Operation Strategy: Compare and Contrast Between Companies2006IntroductionConfiguration and coordination of supply chains have been important aspects of modern-day operation management of companies that have ventured into international operations with suppliers and customers cutting across borders. Configuration of the various actors in the supply chain and coordination between them through information exchange and interaction are the key elements in maintaining the competitive edge (Mahendrawathi & MacCarthy, 2001). In this paper, I will present four case studies – two companies each from the manufacturing sector and two from the service sector – that have strove to gain the competitive edge through international operations and supply chain management.
The companies that I have chosen are Toyota and Dell in the manufacturing sector and MacDonald and Easyjet in the service sector. Operation Management in the Manufacturing SectorThe eighties were the watershed in global business history when manufacturing companies around the world transformed their operation strategy from building inventories as security to lean manufacturing whereby producers produced just-in-time for dispatch and held minimum inventories. Toyota was the pioneer in the lean manufacturing and greater role of the assembly-line worker, soon followed by other companies including those in the United States (Breen, 2004).
Toyota and Dell present two alternate strategies of inventory management whereby Toyota gained on its lean manufacturing practices whereas Dell based its inventory planning on build-to-order model. ToyotaPost World War II, Japanese manufacturing companies found opportunity in the massive amounts of materials left behind by the Allied forces and saw opportunity in the American style of production. Toyota began with the Ford-style mass production system in which the worker had no role in innovation but simply had to be part of the assembly line.
It was soon found that the system did not coagulate with the Japanese work culture or with a multi-product system. By the 1970s, it was also realized that small batch products and a continuous flow like in an assembly plant, which produced a single product, could be achieved only by reducing the setup time. Toyota’s lean manufacturing model (the term first coined by Womack et al, 1990) fitted the bill of reducing the setup time by defining the “value” of the product as that demanded by the customer.
The “lean enterprise” sets up the entire supply chain according to the “value stream” through problem solving, information network and physical transformation (Womack et al, 1996). The customer-oriented business then eliminates all “waste”, defined as "any operation or process that does not raise added value" (Linge, 1991). Towards this aim, Toyota – and later other Japanese car manufacturers – strenuously reduced costs, increased efficiency and productivity. The Toyota production system is a continuously scripted flow of activities yet one that gives sufficient authority to workers to rectify defects thereby eliminating possibilities of rejections and “waste”.
As Speare and Bowen (1999), notes, Toyota has developed this work culture through 50 years on the nature of workers’ attributes regarding 1) how they work, 2) how they interact with each other, 3) how production lines are built and 4) how workers learn to improve. As a corollary to the lean manufacturing Toyota production model, the Just-in-Time (JIT) approach developed to determine how material should be processed and output produced in order to be just in time to cater to the customer without any wastage of material or time.
It is considered to be a philosophy of production, rather than an operation strategy, to ensure timely delivery, quality and value for money (Linge, 1991). For JIT to be successful, not only should the organization be streamlined down the value chain, the entire supply chain including suppliers, retailers and wholesalers have to be cued in to the process. Toyota ensured that workers became specialized in their production areas as well as multi-skilled so that they could rectify defects along the assembly line, thereby reducing inspection requirements to the minimum.
At the same time, the company introduced procedures that enabled improved efficiency by meticulous coordination of tasks. By the “pull system”, each group of workers takes over from the previous group through “parts withdrawal” and “production instruction”, reducing the chances of duplication or defects. Simultaneously, each group while taking over from the previous one ensures that it does not hold more than 10 percent of the required inventory of materials and stocks. Seasonal variations in demand are built in the leveled production stipulations and forecasts regularly updated.
To maintain the continuous flow, the major assemblers in the plant work like mini-plants, stipulating the setup times, productivity levels and product layouts (Linge, 1991).