The relationship between manufacturing integration and performance from an activity-oriented perspective.
| Autor | Paiva, Ely Laureano |
Introduction
Both the literature and practice have called for more integration among different functional areas inside an organization (internal integration) and between organizations (external integration). Consequently, a growing number of studies attempt to analyze the dynamics of integration among manufacturing and different functional areas, hierarchical levels and organizations. Since those processes can enhance organizational performance (Swink & Song, 2007), companies need to increase their levels of internal and external integration.
The internal and external integration of manufacturing is a current topic in OM research, but previous research usually analyzed supply chain integration; manufacturing and marketing integration (Berry, Klompmaker, McLaughlin, & Hill, 1991; Boyer & Hult, 2005); and manufacturing integration along the new product development process (Koufteros, Edwin Cheng, & Lai, 2007; Swink, 1999; Ulrich & Ellison, 2005). Also, regarding supply chain integration, previous literature have explored the relationship between integration and performance (Devaraj, Krajewski, & Wei, 2007; Flynn, Huo, & Zhao, 2010; Narasimhan & Kim, 2002) and issues related to collaboration and commitment (Balakrishnan & Geunes, 2004; Cousins & Menguc, 2006; Zhao, Huo, Flynn, & Yeung, 2008).
Nevertheless, few articles analyzed these issues using an integrated approach considering internal and external integration at the same time. Rosenzweig, Roth and Dean (2003) identified that closer relationships between external actors (suppliers, distributors and customers) and internal actors strengthen capabilities and may lead to better performance. Swink, Narasimhan and Wang (2007) also showed that manufacturing integration throughout the value chain between internal and external actors positively influences business performance.
The objective of this study is to analyze manufacturing integration from an activity-based perspective. Differing from Rosenzweig, Roth and Dean (2003) and Swink et al. (2007), we specified the internal actors that interact with manufacturing and we assess three key activities for the integration among manufacturing and other organizational actors. The focus was on actors from three areas that usually develop direct activities with manufacturing: suppliers, R&D and marketing.
Theory and Hypotheses
Manufacturing integration
Internal Integration. From an internal perspective, integration between manufacturing and marketing has been studied throughout the past few decades (Abernathy, 1976; Crittenden, 1992; Hutt & Speh, 1984; Shapiro, 1977). Some classical articles like Shapiro (1977) and Crittenden (1992) emphasized the existing gap between manufacturing and marketing management. Piercy (2007, p. 202) stated that: "Despite a wide-ranging acceptance of such a proposition in theory, the practical nature of most relationships between marketing and operations departments has been demonstrated to be distant and hostile, with little of the co-operation and collaboration required actually being present".
Piercy (2009) also identified aspects such as conflicting reward systems, different backgrounds leading to different functional strategies, functional separation hindering integration, political power plays and competition for resources, and management and academic failures as the sources for manufacturing and marketing conflict. Malhotra and Sharma (2002) listed key-decision areas, which are dependent of inter-functional integration between manufacturing and marketing and range from strategic to tactical levels: strategic planning integration, strategic or visionary forecasting, new product/process development, tactical forecasting, demand management and operational integration.
According to Parente (1998), individual characteristics influence direct interactions between actors at the operational level, because short time adjustments are needed; while at the tactical level, individual characteristics are not at the center of the interaction. Individual and functional integrations are the focus at the strategic level. For Parente (1998) transaction and communication processes are relevant to all three hierarchical levels.
Despite the importance given to the interactions among marketing and other functions in market orientation literature (Kohli & Jaworski, 1990; Narver & Slater, 1990; Slater & Narver, 1994, 1995), there is not much empirical evidence on how these interactions are developed. Maltz and Kohli (2000) analyzed the relative effectiveness of the integrating mechanisms commonly used in reducing conflict between marketing and other functions, including manufacturing. Cross-functional teams appeared to be a useful mechanism for reducing conflict between marketing and manufacturing, while five other mechanisms (i.e., multifunctional training, social orientation, spatial proximity, compensation variety and formalization) did not present clear effectiveness.
Considering the increasing dynamism of the marketplace, success will be determined by how companies are able to identify customers' expectations and to transfer them to products and services (Zeithaml, 2000), and consequently requires a good interpretation of the market, as well as a good definition of what the company can produce (Varadarajan & Jayachandran, 1999). Therefore, the primary issues are how to coordinate and integrate decisions, how to operate effectively in order to deliver high quality at low cost, and how to fulfill consumers' expectations.
New product development (NPD) is one of the most fertile organizational processes to practice integration among different functional areas. Nevertheless, integration conflict is present throughout the process, as we can see in Table 1. Song, Montoya-weiss and Schmidt (1997) studied this process in Mexican high-tech firms, and stated that R&D, manufacturing, and marketing professionals believe that the strongest and most direct effects on cross-functional cooperation and NPD performance come from internal facilitators (i.e., firms' evaluation criteria, reward structures, and management expectations). There is a similar point of view in Shapiro's classical article (1977), that compared the potential conflicts between marketing and manufacturing for aspects such as capacity planning, production scheduling, delivery, quality assurance, breadth of product line, cost control, NPD and services. Nevertheless, these articles take the traditional approach of manufacturing management centered on cutting costs as the only way to increase productivity, which was severely criticized by Skinner (1969) in his classical article on manufacturing strategy.
Current OM studies bring a wider approach regarding the role of manufacturing integration in the NPD processes. The benefits are not only related to cost but include gains and/or improvements in flexibility, time and quality as well (Koufteros et al., 2007; Petersen, Handfield, & Ragatz, 2005; Swink, Talluri, & Pandejpong, 2006; Ulrich & Ellison, 2005). Swamidass and Newell (1987) made the pioneering research showing that manufacturing strategy influences performance.
There are some specific types of functional integration to consider for their influence on performance. Regarding manufacturing and marketing integration, Hausman, Montgomery and Roth (2002) showed that this is a result of area's morale. Complementarily, O'Leary-Kelly and Flores (2002) argued that manufacturing and marketing integration improves business performance. Similarly, other studies indicate that integration among functional areas influences operational or business performance (Droge, Jayaram, & Vickery, 2004; Swink, Narasimhan, & Wang, 2007): among others, manufacturing and supply chain integration (Flynn et al., 2010; Narasimhan & Kim, 2002), supply chain and NDP integration (Primo & Amundson, 2002), and buyer and supplier integration (Dong, Carter, & Dresner, 2001). At the same time, integration is a result of different activities. Integration may occur during quality improvement efforts (Forker, 1997; Kaynak, 2003; Pannirselvam & Ferguson, 2001), activities that seek to enhance coordination (Frohlich & Westbrook, 2002; Monczka, Petersen, Handfield, & Ragatz, 1998), NPD processes (Koufteros, Vonderembse, & Doll, 2002; Koufteros, Vonderembse, & Jayaram, 2005; Tan, 2001) or capability strengthening (Rosenzweig, Roth, & Dean, 2003). The constructs proposed based on the literature review are listed below.
External Integration. Hayes (2002) argued that operations management has changed in many ways in the New Economy era. The author proposed that operations analysis should consider not only the operating unit, but also a group of independent parts where companies develop on-going relationships with suppliers, customers and complementors. These relationships seek to develop complementary products and to manage ever-changing processes and networks.
Integration also has been studied as an antecedent of value creation (Brandenburger & Stuart, 1996; Wang & Wei, 2007). Thus, Venkatraman and Subramanian (2001) claimed that the strategy is changing from a portfolio of capabilities to a portfolio of relationships in the knowledge economy. Accordingly, the current competitive environment is characterized by internal and external relationships, where companies seek integration into networks in order to achieve economies of scale, scope and expertise.
On the other hand, Ghemawat (2009) argued that competitiveness is not only based on the links among parts, but that the development of competencies in specific parts of the value chain is the key issue. For example, services added to manufacturing have been identified as one of the main sources of value and competitive advantage creation (Boyer & Hult, 2005; Wise & Baumgartner, 1999). Also the importance of NPD for performance is highlighted in different studies (Koufteros et al., 2005; Swink & Nair, 2007). Swink et al. (2007) showed...
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