The organisational design of planning and control: theory and practice
Keywords:
case studies, production system, organisational design
Dr. Jan de Vries
Department of Operations Management
Faculty of Management and Organisation
University of Groningen
P.O. Box 800, 9700 AV Groningen
The Netherlands
Tel: +31 50 363 7020
E-mail:
The organisational design of planning and control: theory and practice
Abstract:
Within companies it is widely recognised nowadays that the performance of production systems is not only determined by the way the production system is controlled but also by its organisational design. Many organisations therefore try to improve their performance by simultaneously implementing advanced planning and control systems and utilising organisational measures. Notwithstanding its importance, the field of production and operations management still lacks however, a comprehensive body of knowledge integrating both control and organisational aspects of production systems. One of the reasons for this shortcoming seems to be a lack of understanding how planning and control systems interact with their organisational embedding. In this article, this interdependence is further explored. Firstly, a conceptual framework is presented. According to the framework, four important groups of characteristics are of importance when trying to understand the interrelationship between planning systems and their organisational design. These groups of characteristics relate to the transformation system involved, the planning and control system, the superstructure of the planning system and the structure of positions. The framework has also been the foundation for five case studies performed during the last years. One of the main conclusions derived from the case studies is that organisations often try to neutralise shortcomings in the planning and control system by applying organisational measures. In addition to this positive congruence, negative forms of congruence were also found. Shortcomings in the planning and control system are then negatively re-enforced by the organisational setting of the planning and control system. The findings of the case studies also suggest that companies often do not apply a clear and well-defined policy regarding the organisational setting of advanced planning and control systems. We end this paper by arguing that objectified notions on (re)designing planning and control systems and its organisational design often under-emphasise irrational behaviour of the parties involved. A further elaboration of the framework presented in this article integrating operations management concepts and organisational theory therefore seems to be worthwhile.
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The organisational design of planning and control: theory and practice
1.Introduction
Due to increasing competition, expanding foreign markets, high-speed technology innovations and the availability of dedicated information systems many organisations have introduced 'new' production concepts during the last decades. One can think for instance of manufacturing resource planning, business process reengineering, lean production, just in time production, enterprise resource planning and more recently supply chain management. It is not surprising, therefore, that in the late 20th century, the body of knowledge of production and operations management has rapidly expanded. It can be concluded that the field of Operations Management has evolved from a rather narrow defined production and industrial engineering discipline to a discipline including a broad array of management issues like manufacturing strategy, innovation management and service management. Notwithstanding our increasing understanding of the design and performance of production systems some gaps and holes in the theoretical foundations of the production and operations management field, still exist yet. As an example, we can take a closer look at the organisational setting of production systems. Nowadays, we often come across theories on self-regulation, decentralisation, autonomous groups and unit management. Many of the theories regarding the organisational design of production systems are still based however on either a behavioural way of thinking or on a more traditional operations management school of thought. It is only recently that authors have stressed the necessity for a greater coherence and integration between the different management disciplines dealing with organisational issues of the production system (e.g. Lovejoy, 1998; Miller and Arnold, 1998).
In practice there appears to be an ongoing struggle how to organise production systems properly as well. When trying to solve interface problems between Production and Sales for example, the introduction of a materials manager is for many years considered as an sufficient organisational measure. Although the introduction of a materials manager seems to be useful in many situations, it is indicated by research that the establishment of this function often results in new domain-conflicts and co-ordination problems (Bowersox and Daugherty, 1987; Sutton, 1990; Murphy and Poist, 1998). Another example of an important organisational issue in the field of operations management illustrating the importance of the organisational design question of the production system, is the ongoing debate about the benefits of semi-autonomous work groups. Many critics have focused on the negative aspects of semi-autonomous groups and have questioned the usefulness of implementing autonomous groups in some production environments. At the same time many organisations all over the world have adopted semi-autonomous groups and have reported major contributions to improved efficiency and competitiveness (Cole, 1989; Rubenowitz, 1992; Van der Meer and Gudim, 1996; Thompson and Wallace, 1996)
The above-mentioned notions have been the starting point for an empirical research aimed to explore the interdependence between the planning and control structure and its organisational design. Within companies it is widely recognised nowadays that the performance of the production system is not only determined by the way, the production system is controlled but also by the organisational design of the planning system. Many organisations therefore try to improve their performance by simultaneously implementing advanced planning and control systems and taking organisational measures with respect to the planning system. Despite its importance, the field of production and operations management still lacks however a comprehensive body of knowledge in which both control and organisational aspects of the production system are integrated. One of the reasons for this shortcoming seems to be a lack of empirical data on how the planning and control system and its organisational design interact with each other. Planning and control systems as well as their organisational embedding apparently seem to be closely related to each other in practice. The question nevertheless is how this interdependence looks like. One can ask for instance whether the characteristics of the planning and control system need to be reflected in its organisational design. In addition to this, the question arises if some specific design rationale is applied in practice. In this context one can speculate on the sequence of the succeeding steps when the planning and control system and its organisational context are to be (re)designed. It is furthermore surprisingly that also little is known about the underlying principles used in practice regarding the organisational embedding of planning and control systems. There are some indications for instance that organisational design strategies regarding planning and control systems can only to a certain extent be explained by current theoretical frameworks and that only some best practice exists (Draaijer and Boer, 1995).
Clearly, it is not possible to deal with all these questions in this article extensively. Our focus therefore will be on two issues. Firstly, a conceptual framework is developed. The framework provides a structure to describe and systematise the interdependence between the planning and control of production systems and the organisational setting of planning systems. Secondly, the overall results of five (longitudinal) case studies are presented and analysed by means of the framework. By doing this, we hope to establish a more profound understanding of the organisational context of planning and control systems; both from a theoretical as well as from an empirical point of view.
The article is structured as follows. In the next section, first some theoretical backgrounds of our research are presented. Subsequently, an analytical framework is developed leading to a set of key-dimensions related to the interdependence between planning and control, and its organisational design. Section four goes into some methodological details of the performed case studies. The last section of this article elaborates some of the major findings of the case studies. One conclusion derived from the case studies is that the interaction and interrelationship between production control and the organisational design of production planning can vary from positive re-enforcement to negative re-enforcement. This conclusion and its implication is more underpinned and discussed in the last section.
2.Theoretical backgrounds
Although the field of production and operations management and behavioural oriented disciplines show some overlap with respect to the issue of planning and control, a number of important dissimilarities between these two disciplines can be distinguished. In literature it is extensively argued that social science oriented disciplines seem to be less technique and method-oriented, more concentrated on some key features of the production system (e.g. standardisation, uncertainty, co-ordination) and more heavily focused on behavioural aspects of the production system. At the same time the production and operations management discipline is often characterised as a design and technological oriented discipline concentrating on the unique characteristics of single production systems and dominated by planning and control issues (e.g. Meredith et al., 1989; Schmenner and Swink, 1998; Van der Zwaan and de Vries, 2000; Meredith, 2001). The differences between both fields are also reflected in the competing paradigms for scientific research. The field of operations management seems to be more a mix of quantitative and qualitative research consisting of both positivists and interpretivists and of both theory builders and problem solvers than behavioural disciplines (Meredith, 2001). The current status of the operations management discipline therefore appears to be more ambiguous and to a certain extent even more confusing than social science based disciplines.
Starting from the multiple competing paradigms it is not surprising that many of the concepts and frameworks concerning the control of production systems do represent to some extent a partial approach. In the field of production and operations management the main focus is for instance often on trying to achieve a fit between the characteristics of the production and distribution system, and the control system to be used (Ruffini et al., 2000). Or stated in another way: in the production and operations management paradigm production and technological characteristics are often considered as the two dominant factors that influence the design of the control system. In more social science based disciplines at the other hand, specific and unique characteristics of the production and distribution system are often simplified to aggregated and isolated variables. Issues like the influence of customer orders, the existence of multiple product/market combinations and the complexity of trade-off decisions in many cases are even neglected. From a scientific point of view one of the main challenges therefore seems to be to develop a framework from which questions regarding both the planning and control of the production and distribution system as well as the organisational embedding of this control can be described and analysed in coherence. Ideally, this framework is also the basis for an integrated design methodology with respect to controlling and organising production and distribution systems.
In trying to achieve a better understanding of production and distribution systems as a whole, we performed several (longitudinal) case studies during the last decade. In these case studies, we focused on the interdependence between the control of the production and distribution system and the organisational setting of this control. Before studying the companies, an explorative framework was developed based on the assumption that a close and complex interaction exists between the planning and control of production and distribution systems and the organisational setting of the planning system. The theoretical background for this assumption can be found in many different managerial disciplines. From the open system approach we know for instance that the control structure of the organisation will usually be designed in such a way that departmental boundaries follow the lines of technological near-decomposability (Bertrand et al., 1990). At the same time, many studies have uncovered a set of so called contingency factors that influence the organisation design of the technical system (e.g. Woodward, 1965; Khandwalla, 1977; Child 1972; Rogers, 1983; Clark and Stauton, 1989). As we will see, elements of our framework are based on this contingency way of thinking.
In the next section, an explorative framework is presented which was used to identify the mechanisms behind the interaction and interrelationship behind the transformation system, the planning and control system being applied, and its organisational design. From this, the results of the case studies are discussed in the remainder of this article.
3.Structuring production control and its organisational design
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To examine the relationship between the planning and control of production systems and the organisational setting of this control more closely, an explorative conceptual model was developed. Figure 1 shows the conceptualised interdependence among the transformation system, the planning and control structure, the superstructure, and the structure of positions. The main idea behind this model is that by means of describing these dimensions as well as their interaction, one can gain a better understanding of the complex and messy phenomenon of production planning and its organisational setting. One important research proposition in our study was that in practice different patterns exist with respect to the interdependence between the planning and control structure, the superstructure of the transformation system and the structure of positions. We will now first explore these dimensions in more detail. In the succeeding sections, the model will be illustrated by means of five case studies.
The transformation system
In our conceptual model, the transformation system is related to the entire material flow from supplier to customer including both the supply of raw material, the manufacturing of parts and products, warehouse activities and the distribution of products to customers. The transformation system in other words refers to the way organisations produce goods and to the way goods and materials are distributed from supplier to the manufacturer and from manufacturer to the customers. So, in our terminology the term transformation system refers to both inbound as well as outbound activities. Sometimes this broad definition of transformation system is referred to as the logistical system. The term ‘logistics’ however, is often very confusing. In many cases the American definition of logistics is limited to warehousing, inventory management, and transportation activities while in Europe, logistics also covers the area of operations.
Within the field of production and operations management, a huge amount of characterisations and typologies exist with respect to the production and distribution system of the organisation (e.g. Woodward, 1965; Hayes and Wheelwright, 1979; Hill, 1991; Slack et al., 1998). Although many of these typologies differ in terms of the goal of the typology and in the way variables are operationalised, the underlying dimensions are often similar. In general terms, the production and distribution system can be described by characterising the products and services, the characteristics of the operations network, the layout and flow of materials, and the process technology used. Each of these four dimensions in itself can be operationalised by additional characteristics. Figure 1 gives an overview of the main characteristics used in our empirical study to describe the transformation system of the companies examined. A wide range of both production and operations management studies and contingency theories of organisations were applied to operationalise these characteristics. As a result, many of the characteristics as depicted in figure 1 can be found in literature and are generally considered as important determinants for the performance of production and distribution system.
The planning and control system
Within the area of production and operations management, the issue of designing a proper planning and control framework for the production and distribution system is strongly emphasised (Bertrand et al., 1990). A control framework can be considered as an overall and to some extent generic model, which includes the trade-offs between the leading decisions regarding the production- and distribution system of the organisation. In general, the production and logistical control system of the organisation reflects the way customer orders are accepted, how production and procurement orders are placed, and the way production and distribution capacity available is used (e.g. Bowersox et al., 1986). From a production and operations management standpoint, the control framework is a leading factor for the methods and techniques, the planning procedures and the information system to be used in a specific situation. It is therefore not surprising that within production and operations management literature the necessity for an adequate control framework is strongly emphasised and that many attempts have been made to develop generic frameworks for production control. An example of a generic framework for the control of production systems is presented in Bertrand et al. (1990) which is founded on the general system-approach as well as on the MRP-II concept. On a more abstract level, the control system also reflects how co-ordination between all these decisions is achieved and identifies the main trade-offs with respect to the production and distribution system.
Clearly, in many organisations the overall control of the production and distribution system can be quite complex. A large number of variables, complex interrelationships and the uncertain outcome of decisions make it in many cases impossible to deal with the control problem as a whole. To avoid this complexity, often a hierarchical control structure is used in which the overall control problem is decomposed into several sub problems (e.g. Burbidge, 1971; Bertrand et al., 1990). From a systems theory point of view, three control levels can be distinguished with respect to the production and distribution system (e.g. Mesarovic et al., 1970). Strategic control focuses on the formulation of a framework of objectives. In this framework, trade-offs between different objectives are made explicit. Besides this, on the strategic decision-making level the context is set in which the production and distribution of products and material take place. The ‘output’ of the strategic control level focuses on constraining the lower control levels, which consists of the adaptive and operational control. At the adaptive control level, the transformation of general objectives with respect to the production and distribution system into operational performance criteria takes place. Finally, the operational control level contains the concrete (operational) control of the production and distribution system. Figure 2 summarises these control levels in general terms.