A Case Study From the Perspective of the Manufacturing Manager
How would you as the manufacturing manager from the perspective of production and operations ensure that there is no interruption of inbound raw materials and components from your suppliers?
The current business atmosphere is dramatically different than that into which retail competitors entered just a decade ago. A variety of broad-based economic changes have prompted the need for core strategic reformation, with many organizations struggling to survive in the face of both global recession and the forces of global trade liberalization. Both of these have had a significant impact on the degree to which manufacturing and production operations are able to function. For organizations such as the one at the center of this theoretical case study, this change has carried with it significant implications for retaining operational viability. Particularly, this case concerns a theoretical organization operating within the medical supply manufacturing field. This is selected for several reasons, including the continued robustness of healthcare supplies even in the midst of recession; the continued demand for such supplies; and the importance of both production and service. These allow a hypothetical scenario in which I am the manufacturing manager responsible for ensuring production and operations remain steady in the face of supplier and resource changes.
The discussion is underscored by the insights lent from the text by Heizer & Render (2005), which provides our research with some core management competencies such as defining the balance between goods and services; recognizing the core challenges produced by globalization; and identifying the conditions of the supply chain as they impact future operational decisions. Indeed, in the discussion, the recommendations produced and in the industry within which the case study has been contextualized, the text by Heizer & Render provides critical background knowledge.
To be certain, in the medical supply industry, our dependency on the relationship established with our suppliers has been crucial. This is true to the extent that our price structure, the expedience of our distribution and the scale of our available stock all hinge on the steady and consistent production values and practices of the domestic suppliers with whom we have historically conducted our business. Therefore, in the current economic scenario, where suppliers are beginning to close up shop and declare bankruptcy, we have been forced to make some difficult decisions in the interest of preventing a critical disruption in our supply chain. The discussion hereafter will consider the various practical managerial implications of the scenario, detailing the impact of such macro-economic factors as the current recession and globalization on the company’s current outlook and the decisions which I as manager must therefore consider. This will be intended to elucidate the appropriate path for retaining its essential effectiveness while executing some inherently dramatic change in the primary business operation.
Some background on the company and its current problems is appropriate and provides insight into the goods and services which are provided by the organization. Our manufacturing firm is driven by many of the conditions that are present throughout the medical supply field. Particularly, our external supplier relationships have long been crucial to our operation, with our steady acquisition of raw materials helping to define our pricing structure, to shape our supply chain and to impact the experience of our consumers. Therefore, any disruption in this area of the operation is likely to have a sustained and negative impact on our ability to meet the needs of important consumers and clients.
Our clients will tend to be healthcare facilities, with private doctors and specialist clinics making use of our bandages, wound dressings and hand sanitizer items but with larger hospitals, nursing homes and hospice facilities making up the largest share of our revenue. In addition to providing a regular flow of these bandage and wound care products, we also provide several in-house nurses who accompany our salesmen for presentations, who help our distributors make hospital rounds and who are instrumental in training and guidance that can help clients to use our products more optimally. This is a service which is provided as an included benefit to becoming a sustained and regular client. This helps to form the basis for the goods and services which we provide, making both aspects of our operation fully dependent upon the pricing, availability and distribution which is facilitated by our various supplying partners.
Our company’s situation is not a unique one in today’s business environment. Quite to the contrary, the issue of balancing price competition with quality management juxtaposes sharply with conditions of the current marketplace. Particularly, the deep and catastrophic retraction and erosion of America’s factory front has obliterated labor opportunities, reversed growth trends and shifted the center of America’s manufacturing economy away from the markets which it previously designed and sustained. Simultaneously, the trade liberalization facilitated by globalization has had the effect of opening up labor markets with much lower costs of operation. In countries where labor protections and environmental protections are less stringent, and where smaller economic scales also denote proportionally lower labor costs, manufacturers in nations such as the United States have found it impossible to compete. This has been true in the medical supply business, where our suppliers have one by one retracted or folded operations, sending their jobs and most of their clients to firms overseas. We have worked particularly hard to retain a degree of quality through our in-house manufacturing process as our competitors slash quality and price. While this had already constituted a decline in market-share, we had been able to refocus our marketing efforts to meet the interests of those clients with a priority toward quality over affordability. As suppliers become increasingly incapable of remaining afloat in this atmosphere, however, the pressure for our organization to adapt its approach has become an even greater imperative now precipitous of mere survival.
This poses a considerable dilemma for our firm, and particularly for those of us in manufacturing management roles. Weighing the implications of the decision that so many competitors have made to begin importing products from overseas manufacturers, it is necessary to consider the realities associated with such a change in location strategy. With the opening of free trade paths between the developed and developing world, our global economic alignment is coming to reflect a divided pursuit of collective advancement which imposes a byproduct of considerable detriment to a wide range of parties. Shaiken (2004) draws the conclusion that the diminished emphasis on the acquisition of labor skills that are informed by the socio-cultural context of their intended product market is reducing the performance and production quality yielded by workers. This is especially true of manufacturing sites where advanced technological processes are utilized, with global outsourcing far removing workers from the site of the new technology’s evolution.
This necessitates a change in the labor specialization within the broader economy, with the reorganization of our production serving to combat a “fierce world-wide competition for jobs [which] threatens to undercut wages and working conditions.” (Shaiken, 1) This situation has helped to prompt the situation currently facing our organization, which must find ways not to evade but to participate in the changing nature of business. Therefore, our decisions must be informed by a fuller understanding of what has occurred across the last decade. To this point, the most compelling and forthright representation of globalization may well be captured in the words of progressive stock speculator and philanthropist George Soros, who observed that “the salient features of globalization is that it allows the financial capital to move around freely, by contrast, the movement of the people remains heavily regulated.” (Shaiken, 3) This is particularly true of socioeconomic mobility, which is evidently supplanted in a globalizing market by the extension of wealth for the economically elite and a simultaneous widening of the gap between rich and poor. Such a resolution points to a fundamental aspect of contention in the discussion of globalization, which concerns how best to approach the labor scenario produced by the condition of globalization. For our organization, which is deeply dependent upon the quality labor of its in-house manufacturing staff, an incapacity to continue to execute its long-standing manufacturing strategy has precipitated serious consideration of dismantling many of its in-house facilities. With respect to the labor, equipment and in-house factory facilities which have defined our process and capacity, a serious retraction of such assets could be a real prospect.
This is not just a change which is occurring across labor and manufacturing fields but additionally through service channels as well, which is of primary interest to an organization such as ours that provides both. During the last decade, the presence of American corporations in developing states such as India has produced a new class of technology labor. Through this duration, “Indian programmers, already well educated and fluent in English, became proficient in exactly the systems American and European companies were rushing to embrace.” (Prestowitz, 85) This would precipitate a current reality in which, beyond the loss of American production jobs during the first wave of free trade, service job markets are now shifting overseas en masse as well. Prestowitz (2005) addresses the incongruity that this is presenting to the American laborer. Even as education costs continue their annual climb, the competition for jobs in service and technology industries is making a loser out of the American white-collar worker. The economic demands created by the social parameters of American educational and professional advancement dictate such occupations must command a wage spectrum concordant with the attendant costs above mentioned. This is a wage which far exceeds that of the aspiring Indian programmer or support technician. This global proliferation of information and communication technologies such as mobile communication, the internet and voice-over-internet-protocol devices — direct and intentional results of free trade — has created a far cheaper workforce in many of the disciplines which gained their economic pertinence in the United States. With the enhancement of telehealth communicational possibilities, this reflects a danger that soon the consultation which is provided by our company will also be considered too costly to compete with overseas consultation.
The general effect of devaluing our own education by diminishing the value of formerly specialized skill sets is supplemented by what Prestowitz refers to as an ominous failure on the part of the United States to invest in the development of new scientific and technological endeavors on a broad scale. The propensities that helped fuel America’s initial ascension are now presenting America with competitive markets of its own design and yet operating at far lower costs. The author speaks, then, less of a philosophical grievance with the nature of globalization than through a critical understanding of America’s incongruent economic policies. A consideration of its current approaches to detachment from its own labor markets and a disbursement of its labor sectors throughout the world indicates that either the United States is not prepared to comprehend and operate according to the true implications of globalization or that its leadership is actually more interested in the advancement of its corporations than the protection of its labor classes. Regardless of the motive, in its current incarnation, globalization is proving rather destructive to overall economic growth in such important and previously America-dominated sectors as technology and communications. As Prestowitz remarks, “the long-held assumption that U.S. exports of robust services and high-tech products would so dominate world markets as to balance trade has been seriously undermined by the third wave of globalization. Instead, much of the technology developed in U.S. universities and funded by taxpayer money is likely to be commercialized abroad.” (Prestowitz, 250) This is a pattern that is hurting the U.S. laborer, now in competition both in the production and service industries with a far more affordable foreign counterpart working in a setting with more lax environmental standards and fewer costly protections for worker rights. Were it that this economic incentive was accompanied by a more concerted effort to retain America’s unique stature as a nexus point for the evolution of ideas, technologies and products through proper divestment of public and corporate assets, then the global outsourcing of jobs would not augur so poorly for the working and service classes that will be negatively impacted in our company and others like it. At present though, the United States has seen fit to allow its operations to move their facilities abroad in search of higher profit margins. While the nations where such operations have been instated seem to enjoy exponential economic growth, the United States has stagnated on multiple fronts. With labor market growth, educational standards and job opportunities all enduring an era of retraction, the only rising indicator is the cost of living here. This illustrates that America has been unwilling to create the environment suitable for a functioning economy within globalizing markets. In essence, it must endeavor to reorient its labor force for competition with 3 billion new players.
This invokes a marked and previously nonexistent form of labor and production competition that has decimated the operational capabilities of our suppliers. Reestablishing new connections after years of dealing with the same partners is revealing for our organization the types of pressures that have been created by the process of globalization. Namely, for companies such as ours that have been hesitant to send our contracts overseas, it has been difficulty to remain functional and operating at a steady clip. For our purposes though, we must consider whether we are prepared and suited to make such a change, or whether there are other angles that we might take to resolving the disruption in our flow of business. This invokes theoretical examination of strategic planning, which must enter into an evaluation of external circumstance. Matters of management theory to be addressed accordingly are “the competitive advantage of firms is seen as resting on distinctive processes (ways of coordinating and combining), shaped by the firm’s (specific) asset positions (such as the firm’s portfolio of difficult-to-trade knowledge assets and complementary assets), and the evolution path(s) it has adopted or inherited.” (Teece et al., 509) a consideration of these aspects of business management will help us to make decisions with a firm theoretical grasp on strategic planning and navigating the transformation process. External factors will also be significant and due for evaluation.
A critical understanding of the forces of globalization is thus appropriate. As we find, categorical objections to the concept of globalization are less pertinent than those which accept its inevitability but question the motives and methods constituting its current form. Indeed, one of the greatest drawbacks to globalization has been its mismanagement. In the text by Bhagwati (2005), the author provides the rationale that, in and of itself, globalization is a proper prism through which to view the world economy. As a symptom of its failures, though, he points to the misappropriation of its central agency. He asserts that “the WTO has been corrupted by various lobbies (in the rich countries) into being no longer a pure trade institution.” (83) Pressured by such nations as the United States, for example, to help pursue its collection of foreign debt from developing nations, the WTO is more a vehicle to the interests of its most influential parties than it is a channel for the regulation of free trade. Therefore, it must be noted as a corollary to the strategic demands placed upon our company that a change in America’s approach of globalization is necessary in the very short run if we are to begin undoing a path which has already levied considerable destruction upon the American economy. The U.S. has persisted to engage in a uni-directional free trade, in which its willingness to buy foreign products at low, low prices that it may thereafter pass along to the consumer, has not been met by its retention of a dominant presence as a seller in foreign markets. Such is the problem which we have faced. The shift from the United States to smaller-scaled economies of production industries, agricultural operations and technology firms has unraveled America’s presence on a world stage as a center for production and ingenuity. And on its current path, “the United States accepts asymmetric investment and trade conditions that further exacerbate U.S. deficits, which in turn result in enormous piles of U.S. Treasury bonds sitting in the coffers of foreign central banks.” (Prestowitz, 251) This entitles foreign leaders dramatic latitudes for influence over U.S. economic policies. The result is the irresistible pressure imposed upon such organizations as ours, which has worked hard to retain fair labor practices, in-house production methods and domestic partnerships with suppliers. The current scenario, however, has so aggressively altered the production landscape that our survival depends upon such strategies as the adoption of outsourcing policies.
In terms of the layout strategy for our in-house facilities, it is becoming apparent that a greater degree of manufacture outsourcing should be considered necessary. Outsourcing has a number of key virtues, which are the cause of its espousal by industry and governmental leaders. According to the Farrell (2002) at the top of the list, is the financial impetus. To date “cost savings are still a key outsourcing benefit,” with the reduced cost of transferring labor to external settings, or even overseas, coming from the access to new markets. (Farrell, 1) Similarly, building costs and regulations are often cheaper in smaller markets. Another benefit which Farrell notes is the freedom availed to in-house workers to focus on regular responsibilities, as specialized projects are left to the specialists, often found in independent service agencies. For our organization, this could mean a reduction in-house operations which could relocate some of the more basic dressings and wound covering manufacturing process to cheaper overseas markets. This could allow our company not to cede significant marketshare while still retaining its flagship products in its own manufacturing context. The focus could be driven by those products which local suppliers remain capable of distributing, with in-house manufacturing used to develop the products of greater quality and thus a higher premium on the market. By at least partially bending to the pressure to participate in global outsourcing, and thus reducing the factory space used in domestic spaces, it is hoped that we can continue to satisfy in those areas where we are most reluctant to allow for a distribution gap while continuing to compete in those areas where lower pricing has elevated our competitors.
Unfortunately, as a reality of the current market tenor, there are distinct consequences to the human resources capacities of a domestic manufacturing organization. One of the major drawbacks to outsourcing is the result of this trend according to Kandikar (2005), who argues that with the externalization of important business commissions, such aspects of the business are now being overseen by individuals not necessarily operating in concurrence with company culture, mission and vision. Another drawback is the damage which such outsourcing may bear on individuals involved in the in-house operation, who may resent the redistribution of responsibilities to external parties. This is also related to the warranted fear that outsourcing could even cost the devaluation or loss of in-house jobs. This devaluation is concurrent with an overall diminishment in the value of certain labor responsibilities in large markets, such as the United States. From the perspective of our internal management core, this demands a lucid design of those jobs which will be kept in house. Those positions which are retained must be buffeted with assurances of job security and a clarity of new responsibilities invoked by the change. Any failure to properly shepherd personnel through the rigors of transition will be demoralizing and will levy a negative impact on performance and workplace culture. Here, a shift in focus toward those products which are accompanied by nursing consultation and a greater emphasis on the provision of this service as a complimentary aspect of steady client-manufacturer relations. The outcome may well be the increased emphasis on the service aspects of our operation, which can be demonstrated to provide distinct advantages over that which more affordable manufacturers or distributors may provide. Thus, the HR focus should shift toward the recruitment, training and promotion of nursing specialists with the knowledge to support the users of our products.
One of the most significant areas of our operation which will undergo change, and which has necessitated such a shift toward service concerns, is that of supply chain management. Here, the disruption and uncertainty being created by suppliers has demanded a change in our familiar process. Particularly, we will be forced to relocate our interests overseas, where partners are more readily available today and where prices are distinctly lower. This also means finding ways to facilitate more streamlined ordering, inventory and customer delivery methods. E-commerce databases may provide a positive solution to this need, with online ordering methods connecting to stock inventories and automated overseas shipments from outsourced manufacturers. This also means less idle warehouse facilities as online methods are used to make photographic presentation of products.
Indeed, the capacity to stock a series of photographs and specs on a product, rather than the demand to stock daily a set number of such physically available items, is demonstrative of a set of supply chain advantages which will be facilitated by the change in our business. Namely, the diminishing requirement for tangible representations of consumer items has, for such retail organizations, “tightened the links with suppliers, eliminated all interim warehousing [and] adopted just-in-time production techniques.” (Taylor, 1) This has certainly been facilitated to an extent by the relocation of our manufacturing core to developing economies in Mexico and Asia, where more affordable and less-labor restrictive parameters have allowed such companies to become more directly linked to production characteristics abroad. For us, this may also help to heighten the emphasis on in-house brand products, which can be produced and inserted into the market upon real rather than projected demand. Particularly, the idea of the ‘just-in-time’ production approach is significant, nullifying the traditionally costly demand of building or leasing warehouse space for the facilitating of production-to-retail lag time. The proliferation of internet communication may be evaluated as the factor underpinning the ability of a small company such as ours to appropriate such fast turnaround in spite of geographical and practical boundaries.
A consideration of the supply chain underscores a reality in manufacturing, which is that responsibilities and leadership will be spread across different areas of the operation. This is an important reality for management. So is this demonstrated in the research by Hao et al. (2004), which assesses manufacturing management as a multifaceted role, indicating that “manufacturing management issues are addressed at three levels: virtual enterprise (inter-enterprise), enterprise (intra-enterprise) and shop floor levels.” (Hao et al., 71) This means that management not only will function at different levels and in different departments, it is also necessary for a management core to develop which allows coordinated effort and unified purpose between these different aspects of the operation. For a manager in any context, this denotes the need for an orientation not just toward his team or department, but also an orientation toward the solidarity of a management team. The sharing of leadership responsibilities is crucial in this regard.
This is underscored by additional research pointed to coordination as helping to provide a singular organizational culture, identity and vision. Accordingly, our literature denotes that “management at the operations level is seen to consist of the centralized creation, revision and implementation of plans. This approach to management views a strong causal connection between the actions of management and outcomes of the organization.” (Koskela, 4) Thus, even when turnover becomes necessary, it is anticipated that the properly chosen leader will have remained in position long enough and with the integrity befitting this role to have facilitated a smooth transition with properly trained and debriefed successors. This is why such works as that by Uhl-Bien et al. make a case against bureaucratic stodginess and the danger this denotes in terms of a failure to prepare for leadership change when such occurs. (Uhl-Bien et al., 298).
One of the clear misfortunes provoked by the current scenario will concern the status of many members of our team. This is to indicate that we will not be able to retain the currently existing scale of labor given that many of our manufacturing concerns will be shipped to overseas markets. Layoffs will be necessary to offset the cost of payroll as we schedule the next steps in changing the nature of our business orientation. Since the primary objective of this recalibration of business processes is to stave off any gaps in our capacity to serve the needs of the client, the labor staff will unfortunately bear the brunt of the decisions which have become necessary.
Under these conditions, it is incumbent upon the management of our operation to employ strategies of goal-orientation that are closely aligned with the needs and capabilities of the retained labor staff. But this sustainability cannot be achieved without consistency in terms of leadership personnel. The rapport and comfort which are developed over time in an organization are neither optional to success or easily won. Such factors as multi-directional communication, technical ability, delegation of responsibility and integrity are qualities all which reflect and practice the shared goals and principles of a positive team culture. (Terry, 59) if these aspects are not reflected at the leadership level, it will be difficult to return to a place of normalcy within which retained personnel have once again gained trust for the organization’s management core. A renewal of organizational culture with an emphasis on the positive opportunities which will be presented under the new framework will be necessary if we are to weather the inherent psychological blow of widespread layoffs. Accordingly, literature denotes that “the type of work goals whose pursuit is encouraged and rewarded depend in part on the prevailing cultural value emphasized.” (Jaw et al., 2)
This is to suggest that in terms of maintenance of the organization as it weathers this transition, consistency at the leadership role is essential to stability in meeting the organization’s demands. Any major transition such as this must be benefited by the ascension in authority and retention of stable leadership of key figures who will help the operation regain its composure in a new market context. Instability at the leadership role can be damning to maintenance of the changes made and the outcomes sought. This is, as we can see, a problem which has the potential to be damaging to the quality or operational effectiveness of all manner of organization. The reality is that leadership change can at times not be avoided, and it is often the case that this transition will be challenging, especially in the face of conditions like changing information technology and the parameters of globalization. (Bass, 17) However, the current body of knowledge shows that there is a need to channel through our Human Resource department a refined focus on leadership recruitment and development which seeks out candidates of long-term viability. Where leadership is inconstant, so will be the success of the organization itself.
Ultimately, the changes which now stand before us promise to be rigorous and in many regards will manifest as a negative experience for members of the organization and the organization as a whole. Given that many of the economic indicators leading to this event were distinctly unwanted and negative, it should be expected that the resolutions before us are to a large extent negative and foisted upon us. They are, however, the realities of a retracting domestic marketplace. Therefore, we have been faced with many of the same difficult dilemmas that have been faced by our competitors. For lack of our own autonomy in defining supplier-manufacturer relations, we have been forced to abide the rising tide in a globalizing market. The widespread layoffs that will aggressively deplete our manufacturing capabilities in many areas previously crucial to our operation is not seen as elective but fully necessary in light of the competitive nature of our industry, which has felled our most important suppliers.
Therefore, by outsourcing the manufacture of our most basic and cheapest products, and by implementing a necessary layoff of significant portions of our manufacturing core, we will at least be able to retain some personnel and some aspects of our operation while competing with our lower cost competitors in these areas. The offshoot is the optimistic anticipation of at least retaining the viability of our premium in-house products with those clients that require higher quality over greater affordability. This would be the area in which we retained certain trademark characteristics and processes relating to our in-house production methods. Simultaneously, we anticipate improving the focus on our support services. By investing a greater recruitment and promotion effort on retaining a staff of on-call nursing and wound care specialists designed to provide support and consultation to clients, we also expect to reinvent the balance in our organization’s identity. The greater emphasis on-site consultation could significantly reduce the threat rendered by shifting markets to the competitive viability of our cost structure. Ultimately, ours is a case examination which demonstrates the position in which globalization and recession have placed many manufacturers, and indicates the hard decisions which must be made as a result.
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