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Limits of Operational Effectiveness

Explore how implementing Just-in-Time (JIT), Total Quality Management (TQM), and Lean principles can help businesses transcend trade-offs and achieve high productivity, quality, and low costs.

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Limits of Operational Effectiveness

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  1. Limits of Operational Effectiveness High Productivity Frontier (state of best practice) Quality or Lead-Time JIT TQM LEAN Low High Low Cost

  2. Transcending Trade-offs • Skinner suggests separate “focused factories” for volume versus flexibility • Achieve simultaneity by building capability successively - first quality, then lead-time, etc. • Simultaneity is indicative of slack in existing processes • Organizational and technological innovation can shift the productivity frontier upwards

  3. Investment Strategy and Manufacturing Capabilities • Invest in capital • High fixed costs • Allows speed • Invest in people • Labor becomes a fixed cost • Allows high quality and innovative solutions • Minimal investment in resources - outsource • Capital and labor are variable costs • Allow low cost production • Investment in capital and people?

  4. Types of Trade-offs • Speed and volume flexibility, but high fixed cost and low work force commitment (Capital) • High quality and innovative solutions (range flexibility), and high work force commitment, but volume inflexibility (Lifetime) • Low cost and volume flexibility, but long lead- times and low work force commitment (Overtime)

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