Lessons from the ‘made in Switzerland’ study: What makes a world-class manufacturer?

~ Pergamon European Management ]ournal Vol. 14, No. 6, pp. 576--589, I996

Copyright © I996 Elsevier Science Ltd Printed in Great Britain. AIl rights reserved

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Lessons from the 'Made in • 'S tudy Switzerland :

What Makes a World-class Manufacturer? ROBERT COLLINS, Professor of Manufacturing Management, lIVID Lausanne; CARLOS CORDON, Professor of Operations Management, IMD Lausanne; DENYSE JULIEN, Research Associate, Manufacturing 2000 Project, IMD Lausanne

Many executives are currently striving to develop world-class manufacturing operations to ensure that they remain competitive in increasingly global markets. To do this, they are adopting a range of practices, from organisational changes such as empowerment and teamwork to the use of techniques such as pull production. Their goal is to substantially improve performance: faster cycle times, reduced manufacturing costs and greater customer satisfaction.

The question of how far companies have moved towards world-class manufacturing is at the heart of the 'Made in Switzerland' project, a major benchmarking study of Swiss manufacturing practice and performance. The study was carried out in 1995 by IMD faculty and researchers working with consultants from IBM Switzerland. It is part of the internationally-based 'Made in Europe' project comprising similar studies in the UK, Germany, The Netherlands and Finland.

The central hypothesis of the studies is that the adoption of best practice leads to high performance. The objective is to establish a benchmarking database for participating manufacturers around the world. The studies, which are highly structured, examine six areas of manufacturing practice and performance in detail and assess the relationship between them at individual plants. The areas covered in the study are quality, organisation and culture, concurrent engineering, logistics, lean production and manufacturing systems.

Plants in each country are grouped according to

their position on the practice and performance indices and then studied in order to pinpoint the issues and challenges facing the manufacturers within that group. Less than three per cent of the 800 plants currently on the 'Made in Europe' database are considered 'world-class'. Yet for manufacturers striving to reach this level of performance, this small minority can provide some valuable insights for the way ahead.

This article discusses many of the issues raised by the analysis described above, with particular reference to the 'Made in Switzerland' study. In the first section, it looks at the key lessons arising from the Swiss study and what insights these can provide for manufacturers, not only in the Swiss market, but across Europe. In the second section, it looks at how the study can be used for benchmarking and provides manufacturers with some general recommendations to help them focus their improvements and move closer to becoming world- class. Copyright © 1996 Elsevier Science Ltd

Background

The Made in Switzerland (MIS) project was undertaken in 1995 as a major benchmarking study of manufacturing practice and performance in Swiss manufacturing industry. It was carried out jointly by faculty and researchers from IMD and consultants from IBM Switzerland as part of the internationally-based Made in Europe (MIE) project, which includes similar studies from Britain, Germany, The Netherlands and Finland.

.576 European Management JournalVo114 No 6 December 1996

LESSONS FROM THE 'MADE IN SWITZERLAND' STUDY

Figure 1 The Model

The central hypothesis behind the studies was that the adoption of best practice in manufacturing leads to high performance. The aim was to support and then use this hypothesis to establish benchmarks for manufacturing enterprises in various countries throughout the world. The definition of 'practice' in this instance was 'the established processes which a company has in place to improve the way it runs its manufacturing business'. These could range from organisational aspects, such as teamwork and empowerment, to the use of techniques such as pull production. 'Performance' was defined as 'the measurable results of the company's processes', for example, production cycle times, work-in-process inventory and customer satisfaction.

The model used as the basis for the study links practice in six areas of manufacturing to operating and business performance (see Figure 1). The same model was used in both the MIS and the previous MIE studies to ensure that results could be included in composite studies and that a comparison of findings could be meaningful. The objective in each case was to provide insights into the following key questions:

°:° How effectively have plants implemented manufacturing best practices in each of the O areas?

o:- How effectively have plants performed in each of these areas?

°:* What is the relationship between practice and performance, and which best practices should be adopted7

• :o How has size, parent origin and industry sector affected manufacturing practice and performance?

o~° What do companies see as business priorities, and what inhibits the achievement of their business vision?

°~° How do production managers assess their performance relative to their competitors?

In addition, each study looked at factors which affected manufacturing practice and performance in the specific country and then compared similarities and differences between that country and the others in the MIE study.

The methodology for the research was similar in each country. Researchers held in-depth interviews with an appropriate sample size of companies from a range of industries (see the Swiss example below). The results

were then analysed and practice and performance indices were developed for each site. Rigorous statistical testing was used to ensure the reliability and validity of the model. To help with the analysis, a common terminology was developed. In particular, insights were gained in each country by comparing the top 10 per cent of companies, known as the 'leaders', with the bottom 10 per cent, known as the 'laggers'.

The results from the MIS and MIE studies have provided significant insights into the questions given above. The original hypothesis, that the adoption of best practice does lead to improved operational performance, has been shown to be true in all the countries studied so far. The project has now created a database of over 800 sites which can provide benchmarks for individual plants or groups of plants, as well as important insights into the issues and challenges facing manufacturing companies today. This article discusses many of these, with particular reference being made to the MIS study. In the next section we look at some of the key lessons to come out of the Swiss study, many of which are supported by the results from the other studies, and in the following section we explain in more detail the benchmarking capabilities provided by the project as a whole.

Lessons from the Swiss Market

The fieldwork for the MIS study was carried out between April and October 1995. Researchers visited 116 manufacturing sites with 50 employees or more, primarily in the food and tobacco, textiles, chemicals, machinery and electronics sectors (see Figure 2 for a breakdown of the sample by industry sector). The visits consisted of a tour of the plant, followed by interviews with one or more senior manufacturing executives which typically lasted from 21/2 to 4 hours.

The questionnaire, which was sent to respondents before the interview to allow them to collect the relevant data, contained 48 core questions, split between practice and

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Paper 1%

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Figure 2 Sample by Industry Sector

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European Management JournaIVo114 No 6 December 1996 5 77


performance (for a detailed overview of the questionnaire, see the Appendix). The face-to-face interview technique was important not only to provide an opportunity for the interviewing team to clarify the meaning of certain terminology for the respondent, but also to discuss apparent inconsistencies in the responses received from the respondent.

Summary of Results

One of the primary findings of the MIS study was that while only 2.6 per cent of Swiss sites could be directly classified as 'world class', with both practice and performance equal or surpassing the very best international plants, a further 75 per cent were 'contenders' for this status. This compares very favourably with the MIE study, where 2.8 per cent of sites were world-class, but only 52.2 per cent were considered 'contenders'.

The other sites from the Swiss sample were further divided into four groups. These groups, and the two groups described above, were designated by an analogy originally used in the MIE study to describe the ability and performance of boxers in the ring (see Figures 3 and 4 for a comparison of the Swiss and European results). 'Promising' sites - 7 per cent of the Swiss sample - were those who had invested in adopting best practices but were still waiting for the 'pay-back' in terms of their performance. Sites that 'won't go the distance' had a high performance rating, but were potentially vulnerable in the long term because they had not underpinned this rating by consistently adopting best practices. Eight per cent of Swiss sites fell into this category, equivalent with the nine per cent across Europe. However, many fewer Swiss sites fell into the final two categories, the 'make- weights' and the 'punch-bags' - 7.7 per cent for both categories in Switzerland versus 19.5 per cent in Europe. 'Make-weights' were sites that lagged in both the practice and performance levels necessary to succeed in

an international arena. 'Punch-bags', who scored below 50 per cent on both the practice and performance indices, required extensive changes to their manufacturing practices if they were even to survive.

One reason for the high number of Swiss sites in the world-class and contender categories, (and the correspondingly low numbers of make-weights and punch-bags), may be the need to achieve high levels of productivity to compete successfully in intemational markets. Many Swiss companies export more than 90 per cent of their production, despite the traditional strength of the Swiss Franc. This emphasis on productivity can be seen in the fact that Switzerland is ranked highest for productivity growth against the other countries. Germany is ranked second, followed by The Netherlands and the UK. Conversely, this list is reversed, with Switzerland ranked at the bottom and the UK ranked at the top, for low product cost.

A second reason for the high number of Swiss world- class and contender companies may be the fact that the laws of natural selection - the survival of the fittest - operate at a much faster rate in Switzerland than in the other countries, with plants achieving less than 60 per cent in overall practice and performance ratings having a short life expectancy.

In order to understand in more detail some of the competitive pressures facing Swiss manufacturers, the survey respondents were also asked to provide their opinions on such things as market growth opportunities, the advantages and disadvantages of Switzerland as a production location and the key priorities of and inhibitors to their business vision. Not surprisingly, Asia Pacific, the 'New Europe' (including both East and West Europe) and North America were considered the most important growth markets. However, there were important differences between the opinions of the

u

Prac t i ce index 50 60 80 Pract ice index 50 60 80

Figure 3 Pract ice vs Per formance in Switzer land Figure 4 Pract ice vs Per formance in Europe

578 European Management JournalVo114 No 6 December 1996


leaders and the laggers on this point. The laggers saw more market opportunities in North America and Eastern Europe, whereas the leaders believed that opportunities in both Western Europe and South America were greater. Given their levels of manufacturing practice and performance, it is doubtful that the laggers can capture an appreciable share of the market in regions where fierce price competition faces exporters to the area, or establishing low-cost manufacturing operations is a key competitive factor.

Respondents believed that Switzerland had a number of advantages as a production location, with the availability of qualified employees, a far-reaching social consensus and political stability as the most frequently cited. However, the advantages were offset to a certain extent by concerns about regulatory constraints and inertia. The three most serious disadvantages quoted were high wages, government regulation by taxes, prescriptions and laws and the inflexibility of outmoded regulatory structures.

The most frequently cited priorities in achieving business vision were (see Figure 5):

o~° to be a leader in product innovation °~° to minimise manufacturing costs o:" to be a leader in quality

The reduction of manufacturing costs and quality leadership were top business vision priorities across the MIE study, reflecting European manufacturers' concern. However, only Swiss manufacturers placed such importance on product innovation (German manufacturers placed it 3rd, the Dutch and Finnish 5th, and the British 7th in their lists of business vision priorities.) One reason for the Swiss emphasis on innovation could be their need to maintain their traditional reputation for product leadership in order to successfully compete in export markets, given their high cost manufacturing environment.

The most frequently cited inhibitors to business vision in Switzerland reflect Swiss manufacturers' concerns about international competitiveness. The top three inhibitors were:

o:° international competition °:° international exchange rates o~o the inability to implement change quickly enough

Apart from the international exchange rate issue, the Swiss manufacturers' concerns are mirrored by the markets in the MIE study. The UK, Germany and The Netherlands each place international competition and the ability to implement change quickly enough at the top of their list of business vision inhibitors, with the availability of skilled people as the third. Many Swiss respondents expressed concern about the availability of people with the skills to fulfil current requirements in manufacturing, despite unusually high unemployment levels in Switzerland. They were also concerned that the

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Figure 5 Business Vision Priorities (Frequency of Response)

education curriculum was not addressing the future needs and skill requirements of manufacturing industry.

In the final questions posed by the Study, manufacturing managers were asked how they perceived their sites relative to the competition. In almost all cases, the respondents' replies appeared to be overconfident when measured against the true position of the site as shown by the practice and performance indices.

Key Findings A number of general conclusions can be drawn from the MIS study which may prove helpful to both Swiss and other European manufacturers.

World-class companies have good practice and performance ratings across all areas There are no 'quick fixes'; both the MIS and the MIE studies show that companies are unlikely to be successful if they choose to concentrate on only one or two areas in an effort to build long-term sustained performance. Best practices have to be put in place in all six areas encompassed by the original model (see Figure 1).

Leading companies are market oriented and concentrate on 'doing better things' The leading companies from the MIS study tended to have a greater market focus and were more preoccupied with 'doing better things' than the laggers (see Figure 6). This was particularly apparent in their business vision priorities and inhibitors. In terms of priorities, executives from leading companies were concerned about such things as product innovation, maximising market share and becoming world-class. Executives from lagging companies, on the other hand, emphasised the need to reduce manufacturing costs, and to lead in customer service and quality - a focus on continuous improvement or simply 'doing things better'. In terms of business vision inhibitors, again the leaders were concerned with external, market related, issues such as international competition and exchange rates, while laggers were more likely to list internal issues such as the availability of financial resources and skilled people.

European Management Journal Vo114 No 6 December 1996 579


.EADER5 AGGERE

"Doing better things . . . . Doing things better"

PRIORITIES (Leaders rr~us laggers) PRIORITIES (Daggers minus leaders)

To lead in product innovation 30%

To maximise market share 20%

To be world class 19%

E x t e r n a l focus

Minimise manufacturing costs 35%

To lead in customer service 17%

To be leaders in quality 7%

I n t e r n a l f o c u s

INHIBITORS (Leaders minus laggers) INHIBITORS (Laggers minus leaders)

Availability of money 26% International competition 37%

International exchange rates 25%

Swiss Government policy 12%

Availability of skilled people 25%

Inability to change quickly 14%

F i g u r e 6 A c h i e v i n g B u s i n e s s V i s i o n ( D i f f e r e n c e s in F r e q u e n c y o f R e s p o n s e )

Leading companies have a greater international focus The international nature of the Swiss manufacturing business has already been stressed. However, detailed analysis of the differences between the leaders and the laggers from the MIS sample show that the former are consistently more internationally oriented than the latter.

For example, when assessing the advantages and disadvantages of Switzerland as a production location, the leaders were more aware of Switzerland's large infrastructure and preferential geographic location. They were also concerned about the fact that Switzerland is not a member of the European Union (see Figure 7). The laggers had a greater domestic focus, emphasising advantages such as a stable currency, political stability and tax advantages and disadvantages like government regulations and the inflexibility of working hours.

The inability to implement change fast enough is a significant business vision inhibitor While a large number of all respondents had problems with their inability to implement change fast, laggers in particular cited it more frequently than any other reason as an important business vision inhibitor (66 per cent versus 56 per cent for the sample as a whole). Leaders, on the other hand, were slightly less likely to cite it as an inhibitor (52 per cent).

This finding is borne out in the MIE study. The inability to implement change is listed as the second most important business vision inhibitor in the UK, Germany and The Netherlands, and as the first in Finland. These results suggest that manufacturers across Europe are placing change management high on their business agendas and are struggling to develop the organisational capabilities to manage change successfully.

Site size may affect performance In the MIS project there was a high correlation between the leaders in the sample and sites with between 201 and 2000 employees. In the case of the laggers, the reverse was true: no laggers were found at all in sites with

International focus Domestic focus

ADVANTAGES (Leaders minus laggers) ADVANTAGES (Laggers m r US leaders)

Large infrastructure 18%

Geographical location 18%

Other 18%

DISADVANTAGES (Leaders minus laggers)

Not EU member 32%

High social contribution 22%

Other 10%

Stable currency 27%

Political stability 18%

Tax advantages 9%

DISADVANTAGES (Laggers minus leaders)

Government regulation 23%

Inflexibility of working hours 17%

Inflexibility of outmoded

structures 14%

Figure 7 Switzerland as a Production Site (Differences in Frequency of Response)

between 501 and 2000 employees (see Figure 8). Plants in the 201 to 2000 employee range were found to achieve above average practice in virtually all areas, although it is important to note that performance did lag behind practice scores as plants increased in size to beyond 500 employees.

These results vary from the MIE study, where the best performing sites fell into the 50--200 employee range. However, in both studies the largest plants lagged behind in performance, even if the relevant practices were in place, which may suggest that the infrastructure at large sites impedes rather than supports the implementation process.

Practice and performance can vary significantly by industry sector When the Swiss sample is split between process and non-process industries, there is a much higher correlation between better practice and performance in the non- process industries like machinery, electronics and measuring instruments than in the process industries such as food and tobacco, chemicals and textiles (see Figures 9 and 10).

In process industries better performance does not appear to be as highly influenced by better practice. For

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,580 European Management JournalVo114 No 6 December 1996


1 100 -I

80

60

40

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Figure 9 Non-process Industry Scores

example, while food and tobacco companies had performance ratings significantly better than average in all areas, their practice ratings tended to be around or below average (see Figure I1). Given that food companies would not be in business if they did not perform well in areas such as quality and logistics, this raises the issue of whether they are incurring higher costs to achieve such performance - by maintaining finished goods inventory to ensure delivery times, for example - rather than improving practices.

Some differences between practice and performance are due to unavoidable industry specific factors. For example, chemical companies tend to have long lead times and high inventories due to technical constraints like quarantine periods for drugs and time-consuming quality assurance procedures. In addition, pharmaceutical companies meet obligations to achieve high service levels through make-to-stock operations. This means that while elements of lean production practices are in place in the industry, lean production performance is often significantly below average.

Figure 10 Process industry Scores

Table 1 World-Class Companies by industry Sector for Four Countries"

Chemicals 3 Metal products 2 Electronics 2 Rubber & Plastics 2 Instruments 1 Textiles & Apparel 1 Food & Tobacco 3 Transportation 1 Machinery 6 Miscellaneous 1

*Switzer land, UK, Germany and The Nether lands. There were no wor ld-c lass plants in the Finnish sample.

However, despite variations in practice and performance, the MIE study shows that world-class companies can come from any industry sector, as shown in Table 1.

The origin of the parent company can influence results

In the MIS study, Swiss-owned plants achieved lower levels of overall practice and performance than non- Swiss. Eighty-three per cent of plants in the sample were owned by Swiss-based companies, eight per cent by American-based organisations and a further six per cent

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Figure 11 Deviation from Average by Industry Sector

European Management Journal Vol 14 No 6 December 1996 5 8 1


% of group

Leader

Lagger

Average

Switzerland Europe USA Other

Figure 12 Leaders and Laggers by Parent Origin

by parents from European Union (EU) countries. Although the sample size for non-Swiss-owned sites was small, analysis showed that the number of leaders in the EU-owned plants is disproportionately high. However, it should also be noted that there were no leaders at all among plants with American or other parent companies, which included parents from Canada and Scandinavia (see Figure I2).

These results are consistent with the MIE study, where foreign-owned companies fared considerably better than home-based companies in each country. Although no Japanese-owned plants were surveyed in Switzerland, these were found to be particularly successful in other country studies, scoring high in both practice and performance across almost all areas. American-owned firms surveyed in the other country studies were also found to have better practices, but these were not always translated into performance, while other European plants maintained a small lead in both practice and performance over locally-owned companies. A number of reasons have been put forward to explain the advantage of foreign parents, including the 'green field site' effect, where latest practice and technology can be adopted without having to jettison obsolete equipment or

traditions, and the fact that overseas managers can more easily challenge local conventions and more effectively manage change. Such plants may also have the advantage of being able to exchange best practices with their sister plants in other countries.

Quality certification does not necessarily lead to better quality performance Sixty-three per cent of the sites surveyed for the MIS study had ISO 9000 certification. In addition, a number of sites who were not certified at the time of the survey were planning to apply for it. However, when the quality performance data was split between companies with ISO 9000 certification and those without it, certification appeared to have little or no influence (see Figure I3). A second index, specifically created to measure the degree of customer focus among companies, also provided no conclusive evidence that ISO 9000 certification was leading to greater customer-driven improvement in quality performance.

One reason for this apparent discrepancy may be the reputation for quality already enjoyed by Swiss manufacturers. Unlike firms that pursue certification simply for marketing purposes, many Swiss companies already have quality practices in place very similar to those required for ISO 9000. Certification therefore has little impact in terms of improving existing good practices.

A look at the results of some of the other surveys upholds the finding that certification in itself is not necessarily a guarantee of a high level of quality performance. In the UK study, for example, leaders and laggers were plotted against quality performance and customer focus indices. While the majority of leaders and laggers held the British ISO 9000 certification equivalent, BS5750, the laggers still continued to score well behind the leaders in both quality performance and customer focus. In this case it was argued that only those

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Figure 13 How I l O 9 0 0 0 Relates to Quality Performance

,582 European Management JournalVo114 No 6 December 1996


companies who treated certification as an integral part of a total quality programme were able to see real improvements in quality performance. It appears that a high level of quality performance comes through consistent customer focus and developing the requisite quality 'mindset' throughout the company, rather than through the certification process alone.

Manufacturers tend to be overconfident about their competitive position Manufacturers tended to overestimate their competitive position in both the MIS and MIE studies. In the Swiss sample, 17 per cent of respondents felt that they were currently able to compete with the best of their international competitors and 44 per cent felt that they were mostly able to do so. However, further analysis showed that these respondents were found to be evenly spread throughout the overall sample (see Figure 14). Based on this discrepancy, an index was developed to measure the difference between site performance and the level of competitiveness as perceived by the site managers (see Figure 15). With the exception of the companies belonging to the 'won't go the distance' group, all the other groups had a more optimistic view of themselves than the reality suggested. A similar picture is found in the MIE study, with those at the bottom of the scale, make-weights and punch-bags, tending to most overconfidence.

It is apparent from this that the majority of companies, lacking an appropriate point of reference, do not have an accurate picture of where they stand in respect to achieving world-class status. This suggests that there is a need for more effective benchmarking, so that companies can ascertain clearly where they are in relation to the competition. Only 24 per cent of respondents to the Swiss survey currently used benchmarking outside their own organisation. This figure is similar (23 per cent ) to that in the UK and The Netherlands. While Germany achieved the highest number of respondents using external benchmarking (44.0 per cent), this is still less than 50 per cent of the companies in the sample.

The Way Ahead: Future Steps For Swiss Manufacturers

The question has been raised as to how both the studies can benefit the participants. During the MIS project, it quickly became clear to the researchers that many companies found that even collecting the data was valuable. The process raised pertinent questions about their practice and performance in particular areas and stimulated discussion among the management team as to where improvement initiatives might be undertaken. However, one of the most important outputs for the participating companies was the detailed benchmarking analysis that they received. Such analyses may be of particular value given the tendency to overconfidence shown by many executives in the assessment of their overall competitiveness. The section below looks at the

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Figure 14 Sites Which Consider Themselves 'Completely' and 'Mostly' Competitive

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Figure 15 Gapsin Perception

benchmarking data available to individual participants and then considers some of the broader conclusions that can be drawn by comparing selected categories from the research.

Benchmarking in Practice

Benchmarking information was provided to participating companies as a series of charts. The charts showed respondents the overall practice and performance of their plant relative to both studies' databases. Depending on the industry sector and the sample size, the relative position of the plant was shown in a number of ways:

°:° in relation to the overall country sample °:° in relation to the industry sector within their own

country o~o in relation to their industry sector against the MIE

database

In addition, the plant was also plotted within the range of scores for each of the seven practice and performance indices. These again included the plant's position relative to their overall country sample, the industry sample within their own country and the MIE sample for their

European Management JournalVo114 No 6 December 1996 583


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This scatter d iagram indicates where a respondent plant (in this case Company A in the food and tobacco sector) is posit ioned re lat ive to the MIS sample as well as to respondents within its own industry.

F i g u r e 1 6 P r a c t i c e a n d P e r f o r m a n c e R e l a t i v e t o S w i t z e r l a n d

industry. An example of each of the two types of charts is shown in Figures 16 and 17. Explanatory notes were also provided with the charts to help the companies fully understand and use the data.

The primary benefit for companies using the information provided from the survey was to highlight the areas of manufacturing practice and performance requiring attention and improvement. In reviewing their scores, respondents were able to consider the following:

1. Their consistency across all six areas of practice and performance, and their strengths and weaknesses relative to the other respondents.

2. Whether their level of practice was being fully reflected in their level of performance. If practice ratings were higher than performance, there was a potential implementation issue; if performance exceeded practice, the respondent could be operating at a cost penalty.

3. Whether the range in a specific practice or performance index indicated that some plants were facing greater challenges than others in adopting that practice or achieving that performance.

4. Whether the respondents' industry was leading or lagging behind other industries, and if this was the case, where the best opportunities were for inter- industry benchmarking.

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This chart posit ions the plant (Company C in the electronics sector) within the range of scores for each of the seven pract ice/ per formance indices.

F i g u r e 1 7 R e s p o n d e n t P l a n t R e l a t i v e t o t h e T o t a l M I S S a m p l e

.584 European Management JournalVo114 No 6 December 1996


Improving Manufacturing: The Broader Picture

Broader comparisons between different groups from both the studies can help to illustrate the information that companies can gain from the analyses described above. They can also lead to more general recommendations as to where manufacturers should focus their improvement efforts. Some of the key comparisons are given below.

Plants achieving world-class status in the MIE study versus the Swiss leaders The most significant differences between these two groups were in both practice and performance for lean production and logistics, as shown in Figure 18. The Swiss leaders (the top 10 per cent of the Swiss sample) outscored the world-class European sites in the areas of manufacturing systems and organisation and culture performance, but these differences were statistically insignificant. Recommendations for the Swiss leaders included improved management of the supply chain, both upstream and downstream of the plant, and better material flow inside the plant. Greater emphasis could also have been placed on the implementation of 'pull production', with reduced batch sizes. Performance improvement was needed to reduce supplier lead times and throughput time and to increase inventory turnover.

'Rest of the contenders' (not including the 'leaders') versus the leaders in Switzerland The 'rest of the contenders' category, made up of 79 sites, was outscored in all areas of practice and performance by the Swiss leaders (see Figure 18). The most significant differences were found in their organisation and culture, manufacturing systems and quality performance indices, all areas in which the Swiss leaders scored particularly high. It could be argued that while many of the 'rest of the contenders' group had relevant practices in place, they still needed to implement them more effectively.

Further analysis suggested that the leaders outperformed the 'rest of the contenders' in a number of important areas. Employee morale was significantly higher among the leaders, with recognition of growth opportunities, linked to an atmosphere of optimism and confidence, cited as a contributing factor. The leaders made a particular effort to maintain high levels of employee morale by adopting leadership styles that fostered employee participation and empowerment. The leaders also enjoyed consistently improving levels of productivity. They had to deal with fewer priority orders in manufacturing, which meant that they were more likely to conduct operations on a routine basis and have to contend with fewer surprises. The leaders also outperformed the 'rest of the contenders' in product reliability, warranty claim costs, internal defects and scrap or re-work costs. These performance levels were achieved through quality practices firmly embedded in strong customer orientation. For example, leaders were more likely to measure customer satisfaction and to

--~Jll~ World Class Europe

Leaders

Rest of the contenders

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LOG PF

Figure 18 Rest of Contenders vs Leaders in Switzer land

maintain a learning environment with formal systems to resolve product and process-related problems.

Promising versus the 'rest of the contenders'

As shown in Figure 19, the promising group lagged behind the 'rest of the contenders' in all areas of practice and performance. The most significant differences between the groups were seen in manufacturing systems,

..... ~ World Class Europe

Rest of the contenders

........ ;~b ..... Promising

CONC PF

ORG PR

CONC PR QUAL PF

gO ÷

S 5 -

QUALPR

\ \

LEAN PF

l LEAN PR

i

ORG PF /

l MANU PR LOG PF

LOG PR

MANU PF

Figure 19 Promis ing vs Rest of C o n t e n d e r s

European Management JournalVo114 No 6 December 1996 .585


- ~ World Class Europe

Rest of contenders :~i~.~:. Won' t go the distance

QUAL PF ^ .

C( PF

ORG PR FAN PR

LOG PF

Figure 2 0 'Won't go the Distance' vs Rest of Contenders

concurrent engineering, logistics and quality performance. As in the previous comparison, while the promising group had a reasonably good level of practice, the issue was how they leveraged such practices to achieve enhanced performance.

A number of specific areas needed to be improved such as internal defects, scrap and re-work costs, initial yield on new product introduction, priority orders in manufacturing, order processing time and total cycle time. These deficiencies suggested that there was often an inability to meet quality specifications and that there were longer-than-necessary throughput times. The level of priority orders indicated that this group had a tendency to pursue an expediting philosophy, and it was therefore not surprising that customer delivery, customer satisfaction and productivity measures fell short of those reached by the 'rest of the contenders' group.

In terms of practice, the 'rest of the contenders' group ranked significantly higher on employee involvement, job flexibility and the management of supplier relationships. This may have been due to a difference in managerial style between the two groups, with the 'rest of the contenders' leaning towards a more participative approach to the management of operations.

'Won't go the distance' versus the 'rest of the contenders' The 'won't go the distance' group was outranked by the reference group in all areas of practice and performance with the exception of logistics performance (see Figure 20). However, the differences were significant in only five areas of practice, of which the most important were

, ~ . ~ - World Class Europe

Rest of contenders ........ ::::: ........... Laggers

QUAL PF

CONC PR 9s 9o QUAL PR

CONC PF LEAN PF

ORGPR / / " ~ ' . • \ / LEANPR

M ~ ~ ANU PF

LOG PR ~ MANU PR

LOG PF

Figure 2 1 Laggers vs Rest of Contenders

manufacturing systems, organisation and culture, quality and lean production.

The dilemma for companies with issues across such a wide range of practices was to create a plan of action broad enough to make an impact but narrow enough to be internally consistent. They needed to avoid a 'flavour of the month' approach to launching improvement initiatives.

The 'won't go the distance' group in the MIS study had one advantage: a realistic self-assessment of their position (see Figure I5). This was likely to be helpful in communicating an appropriate vision for manufacturing operations, in developing a sense of urgency regarding the need for change and in ensuring that a practical action plan was put in place. The research team recommended that the 'won't go the distance group' focus their improvement initiatives on quality and lean manufacturing practices. In addition, it was felt that they needed to develop managerial practices that would engender a participative operating environment.

Laggers versus the 'rest of the contenders' Not surprisingly, the laggers were outranked in all areas of practice and performance by the reference group (see Figure 2I). The differences were significant in all but one area, organisation and culture performance. The recommendations made for the 'won't go the distance' group were also appropriate for this group, but the difficulties in communicating the need for change were likely to be greater. As shown in Figure 15, this group included those plants that had the most unrealistic assessment of their manufacturing practice and performance.

58(3 European ManagementJournalVot 14 No 6 December 1996


Conclusions and Recommendations

The results of the MIS study provide some interesting insights for manufacturers in Switzerland and also for those in other European markets who wish to increase their competitiveness. It is clear, for example, that many manufacturers need to start by taking a more realistic view of their own position vis-h-vis both their competitors and other industries. Without establishing their true position, it is difficult for companies to raise the necessary organisational energy for change and develop the relevant prioritised plans for action. Projects like MIS and MIE are a useful starting point, but many more manufacturers could use such tools as benchmarking. As the figures for Switzerland show, with only 24 per cent of companies using external benchmarks, there is plenty of scope for increased effort in this area.

It is also important for companies to maintain an external focus. The leaders in the Swiss sample tended to be much more externally focused than the laggers. They rated product innovation and maximising market share as important parts of their business vision, and saw international competition and exchange rates as their major business inhibitors. Switzerland was rated as a production location because, among other things, it had a large infrastructure and good geographic location. In addition, the leaders were more likely to be customer focused, with a greater emphasis on quality and a more widespread use of such things as customer satisfaction measures. It could be argued that many of the companies lower down in the sample have no option but to concentrate on internal issues, as this is most likely to be where their major problems lie. They need to get the relevant practices in place and improve their performance in order to ensure their long-term survival. However, the issue for these companies is not only where to start with their change programme, but also" how to determine the optimal balance between their inevitable internal focus and the need to be aware of the 'bigger picture'.

Many of the companies in the middle of the Swiss sample were already well on the way to having the necessary practices in place to become world-class

companies, but had not yet been able to translate this into a higher level of performance. Again, a study of the leading companies suggests that one of the deciding factors rests on organisational and cultural issues such as employee morale. The leaders made great efforts to maintain employee morale through such initiatives as employee participation and empowerment. They were also more likely to foster a learning environment and have systems in place to ensure the efficient resolution of product and process problems. Companies from lower down the sample may find that a higher level of employee morale will lead to improved implementation and subsequent improved performance.

Despite some of the issues raised above, the message from both the studies is a positive one. While less than three per cent of companies in both samples can be designated as world-class today, over 50 per cent from the MIE study and an impressive 75 per cent from the MIS study are contenders for this category. Given that the assumption behind the studies - that good practice leads to good performance - appears to hold true, there remains significant room for companies to continue to improve and to compete not just in Europe, but across global international markets.

Acknowledgments 1. The Made in Switzerland research was supported not only

by IBM Switzerland and IMD but also by the executives of the 116 sites across Switzerland who gave graciously of their time in order to facilitate a tour of their plant and to participate in the interview process. The MIS Research Team comprised: IMD - Prof. Robert S. Collins, Prof. Carlos Cordon, Jean-Luc Cornaz, Denyse Julien; IBM (Switzerland) - Hans-Rudolf Eugster, Roman Jakob

2. Manufacturing 2000 research is based on a research partnership between IMD, Lausanne, Switzerland and the following companies: Andersen Consulting, Bell Packaging Corp., BP Chemicals, DuPont de Nemours, Exxon Chemical International Inc., GKN Automotive, Heineken, Nestl4 SA, Nokia Mobile Phones, Omega SA, Philips International B.V., Siemens AG and Volkswagen Audi AG.

This research does not necessarily represent the views of these organisations.

European Management JournalVo114 No 6 December 1996 5 8 7


Appendix

Distr ibut ion of Swiss sites & Overview of the Quest ionnai re

B a t = ~ A B ' ' ' ~ - ~ I I l k 51 C~ l le r~

/ - o • ~ - ~ ~1"~." ".. ~,. .-~ • " i . . . . ° " " /

- '~. 7": ,: • @

. I

- . . . .

o o • •

Ca tego ry Practice Performance

Total Quality • Questions focused on benchmarking,

documentation of business processes,

vision, problem-solving skills and customer

orientation.

• Process capability, product reliability,

level of defects, productivity and

customer satisfaction were key

indicators.

Concurrent Engineering

• Questions related to the extent to which

design processes were integrated with

manufacturing, marketing, customer

feedback and supplier input.

• Questions sought answers to issues

such as speed of product introduction,

rate of defects and initial yield on new

product introduction.

Lean Production

• Flexibility, supply chain management, pull

production, equipment layout,

organisation, maintenance and process

measurement reporting were the main

focus.

• Productivity, cycle times, equipment

changeover times, warehousing and

material handling, and inventory turns

were the indicators sought.

Manufacturing Systems

• Questions related to process automation

and integrated information systems.

• Questions related to the speed and

efficiency of processing orders.

Logistics • Questions focused on supplier relations,

kanban and order release into

manufacturing.

• Questions focused on cycle times,

supplier lead times and customer

delivery.

Organisation and Culture

• Questions focused on business vision,

shared goals, manufacturing strategy,

management style, human resource

policies and customer orientation.

• Employee morale issues were the

primary focus of the questions.

.5 88 European Management Journal Vo114 No 6 D e c e m b e r 1996


ROBERT COLLINS, IMD, International Institute for Management Development, P.O. Box 915, Lausanne, C H- I OO I , Switzerland

Robert Collins is Professor of Manufacturing Management, Director of Manufacturing 2000 and Program Director of Managing Manufacturing

at IMD. His specialist areas are manufacturing strategy, planning and control, organisational development and management education. He is the author of numerous case studies and journal articles, the latest being 'Lessons from the Single Market', with R. Schmenner in European Quality, vol. 2, no. 4, and 'Taking Advantage of Europe's Single Market', also with R. Schmenner in European Management Journal, vol. I3, no. 3.

CARLOS CORDON, IMD, International Institute for Management Development, P.O. Box 915, Lausanne, CH-I OOI, Switzerland

Carlos Cordbn is Professor of Operations Management at IMD. His areas of specialist interest are supply chain management, manufacturing

strategy and time-based competition. His previous experience includes Andersen Consulting and Grupo Espahol Cable (now a subsidiary of BICC). His most recent publications are: Ways to Improve the Company, Financial Times Mastering Management Series, 1995; 'From Supply Chain Management' with T. Vollmann and H. Raabe, IMD Perspectives for Managers, November, I995.

DENYSE JULIEN, IMD, International Institute for Management Development, P.O. Box 915, Lausanne, CH-IOOI, Switzerland

Denyse ]ulien is a Research Associate in the team working for Manufacturing 2000, an IMD Research Project. She has an MBA in Management Science from the University of Miami, and worked in the quality department of an electronics firm before moving to Europe.

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European Management Journal Vo114 No 6 December 1996 5 89

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