Manufacturing - Best Practices

The Five Best Management Practices

The study aimed at finding out the most outstanding ways of managing the

manufacturing firms that could be characterized as the best management practices of the sector. In the final analysis, the researchers were able to summarize the practices into the following:

Increased customer orientation
Quality focus
Building In-house R&D and Technological Capabilities
Corporate Management: Creativity and Innovation
Bias for Action: Task before structure

Increased customer orientation

In a competitive market the customer is the focal point. No private business can afford to ignore the customer and they survive in the long run.

"All business success rests on something labeled a sale, which at least momentarily, weds company and customer" (Peters and Waterman, 1982: 156).

Marketing is viewed as going beyond a one off transaction. The endeavor should be to build a long term, trusting, win-win relationships with valued customers, distributors, dealers and suppliers.

Quality focus

Quality is an important factor in competitiveness and is regarded as a passport for entry into international markets. Garvin (1987:104) identified eight critical dimensions in the concept of quality i.e. performance, features, reliability, conformance, durability, serviceability, aesthetics and perceived quality. The relevance and relative importance of each attribute is likely to vary according to the product category studied.

Building In-house R&D and Technological Capabilities

All the companies surveyed had considerable in-house R&D development facilities. Most of the companies also had been able to formulate strategic alliances with foreign companies and have benefited from technology transfer from these foreign companies. Further, these companies also have put in place procedures which continuously assess the market for future product needs and the means of developing existing products. Performance gap of all existing product portfolios are measured and remedial strategies are adopted.

Corporate Management: Creativity and Innovation

In most companies surveyed, the top management has been receptive to ideas and suggestions originating from the workforce. Most of them have quality circles in operation, while others are implementing continuous improvement programs too.

The CEO's role in product development has been prominent, while employees suggestions to improve production process receives close attention. All the top performing companies are constantly on the look out for market opportunities which pave the way for the development of new products.

Bias for Action: "Task before structure"

In the companies surveyed on observes a strong task orientation, which is to be expected since they are operating in an increasingly competitive environment. Corporate plans are done for a three year period and are done on a basis of a rolling plan. Subsidiaries have to be managed as autonomous profit centers, without the prospect of cross subsidization. Employees have to meet targets that are mutually agreed upon with their superiors and there is a clear performance reward link. Management committees meet regularly to review operating results and take corrective measures. Most CEO's display a tendency to practice MBWA (management by walking about) philosophy. Bureaucratic procedures have been relaxed to some extent for the purpose of achieving speedy results.

Future Directions

Corporate Leadership and Vision

Corporate mission statements and goals that have been formulated by companies serve to give direction to all the activities of the company and act as powerful motivators for action. The fact that the companies studied engaged in medium term planning in an environment of uncertainty is commendable. It would however be necessary for companies to think futuristically and think of the long term in setting to achieve the corporate mission.

Staying Close to the Customer: Need to Bridge Distances

This is the compelling need for export customers to bridge the needs between the manufacturer and the end user. At present the end customer is reached via the long chain consisting of importer, wholesaler and retailer. While dependence on foreign intermediaries is understandable in the initial stages, firms in the long term should plan at least to communicate frequently with the retailer.

Need to Develop a Basis for Competitive Advantage

A firm operating in a competitive market has to develop a basis of competitive advantage that is sustainable. This could rest either on low cost or differentiation contrary to the approach it may be possible for a firm to adopt a best practice strategy as was done by the Japanese export firms. This involved a low cost base and re-investment in low price and differentiation. However, to pursue this strategy firms will have to work energetically on cost and productivity frontiers.

Productivity - A Key Indicator

Productivity is a key indicator for companies to remain competitive in the market. Firms would have to monitor every aspect of productivity viz. raw material, labour, energy and machine productivity. Good inventory management will bring major benefits in terms of working capital management. Certain companies keep three to six months which is bound to be a strain on the company. Total cycle time reduction is another method of improving productivity. This is done by analyzing value adding vs. value consuming elements of a process. It includes elimination of waste, simplification of methods and redesign of processes.

Firms should turn quality into a competitive advantage. Quality should become an obsession and should be everyone's responsibility. Certain firms keep a large number of workers to check the work performed by another set of workers which adds drastically to the overheads of the company.TQM is what should ideally be attained and to this end one must strive to create responsible, self-directed and self-motivated workforce.

Encourage Creativity and Innovation

In a world where the external environment, technology and customer tastes and preferences keep changing, companies cannot afford to remain still. The effort of come of the companies in the sample is commendable, but organizations could excel if they nurture an innovative organization culture. This is a lesson that emerges from high performing companies the world over. Firms could look over their decades of existence and review the product and process innovations they have achieved. This again requires a change of organizational culture, whereby top management encourages, respects and rewards the ideas and suggestions coming up from the workforce. Companies should try to learn from the best practices of their competitors as well as from other industries (Benchmarking).

Build Organizational Capabilities

Firms should pay serious attention to building their competencies in all areas of activity. This would encompass not only technological capability but managerial and marketing capabilities. Upgrading human resource skills is an aspect which deserves special attention. Firms could review their past performance and assess for themselves the upgrading of the human resources skills over the years.

Forging Strategic Alliances

In the contemporary business world, scope exists for the development of strategic alliances and partnerships with other firms. The structure of this relationship would be very much different from the subordinate relationship that is exhibited by some firms at present. Partnerships could not only be struck with material suppliers and distributors but also with competitors (co-competition). Unless local firms are able to attain sophistication in their managerial capabilities and in their internal operations, it may not be able to find partners for strategic alliances. Inefficient players have no place in the fiercely competitive market.

Adapted from:
Best Practices in Sri Lanka Manufacturing Sector,
Dr. Tilak Fonseka,
Postgraduate Institute of Management,
Sri Jayewardenepura University.