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THE BASIC ELEMENTS OF PRODUCTION STRATEGY

30 October, 2015 - 16:05

The post-World War II era witnessed a decline in the role of the production department. Management in the United States was guided by the marketing function. European scholars attributed the tremendous success of U.S. MNCs to their marketing orientation, which they contrasted to the traditional European production orientation. U.S. MNCs, they asserted, produced "what the market wanted," whereas the Europeans, primarily the Germans, "marketed what they produced."

Recently this attitude toward production has come under severe attack. Wickham Skinner, a leading authority on production management, summarizes the situation as follows:

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Part of the problem can be traced back to the time manufacturing managers were ousted from the corporate hierarchy. Starting about 1960, demoralization and discouragement gradually grew in the manufacturing world. Manufacturing managers were not in the top echelons of their companies; they were not in the key strategic planning cycles; they were left out, discouraged, and our plants got older. Now, after all these years, we are turning back to our manufacturing people and saying, "We're sorry we forgot you for so long; sorry we listened to Professor Galbraith at Harvard, who said in 1958 that our productivity problems were over; sorry we listened to some of my colleagues in 1960 who said, 'Don't mess with manufacturing-there's no intellectual talent left there. We've solved the problems of manufacturing.' " Now, we're turning back to manufacturing managers and saying, "We need you to turn things around, to improve quality, to speed up product development, to invest in the right equipment. We'll write blank checks for whatever you want.’ 1

Currently, MNCs are trying to improve productivity by designing production strategies based on General Electric's 40-40-20 rule. According to this rule, only 20% of the total improvement in the productivity of production processes will come from cost-cutting techniques, efficiency improvements, and getting more out of the labor force. Another 40% will be the result of changes in technology, equipment, and processes, and the remaining 40% will come from changes in manufacturing strategy. One of the most promising of the possible changes in manufacturing strategy is a switch to global sourcing-buying or making parts or products in foreign countries.