Academic journal article Management International Review

Manufacturing Performance Reporting for Continuous Quality Improvement

Academic journal article Management International Review

Manufacturing Performance Reporting for Continuous Quality Improvement

Article excerpt

Introduction

Recently there has been a great deal of interest among both academic and industry circles in the new manufacturing strategy of continuous quality improvement (CQI). One of the principal aspects of continuous quality improvement is increased control of the production process by line workers. Shifting control to the workers on the shop floor is expected to result in the identification of areas for process and product improvement as workers learn by doing (Aoki 1986). At the Eaton Corporation, for instance, employees working in teams are encouraged to take many small steps to incrementally improve the products they make and the processes used to make them(1). Because effective learning requires immediate feedback (Einhorn and Hogarth 1978), the central hypothesis in this paper is that the implementation of continuous quality improvement programs requires a shift in the management control system. We test this hypothesis by examining whether the extent of information concerning the current status of manufacturing, such as charts on defect rates or schedule compliance and productivity information, provided to workers on the shop floor is positively related to the implementation of continuous quality improvement programs.

The interrelationships between performance, organizational structure and control systems have been discussed in a number of contexts (Galbraith 1977, Ouchi 1979, Govindarajan and Gupta 1985). Birnberg and Snodgrass (1988) state that the purpose of a management control system is to increase the likelihood of the organization achieving its goals by controlling the flow of information, developing criteria for evaluation and designing appropriate rewards and punishments. Karmarkar, Lederer, and Zimmerman (1990), however, state that little is known about the factors that influence the choice of a manufacturing performance reporting system. The research question we address is what factors tend to motivate the use of nonfinancial/operational information systems on the shop floor that report performance to workers. Strategies that promote continuous improvement include promoting multiple skills in workers, just-in-time production scheduling, incentives to workers and teamwork. Because these strategies put line personnel in charge of production, their performance will likely improve with the provision of shop floor information. Information provides workers with quick feedback, and encourages learning, which facilitates a quick identification of production problems and solutions by those who are most knowledgeable. Therefore, plants that have implemented these continuous quality improvement strategies will benefit from providing operating information on the shop floor.

Other factors may also influence the provision of information on the shop floor. For instance, implementation of a decentralized strategy may also require the provision of operating information to workers. Moreover, operating information may be of greater use when plants are undergoing product line alterations. We therefore include decentralization of authority and product line changes in our analysis. Using data collected from forty-two U.S. plants we document that the provision of shop floor operating information to workers and supervisors is strongly and positively related to the implementation of continuous quality improvement. To some extent these findings provide insight regarding concerns expressed by Kaplan (1983) and Howell and Soucy (1987) that most traditional U.S. accounting practices do not meet the needs of modern manufacturing.

The paper is organized as follows. In the next section, we describe the factors cited in the literature as influencing the reporting of operational information on the shop floor and relate them to control systems. After describing the sample of firms in the study, the following section reports on the regression models relating shop floor information to recently adopted manufacturing approaches. …

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