1.1. A resource-based perspective of manufacturing strategy
In the academic literature, as well as in practice, there is more or less consensus in what constitutes the content of manufacturing (or more broadly, operations) strategy. Manufacturing strategy objectives are defined around the generic areas of cost, flexibility, quality, dependability (on-time-delivery) and speed (Hill, 2000, Mills et al., 2002, Slack and Lewis, 2002 and Acur et al., 2003). Decision areas and related activities for achieving these objectives have been categorised by Hayes and Wheelwright (1984) into structural (amount, timing and type of capacity, size, location and specialisation of facilities, direct process technology (equipment, level of automation, linkages), and level and type of integration (vertical–horizontal, forward–backward, extent, balance)) and infrastructural, i.e. human resources (skills, wages policies, social environment), quality practices (systems and control), production planning and control procedures (decision rules, indirect process technologies, centralisation), as well as general organisational attributes (structures, roles, interfaces and interconnections). The majority of manufacturing strategy scholars adheres to this list, sometimes with some additions and modifications, in proposing/prescribing (their own) manufacturing strategy formulation processes, or in describing processes identified by empirical research ( Joseph, 1999, Quezada et al., 1999, Hill, 2000, Avella et al., 2001, Mills et al., 2002 and Demeter, 2003).
The basic structure of the content of manufacturing strategy has survived the paradigm shift that occurred over the last years in the field of strategic management. In the move from “market-based” to “resource-based” competition, the role of manufacturing/operations as the basis of competitive advantage has been augmented since the development and leverage of resources depend on operational capabilities deeply anchored within business processes and organisational routines (Gagnon, 1999). Resources, capabilities and core competences are now, directly or indirectly, associated with the traditional operational objectives and linked to the above decision areas which were originally connected with the market perspective. Nevertheless, the association of the resource-based view (RBV) to organisational knowledge assets and processes implies a different, more important role, for the organisational attributes of the manufacturing function and its periphery.
In the resource-based view, organisational attributes are not only the outcome of manufacturing strategy. They are also the link that connects the content to formulation processes. As Slack and Lewis (2002) point out, organisational design is both output and input of the strategy process. The outcome of the process determines the internal organisation of resources, whereas, at the same time, the organisation's structure provides the mechanics by which strategy is formed. In other words, the organisational design provides the context in which manufacturing and operations strategy is formulated. Organisations, including manufacturing functions, are complex entities composed of tightly interdependent and mutually supportive and/or conflicting elements (Miller and Friesen, 1984) exhibiting systemic properties. As a result, the effectiveness and the efficiency of managerial processes rely heavily on the degree of understanding of the systemic nature of organisational design (Rivkin and Siggelkow, 2003 and Siggelkow, 2003).
1.2. The organisational attribute of manufacturing strategy
So far, the role of organisation in manufacturing strategy has been undermined and such issues have been considered only as secondary “organisational infrastructure” decisions (Gagnon, 1999), usually treated at the operational level, i.e. only as outcomes of decision process (e.g. Mertins and Jochem, 2005). As far as the strategy process is concerned, a limited number of research efforts have concentrated on micro-level analyses of “rational”/analytic processes and their organisational attributes, where project management and collaboration issues prevail (Joseph, 1999, Platts et al., 1996, Platts et al., 1998 and Hill, 2000; Mills et al., 2002, Tan and Platts, 2004 and Karacapilidis et al., 2006). The lack of research on macro-level considerations, in both time and scope, may be attributed to historical reasons, since in the past organisations were simpler and manufacturing strategy was mostly dominated by the “pure” production function's requirements. However, the shift of interest in competition and economic growth from prices to product innovation, on the one hand, and the globalisation of sourcing and supply on the other, have increased the importance of the innovation/new product development (NPD) and the supply chain management functions, respectively, to the same level with production. Although all three functions could be put under the same umbrella of operations, structurally they constitute autonomous organisational entities and their strategic management, in the framework of resource-based competition, implies the development and leverage of distinct resources and capabilities, frequently by executing restricting and/or conflicting organisational processes. As a result, the overall manufacturing strategy process becomes a much more complex coordinated process.
The complexity of strategic processes in the new forms of organisation has been recognised in the domain of strategic management and new more dynamic and eclectic (evolutionary and organic) approaches that divert from rational unitary actor models have been introduced (Nelson and Winter, 1982, Beinhocker, 1999 and Farjoun, 2002). Manufacturing and operations strategy research has not followed this path so far, and studies from the evolutionary perspective are very rare (Parente, 1998 and Pandža et al., 2003) with only very few exceptions (for instance, McCarthy, 2004 and Rose-Anderssen et al., 2004; Adamides and Voutsina, 2006). Undoubtedly, however, this perspective could provide useful insights on how strategy and performance at the functional level are determined as a result of cognitive and organisational structures and processes, and how they interact over time, rather than what determines them in static and controlled situations. This direction of research could contribute to the understanding of how the interaction over time of decisions/activities and resources of the three aforementioned organisational units in different organisational structures and under different organisational contexts results in emerging outcomes at the level of operations strategy.
Towards this end, the aim of the paper is to develop theoretical perspectives on the role of organisational design and context on the efficiency and the effectives of manufacturing strategy process as a coordinated effort of organisational unit capabilities development. Methodologically, our research is explorative and experimentive in nature. Beginning with the functional decomposition of manufacturing-related decisions into three strategic capability clusters (product development, production, supply chain) with their associated decision sets, we have developed a novel dynamic model of decision-making and capability accumulation. The model diverts from typical complex-adaptive system models used in similar research settings, which, however, concern a market-based view (e.g. Rivkin and Siggelkow, 2003) in that, in addition to decisions/activities, it models resource and capability accumulation for being closest to the reality. Moreover, in comparison to other modelling efforts (e.g. Kauffman et al., 2000), it represents a co-evolutionary situation rather than a purely evolutionary one. The system dynamics model constructed can be considered as a second-order model for theory building, rather than a first-order one which is usually employed for theory testing (Larsen and Lomi, 2002). The model was simulated under different organisational design and context parameter settings to investigate how manufacturing strategy emerges as a result of a coordinated search for fitness in the three correlated fitness/performance landscapes of product, production and supply chain decisions. Following, in Section 2, we discuss conceptual issues of manufacturing strategy and organisational design which constitute the plausible narrative on which the model is based. In Section 3, the model of the manufacturing strategy process is presented, whereas in Section 4, we describe the simulations executed and discuss the results obtained. Section 5 closes the paper by drawing the conclusions of this research effort.
