This study examines how strategic manufacturing planning processes vary systematically with respect to planning characteristics, and how the planning process appears to evolve over time. Through an empirical evaluation of over 200 U.S. manufacturers, we document the existence of four strategic manufacturing planning groups. These groups vary with respect to the degrees of “rationality” and “adaptability” of planning. In addition, the strategic manufacturing planning history and level of planning maturity differs between these groups, providing evidence that the planning process changes and evolves over time from “non-rational adaptive” mode towards a more “rational adaptive” approach. Firms between these polar extremes appear to take different paths in their movement toward a “rational adaptive” mode, with some “focusing on rationality” first and others “focusing on adaptability” first. We also show that irrespective of the firm's environment, a greater degree of “rational adaptivity” is correlated with better planning outcomes and business performance. As such, it represents a “best practice” approach to strategic manufacturing planning. Insights created by this work not only make an important contribution to the manufacturing strategy literature, but can also be used by senior manufacturing managers to facilitate their progress towards more effective planning.
Attention given to the manufacturing strategy by both academics and practitioners has been increasing since the time of Skinner's (1969) seminal work in this area. Although obviously intertwined, work in the area has generally been categorized as addressing the content, or “what”, of the manufacturing strategy rather than the process, or “how” the decisions are made. The vast majority of published work has focused on the content. Dangayach and Deshmukh (2001), in their extensive review of the manufacturing strategy literature, found that 91% (237 out of 260) of the published studies in the area addressed content issues and only 9% (23 out of 260) addressed process issues. But as Dean and Sharfman (1993) observed with respect to organization-level planning, the “how”, or strategic planning process, affects the “what”, or the resulting strategy. Thus there have been numerous calls for more work focusing on understanding the strategic planning process within the manufacturing area, and we address this need in the study described here.
An important part of the planning process is in understanding how the “objectives, policies, and plans are formulated” (Garvin, 1993). How each firm conducts its strategic manufacturing planning (SMP) is captured, in part, by the “strategic planning system”, which is the pattern of planning characteristics that organizes and coordinates the activities of those involved in the planning process (Lorange and Vancil, 1977 and Lederer and Sethi, 1996). Even though the content and implementation of the strategy are important, the planning system itself does contribute to its success or failure. For instance,
“Managers have the power to influence the success of strategic decisions, and thus the fortunes of their organizations, through the processes they use to make key decisions.” (Dean and Sharfman, 1993, p. 399).
This paper conducts an empirical evaluation of how SMP processes and system evolve over time, and thereby seeks to contribute to the development of “a body of literature on the manufacturing planning process” (Adam and Swamidass, 1989, p. 183). In addition, research reported in this paper should assist firms in better understanding and improving the performance of their SMP system and eventually the bottom-line profitability of their firms.
In the next section, the relevant literature is reviewed and propositions are developed. Section 3 describes methodology-related issues pertaining to data collection, operational measures, and pre-testing and validation of the instrument. The results are presented in Section 4, and discussed in Section 5 along with the contributions and limitations of this research. The final section offers concluding remarks.
We have shown that consistent patterns of SMP exist, which in turn are related to planning success and ultimately business performance. It appears that these systematic differences with respect to the degree of “rationality” and “adaptability” also reflect changes in the SMP process over time. And although firms may start at different places with respect to SMP and may travel different paths in changes to their planning approach, they all appear to be moving toward a common form of SMP, the “best practice” of a rational adaptive approach.
Understanding “how” planning is done and what changes are needed to improve it is an important step toward an improved manufacturing strategy (the “what”). By using the results of this study and better understanding the association between planning experience and planning approach, organizations can identify where they currently fall with respect to the SMP groups and what changes are needed to enhance their planning. In other words, management can intervene to hasten the progress toward a more “rational adaptive” approach and more desirable planning outcomes, which when dovetailed with good implementation, can lead to business success.
