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114 PART 2 • STRATEGY FORMULATION

TABLE 4-7 The Basic Functions (Decisions) Within Production/Operations
Decision Areas Example Decisions
1. Process These decisions include choice of technology, facility layout, process flow analysis, facility location, line
balancing, process control, and transportation analysis. Distances from raw materials to production sites to
customers are a major consideration.
2. Capacity These decisions include forecasting, facilities planning, aggregate planning, scheduling, capacity planning,
and queuing analysis. Capacity utilization is a major consideration.
3. Inventory These decisions involve managing the level of raw materials, work-in-process, and finished goods, especially
considering what to order, when to order, how much to order, and materials handling.
4. Workforce These decisions involve managing the skilled, unskilled, clerical, and managerial employees by caring for job
design, work measurement, job enrichment, work standards, and motivation techniques.
5. Quality These decisions are aimed at ensuring that high-quality goods and services are produced by caring for quality
control, sampling, testing, quality assurance, and cost control.

Source: Adapted from R. Schroeder, Operations Management (New York: McGraw-Hill, 1981): 12.

Most automakers require a 30-day notice to build vehicles, but Toyota Motor fills a
buyer’s new car order in just 5 days. Honda Motor was considered the industry’s fastest
producer, filling orders in 15 days. Automakers have for years operated under just-in-time
inventory systems, but Toyota’s 360 suppliers are linked to the company via computers on
a virtual assembly line. The new Toyota production system was developed in the com-
pany’s Cambridge, Ontario, plant and now applies to its Solara, Camry, Corolla, and
Tacoma vehicles.
Production/operations activities often represent the largest part of an organization’s
human and capital assets. In most industries, the major costs of producing a product or ser-
vice are incurred within operations, so production/operations can have great value as a
competitive weapon in a company’s overall strategy. Strengths and weaknesses in the five
functions of production can mean the success or failure of an enterprise.
Many production/operations managers are finding that cross-training of employees
can help their firms respond faster to changing markets. Cross-training of workers can
increase efficiency, quality, productivity, and job satisfaction. For example, at General
Motors’ Detroit gear and axle plant, costs related to product defects were reduced
400 percent in two years as a result of cross-training workers. A shortage of qualified
labor in the United States is another reason cross-training is becoming a common
management practice.
Singapore rivals Hong Kong as an attractive site for locating production facilities
in Southeast Asia. Singapore is a city-state near Malaysia. An island nation of about
4 million, Singapore is changing from an economy built on trade and services to one
built on information technology. A large-scale program in computer education for older
(over age 26) residents is very popular. Singapore children receive outstanding computer
training in schools. All government services are computerized nicely. Singapore lures
multinational businesses with great tax breaks, world-class infrastructure, excellent
courts that efficiently handle business disputes, exceptionally low tariffs, large land
giveaways, impressive industrial parks, excellent port facilities, and a government very
receptive to and cooperative with foreign businesses. Foreign firms now account for
70 percent of manufacturing output in Singapore.
In terms of ship container traffic processed annually, Singapore has the largest and
busiest seaport in the world, followed by Hong Kong, Shanghai, Los Angeles, Busan
(South Korea), Rotterdam, Hamburg, New York, and Tokyo. The Singapore seaport is five
times the size of the New York City seaport. 22
There is much reason for concern that many organizations have not taken sufficient
account of the capabilities and limitations of the production/operations function in formu-
lating strategies. Scholars contend that this neglect has had unfavorable consequences on
corporate performance in America. As shown in Table 4-8, James Dilworth outlined impli-
cations of several types of strategic decisions that a company might make.