Centre for Strategy and Performance

Manufacturing Strategy and Performance Measurement

Background/Context

Over the last decade there has been considerable concern about the competitiveness of U.K. Manufacturing Industry. Exchange rate fluctuations, stock market conditions and global competition have all played their part in increasing the difficulties U.K manufacturers face. All too often these difficulties, coupled with a preoccupation with short term financial results, have led to a knee jerk reaction of cost cutting and retrenchment, and, in many cases, lack of sufficient capital investment. Such activities may deliver short-term profitability, but, leading to reductions of the resources used in businesses, do not promote growth or a sustainable long-term business future. In other words, the strategic view of manufacturing has been weak.

Historically many companies have tended to develop strategies based solely on market perspectives. Such strategies might be well aligned to customer and competitive requirements, but do not address the development or leverage of a firm's technological and manufacturing resources. This partial view of strategy, which relegates manufacturing to merely a reactive and supporting role, fails to capitalise on a major asset, which if managed strategically could result in a sustainable competitive position. The problem has been the lack of knowledge of how to incorporate manufacturing into a business strategy and how to measure its performance in a strategic, rather than purely financial, way.

This research project sought to address this problem by providing manufacturing businesses with a way of taking a strategic approach to manufacturing and providing them with the practical tools to do this. It had the dual aims of providing practical tools for industry, and new knowledge for academe.

Objectives and Results

The main objectives of this research have been to develop and test processes for the formulation of manufacturing strategy and the development of performance measurement system.

The emphasis has been on achieving practical processes that can be applied in an industrial context

Manufacturing strategy

The main output in this area has been a process that can be used by industrial companies to develop competitive manufacturing strategies. This is a highly significant contribution to knowledge as it captures in a structured way an activity which has traditionally been considered a ‘black-art’. Key aspects of the process are:

• Segmentation of the business into product families
• Market, competitor and stakeholder analyses leading to objective definition
• Strategy charting to identify and make explicit current strategy
• Identification of existing competences and capabilities and an analysis of the resources underpinning these (this work is ongoing see competence project)
• Gap analysis of desired objectives and current performance and activity
• Navigation towards revised strategy, involving actions to meet objectives and to develop new resources and competences.

A novel feature of this research has been the development and testing of tools, techniques and facilitation methods which enable industrial companies to undertake the above stages in a logical and structured way. The process involves cross-functional participation that leads to open debate, pooling of knowledge within the organisation and agreed, and recorded, assumptions, analyses and outcomes.

The strategy process has been applied in 20 industrial cases and has been developed into a robust and generally applicable approach. The process is published as workbooks.

Following on from this is an ongoing project to develop ways of identifying competences and capabilities and linking these to underlying resources.

Performance measurement

The performance measurement activity has paralleled the strategy activity throughout the period of the grant. Our fundamental premise was that without a performance measurement system aligned to strategic objectives, companies have no way of judging the extent to which those objectives had been achieved, and furthermore have no mechanism for their deployment or for encouraging compliance throughout the business. Thus the key deliverable here is a process that can be used by industrial companies to develop performance measurement systems that are closely aligned with their manufacturing objectives and strategies. Key aspects of the process are:

• Segmentation of the business into product families, market, competitor and stakeholder analyses leading to objective definition, as with the strategy process
• Identifying, signing off and embedding top level performance measures linked to objectives
• Cascading the top level measures to lower levels by identifying drivers of performance, and deciding which are key
• Designing measures for the drivers, signing them off and embedding as with the top level measures.

The performance measurement process has been applied in 23 industrial cases and has been shown to be a generally applicable approach. The process is published as workbooks.

The latter part of the research into performance measurement investigated the factors which affected the long term adoption of performance measurement systems. This was based on longitudinal research following up case studies undertaken early in the research. The research identified the main drivers, hurdles and show-stoppers for the implementation and embedding of performance measurement systems.

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• The drivers (factors which had to be present for performance measurement to succeed) included senior management commitment and perceived benefits arising from performance measurement
• The hurdles (factors all companies faced but some overcame and others did not) were the time and effort required and the rigidity of the IT systems
• The show-stoppers (factors which blocked progress in all the companies where they occurred) were parent company interventions and management’s fear of measurement

Senior management commitment is the most frequently cited factor in the change management literature for the success and failure of projects. However, this research showed how other factors impacted and changed senior management commitment over the life of the project, providing a more comprehensive understanding of the main factors influencing success and failure.

Ongoing research in performance measurement is investigating performance measurement in the supply chain

Sponsors / Collaborators

Thanks to our industrial sponsors and collaborators:

• Rolls-Royce plc
• T&N Technology
• AI Qualitek
• Domino Printing Sciences
• London and Scandinavian
• The Thomas Group

Researchers

• Ken Platts
• Michael Bourne
• Mike Gregory
• John Mills
• Andy Neely
• Huw Richards