An Information‐Processing Approach for Evaluating In‐Store Retail Operational Design Strategies

We develop a model to evaluate retail store operational design strategies using an information‐processing perspective of organizational design. We propose that three model constructs pertaining to in‐store shopper task uncertainty—the product mix complexity, the service production complexity, and the product mix changeover—create shopper encounter information requirements (IR). These requirements can be met using specific retail service operational design choices for managing shopper encounters, namely, designing layouts for self‐service (SS) and providing employees with task empowerment (TE). The model is then operationalized using a two‐stage approach to develop new multi‐item, measurement scales. The psychometric properties and predictive validity of the scales and model are then confirmed by using structural equation modeling with survey data from 175 merchandise retail store managers. We find that our model can be generically applied across the retail industry to understand how shopper encounter IR motivate retailer store design choices and can be used to determine whether to design stores for SS or to provide store employees with TE. We then evaluate the efficacy of the studied store design choices on customer delivery satisfaction, and offer some suggestions for future research.     

Realizing Benefits from Enterprise Resource Planning: Does Strategic Focus Matter?

A key driver of the recent wave of enterprise resource planning (ERP) implementations was the assumption that the integration of business information would provide firms with a competitive advantage, yet concrete business benefits have been uneven across adopting firms. A possible explanation is that although the resource‐based view holds that competitive advantage is derived from inimitable resources, ERP software has become a commodity. Socio‐technical theory suggests that internal organizational resources based on a foundation of ERP technology may be the true drivers of ERP benefits. A firm's strategic configuration is posited to influence the portfolio of organizational competencies available to leverage the benefits of integrated business information, and a number of hypotheses are developed based on the notion that firms with different strategic objectives will realize different operational benefits from the adoption of ERP systems. Survey data from North American manufacturing firms that have implemented ERP systems demonstrate that ERP adopters seeking operational performance improvements are likely to realize these benefits. On the other hand, those seeking external market and supply chain performance improvements must first establish a foundation of internal operational performance improvements before customer satisfaction and supply chain benefits can be realized.     

Competitive Priorities in Operations Management

Identifying manufacturers' competitive priorities has long been considered a key element in manufacturing strategy research. However, relatively little effort has been devoted to measurement of these constructs in published research. In this study we develop scales for commonly accepted competitive priorities, cost importance, quality importance, delivery-time importance, and flexibility importance. We assess how well the scales capture the constructs that they represent using data collected from 114 manufacturing plants in the United States. The findings suggest that the instrument developed can provide reliable data and that the constructs measured are valid. In addition, comparisons between pairs of informants representing the same business indicate that the perceptual measures of competitive priorities are as reliable as point estimates of routine, seemingly objective information.     

Production Competence and Business Strategy: Do They Affect Business Performance?

The purpose of this article is threefold. First, a comprehensive measure of production competence that assesses the level of support that manufacturing provides for the strategic objectives of a firm is developed. Second, hypotheses relating production competence to several financial measures of business performance are tested using data from a large sample of firms (n=65) in the furniture industry. Third, the impact of business strategy both directly on performance and as a moderating variable in relation to production competence is analyzed. The results of the study suggest that production competence may have more of an effect on business performance for certain strategies than for others.     

Manufacturing Proactiveness and Performance*

Since Skinner's [40] landmark article depicting the manufacturing function as the “missing link” in corporate strategic processes, a portion of the blame for inferior performance in many firms has been attributed to the subordinate strategic position of manufacturing. It has been argued that part of the solution to misalignments between the capabilities possessed by manufacturing and the requirements dictated by customers is for manufacturing to take a more proactive stance. However, little research has been reported which examines manufacturing proactiveness empirically. In this paper, we address this gap by developing an operational definition of manufacturing proactiveness and testing empirically whether a link exists between proactiveness and performance based on data collected from a sample of manufacturers. Based on the manufacturing strategy literature, we identify two major dimensions of manufacturing proactiveness: (1) the degree of manufacturing's involvement in the strategic processes of the business unit; and (2) the degree of commitment to a long-term program of investments in manufacturing structure and infrastructure aimed at building capabilities in anticipation of their need. We develop reliable scales for measuring each of the dimensions of proactiveness and use the data to provide evidence of a clear link between manufacturing proactiveness and business performance. We show that investments in structural programs coupled with either high levels of manufacturing involvement in strategic processes or planned investments in infrastructural programs correlate with higher than average performance.     

A Contingent View of Quality Management‐The Impact of International Competition on Quality

Much of the research on quality practices and performance reflects a resource‐based perspective of the firm, dealing primarily with internal issues of managerial and technological competence in developing and executing an effective TQM strategy. The neoclassical perspective on the influence of the competitive environment on quality practices and performance remains conspicuously absent in the empirical quality literature. Our study aims to address this gap by examining the contingent role of international competition on quality management and performance. We develop and test an integrative framework of quality management, consisting of high involvement work practices, quality practices, quality performance, and firm performance. We then examine the contingent effects of international competition on the constructs and relationships of the framework. International competition was found to moderate the relationship between quality practices and customer satisfaction performance, as well as the relationship between high involvement work practices and firm performance. The moderator effects suggest interesting implications for quality theory and practice.     

Economies of Scope through Multi‐unit Skill Systems: The Organization of Large Design Firms

From a study of three large design firms in Italy, the UK and the USA, we derive a distinct model of how large knowledge‐intensive business services (KIBS) firms organize to manage growth and realize economies in ways that differ from the organizational techniques that are familiar from scale and scope studies of large manufacturing enterprises. Case studies were compiled from interviews conducted at the three firms. Large design firms were selected as a contrasting context to Chandlerian manufacturing firms. Design firms were expected to differ from manufacturing firms in terms of strategy, organization and the overall possibilities of achieving economies of scale and scope. Our results show that competitive advantage of these large KIBS design firms derives from a particular multi‐unit skill system that enables the firms to exploit economies of scope. There are four distinctive organizational features of such KIBS firms. First, multiple business units within the firm play a dual role. These are able both to engage in inter‐unit coordination and resource sharing and to attract business independently, often with heterogeneous business models among units. Second, these firms develop formal organizational routines for involving multiple business units in client projects, thus facilitating the migration of clients' business from one unit to another. Third, there is an important role for cross‐unit strategic ‘insight’ agents. Fourth, these firms expand through the founding of specialized, even idiosyncratic, new business units (often with the important role of mastering new technological skills).     

A Theory of Production Competence Revisited*

A recent article [3] proposed a definable relationship between production competence and business performance and presented empirical evidence to support the relationship. The purpose of this note is four-fold. First, it corrects the authors' numerical measure of production competence. The correction changes the nature of the relationship between competence and performance. Second, this note suggests an improved numerical measure of business performance (the dependent variable in the study). The authors of [3] defined performance in a manner which inadvertently captures elements used to measure production competence (the independent variable). The result is a deceptively close fit of the authors' model with the data. The third purpose of the note is to introduce a more appropriate theoretical framework for the production competence construct. It is shown that production competence is closely related to the formulation and implementation of manufacturing strategy and can best be understood within that context. Last, an alternative conceptual model of the relationship between business strategy, production competence, and business performance is presented. The new model includes a construct which measures the “fit” of a firm's business strategy to its external, competitive environment.     

Measurement Equivalence Using Generalizability Theory: An Examination of Manufacturing Flexibility Dimensions

As the field of decision sciences in general and operations management in particular has matured from theory building to theory testing over the past two decades, it has witnessed an explosion in empirical research. Much of this work is anchored in survey‐based methodologies in which data are collected from the field in the form of scale items that are then analyzed to measure latent unobservable constructs. It is important to assess the invariance of scales across groups in order to reach valid, scientifically sound conclusions. Because studies have often been conducted in the field of decision sciences with small sample sizes, it further exacerbates the problem of reaching incorrect conclusions. Generalizability theory can more effectively test for measurement equivalence in the presence of small sample sizes than the confirmatory factor analysis (CFA) tests that have been conventionally used for assessing measurement equivalency across groups. Consequently, we introduce and explain the generalizability theory (G‐theory) in this article to examine measurement equivalence of 24 manufacturing flexibility dimension scales that have been published in prior literature and also compare and contrast G‐theory with CFA. We show that all the manufacturing flexibility scales tested in this study were invariant across the three industry SIC groups from which data were collected. We strongly recommend that G‐theory should always be used for determining measurement equivalence in empirical survey‐based studies. In addition, because using G‐theory alone does not always reveal the complete picture, CFA techniques for establishing measurement equivalence should also be invoked when sample sizes are large enough to do so. Implications of G‐theory for practice and its future use in operations management and decision sciences research are also presented.     

Manufacturing Practices and Strategy Integration: Effects on Cost Efficiency,Flexibility, and Market‐Based Performance

Manufacturing plant managers have sought performance improvements through implementing best practices discussed in World Class Manufacturing literature. However, our collective understanding of linkages between practices and performance remains incomplete. This study seeks a more complete theory, advancing the idea that strategy integration and enhanced manufacturing capabilities such as cost efficiency and flexibility serve as intermediaries by which practices affect performance. Hypotheses related to this thesis are tested using data from 57 North American manufacturing plants that are past winners and finalists in Industry Week's“America's Best” competition ( Drickhamer, 2001 ). The results suggest that strategy integration plays a strong, central role in the creation of manufacturing cost efficiency and new product flexibility capabilities. Furthermore, strategy integration moderates the influences of product‐process development, supplier relationship management, workforce development, just‐in‐time flow, and process quality management practices on certain manufacturing capabilities. In turn, manufacturing cost efficiency and new product flexibility capabilities mediate the influence of strategy integration on market‐based performance. These findings have implications for practice and for future research.     

Design of Stockless Production Systems

In make‐to‐stock production systems finished goods are produced in anticipation of demand. By contrast, in stockless production systems finished goods are not produced until demand is observed. In this study we investigate the problem of designing a multi‐item manufacturing system, where there is both demand‐ and production‐related uncertainty, so that stockless operation will be optimal for all items. For the problem of interest, we focus on gaining an understanding of the effect of two design variables: (i) manufacturing speed—measured by the average manufacturing rate or, equivalently, the average unit manufacturing time, and (ii) manufacturing consistency—measured by the variation in unit manufacturing times. We establish conditions on these two variables that decision makers can use to design stockless production systems. Managerial implications of the conditions are also discussed.     

Formative Versus Reflective Indicators in Organizational Measure Development: A Comparison and Empirical Illustration

A comparison is undertaken between scale development and index construction procedures to trace the implications of adopting a reflective versus formative perspective when creating multi‐item measures for organizational research. Focusing on export coordination as an illustrative construct of interest, the results show that the choice of measurement perspective impacts on the content, parsimony and criterion validity of the derived coordination measures. Implications for practising researchers seeking to develop multi‐item measures of organizational constructs are considered.     

Supply Performance in Multi‐Echelon Inventory Systems with Intermediate Product Demand: A Perspective on Allocation

In this article, we study the performance of multi‐echelon inventory systems with intermediate, external product demand in one or more upper echelons. This type of problem is of general interest in inventory theory and of particular importance in supply chain systems with both end‐product demand and spare parts (subassemblies) demand. The multi‐echelon inventory system considered here is a combination of assembly and serial stages with direct demand from more than one node. The aspect of multiple sources of demands leads to interesting inventory allocation problems. The demand and capacity at each node are considered stochastic in nature. A fixed supply and manufacturing lead time is used between the stages. We develop mathematical models for these multi‐echelon systems, which describe the inventory dynamics and allow simulation of the system. A simulation‐based inventory optimization approach is developed to search for the best base‐stock levels for these systems. The gradient estimation technique of perturbation analysis is used to derive sample‐path estimators. We consider four allocation schemes: lexicographic with priority to intermediate demand, lexiographic with priority to downstream demand, predetermined proportional allocation, and proportional allocation. Based on the numerical results we find that no single allocation policy is appropriate under all conditions. Depending on the combinations of variability and utilization we identify conditions under which use of certain allocation polices across the supply chain result in lower costs. Further, we determine how selection of an inappropriate allocation policy in the presence of scarce on‐hand inventory could result in downstream nodes facing acute shortages. Consequently we provide insight on why good allocation policies work well under differing sets of operating conditions.     

STRATEGIC PRODUCTION COMPETENCE: CONVERGENT,DISCRIMINANT, AND PREDICTIVE VALIDITY

A resource-based construct of manufacturing competence, termed strategic production competence, is examined with respect to its convergent, discriminant, and predictive validity. The construct evaluates manufacturing performance across a comprehensive domain of competitive priorities relative to item importance and performance. Data from an earlier study of furniture firms (n = 65) are used for statistical testing. The results establish the convergent and discriminant validity of strategic production competence and show that it is positively related to business performance.     

Product Positioning in a Two‐Dimensional Market Space

This paper examines the optimal product portfolio positioning for a monopolist firm in a market where consumers exhibit vertical differentiation for product performance and horizontal differentiation for product feature. Our key results are as follows: (i) Variable costs drive vertical differentiation. In the presence of significant volume‐dependent manufacturing costs, the optimal portfolio contains a mix of vertically and horizontally differentiated products and an increase in the variable cost makes adding vertically differentiated products relatively more profitable; if fixed volume‐independent design costs dominate, the portfolio exhibits solely horizontal differentiation. (ii) Horizontal differentiation is the main profit lever, and vertical differentiation brings only a marginal benefit; this is true even when most of the consumers exhibit low willingness to pay for performance, which is often used as an excuse to offer low‐end products. (iii) There are more low‐quality products than high‐quality ones, and market coverage increases when the willingness to pay for performance increases. In summary, the model shows how portfolio composition decisions depend on the product cost structure and the consumer preferences.     

A Theory of Production Competence*

Production competence is an enigmatic functional phenomenon. What is it? Can it be measured? Does it affect business performance? The literature barely touches on these issues. If competence is defined as a variable rather than a fixed attribute, it can be measured by how well manufacturing's strengths and weaknesses complement the priorities of the business strategy. Since performance is a measure of how well that strategy works, there should be a definable relationship between competence and performance. This study proposes just such a relationship and promotes production competence as the theoretical link between production process and business strategy.     

Socially Responsible Practices: An Exploratory Study on Scale Development using Stakeholder Theory

Socially responsible practices of firms have evolved into an important area of research in operations management; however, it remains challenging to identify specific scales that capture multiple dimensions of such social practices. In this exploratory study, we use stakeholder theory to develop new multi‐item measurement scales linked to multiple groups (i.e., internal, supplier, customer, and community stakeholders). Furthermore, we empirically test a higher order multidimensional construct that collectively assesses the socially responsible practices of a firm. Using these stakeholder‐derived constructs as taxons in a cluster analysis, we identify important patterns in the way that multiple groups of stakeholders are engaged. Finally, we demonstrate that the set of social practices are complementary and concentrating on one group can yield spillover effects to other specific stakeholder groups.     

Dynamic Pricing and Lead‐Time Policies for Make‐to‐Order Systems*

Make‐to‐order firms use different approaches for managing their lead‐times and pricing in the face of changing market conditions. A particular firm's approach may be largely dictated by environmental constraints. For example, it makes little sense to carefully manage lead‐time if its effect on demand is muted, as it can be in situations where leadtime is difficult for the market to gauge or requires investment to estimate. Similarly, it can be impractical to change capacity and price. However, environmental constraints are likely to become less of an issue in the future with the expanding e‐business infrastructure, and this trend raises questions into how to manage effectively the marketing mix of price and lead‐time in a more “friction‐free” setting. We study a simple model of a make‐to‐order firm, and we examine policies for adjusting price and capacity in response to periodic and unpredictable shifts in how the market values price and lead‐time. Our analysis suggests that maintaining a fixed capacity while using lead‐time and/or price to absorb changes in the market will be most attractive when stability in throughput and profit are highly valued, but in volatile markets, this stability comes at a cost of low profits. From a pure profit maximization perspective, it is best to strive for a short and consistent lead‐times by adjusting both capacity and price in response to market changes.