant
source of competitive advantage. This paper seeks to explore some of the basic reasons for this.It begins by providing a framework for manufacturing competitiveness. I t then outlines a handfulof characteristics that seem to have been pervasive n a wide range of manufacturing competitivenessprograms over the past decade. In contrast to those characteristics, it uses three quite different
organizations to illustrate a very different mode for pursuing manufacturing competitiveness.Finally, the paper concludes by outlining three elements that appear to be essential in the successfulpursuit of manufacturing advantage.
(MANUFACTURING STRATEGY; COMPETITIVE ADVANTAGE)
The competitive landscape of manufacturing-based industries-ranging from auto-mobiles to steel, and from consumer electronics to medical devices-has changed con-
siderably in the past decade. During the same period, the number of books, articles,courses, and seminars focused on helping practicing managers cope with the challengesof such an environment has grown dramatically. Numerous consulting firms, rangingfrom the big accounting firms (such as Arthur Andersen’s Andersen Consulting and
Deloitte-Touche) to the corporate strategy houses (such as Bain and McKinsey ) and onto the specialty consultants (such as PRTM and Analysis Group), have prospered by
focusing a major part of their practice on manufacturing opportunities and challenges.Even at graduate schools of business, few would have predicted as recently as a decadeago that MBA courses on technology and operations management would be listed among
student favorites and that student-run manufacturing and technology management clubswould flourish.
Yet despite such apparent successes and advances for the manufacturing cause, one
does not encounter many CEOs who point to their manufacturing activities as a significantsource of competitive advantage. Nor does one find many senior manufacturing executiveswho think their organization has a meaningful, sustainable lead over competitors or who
would describe manufacturing as a full partner and peer with its corporate counterparts.In short, while many firms can point to significant progress in their manufacturing op-erations over the past decade, few feel they have achieved the competitive results they
believed pursuit of manufacturing strategy promised.
* Received July 1994; revised June 1995; accepted August 1995.
59
lO59-l478/96/OSOl/O59$1.25Copyright 0 1996, Production and Operations Mana gemen t Society
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 2/19
60 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
Observing these mixed results while acknowledging the substantial resources that have
gone into the development and application of new concepts, techniques, and tools for
improving manufacturing competitiveness, one might well ask why such efforts have
fallen so short of their intended results. Has the past decade shown these concepts to be
inappropriate and/or ineffective in a complex world? Are the techniques generally correct,
but practitioners unable to adapt and implement them in their own setting? Or is it thatthe tools address such a small fraction of extant challenges that the areas not addressed
overwhelm the positive results expected? The purpose of this paper is to suggest some
partial answers and to identify a number of issues and questions worthy of additional
discussion and research.
We begin by summarizing a widely published and frequently embraced framework
for manufacturing strategy development and the pursuit of competitive advantage in
manufacturing. While that framework and its basic elements have continually evolved
and been refined, many of its central concepts and techniques have been part of the
manufacturing management scene for well over a decade. A review of this framework
offers three advantages. First, because thinking has evolved and no single publication hasattempted to pull together all the elements currently advocated, such a summary mightbe useful in its own right. Second, a review makes quite clear the framework’s stability
and consistency over the past several years, facilitating an evaluation of its appropriateness
given the experience firms have had applying it. Finally, to the extent that revisions and
further elaboration on the framework are needed, it will be easier to describe where they
would fit and the challenges in developing them following such a summary.
In the second section, we provide an assessment of the manufacturing strategy pursuits
in which so many industrial firms have engaged over the past decade. Although not based
on an exhaustive statistical study of such efforts, we describe the readily identifiable
patterns we have observed consistently in a wide range of industries.In the third section, we describe four firms that have been extremely successful in
establishing and utilizing manufacturing as a source of significant competitive advantage.
After characterizing the activities of these firms, the final section outlines a handful of
important principles that underlie their successful efforts. We also comment on the in-
teraction among these principles and indicate how we think the approaches taken by so
many firms undermine the establishment of significant manufacturing advantage. We
close with some observations and predictions as to the prerequisites that must be met if
achievements in manufacturing competitiveness during the coming decade are to differin kind and impact from those of the past decade.
1. A Basic Framework for Manufacturing Competitiveness
To better understand the context within which manufacturing strategy develops in an
organization, it is useful to consider three levels of strategy in business: corporate strategy,
business unit strategy, and functional strategy (such as for the manufacturing function).
Much has been written about each of these levels of strategy and their relationships with
one another. (Especially useful in this regard is work by Kotha and Orne 1989, and Kim
and Lim 1988.) Moreover, substantial literature has been developed over the past decade
exploring various aspects of manufacturing competitiveness. (Some of the most widely
referenced work includes Swamidass and Newell 1987, Miller and Roth 1994, Gerwin1993, Ettlie and Penner-Hahn 1994, and a review article on manufacturing strategy by
Adam and Swamidass 1989.)
One of the most widely discussed and examined frameworks for manufacturing strategyis that suggested by Skinner ( 1985 ), Hayes and Wheelwright ( 1984 ), and Hayes, Wheel-
wright, and Clark ( 1988 ). These authors have identified a handful of alternative dimen-
sions that might be the focus of a business unit strategy and thus represent the desired
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 3/19
THE CHALLENGE OF MANUFACTURING ADVANTAGE 61
competitive advantage that manufacturing would be expected to support and enhance.
The candidate dimensions include cost, quality, dependability, flexibility, and innova-
tiveness. Each business must not only decide on which of these dimensions it seeks to
be distinctive for its intended markets, but also determine the appropriate definitions of
these dimensions as they apply to its product lines, technologies, and competitive envi-
ronments. Clearly the goal is to develop a position (capability) on one or more of the
performance dimensions that is both highly valued by customers, and superior (distinctive)
to that of competitors. The basic logic is that achievement of this goal will provide a
strong competitive advantage.
In most markets, creating such a competitive advantage is not a once and for all
proposition. Improved technologies and changing customer tastes challenge an organi-
zation to improve constantly. A strong competitor is thus one that excels (is well above
the industry acceptable range) on one or two performance dimensions, and very com-
petitive (but perhaps still within only the acceptable range) on each of the other dimen-
sions. However, a strong competitor will only retain its distinctiveness and competitive
advantage if its rate of improvement is as great as or greater than that of its competitors.
Although we will return to the need for dynamic, continuous improvement, it is in-
structive at this point to examine an organization that fails to meet the “acceptable
range” on each performance dimension. Such an organization can be distinguished from
its strong competitor in at least two ways. First, for the organization in catch-up, all five
dimensions may need attention-not just the one or two on which it is seeking to be
distinctive. This has major implications for signaling priorities to the organization because
a function in catch-up is likely to emphasize the performance dimensions that are most
troubling, not necessarily those where it is seeking to be distinctive in its business strategy.
Second, the acceptable range sets a very clear standard for the organization in catch-up,
making it easier to identify (and benchmark) what must be accomplished as a minimum
to be viable. For the strong competitor, certain trends may be readily apparent, but the
target it must pursue-particularly on those one or two dimensions on which it is seeking
to be truly distinctive-is much less clear than for the organization in catch-up. (See
Edmondson and Wheelwright 1989, for a more complete discussion of the dynamic
nature of the manufacturing challenge.)
Having identified the pertinent performance dimensions, the next element of this
manufacturing strategy framework is to consider the patterns of decisions built up over
time in a function (such as manufacturing) that account for and result in the degree to
which the firm achieves a strong competitive position. According to this framework, itis not a single decision or even a handful of major decisions that in most instances
determines how a firm is positioned over time. Rather, competitive positioning is the
composite and cumulative effect of literally hundreds and even thousands of decisions-
some large, but many small. (See Ferdows and De Meyer 1990 and Gil& Roth, and Seal
1990 for further discussion of the cumulative impact and importance of patterns of
decisions in manufacturing.)
Wheelwright and Hayes ( 1985) suggest that, of the many decisions made by a man-
ufacturing organization, it is possible to group them into a handful of categories or types.
One such grouping consists of ten types of major manufacturing decisions: capacity
(amount, utilization, timing); facilities (type, size, location, specialization) ; vertical in-tegration and vendors (direction, extent, balance, number); process technologies (scale,
flexibility, interconnectedness); new products (integration, start-up, modification); human
resources (selection/training, compensation, security); quality management (definition,
role, responsibility, yields); information technology (maintenance, material f lows, pro-
duction planning, cost tracking); organization (organization structure, layers, reporting);
and customer (access, relationship, support).
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 4/19
62 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
Utilizing such groupings to recognize patterns of decisions has a number of advantages.
First, it enables an organization to link its daily and repeated decision making to its
strategy and competitive positioning. Second, because every operating organization has
such a pattern of decisions, it suggests that every organization has a manufacturing func-
tional strategy. Third, it provides a tool to diagnose the historical pattern in such decisions
and then relate those decisions to the firm’s competitive performance realities. Finally,
it provides a level of detail that can be used to guide future decisions so they more fully
and consistently reinforce the desired competitive advantage of the business.An important discovery by those who have examined their patterns of decisions in
manufacturing is the presence of driving forces. Patterns do not arise randomly; rather,they are a response to a set of internal and external pressures. Examples of internal
pressures would be those related to senior management directives, organizational structure,incentives and performance measures, and decision making processes such as capital
budgeting. Examples of external drivers would include customer requests, competitor
pricing and product moves, and industry technological evolutions. Recognizing how past
driving forces have influenced historical decision patterns not only gives insight into theexisting competitive position of the business and manufacturing’s contribution (or lack
thereof) to it, but also suggests how new patterns might be formed. Many managers who
try to change patterns of decisions on a “management by exception” basis find it a
frustrating and, in the end, largely futile exercise. Seeking to change decision patterns by
creating and amplifying a set of forces that will result in the correct patterns is a much
more successful path to follow in seeking to alter functional and business unit strategies.
Interestingly, the emphases of the last fe w years on listening to the customer and
benchmarking against “best in class” competitors are simply recognition of the fact that
these external drivers-customers and competitors-should be given top priority in es-
tablishing appropriate decision patterns. This relationship of the critical linkages in man-ufacturing strategy is summarized in Exhibit A-l. Essentially, it suggests that manufac-
turing’s competitive contribution seeks to connect market performance (the far right
hand side of Exhibit A- 1) through products and services to the capabilities (those that
are distinctive and valued by the customers) that the business unit is seeking to provide
and pursue through its business strategy. Those capabilities, however, come about because
of the patterns of decisions adopted within the various subparts of the business unit (such
as the manufacturing function) and are the consequence of the driving forces to which
those subunits have chosen to listen and respond. (See also Roth and Miller 1992 for a
further discussion of the relationship between a set of manufacturing decisions and mea-
sures of business success. Similarly, the work of Vickery, Droge, and Markland 1993,and Cleveland, Schroeder, and Anderson 1989 seeks to relate manufacturing competencies
to business performance.)
As a result of observing senior managers in a variety of manufacturing industries,
Wheelwright and Hayes ( 1985) have suggested that an additional condition that often
determines the extent to which the manufacturing function reaches its full potential is
its organizational role. Using a continuum consisting of four stages, they suggest that
manufacturing’s role can range from minimizing its negative impact (internally neutral)
to providing superior capabilities for competitive advantage (externally supportive). While
originally developed with the manufacturing function in mind, subsequent application
Drivers
l internal
l external
Patterns Products
+ of and Services +PResulting
Decisions ProvidedPerformance
EXH IBIT A- I. Critical Linkages in Manufacturing Strategy.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 5/19
THE CHALLENGE OF MANUFACTURING ADVANTAGE 63
in a number of businesses has revealed that a similar continuum, divided into four stages,
is equally applicable to other functions such as marketing/sales and R&D/product de-velopment. As summarized in Exhibit A-2, stage 1 consists of a functional role that is
in catch-up or reactive mode; stage 2 consists of matching but not exceeding industry
practice and standards; stage 3 consists of setting appropriate functional priorities to
support the business strategy; and stage 4 puts a function in a proactive role, seeking to
establish additional competitive advantage for the business unit.
Experience with this four-stage framework has suggested a common cycle. Most busi-
nesses start out emphasizing one function as the primary source of business advantage
(externally supportive, or approaching stage 4) and seek to have the other functions be
neutral (in a stage 1 or stage 2 role). As businesses mature and their industries become
more competitive, stage 2 in all functions and stage 4 for the function that has been
chosen as the basis for competitive advantage become the minimum requirement for
acceptable performance.
At this point, having one function at stage 4 competitively and the others only at stage
2 creates two classes of citizens in an organization. Internal choices regarding systems,
procedures, performance evaluation, and even organizational structure combine to rein-
force the stage 2 role of certain functions and the stage 4 role of the “chosen” function.
Furthermore, progress toward stage 3 on the part of the stage 2 functions is often inter-
preted by the stage 4 function as a direct attack on its contribution to the business. A
classic example is the high-tech firm focused on innovation and product features that
discourages the marketing/sales and manufacturing operations from making early inputs
to product development because such inputs are viewed as “hindering” and “inhibiting”
the creativity and value-added of R&D/product development.
As industry competitiveness increases, firms find the need to move stage 2 functions
more fully into stage 3. For example, as the rate of product innovation increases and thespeed of competitive imitators quickens, a firm such as one described above finds that
stage 2 manufacturing is no longer adequate. However, an interesting characteristic of
stages 1-3 is that any function therein finds itself in a derived role. That is, its role is
derived from the business strategy, which is established largely by the function considered
stage 4 in the organization. This puts all but the stage 4 function in the role of follower
and gives them the assignment of “fixing themselves” while not interfering with the value
provided by the stage 4 function.The full potential of a stage 4 role for a function can occur only when it is complemented
and enhanced by the other functions being at stage 4 as well. That is, over time, the full
benefit of superior and distinctive capabilities in one function can only be realized whenother functions are at that same level. The old adage that a chain is only as strong as its
EXHIBIT A-2
The Four Stages in a Function’s Strategic Role
R&D/Pi'Oduct
Development Marketing/SalesManufacturing
Operations
Stage 1Internally neutralStage 2
Externally neutralStage 3
Internally supportiveStage 4
Externally supportive
Catch-up imitate Order taking sales focus
Industry cycle and specs Industry terms
Obvious needs fil l gaps Marketing support
Innovative new products New markets/channels
Reactive (do as told)
Industry practice
Correct priorities
Distinctive capabilities
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 6/19
64 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
weakest link applies to competitive advantage and business strategy. A stage 4 business
unit is of necessity an integrated entity.
It is instructive to conclude this section by returning to Exhibit A-l and the critical
linkages in manufacturing strategy. The objective of such strategy is to improve business
performance as measured, for example, by return on investment or total return to inves-
tors. While much has been written about industry analysis and business unit performance,
the experience of the authors and some of their students has been at odds with two widely
held notions concerning performance. The first is that outstanding performance tends
to be associated with more attractive industries. The most systematic evidence countering
this belief is provided by Hall ( 1980). In looking across a number of different industries,
he discovered that the best performer in each of several industries had performance
results closer to the best performers in all other industries than to the average performance
in its own industry. Our observations of the past decade support this finding. For example,
the best performing U.S. steel companies achieve performance levels comparable to those
of the best ethical pharmaceutical or proprietary electronics firms, and the same is true
for the best auto, disk drive, and paper companies. Their results are not dependent onthe attractiveness of their industry.
A second widely held premise regarding performance is that market position (e.g.,
market share), absolute size (e.g., scale), and proprietary technologies (e.g., patents)
provide the most lasting and defensible sources of competitive advantage. Authors as
varied as Peters and Waterman ( 1982) and Prahalad and Hamel ( 1990) recently have
challenged this premise; they posit instead that capabilities (which we would claim are
the result of patterns of decisions) are the best and most durable source of competitive
advantage.
If one largely rejects these two traditional premises and accepts their alternatives, then
the level of business unit performance should vary dramatically as an organization movesfrom stage 1 or 2 on into stage 4. Such changes in performance are illustrated by the
curve in Exhibit A-3. Hypothesis I illustrates the performance one might expect if a single
function provides competitive advantage, whereas hypothesis II is what one might expect
when all the functions pursue and achieve an integrated stage 4 capability. The next
section of this paper describes four businesses that have made substantial headway in
Performance
IndustryAverage
I I I IStage 1 Stage 2 Stage 3 Stage 4
Composite Stage of Company’s Function
EXHIBIT A-3. Relating Functional Roles to Business Unit Performance.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 7/19
THE CHALLENGE OF MANUFACTURING ADVAN TAGE 65
moving their entire organization to stage 4. These provide empirical evidence that supportsHypothesis II and suggests the dramatic impact stage 4 status can have on performance.
2. The Characteristics of Manufacturing Strategy Pursuits during the Past Decade
The reader might well ask at this point why, with so many firms over the past decade
seeking to improve their manufacturing performance and achieve the associated benefits,have so few achieved true manufacturing advantage? To answer this question, it is helpfulto consider where the center of gravity has been with respect to manufacturing compet-
itiveness efforts during the past ten years.Our observations are that while tremendous energy, resources, and attention have been
devoted to manufacturing strategy during this period, the vast majority of efforts havesuffered from three characteristics that, while seemingly consistent with the frameworkoutlined above, in fact undermine progress toward the goal of competitive advantage.
These characteristics might well be thought of as biases or central tendencies that many
firms have incorporated unconsciously, yet pervasively, into their manufacturing im-provement efforts.
The first has been a focus on “fixing something that is broken.” The vast majority ofmanufacturing improvement programs of the past decade have been conducted by man-ufacturing organizations that found themselves in a catch&p position. The primary mo-
tivation for their improvement efforts has been to close the gap with identifiable, knowncompetitors, not to move ahead. Because the majority of U.S. manufacturing was in
trouble and the competitive gap was wide and readily apparent, this was a natural focusfor improvement efforts. In the auto industry, for example, by the early 1980s it waswidely recognized that U.S. manufacturers had a $2,000+ cost disadvantage as well as
a significant quality disadvantage vis-&is their Japanese counterparts. As a natural con-sequence, the Big Three auto makers focused on reducing costs and improving conform-ance quality to get into the ballpark with competitors such as Honda and Toyota. Fre-
quently, much was accomplished by fixing the obvious, but the fundamental drivers-the things that had caused or allowed the weaknesses to become significant in the firstplace-remained uncorrected.
Because performance gaps threatened the very existence of U.S. auto companies, theywere compelled to concentrate their attention on correcting manufacturing problems.Furthermore, given competitive and investment community pressures, something hadto be done quickly, and the results (i.e., savings and quality improvements) had to be
dramatic and measurable. A number of powerful tools became widely touted during thisperiod as means by which organizations seeking to “fix” manufacturing could makesignificant gains. Representative of the variety of such tools were just-in-time (JIT),
quality improvement, benchmarking, and facilities rationalization. Understanding these
tools and their impact helps explain the detrimental side of these efforts for U.S. man-ufacturers.
By the mid-1980s JI T had been amply proven in practice by Toyota. The benefits
achieved illustrated to firms around the world the power of redefining work flows, set-up procedures, inventory roles, and other activities associated with shop floor operations.The basic message from JI T was that there was a far better way to run a factory than had
been thought traditionally. Furthermore, if adopted, it was likely to close the gap withcompetitors substantially.
A second tool (or perhaps more accurately, an approach) widely heralded and pursuedwas the quality revolution. Under the guidance of such diverse philosophies as thoseproposed by Deming, Juran, and Crosby, firms focused on changing their definition of
quality, how it was measured, the training provided to support it, and the behaviorsadopted to pursue it. Numerous industry and corporate awards were initiated and sub-
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 8/19
66 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
sequently pursued by literally thousands of firms. But again, the primary emphasis was
on closing a competitive gap.
Another tool of a somewhat different but equally important nature that gained wide-
spread acceptance was benchmarking. Assessing, measuring, and contrasting one’s own
performance against that of others helped in identifying problem areas, recognizing the
magnitude of the effort required to correct them, and suggesting possible solutions thathad worked for others. Appropriately, this tool led manufacturing groups to look outside
their own four walls and judge their performance not against how hard they had been
working or how difficult they perceived their task, but rather based on their capabilities
and performance relative to what others-especially those considered “best-in-class”-
had been able to achieve. This tool facilitated a clearer focus on competitive realities that
could be translated into measures directly relevant to manufacturing operations.
A fourth tool that emerged and gained widespread adoption for “fixing manufacturing”
was that of manufacturing facilities’ repositioning and restructuring efforts. Given the
presence of tools such as JIT, quality improvement, benchmarking, and rationalization
as well as the organization’s recognition that something in manufacturing was brokenand needed fixing, firms quite naturally turned to outsiders for help. Many firms consid-
ered insiders too close to the trees to see the forest and politically unable to take the
tough steps required (i.e., layoffs, plant closings, and outsourcing) to correct known
problems. Because manufacturing historically had most often been in a stage 2 role(defined largely in terms of the domestic rather than the global industry), there were few
firms that thought they could turn to their own manufacturing management for leadershipin putting in place the magnitude of changes needed.
As a consequence of the widespread adoption of these tools and approaches, and, moreimportantly, of the focus on “fixing something that is broken,” manufacturing strategy
during the past decade was viewed as a means to close a known gap, to catch up withthe standards established by industry leaders, and to do so quickly and with clearly
measurable results. Often a sequence of such tools was pursued like the “flavor-of-the-
month,” each with a largely single issue focus and relying on “outside experts.” Seldom
was there an overarching system or comprehensive model. Although other long-term
issues were not ignored intentionally, steps that had no short-term payoff were considered
secondary given the compelling nature of manufacturing’s current challenges. In fact,
those few consultants who sought to sell their services based on the creation of long-term
capabilities and the establishment of stage 4 patterns of behavior often were met with
blank stares and little interest on the part of potential clients. Senior management was
concerned with fixing the current problems now, not worrying about future, largely un-specified opportunities and needs.
A second bias characteristic of manufacturing competitiveness efforts of the past decade
has been the gradual but clear shift from a concentration on the capital investment and
fixed asset categories of manufacturing (such as capacity, facilities, and process technology)
to the infrastructural, softer areas (such as quality management, new product development
procedures, and human resource policies) as the primary focus of improvement efforts.
For example, the tools of JIT, quality improvement, and benchmarking (mentioned above)
have been viewed primarily as approaches for addressing infrastructural elements rather
than approaches requiring substantial capital investment or the restructuring of fixed
assets.Recognizing the pervasiveness of this shift and its impact on manufacturing compet-
itiveness thinking is important for at least two reasons. First, focusing on infrastructural
decisions and patterns-while different in kind from focusing on structural decision
categories-is not automatically more or less consistent with the overall manufacturing
strategy framework outlined at the outset of this paper. It simply represents a different
content focus. Second, recognizing this shift is important because structural decisions
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 9/19
THE CHALLENGE OF MANUFACTURING ADVANTAGE 67
EXHIBIT C-la
HP Vancouver-Phases and Areas of Focus in an Improvement Process
Phase 1: within
the factory
Phase 2:
systems
Phase 3:external to the
factory
Worker involvementl Problem Solving
l Statistics QCl Training/rotationl TQC
Vendorsl Expectations/standardsl Structure/networkl Single source design
Production schedulel Linearity (mo/wk/dy)
l Smoothed levelsl Mix independentl Credible schedules
Systems
l Accountingl Inventory trackingl Shop floor controll Performance evaluation
Product designl Parts structurel Manufacturability. Process utilization
Process changel Flows (material/
information)l Setup timesl Batch sizes
l Manufacturing cycletimes
l Layout of plant
l Task definitionsl Mixed model balancel Process control
l Storage removall Material accessibility
Advanced manufacturingprocesses
l Capability
enhancementl Islands/substitutionl Fit with product
typically are viewed as less flexible over time and thus more susceptible to a “one-time
fix,” while infrastructural decisions are viewed as easier to change. Yet, experience suggests
that the reverse is more often the case.
The fact is that many of the firms we have studied have chosen to seek a one-time fix
in areas such as human resources or total quality management, just as they might have
with facilities or capacity. Furthermore, while many such organizations might state their
goal as’becoming “world class,” most who see themselves closing the gap with their better
competitors end up falling far short even though they make significant improvements.
As others in their industry make similar improvements, the result is a redefinition of
stage 2 (industry practice) to reflect those new industry-wide patterns, while existingstage 4 competitors continue their own ongoing improvement efforts.
The third characteristic pervasive in the vast majority of manufacturing competitiveness
programs of the past decade has been that of viewing manufacturing operations as largely
separable from the rest of the business. From this perspective, manufacturing can be
improved independently, without changing its interaction with other functions or affecting
how other functions do their work. This further reinforces the view that manufacturing
improvement, once executed, can be considered finished. Thus, while some firms have
stated their goal as becoming stage 4, when probed further it becomes clear that they
think of stage 4 as a specific point that, once achieved, will represent stage 4 capability
into the future. Additionally, they view stage 4 as having world-class factory operations,and no t requiring significant integration of a distinctive manufacturing function with the
rest of the organization.
Achieving a step improvement in manufacturing to a new competitive plateau would
constitute a significant improvement for most organizations and result in real performance
gains-gains that might show up in inventory reductions, shorter throughput times, higher
quality levels, and overall market success. However, on its own, even outstanding man-
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 10/19
68 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
ufacturing is no match for a fully-integrated business where all functions are at stage 4
and all provide distinctive capabilities the other functions can (and do) make use of.
One effort currently underway that deserves comment because it appears to be much
more in keeping with a stage 4 role for all the functions is that of “reengineering.”
Reengineering often focuses on areas of cross-functional activity that have extremely
high potential-for example, new product development or order fulfillment processes.
However, while it is true that these activities offer the potential for a truly integrated
stage 4 approach, typically that is not how most reengineering projects are tackled. Rather,they are viewed as individual programs, each done largely on its own; they are not viewed
primarily, or even significantly, as an area of manufacturing responsibility (although
parts of them may be); and, like prior efforts, they are viewed as “fixing something that
is broken” or, in other words, reaching a new competitive plateau that will enable the
organization to ignore that area for some years to come.
None of the three biases or central tendencies discussed in this section is diametrically
opposed to the framework for manufacturing competitiveness summarized in Section
A. In fact, it is easy to understand why a firm that finds itself under tremendous competitivepressure in manufacturing would focus on short-term fixes, closing a gap in those decision
categories where the shortfall is most apparent, and achieving performance that would
put it on the same competitive plateau as it imagines the industry leaders to be. The
problem is that a manufacturing competitiveness effort based on these premises falls far
short of the basic framework and its potential as illustrated by the results of organizations
as diverse as Hewlett Packard in printers, Allegheny Ludlum in stainless steel, Quantum
in disk drives, and Toyota in the automotive industry-companies whose efforts and
performance are described in more detail in the next section.
3. Illustrations of Stage 4 in Practice
It should be possible to recognize business units that have pursued strategies consistent
with the manufacturing competitiveness framework outlined in Section 1 and to contrast
their approaches and efforts with those widely adopted in practice, as outlined in the
preceding section. In this section, we identify four such businesses, describe their efforts,
and summarize their performance results. While none of these four necessarily followed
every detail of the framework proposed above, in each case they applied principles largely
consistent with those underlying the framework and avoided the pitfalls previously de-
scribed. We have chosen these four for presentation here because of that similarity. How-
ever, each also represents a significantly different organization with regard to the substanceof its business strategy, its competitive environment, and its overall corporate setting.
Hewlett Packard 5 DeskJet Printer Business
The first illustration comes from Hewlett Packard’s DeskJet printer division located
in Vancouver, Washington. As described by Hayes, Clark, and Wheelwright ( 1988, p.
363), the manufacturing function in this printer business set out to improve significantly
the competitive contribution it was making to the business unit. It did so by outlining a
three-phase approach and then spending almost three years putting it fully in place. As
summarized in Exhibit C- 1a, Hewlett Packard began by focusing on improving existing
factory operations, a step not unlike that taken by so many others seeking to close acompetitive gap in manufacturing. However, it conscientiously followed with a second
phase focused on redesigning its systems and procedures so they would support and
reinforce the new factory operating environment. It then moved to a third phase aimed
at involving vendors, pursuing advanced process automation, and creating a new approach
to product development. It sought to change the interaction of manufacturing with the
other functions and the surrounding environment. Some of the results achieved by this
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 11/19
THE CHALLENGE OF MANUFACTURING ADVANTAGE 69
EXHIBIT C-I b
HP Vancouver-Performance Resu lts (3-Year Period)
Metric
l PC Board Cycle
l Inventory Turnsl Floor Space Needs
l Labor Productivityl Reject Ratel Reduced Fire Fightingl Product Development Time
l Product Designsl Marginsl Revenues
Improvement
Cut to 1/6th Time
Fourfold Increase50% Decrease
50% IncreaseSubstantial ImprovementPre-empting QuestionsCut in Half
Better and ManufacturableDoubleUD bv 50%+
business unit through its efforts to improve its functional strategy and better integrate
manufacturing into the remainder of the business are summarized in Exhibit C-lb.
As manufacturing made significant progress, other functions in the business also were
rethinking their competitive roles and contributions. These combined efforts became
even more integrated and focused when division general management created a cross-
functional, colocated team to develop a new generation of the DeskJet printer. Thatteam undertook a number of new approaches to the product development process-
most importantly, involving all the functions in monthly prototype builds to test allelements of the system, not just the engineering aspects of the new design (see Chapter14 in Bowen et al. 1994). Even when the project was considered complete, additional
behavior changes were identified as needed, including the assignment of design engineersto manufacturing for the first three months following production start-up. As summarizedin Exhibit C-lc the results of this project were indeed impressive. However, even moreimportant than the product’s success was its impact on the business unit and its com-petitive capabilities. The project became a demonstration to the entire division of howintegration could be accomplished and of the benefits of having all the functions pursuing
a stage 4 role.Although Hewlett Packard is a multibusiness corporation that does not report the
financial and market results of individual divisions, it is clear that the Vancouver Division’s
process has been mirrored by other divisions focused on the LaserJet and InkJet tech-
nologies and their multiple product lines. In fact, while it may come as a surprise tomany, printers had become Hewlett Packard’s number one business by the early 1990s.For example, in 1994 Hewlett Packard added approximately $5 billion in revenues and$400 million in after-tax earnings to its impressive 1993 results. The vast majority of
these gains were in its printer businesses. Much of the turnaround in the corporation’s
EXHIBIT C-lc
DeskJet Results
Performance improvements. 22-month development (versus traditional 36-60 months)
l 17 months to complete manufacturing, testing, and toolingl HP Corporate Award for best R&D design (1987)l Datek ( industry) award as printer of the year (1988)l Laser quality printing on plain paper at under $1000
l More than double the margin of prior product generationl Sales volume substantially in excessof forecasts
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 12/19
70 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
performance in the late 1980s and early 1990s also was driven by the accomplishments
of these printer business units as they successfully transformed their functional and busi-
ness strategies to be more reflective of the excellence and integration representative of a
stage 4 organization.
Allegheny Ludlum S Stainless Steel BusinessA second example of outstanding manufacturing advantage comes from the steel in-
dustry. Allegheny Ludlum Corporation, a specialty steel firm with sales in excess of $1
bi llion (primarily from stainless steel products), has achieved outstanding financial per-
formance over the past decade (Garvin 1994). In its stainless steel business, Allegheny
Ludlum has aggressively sought to turn its manufacturing operations from art into science,
raising quality standards and consistency, and lowering the costs of its processes throughout
the complex set of steps involved in the production of stainless steel. In recent years, it
also has reduced inventories dramatically and raised delivery performance to levels far
beyond those typical of its competitors. Allegheny Ludlum’s efforts to apply the principles
of stage 4 operations date back to the late 1970s when the business-through the efforts
of Richard P. Simmons and others-chose to focus on improving operations at a time
when its own parent corporation, Allegheny International (AI), and many other steel
companies were looking to diversification, innovative financial moves, and industry re-
structuring as the primary sources of competitive advantage.
Simmons and his colleagues bought the steel business of AI in a leveraged buyout in
1980 and proceeded to focus on implementing a handful of principles, which they have
continued to pursue consistently for well over a decade. As reported recently by Hayes
and Pisano ( 1994)) some of the Allegheny Ludlum manufacturing decision patterns that
stand in sharp contrast to others in the industry include the following:
l continued, ongoing investment in the technical skills of its people;l a significant R&D budget focused on products and processes;
l a measurement and tracking system that provides detai led cost data for different
routings through the production process at the level of individual coils of steel;
l systematic experimentation and a constant stream of projects that test new ideas;
l significant spending on mathematical modeling and simulation of the manufacturing
process in order to make it more scientific and robust; and
l selected capital investment in new products and processes and the upgrading of
existing activities to expand capacity.
By 1987, Allegheny Ludlum Corporation had achieved significant financial success
and was able to repay much of its debt and go public. As shown in Exhibit C-2, thepretax operating earnings achieved since that publ ic offering are most impressive. Average
return on owners’ equity during that period has been in excess of 25%, despite the firm’s
being subject to periodic industry downturns ( recessions) in 1986- 1987 and 199 I- 1992.
Furthermore, recent advances in products and services at Allegheny Ludlum would suggest
that its rate of improvement both continues unabated (particularly as it is now being
applied to the service and delivery dimensions of the business) and is directly transferable
to additional operating units, such as the stainless plate, plate-mill-p late, and tool steel
operations of Jessup Steel, which it recently acquired.
Quantum’s Disk Drive Business
A third example that further illustrates the opportunity and achievements associated
with the pursuit of stage 4 capabilities in al l the functions is provided by Quantum
Corporation, a participant in the rigid disk drive business. Quantum was founded in
1980 and immediately began to grow its revenues and expand its market position by
designing, manufacturing, and marketing first 14”, then 8”, and fina lly 5$” rigid disk
drives (see Langowitz and Wheelwright 1994, and Wheelwright and Christensen 1992).
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 13/19
THE CHALLENGE OF MANUFACTURING ADVAN TAGE 71
209
Year87 88 89 90 91 92 93
ReturnonE uity3
39% 44% 48% 20% 11% 18% 24%(after tax
EXHIBIT C-2. Allegheny-Ludlum: Superior Performance.
In 1984, its fourth year of existence, Quantum set up a separate, wholly-owned subsidiary,
Plus Development Corporation, to create a 34” disk drive for the IMB PC after-market.(This product, the Hardcard, enabled owners of IBM personal computers to add a hard
drive in an expansion slot of their PC and thus extend the life of their machine andexpand its usefulness.)
The Plus Development subsidiary, knowing that it would face severe competition and
would have to distinguish its product on quality, reliability, and ease of use, acknowledged
the need to design products that were far more manufacturable, with a process giving
much higher yield and quality, than had been true of earlier generations of disk drives.
At this point, Plus Development made a trip to Japan to visit potential manufacturing
partners, and as a result decided to partner with MKE, a Matsushita subsidiary with a
leading position in VCRs. While MKE did not do any design or marketing, its manufacturing
operations and its ability to develop superior new manufacturing processes were considered
second-to-none.As Quantum Corporation’s fortunes in its original OEM business began to wane and
the successof Plus Development continued to grow, senior management of both operations
concluded they should apply the principles of the Plus business to the entire OEM and
mass distribution businesses as well. In 1987, the Plus subsidiary was integrated back
into the parent, and MKE became the process developer and production source for the
price-sensitive, high volume portions of Quantum’s entire product line.
Furthermore, to take full advantage of MKE’S capability, it became clear that product
development had to be far more integrated across the entire business and much more
responsive to customer needs and technical possibilities if long-term success were to
become a reality. With the disk drive industry growing rapidly, Quantum managementset a number of goals for product development that it felt would enable it to achieve its
competitive objectives. These included cutting the time to market by one-third, hitting
the market window within plus-or-minus two months on every major new product,
leveraging technology across multiple products and generations of products, doing all
development work in cross-functional teams, and making sure that every new product
thoroughly delighted at least one major customer.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 14/19
72 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
In the early 199Os, Quantum made the strategic choice to aggressively pursue therapidly growing, high capacity disk drive market. Because this required even tighterintegration of manufacturing-especially with regard to rapid new product introduction
and product customization for key customers-the firm chose to greatly expand its U.S.manufacturing base while incorporating much it had learned from its low-end businessthrough interactions with MKE.
By 1994, that manufacturing capability was well established and Quantum leveragedit dramatically through the purchase of Digital Equipment Corporation’s high capacitybusiness. Within six months, analysts estimated Quantum had turned the acquired busi-
ness around and the company was well on its way to instilling its successful approach tomanufacturing in the factories and product lines it had gotten from Digital.
While the disk drive industry has continued to be extremely competitive and those atQuantum would never claim to have “arrived” with regard to competitive advantage, itis clear that its approach to pursuing a stage 4 role for each of the functional areas and
focusing on their integration through the product development process has resulted in
dramatic growth and financial success, as illustrated in Exhibit C-3. Ongoing price pressurefrom OEM customers, demanding retail consumers, and new foreign competitors have
continued to force application and refinement of the principles of manufacturing com-petitiveness on both Quantum Corporation and its partner, MKE. However, both agreethat the foundation established in the preceding half-dozen years is an excellent one for
continuing to build and gain competitive advantage in the coming decade.
Toyota Motor’s Automotive Business
The fourth example of how a company attains a sustainable competitive advantagethrough manufacturing excellence comes from Toyota’s automotive business and its use
of a central organizing model-the Toyota Production System (TPS)-to guide its decisionmaking (Toyota Motor Corporation 1992 ) . TPS drives the way the company designs andoperates its plants; more important, it drives the design and operation of the total pro-
duction value chain. Largely due to the superior performance that results from TPS,Toyota has been held up as an example of the “lean manufacturing” paradigm, thebenchmark for manufacturers in the 1990s (Womack, Jones, and Roos 1990).
TPS is often described in terms of its tools and procedures, such as andon boards,kaizen teams, error-proofing processes, standardization of work, JIT inventory policies,
EXHIBIT C-3Results of Quantum’s Integrated Stage 4 Strategy
January 1994Dominate the non-IBM segment of the rigid disk drive market#I producer in units worldwide
Stream of recently introduced productsMultiple product familiesPipeline of next generation products
Financial Results (Fiscal Year Ending 3/3 1)
1986 1987 1988 1989 1990 1991 1992 1993 1994
Sales $121m $121m $189 m %208m $446 m $878 m $1,127 m $1,697 m $2,131 mNet Income 22 m 8.8 m -3.2 m 12.9 m 44 m 74 m 48.5 m 93.8 m 2.7 mROS 19% 7% -3% 6% 10% 9% 4.3% 5.5% -
ROA 19% 7% -5% 9% 25+% 25% 17% 13%* -
* ROA would have been l8%, but one month before year end, the company issued a convertible debenture
that added $200 million to the asset base.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 15/19
THE CHALLENGE OF MANUFACTURING ADVAN TAGE 73
and heijunka. Companies that attempt to adopt these tools piecemeal, however, reap
only limited, if any, rewards. TP S works for Toyota, and its suppliers and group companies,
as a holistic system approach. At the highest level, TP S is designed to optimize the business
and create advantage through operations that excel in safety, quality, flexibility within
pre-specified boundaries, dependability of delivery, and cost. Subelements of the pro-
duction system may not be optimized at the expense of the whole system, nor is fanatical
adherence to a single principle or tool (e.g., zero inventory) allowed.
One way to understand TP S is to structure its associated tools, concepts, and procedures
around the questions, “What is TP S designed to do?” and “How is TP S designed to op-
erate?’ Doing so, we have identified five essential elements that guide the design, operation,
and improvement of manufacturing in the TP S approach.
l TP S strives to have all critical processes “in control and capable,” thus creating
stability in operations (including business as well as manufacturing processes).
Achieving such stability requires discipline, documentation, and standardization ofwork; thus, safety, quality, dependable delivery, flexibility, and cost are achieved
with processes that are statistically validated and repeatable and that have naturaltolerances (variations) that more than meet customer requirements (capable). Toy-
ota’s emphasis on workplace order and cleanliness, as well as practices to simplify,
error-proof, and carry out total productive maintenance, are part of this theme and
can be applied not only to individual machines or operators, but to systems of
machines, workers, and plants.
l TP S systematically improves its in-control and capable processes by re-examining
every activity and operation to improve the value each adds to the product (and
thus the customer). This relentless elimination of waste (muda) satisfies the objects
of lowering costs, increasing productivity and quality, extending the boundaries of
flexibility (accommodating increased variety without penalty), and decreasing leadtimes. Thus, kaizen, for example, reflects the drive to continuously improve methods
of doing work; similarly, continuous flow, pull systems, and kanban attempt to
minimize inventory (which is seen as wasted resources) and elaborate “information
factors” within the plant and throughout the supply chain.
l TP S highlights production problems as close to their source as possible so that their
root cause can be identified and eliminated. Even carefully designed production
systems will inevitably encounter deviations and problems; TP S emphasizes managingthat uncertainty and complexity as it arises. Tools such as jidoka to highlight prob-
lems, production control through visual management, and procedures to separate
the problem from people (creating a no-blame environment) are examples of thisaspect of TPs .
l TP S connects the production plane directly to upstream suppliers and downstream
customers. Takt time (the rate at which customers are ordering products) is the
basic unit for organizing this value chain. The objective is to deliver the right product,
in the right volume, at the right time using a principle known as heijunka. Heijunka
also strives to distribute work intelligently and efficiently, thereby ensuring level and
balanced production. This requires clearly defining each production system element,
such as which lines are to be synchronous with JI T feeds and which should have
small buffer stores. It also requires minimum changeover and setup times to avoid
large batch production, sets out rules for order processing and production control,and defines vendor policies and capability standards. It strives for machines and
processes that allow single piece flow.
l TP S requires a workforce-from the line worker through management-that focuses
on learning and continuous improvement. Because problem identification and elim-
ination are crucial, all levels in the organization, and especially operations managers,
must have a deep understanding of the products and processes and be able to “walk
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 16/19
74 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
the talk.” For example, team leaders-the first level of supervisor at Toyota-must
be the best not only at “doing” the 4-6 tasks in their area, but also at identifying
and solving problems and teaching others.
These five elements of the Toyota Production System are interdependent and mu-
tually supportive. TP S works to optimize the business and maintain customer satis-
faction through innovative products delivered with the highest quality, shortest lead
time, and lowest cost. Toyota’s success, and its ability to replicate its success in a
variety of nations, cultures, and for plants with differing scales and scopes, suggests
that TP S is a robust system of production that meets customers’ needs in one of the
most competitive markets in the world.
In fact, Toyota’s unbroken string of multiple decades of consistently profitable growth
is the envy of the world’s auto industry. Its ability to introduce new products, enter new
markets, and embrace new technologies while maintaining a global reputation for low
cost and high quality is particularly disheartening to its competitors.
4. Essential Elements in the Successful Pursuit of Manufacturing Advantage
As outlined in Section 2, a handful of common practices and approaches have been
employed extensively over the past decade as firms have sought to overcome clear defi-
ciencies in manufacturing. In many cases, the impact of these tools has been rapid and
significant. However, many firms have also discovered that closing a gap or catching up
results in neither a competitive advantage nor a leadership position.
In contrast, the four firms described in Section 3 not only have achieved advantage
through integrating their manufacturing capabilities with other functions, but their ability
to improve appears to offer the promise of becoming a sustainable advantage. Hewlett
Packard, Allegheny Ludlum, Quantum, and Toyota have avoided the shortcomings weidentified in Section 2; moreover, they have adopted a handful of principles that seem
to generate real momentum and provide a base for competitive leadership. Our analysis
suggests that three principles are essential (through one or more often is overlooked) for
achieving true stage 4 capability and performance.
The first essential element is a focus on the rate of change (i.e., the rate of learning
and improvement) rather than simply a focus on a step change. While a step change
may be needed to make critical short-term improvements and to buy time, once such
change has been accomplished there is little momentum or foundation for ongoing im-
provement. In fact, the opposite is often the case: once significant improvements have
been made, senior management’s expectation is that no further investments in people,systems, or capital assets will be required in manufacturing for some time to come. Thus,
the very act of making a step change improvement becomes a roadblock to making
ongoing, continuous improvements.
Three things often contribute to this failure to adopt a “rate-of-change” perspective
in manufacturing improvements. First, the impact of a step change is clearly easier to
measure and a step change will likely show a faster payoff than a focus on continuous
improvement. Even when a capability for rapid, ongoing improvement is instilled suc-
cessfully within an organization, the first six months on the new trajectory may not result
in dramatic, quantifiable payoffs.
Second, a step change is much more consistent with the practice of managementconsulting and the mode in which consultants work-near-term projects for high pay-
back-than are the approaches required for implementing a rate-of-change improvement.
It is extremely difficult for an outside consultant coming into a manufacturing compet-
itiveness framework advocates. The consultant’s skills, approaches, and rewards simply
are not set up for it. Consultants must show immediate, significant improvement to
justify their fees, and the easiest way to do so is by closing a known gap.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 17/19
THE CHALLENGE OF MANUFACTURING ADVAN TAGE 75
A third contributing factor is that the foundation for ongoing improvement in man-
ufacturing performance lies in establishing a correct set of principles, making the detailed
operating procedures of the organization consistent with those principles, and then using
management leadership and other driving forces to build momentum for continuing
down that path. Such action plans are difficult to create and implement not only for
consultants, but for senior managers as well. Senior managers are more used to “man-agement by exception” and “fixing known problems” than to laying a foundation andpursuing the detail needed for such efforts to take full effect.
The second of the essential yet often missed elements is a focus on integrating man-
ufacturing operations with other aspects of the business, including other functions, sup-
pliers, and customers. It provides an overarching model and integrated system view of
the business into which manufacturing fits naturally and consistently. In some circles,
this has been recognized as the capital “M” (or big M) perspective on manufacturing
operations, as opposed to the more traditional little “m” perspective. It is a holistic,
broad-based view of manufacturing’s potential and how the elements work together,
rather than a view of the elements as distinct or separable choices. It enables an orga-nization to shift manufacturing from a function whose role is derived after the business
strategy and other functional strategies have been set, to one that makes manufacturing
a peer and co-developer of not only its own strategy, but the strategies pursued across
the business unit.
When this occurs, the skills and capabilities manufacturing has developed in putting
its own areas of responsibility on the path of rapid, continuous improvement become
highly valued by others in the organization. Thus, in firms such as those identified in the
preceding section, operations’ expertise in continuous improvement is brought to bear
in areas as diverse as product development, field service, customer support, and accounts
receivable/payable administration.The third of the essential yet often missed elements in achieving stage 4 manufacturing
competitiveness is that of leadership. Leadership must be present within manufacturing
operations as well as within the business unit. When fully effective, it is likely to be
recognized by others in the industry as well. Such leadership plays an essential role in
establishing a vision and sense of direction, ensuring that patterns of decisions are aligned
with that vision and direction, and maintaining momentum and consistency in fol low-
through. Unfortunately, in firms where manufacturing operations have been placed tra-
ditionally in a stage 2 or stage 3 role and where other functions have been viewed as the
primary providers of competitive advantage, it is unlikely that such leadership in oper-
ations will have been cultivated or nurtured.Significant doses of leadership are required in achieving a manufacturing edge because
a distinctive advantage in manufacturing requires that the firm be out in front of its
competitors, not simply catching up or maintaining parity. When one is behind, the
target of what is required to become competitive is far easier to identify and articulate
than is the case when one is out in front. Leadership is needed to create that target.
The challenge of leadership is to reinforce the efforts of manufacturing to be ahead of
the game through complementary efforts in al l the functional areas. Often times business
strategy in such a setting becomes a directional sense and rate of overall improvement,
rather than the more traditional view of a clearly articulated, five-year plan with easily
measured goals in key product-market areas. This is what Hayes ( 1985) has referred toas strategy based on integrating and directing forces, rather than strategy based on a set
of specific, fixed endpoints and controls.
Concluding Comments
In this paper, we have suggested a number of possible explanations for the failure ofthe manufacturing strategy framework to take full effect in a wide range of firms and
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 18/19
76 STEVEN C. WHEELWRIGHT AND H. KENT BOWEN
industries. While there is undoubtedly some truth in each explanation, our conclusion
is that the primary reasons for this failure are in the execution, not in the theory. That
is, it is the adherence to fixing something that is broken, making one-time improvements
to infrastructure patterns, and viewing manufacturing as largely separable from the rest
of the business, combined with the absence of one or more of the three primary elements
essential to making the theory work in practice, that explains why most firms have notrealized the full promise of manufacturing advantage. Furthermore, based on our ex-
perience with a handful of firms that have achieved outstanding performance, such ad-
vantage can be traced directly to the degree with which those firms possess and pursue
these three elements.
We recognize that it is far easier to identify critical elements than it is it put them into
practice. The challenge for academics and practitioners alike is to expand the collective
knowledge and understanding of these elements, and to develop far more powerful tools
and techniques for putting them into practice. We hope others will join us in this ongoing
effort so that increasing numbers of firms can develop the capabilities of significant on-
going, continuous improvement.
References
ADAM, JR., E. E., AND P. M. SWAMIDASS ( 1989), “Assessing Operations Management from a Strategic Per-spective” Journal ofManagemenl, 15, 2, 18 I-203.
BOWEN, H. K., K. B. CLARK, C. A. HOLLOWAY, AND S. C. WHEELWRIGHT (eds.) ( 1994), The Perpetual
Enterprise Machine, Oxford University Press, New York.CLEVELAND, G., R. G. SCHROEDER,AND J. C. ANDERSON ( 1989), “A Theory of Production Competence,”
Dec ision Scien ces, 20, 4, 655-668.
EDMONDSON, H., AND S. C. WHEELWRIGHT ( 1989), “Outstanding Manufacturing in the Coming Decade,”California Management Review, 3 1, 4, 10-90.
ETTLIE, J. E., AND J. D. PENNER-HAHN ( I994), “FIexibiIity Ratios and Manufacturing Strategy,” Management
Scien ce, 40, I I, 1444-1454.FERDOWS,K., AND A. DE MEYER ( 1990), “Lasting Improvements in Manufacturing Performance: In Search
of a New Theory,” Journal of Operations Management, 9, 2, 168- 184.
GARVIN, D. A. ( 1994), Allegheny Ludlum Steel (Abridged), Harvard Business School Publishing Case 695-023, Boston, MA.
GERWIN, D. ( 1993), “Manufacturing Flexibility: A Strategic Perspective,” Management Scien ce, 39,4, 395-
410.GIFFI, C., A. V. ROTH, AND G. M. SEAL ( 1990), Competing in World-Class Manufacturing: Am erica’s 2lst
Century Challenge, Business One Irwin, Homewood, IL.HALL, W. K. ( 1980), “Survival Strategies in a Hostile Environment,” Harvard Bus iness Review, 58, 5, 75-85.
HAYES, R. H. ( 1985), “Strategic Planning: Forward in Reverse ,” Harvard Busin ess Review, 63, 6, 1 I I-I 19.HAYES, R. H. AND G. PISANO ( 1994), “Beyond World Class: The New Manufacturing Strategy,” Harvard
Bus iness Review, 72, 1, 77-86.HAYES, R. H., S. C. WHEELWRIGHT ( 1984), Restoring our Competitive Edge, John Wiley & Sons, New York.HAYES, R. H., S. C. WHEELWRIGHT, AND K. B. CLARK ( 1988), Dynamic Manufacturing, Free Press, New
York.KIM, L., AND Y. LIM ( 1988), “Environment, Generic Strategies, and Performance in a Rapidly Developing
Country: A Taxonomic Approach,” Academy ofManagement Journal, 3 I, 4, 802-821.
KOTHA, S., AND D. ORNE ( 1989), “Generic Manufacturing Strategies: A Conceptual Synthesis,” Strategic
Management Journal, 10, 3,2 1 -23 I.KOTHA, S., AND B. L. VADLAMANI ( 1995), “Assessing Generic Strategies: An Empirical Investigation of Two
Competing Typologies in Discrete Manufacturing Industries,” Strategic Management Journal, 16, 1,
75-83.LANGOWITZ, N. S. AND S. C. WHEELWRIGHT ( 1994), Plus Development Corporation (A) (Abridged), Harvard
Business School Publishing Case 694-096, Boston, MA.MILLER, J. G., AND A. V. ROTH ( 1994), “A Taxonomy of Manufacturing Strategies,” Management Science,
40,3,285-304.PETERS,T. J., AND R. H. WATERMAN, JR. 1982), In Search of Excellence , Harper & Row, New York.PRAHALAD, C. K., AND G. HAMEL ( 1990), “The Core Competence of the Corporation,” Harvard Business
Review, 68, 3, 79-9 1.
ROTH, A. V., AND J. G. MILLER ( 1992), “Success Factors in Manufacturing,” Bus iness Horizons, 35, 4, 73-
81.
8/3/2019 Challenge of Manufacturing Advantage
http://slidepdf.com/reader/full/challenge-of-manufacturing-advantage 19/19
THE CHALLENGE OF MANUFACTURING ADVAN TAGE 77
SKINNER, W. ( 1985), Manufacturing: The Formidable Competitive Weapon, Wiley, New York.SWAMIDASS,P. M., AND W. T. NEWELL (1987), “Manufacturing Strategy, Environmental Uncertainty and
Performance: A Path Analytic Model,” Management Scien ce, 33, 4, 509-524.
TOYOTA MOTOR CORPORATION I992 ) , The Toyofa Production System, Operations Management ConsultingDivision, 1 Toyota-cho, Toyota City, Aochi Prefecture 47 1, Japan.
VICKERY, S. K. ( 199 1 , “A Theory of Production Competence Revisited,” Decis ion Scien ces, 22, 3,625-643.
VICKERY, S. K, C. DROGE, AND R. E. MARKLAND ( 1993), “Production Competence and Business Strategy:Do They Affect Business Performance., ” Decis ion Scien ces, 24, 2, 435-455.
WHEELWRIGHT, S. C., AND C. M. CHRISTENSEN 1992), Quantum Corporation: Busin ess and Product Team s,
Harvard Business School Publishing Case 692-023, Boston, MA.
WHEELWRIGHT, S. C., AND R. H. HAYES ( 1985), “Competing Through Manufacturing,” Harvard Business
Review, 63, 1, 99-109.WOMACK, J. P., D. T. JONES,AND D. Roos ( 1990), The Machine that Changed the World, Rawson Associates,
New York.