Modern Manufacturing Practices: Information, Incentives and Implementation

Posted: 17 Mar 1998

See all articles by Ratna G. Sarkar

Ratna G. Sarkar

Harvard University - General Management Unit

Date Written: October 1997

Abstract

In this paper, I explore the impact of management control policies on the relationship between various Modern Manufacturing Practices like Just-in-Time (JIT) and the customer satisfaction metrics of quality, timeliness and cost. This research is motivated in part by the paucity of empirical work that links the theory and implementation of MMPs.

The first part of this paper models the benefit to a firm from a JIT production system and derives conditions under which JIT is an optimal response to uncertainty about demand and worker productivity. It applies multi-person decision theory to provide a rationale for the concurrent adoption of modern manufacturing practices such as zero-inventory, process improvement, information sharing and worker empowerment.

In the second part, which is a field-based empirical study, using data collected from the operating plants of several large companies and Structured Equation Modeling (SEM), I relate the emphasis placed on specific combinations of practices to the degree of improvement experienced in quality, timeliness and cost. I find that process improvement activities positively affect all the manufacturing performance measures of interest. I also find evidence of strong complementarities between process improvement and information sharing, particularly for quality. Automation and supplier initiatives seem to have had a very limited impact on the performance metrics. These results have implications for plant management who, with the aim of improving particular aspects of plant performance, must allocate limited resources among various plant initiatives and practices.

JEL Classification: M4o, M46, J33

Suggested Citation

Sarkar, Ratna G., Modern Manufacturing Practices: Information, Incentives and Implementation (October 1997). Available at SSRN: https://ssrn.com/abstract=67848

Ratna G. Sarkar (Contact Author)

Harvard University - General Management Unit ( email )

Cambridge, MA
United States
617-495-6408 (Phone)
617-496-7363 (Fax)

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