Questioning the Trade-Offs
With the world becoming a single global village there has emerged a group of companies that have adopted an international perspective toward both manufacturing and marketing.
Within this global arena competition is significantly more intense due to both the greater number of players and the tremendous profit opportunities that exist Those companies that have excelled on this global level often have been referred to as world-class operations Events in the world marketplace during the 1970 and 1980 in terms of the growing intensity in competition forced these companies to reexamine the concept of operations strategy especially in terms of the so-called necessary trade-offs Managers began to realize that they didn't have to make trade-offs to the same extent that they had previously thought What emerged instead was a realization of the need to establish a hierarchy among the different priorities as dictated by the marketplace Exhibit 23 presents the sequence in which these priorities were introduced over time Specifically in the late 1960 and early 1970 cost was the primary concern a holdover from the philosophy of the 1950 that manufacturing's only objective was to minimize production costs However as more and more companies began to produce low-cost products the need became apparent to develop other ways to differentiate themselves from their competitors The priority thus shifted to quality Companies at this time obtained a competitive advantage by producing high-quality products which allowed them to charge more-although price still was a factor in the consumer's buying decision However competition again soon caught up and everyone was offering high-quality products that were reasonably priced Companies in looking to obtain another competitive advantage in the marketplace turned to speed and reliability of delivery as a means of differentiating themselves from the rest of the lack Now the ante into the game was high-quality products that were reasonably priced and that could be delivered kicky and reliably to the customer in the 1980 George Stalk a leading management gurus previously noted identified speed of delivery as a major factor in determining the success of a company Companies therefore concentrated their resources on reducing product lead times with very dramatic results Products that once took weeks or months to deliver were now being shipped within hours or days the receipt order
Eventually the competition again caught up and the more aggressive firms looked for still another means to obtain a competitive advantage This time flexibility was selected as measured in terms of the firm's ability to produce customized protects Now the marketplace dictated that for firms to be successful they had-to 'produce reasonably priced customized products of high quality that could be quickly delivered to the customer. A good example of a firm that has accomplished this is the National Bicycle Industrial Company in Japan See the OM in Practice box on Japan's Personalized Bike Production As the "rules" for operations strategy shifted from that of primarily reducing costs to that of including quality speed of delivery flexibility and service the strategy for the operations management function also has shifted The strategy of minimizing production costs has been replaced with that of maximizing the value added This emphasis on being competitive on more than one dimension might lead to the conclusion that there are no longer any trade-offs This is not the case As Wick ham Skinner said at a breakfast meeting of the Boston POM Pancake Society in April 1995 There will always be trade-offs Today however those trade-offs occur on what can be described as a superior performance curve as shown in Exhibit In moving to a higher performance curve, managers are no longer only concerned with trade-offs which take place when one moves along an established curve such as going from point Al to point A2 on curve A in Exhibit 24 Instead the same speed of delivery can be provided but at a lower cost, as shown in going from point A2 to point Another approach is to improve the speed of delivery while maintaining the same cost as seen in going from point Al to point A third alternative is to both improve the speed of delivery and reduce cost as seen in going from point to point The important issue here is that in all three examples the value to the customer is increased significantly which is the primary purpose for moving to the superior performance curve.