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Improving Manufacturing Performance Through Process Change and Knowledge Creation

Author

Listed:
  • Janice E. Carrillo

    () (John M. Olin School of Business, Washington University, St. Louis, Missouri 63130-4899)

  • Cheryl Gaimon

    () (DuPree College of Management, Georgia Institute of Technology, Atlanta, Georgia 30332-0520)

Abstract

A model is introduced to guide a profit maximizing firm in its quest to enhance performance through process change. The key benefit sought from process change is a long term increase in effective capacity. However, realizing success from process change is not trivial. First, while process change may increase effective capacity in the long run, the disruptions during implementation typically reduce short term capacity. Second, competitive forces such as decreasing revenue streams and shrinking product life cycles complicate the implementation of process change. Third, while knowledge may enhance the ultimate benefits derived from process change, the correct timing and means of knowledge creation are difficult to discern. Lastly, a variety of trade-offs must be evaluated when selecting the particular process change to pursue. For example, choices range from hardware and software replacements to modification of manufacturing procedures. The model introduced here explicitly considers both the short term loss due to disruption and the long term gain in effective capacity associated with the process change. In addition, investments in the accumulation of knowledge are investigated for their potential to enhance process change effectiveness. Knowledge is generated from investment in preparation and training (learning-before-doing) and as a by-product of process change (learning-by-doing). Analysis of the model provides managerial recommendations for several key decisions relating to process change implementation including: (i) the selection of an appropriate process change alternative, (ii) the rate and timing for investment in process change, and (iii) the rate and timing for investment in preparation and training. New results are reported reflecting the important relationship between process change and knowledge. For example, we show that under certain conditions, a firm should optimally delay investment in process change until sufficient accumulation of knowledge is achieved. More generally, we identify conditions whereby investment in process change occurs at an increasing rate over time. This result is particularly important since it demonstrates a limitation of the existing literature where process change always occurs at a decreasing rate.

Suggested Citation

  • Janice E. Carrillo & Cheryl Gaimon, 2000. "Improving Manufacturing Performance Through Process Change and Knowledge Creation," Management Science, INFORMS, vol. 46(2), pages 265-288, February.
  • Handle: RePEc:inm:ormnsc:v:46:y:2000:i:2:p:265-288
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    File URL: http://dx.doi.org/10.1287/mnsc.46.2.265.11925
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Voros, Jozsef, 2006. "The dynamics of price, quality and productivity improvement decisions," European Journal of Operational Research, Elsevier, vol. 170(3), pages 809-823, May.
    2. Silbermayr, Lena & Minner, Stefan, 2016. "Dual sourcing under disruption risk and cost improvement through learning," European Journal of Operational Research, Elsevier, vol. 250(1), pages 226-238.
    3. Vits, Jeroen & Gelders, Ludo & Pintelon, Liliane, 2006. "Production process changes: A dynamic programming approach to manage effective capacity and experience," International Journal of Production Economics, Elsevier, vol. 104(2), pages 473-481, December.
    4. Levesque, Moren, 2004. "Mathematics, theory, and entrepreneurship," Journal of Business Venturing, Elsevier, vol. 19(5), pages 743-765, September.
    5. Raul O. Chao & Stylianos Kavadias & Cheryl Gaimon, 2009. "Revenue Driven Resource Allocation: Funding Authority, Incentives, and New Product Development Portfolio Management," Management Science, INFORMS, vol. 55(9), pages 1556-1569, September.
    6. Demeester, Lieven L. & Qi, Mei, 2005. "Managing learning resources for consecutive product generations," International Journal of Production Economics, Elsevier, vol. 95(2), pages 265-283, February.
    7. Vörös, József, 2008. "A kereslet hatása az árak, a minőség és a fejlesztési döntések dinamikájára
      [The effect of demand on the dynamics of prices, quality and development decisions]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1094-1115.
    8. Vörös, József, 2013. "Multi-period models for analyzing the dynamics of process improvement activities," European Journal of Operational Research, Elsevier, vol. 230(3), pages 615-623.
    9. Voros, Jozsef, 2002. "Product balancing under conditions of quality inflation, cost pressures and growth strategies," European Journal of Operational Research, Elsevier, vol. 141(1), pages 153-166, August.
    10. Morrison, J. Bradley, 2008. "Putting the learning curve in context," Journal of Business Research, Elsevier, vol. 61(11), pages 1182-1190, November.
    11. Yimin Wang & Wendell Gilland & Brian Tomlin, 2010. "Mitigating Supply Risk: Dual Sourcing or Process Improvement?," Manufacturing & Service Operations Management, INFORMS, vol. 12(3), pages 489-510, September.
    12. Janice E. Carrillo & Cheryl Gaimon, 2004. "Managing Knowledge-Based Resource Capabilities Under Uncertainty," Management Science, INFORMS, vol. 50(11), pages 1504-1518, November.
    13. Vörös, József, 2003. "A minőség figyelembevételének szükségessége az egyensúlyi állapot meghatározásában
      [The need to consider quality when determining a state of equilibrium]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 6-21.
    14. Carrillo, Janice E. & Franza, Richard M., 2006. "Investing in product development and production capabilities: The crucial linkage between time-to-market and ramp-up time," European Journal of Operational Research, Elsevier, vol. 171(2), pages 536-556, June.
    15. Anita L. Tucker & Ingrid M. Nembhard & Amy C. Edmondson, 2007. "Implementing New Practices: An Empirical Study of Organizational Learning in Hospital Intensive Care Units," Management Science, INFORMS, vol. 53(6), pages 894-907, June.
    16. repec:eee:ejores:v:262:y:2017:i:2:p:771-779 is not listed on IDEAS

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