Conflicts in Operations Strategy

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Conflicts in Operations Strategy

Towards a framework for OS conflicts

Details:

Name: Guido Bloemsma

Master Thesis, Dual Degree in Operations Management Student number: 2550873 (RUG), 170717302 (NUBS)

Email: g.r.bloemsma@student.rug.nl

Supervisors:

Prof. Dr. J. de Vries (University of Groningen) Dr. A. Small (Newcastle University)

Universities:

University of Groningen, Faculty of Economics and Business Nettelbosje 2, 9747 AE Groningen

University of Newcastle, Newcastle University Business School 5 Barrack Road, Newcastle upon Tyne, NE1 4SE

December 2018 Abstract

Purpose – The purpose of this study was to identify and categorize conflicts between production,

purchasing and logistics regarding the competitive priorities (cost, quality, delivery and flexibility). The subsequent goal was to generate a OS conflict framework which could be used by practitioners to understand and diagnose OS conflicts.

Design/methodology/approach – To this end, a in-depth single case study research design has been

used. Both interviews and surveys were conducted with production managers, purchasing managers and logistics managers at a single SME, operating in the EMS industry.

Findings – This paper proposed a two-dimensional framework which consists of the following four

OS conflicts: process conflict; relationship; task conflict and realistic group conflict. Second, this paper indicated that there might be a relation between strategic consensus and the amount of OS conflicts a company is facing. After all, the findings suggested that “process consensus” could possibly be a moderating variable in the strategic consensus – performance relationship.

Research limitations/implications – Due to a single case study, future research is needed to increase

external validity. Moreover, this study should be executed in different countries, since culture has already been proven as a influential force regarding organizational conflicts. Thereby, quantitative analysis is needed in order to validate the presumed relation between the amount of OS conflicts and strategic consensus. Lastly, quantitative analysis is needed in order to validate “process consensus” as being a moderating variable in the strategic consensus – performance relationship.

Practical implications – The proposed framework could help practitioners in three ways. First, it

could help identify and understand the root causes of OS conflicts. Consequently, this knowledge could be used for effective conflict management. Second, this paper found that OS conflicts could possibly work as an indication for strategic consensus. Thirdly, knowledge on OS conflict could help managers to implement and verify how the operations strategy is operationalised.

Originality/value – This paper adds knowledge to the existing base in three ways. First, it is a pioneer

in the field, since literature on strategic consensus has never been linked to conflict literature. Second, in-depth case research is fairly limited in the strategic consensus literature. Third, this paper suggests a moderating variable (process consensus) regarding the strategic consensus-performance relationship.

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This Master Thesis forms the last step towards the degree in Operations Management and Supply Chain Management offered by Newcastle University and University of Groningen. I would like to take this opportunity to express my very great appreciation to a few people. First, I would like to offer my special thanks to Prof. Dr. Jan de Vries (University of Groningen) and Dr. Adrian Small (Newcastle University) for their patient guidance, enthusiastic encouragements and useful critiques for this research. Second, I would like to thank the CEO, Operations Manager and all participants involved in this research for willingness to participate. Finally, I wish to thank all people who are close to me for their great support.

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1. Introduction

Operations strategy (OS) is widely known as “the total pattern of decisions that shape the long-term capabilities of any type of operations and their contribution to overall strategy, through the reconciliation of market requirements with operations resources” (Slack and Lewis, 2008, p18). This alignment between the market requirements and operations resources is reached through a combination of structural and infrastructural decisions made within the operations function (Hayes and Wheelright, 1984; Miltenburg, 2005). Since operating decisions are made by almost all individuals within a operations function, a critical requirement for effective decision making is a shared understanding of a firm’s operation strategy (Boyer and McDermott, 1999; Mirzaei et al., 2016). Slack and Lewis (2008) state that understanding broad stakeholder objectives is essential, since different or conflicting priorities between these stakeholders often provides a backdrop to operations strategy decision-making. The misalignment of competitive priorities between groups of individuals in the organization may lead to a realized strategy which is different from what initially was intended (Boyer and McDermott, 1999; Mirzaei et al., 2016). This could be seen as groups pulling the organization in different directions (Boyer and McDermott, 1999). The impetus for research regarding strategic consensus “is that a higher degree of strategic consensus is associated with improved coordination and cooperation in the implementation of strategy, and hence, with organizational performance” (Walter et al., 2013, p. 305). This premise of this strategic consensus – performance relationship has led to various studies researching the extent to which strategic consensus occurs in organizations.

Several papers have researched the degree to which strategic consensus occurs by comparing managers and operators (Boyer and McDermott, 1999; Boyer and Lewis, 2002; Mirzaei et al., 2016). Others compared general managers and manufacturing managers (Joshi, Kathuria and Porth, 2003), senior executives and manufacturing managers (Joshi et al., 2003; Kathuria et al., 2018) and different functional departments (Feger, 2014). Although several studies have supported the strategic consensus – performance relationship (Homburg et al., 1999; Pagell & Krause, 2002; Bao et al., 2008; Walter et al., 2013), other papers found that there was a negative relation or none at all (Wooldridge and Floyd, 1990; Ramos-Garza, 2009; González-Benito et al., 2012). Because of this inconsistency of research results, Kellermanns et al. (2011) proposed that future research was needed in order to explore the relationship between strategic consensus and organizational performance. Moreover, they suggested to link the strategic consensus construct to other research domains in order to get a better understanding of the strategic consensus – performance relationship (Kellermanns et al., 2011).

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6 literature. For this purpose, this paper aims to identify and categorize conflicts between production, purchasing and logistics regarding the competitive priorities (cost, quality, delivery and flexibility). Therefore, the research question is: How are the perceptions on competitive priorities related to OS conflicts? In this way, a theoretical understanding can be generated how the perceptions on the competitive priorities influence the OS conflicts. After analyzing these conflicts, the goal is to generate a framework which could be used by practitioners to understand and diagnose OS conflicts. In addition, this knowledge can be used as input for appropriate conflict management. As a result, the sub research question is: How can these OS conflicts be categorized in a OS conflict framework? Since literature on OS conflicts is fairly limited, exploration is needed to uncover areas for research and theory development (Karlsson, 2016). For this purpose, an exploratory, in-depth case study research design will be used. The main challenge in this research is the generalizability of results from a limited set of cases. However, a deeper understanding of the phenomenon involved are seen as a good starting point for future research. Where many papers stop after the quantitative analysis of strategic consensus, this paper tries to contribute to a deeper understanding of the phenomenon by interpreting qualitative data from semi-structured interviews.

This paper is organized as follows. First, it presents the relevant literature in the theoretical framework. Second, it defines the methodology. Third, it demonstrates the findings. Finally, interpretations of the data are discussed in the analysis and conclusion sections. The conclusion section includes practical implications and theoretical contributions. The latter, theoretical contributions, will result in directions for future research.

2. Theoretical framework

This chapter describes the relevant theory that has been used during this thesis. First, the operations strategy concept is explained. Second, the strategic consensus concept is outlined. This will be followed by relevant theory on interpersonal and intergroup conflicts. Finally, this chapter presents a conceptual model which will visualize how the perceptions on the competitive priorities (cost, quality, delivery and flexibility) are related to OS conflicts. This conceptual model is essential in answering the research question of perceptions on competitive priorities are related to OS conflicts. The conceptual model will be used during the analysis in chapter five.

2.1 Operations strategy

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7 identified. Competitiveness through focus showed that an operation could not excel at all of the competitive priorities at the same time, for example generating cheap and very high quality products (Skinner, 1974). Therefore, one of the main contributions to the field by Skinner (1974), was the existence of trade-offs in a operations strategy. Trade-offs among competitive objectives (cost, quality, delivery, variety, inventory, capital investment, etc.) mean that focus on one objective, usually results in less performance of the other competitive priorities (Slack and Lewis, 2011). In practise, these trade-offs formed the basis for decisions within the manufacturing function. The operationalization of these decisions resulted in focused factories (e.g. focused on quality or cost) (Maylor et al., 2015).

After Skinners’ (1969; 1974) findings of ‘focus’, identifying the market requirements became increasingly important (Maylor et al., 2015). Based on the work of Skinner (1969;1974), filling the gap between the market requirements and the operations resources was seen as operations strategy (Hayes and Wheelwright, 1984; Hill, 1994). In case of low-scale operations, this reconciliation process was assumed to be effective (Maylor et al., 2015). However, the alignment of multiple parts of the operation was problematic in large-scale operations (Maylor et al., 2015). As a result, Boyer and McDermott (1999) stated the importance of gaining alignment of the perception on competitive priorities within the firm. Boyer and McDermott (1999) state that after determining focus, the operation has to go through a process of strategic consensus, ensuring that the strategy is both appropriate and communicated (Maylor et al., 2015). The reconciliation of market requirements with operations resources determines the focus, or vice versa (Maylor et al., 2015). With this, it is meant that market requirements could determine the operations’ focus. Nevertheless, this has to be communicated throughout the organization so that the pattern of decisions matches this ‘focus’ (Maylor et al., 2015). Although gaining strategic consensus is essential, Slack et al. (2011) state that the enactment into resource configuration needs to follow (Maylor et al., 2015). With this resource configuration process, Boyer and McDermott (1999) meant that the strategic consensus needs to followed by appropriate structural and infrastructural decisions that fit to the operations strategy(Boyer and McDermott, 1999). In case of repetitive operations, these decisions include the level of technology, the capacity adjustment strategy, supplier development, inventory, planning and control systems failure prevention and improvement and improvement process strategy (Slack et al., 2011).

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2.2 Strategic consensus

It is widely agreed that the corporation’s strategy is represented by the composition of the key competitive priorities (cost, quality, flexibility and delivery) (Boyer and McDermott, 1999). Researchers in the field of operations strategy also agree that a company’s operational strategy can be assessed by measuring the link between competitive priorities and the operational decisions (Hayes and Wheelwright, 1984). These operational decisions are made at all levels of the organization. With the important linkage between competitive priorities and operational decisions, it is essential that all employees highly agree on the overall strategy (Boyer and McDermott, 1999). This strategic consensus is a core component of a strategy compass, providing a “general framework for employees at all levels of the organization to make operating decisions” (Boyer and McDermott, 1999, p. 292). Hayes (1985) described this situation by using the metaphor; roadmap versus compass (Boyer and McDermott, 1999). With a ‘roadmap’, Hayes (1985) means a very structured and mostly written strategy which represents the organizational strategy. He states two negative influences of this ‘roadmap’: (1) inflexible adaptation to the environment and (2) lack of strategic consensus (Boyer and McDermott, 1999). Opposed to this, Hayes (1985) states that a widely communicated and agreed strategy is like a compass. This compass, represented by all employees, is able to adapt to a changing environment. Moreover, there is general agreement that strategic consensus forms an essential requirement for financial performance (Boyer and McDermott, 1999; Kellermanns et al., 2005).

Some key aspects of strategic consensus are: shared understanding, commitment, agreement and shared perspectives (Floyd and Wooldrigde, 1992; Kellermanns et al., 2005; Rapert et al., 2002; Mirzaei et al., 2016). Boyer and McDermott (1992, p. 292) define strategic consensus as “the level of agreement within an organization regarding the relative importance of cost, quality, delivery and flexibility to the organization’s operational goals, as well as the relationships between these competitive priorities and operational policies”. With terms as “agreement” and “global understanding”, Boyer and McDermott (1999) and Gagnon et al. (2008) stress the importance of strategic consensus amongst all individuals working with operational goals and policies (Mirzaei et al., 2016). There are two dimensions involved with agreement: emotional, as commitment and cognitive, as understanding and common perception (Floyd and Wooldridge, 1992, p. 28). Lack of commitment often results in half-hearted actions, whereas a lack of common perception often leads to divergent directions (Floyd and Wooldridge, 1992). Floyd and Wooldridge (1992, p. 28) state that strategic commitment depends on: “(1) how the contemplated strategy fits with what managers perceive as the interest of the organization and (2) how it fits with the managers' own, personal self-interests”.

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9 and Lewis (2002) and Mirzaei and Winroth (2016) did this by comparing the perception of managers and operators. Other studies focused on the comparison of general managers and manufacturing managers (Joshi, Kathuria and Porth, 2003) and senior executives and manufacturing managers (Joshi et al., 2003). Feger (2014) focused on cross-functional strategic consensus among production, purchasing and logistics. In this study, Feger (2014) provides an example of a manufacturing firm that contains multiple functional departments, each trying to achieve its own goals. Moreover, he states that it is remarkable that in the traditional corporate structure of functional groups, there is little coordination between purchasing, production and logistics, whilst these departments together form the core supply chain processes of a firm (Fawcett and Magnan, 2002; Pagell, 2004). Despite that this example does not represent all manufacturing companies, it is a good example that different departments may have conflicting goals and objectives. As a consequence, it could be the case that this lack of common goals and objectives leads to OS conflicts. Hence, “individual stakeholders are likely to have different views on a project’s objectives that may conflict with other stakeholders” (Slack and Lewis, 2008, p320). On the other hand, there is also a scenario where different departments share common goals and objectives. In this case, it is expected that we find less conflicts compared to the case where different objectives and goals are identified. In order to get a deeper understanding of the relation between strategic consensus and OS conflicts, most relevant literature on conflicts are adopted. Despite research on conflicts is executed in many research fields such as psychology, communication, organizational behaviour, information systems and marketing (Barki and Hartwick, 2001), the OS literature on conflicts is limited. Therefore, this paper aims to identify and categorize conflicts between different stakeholders within the firm. Hopefully in this way, a theoretical understanding can be generated in order to help practitioners to identify OS conflicts. The literature on conflicts starts at chapter 2.3 “Interpersonal conflict”.

2.3 Interpersonal conflict

Slack and Lewis (2008) provide an hypothetical example where a company is facing different pressures. On the one hand a company is trying to minimize costs, whereas on the other hand the company wants to maximize its service to the customers (Slack and Lewis, 2008). It is expected that there are many more situations where different interests are represented within the company regarding cost, quality, delivery and flexibility. Since different stakeholders (Production, Purchasing and Logistics) within the organization are expected to focus on different performance objectives, it is very likely that this results in OS conflicts. Because the conflicts could arise between two individuals or between groups, both interpersonal and intergroup conflict are described in the theoretical framework.

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10 (2015), a conflict consists of interfering goals or a disagreement on interests, values , and power. In effect, conflicts include a perception of incompatibility among concerns which usually generates negative emotions (Boonstra and de Vries, 2015). Furthermore, conflicts include contextual (interdependence), cognitive (disagreement), behavioural (interference), and affective (negative emotions) elements (Barki and Hartwick, 2001, p.197-198).

Caputo et al., (2017) state that there are three types of interpersonal conflicts identified: task, process and relationship conflict (Jehn, 1995: 1997). Task conflicts result from discussions on objectives and business strategies (Caputo et al., 2017). Process conflicts arise when there is disagreement on how the work has to be performed by employees/individuals within the firm (Caputo et al., 2017). Therefore, this type of conflict consists of responsibilities and tasks regarding individuals within the company (Caputo et al., 2017). The relationship conflict is seen as the personal or human incompatibility among members within the firm (Caputo et al., 2017). Opposed to task and process conflict, relationship conflict has a affective component (Caputo et al., 2017). Hence, the relationship conflict arises when there is personal and human incompatibility among members in the firm (Caputo et al., 2017).

2.4 Intergroup conflict

Group conflict can be divided into intergroup and intragroup conflict. The latter, where conflicts are related to individuals of the same group (McCarter et al., 2018), are neglected during this research. The reason for this is that we take a look at conflicts between the departments production, purchasing and logistics. According to Böhm and Rusch (2018, p.4), intergroup conflict is “the perceived incompatibility of goals or values between two or more individuals, which emerges because these individuals classify themselves as members of a different social groups”. Various papers have identified different types of intergroup conflicts. For example, intergroup conflicts could have different sources (Böhm and Rusch, 2018). The sources of conflict could be: the allocation of (scarce) economic resources (e.g. money, territory), power (e.g. the ability to influence another group), values, or a combination (Katz, 1965; Böhm and Rusch, 2018). In addition, intergroup conflicts can range from tractable to intractable conflicts (Bar-Tal, 2011; Böhm and Rusch, 2018). The tractable conflicts are identified as goals with low-importance, which are both partially compatible and partially incompatible (Böhm and Rusch, 2018). The time-span of these conflicts is often low and they are seen as solvable problems (Böhm and Rusch, 2018). Opposed to this, intractable conflicts are identified as goals of high-importance (e.g. resources are essential for the group’s survival) which are noticed as being unsolvable (Böhm and Rusch, 2018). The time-span of intractable conflicts are generally longer than tractable conflicts, which results in a situation of hostility amongst the parties involved over time (Böhm and Rusch, 2018).

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11 groups are competing for competitive priorities (cost, quality, delivery and flexibility). Therefore, this intergroup conflict theory is taken into account during this research.

2.5 Realistic group conflict theory

Sherif (1965) and colleagues have introduced a very influential situation-based perspective regarding intergroup conflicts (Böhm and Rusch, 2018). Sherif (1966) states that competition over (scarce) resources between groups (e.g. power, money, social status) results in discrimination and prejudice (Sherif, 1966; Böhm and Rusch, 2018). This negative interdependence of groups increases when, for example, the scarcity of resources increases (Böhm and Rusch, 2018). Opposed to this, when groups are positively interdependent, e.g. when two groups together need to work on a common goal, this leads to positive intergroup relations (Böhm and Rusch, 2018).

The realistic group conflict theory is proposed by the famous Robber’s Cave experiments (Sherif et al., 1961; Sherif and Sherif; 1953; Böhm and Rusch, 2018). These experiments were executed at Robber’s Cave State Park (Oklahoma, US) (Böhm and Rusch, 2018). The study used twenty boys which were unfamiliar with one another, but with a common family background (Böhm and Rusch, 2018). These boys were randomly separated into two groups, without knowing the existence of the other group (Böhm and Rusch, 2018). The first step of the research consisted of in-group forming, by making use of joint within-group tasks (Böhm and Rusch, 2018). The second step consisted of creating awareness of the other’s group existence and letting them compete for resources, by making use of tug-of-war contests (Böhm and Rusch, 2018). This meant that the winning group received resources (Böhm and Rusch, 2018). After this, out-group hostility arose and both groups started with for example name-calling, burning the others’ group flag and stealing out-group members’ belongings (Böhm and Rusch, 2018). This second stage was quite short, because it was unavoidable for the experiment leaders to stop this second stage of research after these escalations (Böhm and Rusch, 2018). During the final stage (integration), both groups had to jointly work on shared goals which were only reachable when they worked together (Böhm and Rusch, 2018). Here, the experiment leaders noticed a small increase of positive intergroup relations (Böhm and Rusch, 2018). All in all, this research proves that competition over scarce resources could result in intergroup conflicts (Böhm and Rusch, 2018).

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2.6 Conceptual model OS conflicts

Based on the literature review, a conceptual model of OS conflicts has been generated (Figure 2.1: Conceptual model OS conflicts). In order to get a deeper understanding of how the perceptions on competitive priorities are related to OS conflicts, this model has been operationalised. First, the perceptions on the competitive priorities are measured by making use a survey (Chapter 3.2). Second, semi-structured interviews are held in order to explore conflicts related to the competitive priorities (Chapter 3.3). Lastly, based on a combination of surveys, interviews and company visits, a holistic interpretation of the findings will be presented. It is presumed that when there is strategic consensus, this leads to less conflicts compared to a situation where no strategic consensus occurs. Despite that this hypothesis could not be verified based on a single case study, the researcher is trying to interpret this relation as being possibly useful for future researchers. During this research, a OS conflict is considered as a conflict related to the competitive priorities: cost, quality, delivery and flexibility. Existing literature on interpersonal and intergroup conflict is used in order to identify these types of conflicts.

Figure 2.1: Conceptual model OS conflicts

3. Methodology

This chapter accounts for the methodological choices that are made during this research. Moreover, it describes how the conceptual model is operationalised. First, the research design is presented. Second, the case selection process is explained. Third, the sources of data are provided, including the analysis method. After all, the quality of research and ethical considerations are presented.

3.1 Research design

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13 consensus and organizational performance (Homburg et al., 1999; Pagell & Krause, 2002; Bao et al., 2008; Walter et al., 2013), a complete understanding of this relationship is still missing (Walter et al., 2013). As a consequence, this research uses an exploratory, in-depth case study research design in order to investigate conflicts related to competitive priorities. The reason for this type of study is that “case studies can be used for different types of research purposes, such as exploration, theory building, theory testing and theory elaboration/refinement” (Karlsson, 2016, p. 167). Since the literature on OS conflicts is limited, exploration is needed to uncover areas for research and theory development (Karlsson, 2016). Another reason for in-depth case study is the lack of a deeper understanding of the OS perceptions in existing literature (Mirzaei et al., 2016). Despite case studies are a very powerful tool for research, the main challenge in this type of research is to ensure that research is conducted well and that results are both rigorous and relevant (Karlsson, 2016). For this reason, the most important choices regarding this research are explained in the next sections. First, the case selection process is explained. Second, the sources of data including the analysis method are explained. The first step contained a background and context analysis. The second step was a quantitative analysis of the perceptions on competitive priorities. The third step contained a qualitative exploration of OS conflicts. The last section of the methodology contains an explanation of the research quality.

3.2 Case selection

The case selection criteria should be backed up by the research question (Eisenhardt 1989; Yin, 1994). Moreover, the questions regarding the selection process were backed up by Miles and Huberman (1994). For this research, a company was needed that conforms to the following questions:

 Is it relevant to the conceptual frame and research questions?

 Will the phenomena to be studied appear? Can they appear?

 Is the company willing to participate?

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14 distance travelled by the author. Furthermore, in this region it was most easy for the author to find a company who was willing to participate. The reason why a SME is chosen is because of the relative simple organisational structure and limited number of employees (approx. 100). These factors enable (limited number of employees and relative simple organizational structure) the closeness of hierarchical levels in SMEs (Mirzaei et al., 2016). Consequently, this setting is considered as ideal to study strategic consensus (Mirzaei et al., 2016). Another reason for choosing a SME was that with relative few interviews a complete understanding could be generated of the departments involved. The manufacturing plant is seen as the unit of analysis during this research.

3.3 Data collection and analysis

There were four sources of information used during this research: informal conversations, document analysis, surveys and semi-structured interviews. The data collection process contained three steps. The first step contained the case background and context. The second step contained a quantitative analysis of the competitive priorities regarding production, purchasing and logistics. The last step contained a qualitative exploration of OS conflicts. The corresponding research steps are explained in the next sections.

Step 1: Case background and context

First, several plant visits took take place in order to get familiar with the organization participating in this research. In this phase, the author explained the purpose of this research. Moreover, the employees of the organization were informed about the privacy that would be guaranteed during this research. The respondents and corresponding company could remain anonymous, since this would not affect the outcomes of the research. Because conflicts are most likely a sensitive topic in organizations, anonymity may result in fair responses. Wildman (1977) states that respondents who can be identified, could give more “socially desirable” responses than those who remain anonymous. One of the main reasons for visiting the company beforehand was to create willingness to participate in this research. Another reason was to get more familiar with the business and the processes that took place in the company. Another source of information in this first step was document analysis. Document analysis took place in order to identify the mission, vision and market characteristics of the company. All relevant information on the organization including this analysis can be found in chapter 4.1 “Case background and context”. The reason for this first research step is that single case-studies are inherently context dependent. As a consequence, explaining this context was seen as critical.

Step 2: Quantitative analysis of competitive priorities

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15 departments had to indicate to what extent operational decisions are important for their department regarding cost, quality, delivery and flexibility. To this end, they had to scale questions that asked for: how important is the ability to (Likert scale ranging from 1 = Not important, to 4 = Very important, to 6 = Absolutely critical) for example (a) reduce inventory. The scales used in this survey correspond to the competitive priorities (cost, quality, delivery and flexibility). This survey (Appendix I) is based on the survey created by the Boston University Manufacturing Futures Survey (Miller and Vollmann, 1984; Boyer and McDermott, 1999; Mirzaei et al., 2016). This survey has previously proven its reliability in various studies (Boyer and McDermott, 1999). The values for each competitive priority (cost, quality, delivery and flexibility) are presented by averaging the corresponding items (Boyer and McDermott, 1999). Departments which represent a difference of 0.50 or more are highlighted (Boyer and McDermott, 1999). This somewhat subjective value has been chosen to present where significant difference occurs (Boyer and McDermott, 1999). The results of this surveys were used in order to put the semi-structured interviews on conflicts into context. With this, we mean that we tried to clarify why certain differences (relative importance of competitive priorities) among departments occurred. The target size of respondents consisted of all employees corresponding to the departments: production, purchasing and logistics. The reason for this is that all employees who are part of a department together form the perception of that department. Therefore, taking a sample of the group was not encountered to be representative. This survey was sent to employees via Qualtrics. The surveys were analyzed after the analysis of step 3: Qualitative exploration of OS conflicts. The reason for this was to prevent observer bias. The knowledge on the degree to which strategic consensus occurs and how these departments differ on the relative importance of competitive priorities was seen as information that could possibly enable observer bias.

Step 3: Qualitative exploration of OS conflicts

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16 were randomly chosen for each department. This random sampling took place during a company visit. Based on a conversation with the operations manager, it was discusses which employees could participate in this study. There was a case where the operations manager suggested to take an alternative employee for a chosen participant, because he claimed that this person might had less to say due to the lower education.

Production Purchasing Logistics

Production Production – Purchasing Production – Logistics

Purchasing Purchasing – Production Purchasing - Logistics

Logistics Logistics – Production Logistics – Purchasing

Table 3.1: Departmental relations

However, since the sample should represent the whole department, this was not considered valid. The characteristics of the interviewee’s could be found in table 3.2. The reason for this is that multiple viewpoints provide both triangulation and increase validity (Karlsson, 2016). Another source of increased validity was the use of interview protocols. Because of this, all interviewees were asked the same questions. The semi-structured interview protocols could be found in Appendix. II (Dutch) and Appendix. III (English). The titles and names of these managers will be held anonymous. For this reason, each interviewee was represented by a number. The numbers and corresponding names were held apart in order to ensure anonymity during the research process.

Individual Department Position Experience Duration

P1 Production Production manager 4 years 44:34

P2 Production Production team planner 2 months 22:44

P3 Production Production team planner 23 years 33:30

P4 Production Production team planner 26 years 27:41

P5 Purchasing Purchasing team leader 3 years 38:49

P6 Purchasing Initial buyer 14 years 39:16

P7 Purchasing Initial buyer 13 years 35:10

P8 Purchasing Operational buyer 8 years 42:42

L9 Logistics Customer focus planner 2 years 56:10

Table 3.2: Interviewee characteristics

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17 Dutch language during the interviews. According to Miles and Huberman (1994) there are three steps to be followed during case research: data reduction, data display and conclusion drawing (Karlsson, 2016). In this first step (data reduction), the coding of data is central (Karlsson, 2016). In this coding process, Strauss and Corbin (1990) propose three coding steps. The first one is open coding, where data is fragmented (Karlsson, 2016). The second step is axial coding, where this data is put in new ways (Karlsson, 2016). This is followed by the last step, selective coding, where the categories made in axial coding are related to each other (Karlsson, 2016). The above described coding was done by using the software programme ATLAS.ti. After this coding process, the last two steps mentioned by Miles and Huberman (1994) were executed. In chapter 4.3, the data is displayed by making use of quotes and interpretations of the data. Finally, conclusions are drawn based on the analysis described in chapter 4.

3.4 Research quality and ethics

It is important to pay attention to validity and reliability in case-study research (Karlsson, 2016). The four dimensions on validity and reliability in case-research are described in Table 3.3.

Test Case study tactic Phase of research

Construct validity Use multiple sources of evidence Data collection

Establish chain of evidence Data collection

Internal validity Pattern matching or explanation building Data analysis

or time-series analysis

External validity Use replication logic in multiple-case Research design

studies

Reliability Case study protocol Data collection

Develop case study data base Data collection

Table 3.3: Reliability and validity in case research (Voss et al., 2002, p.211)

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18 cases (Karlsson, 2016). For this purpose, the research was framed by existing theory (Karlsson, 2016). However, although single cases provide greater depth, the generalizability of conclusions drawn is very limited. Therefore, the limitations of this research are described intensively in the discussion section. The last dimension “reliability” is ensured by repeating the same study’s operations. The objective is that for all cases, the same processes have been used (Yin, 1994). To ensure these same processes, this research makes use of a case study protocol. Moreover, respondents were allowed to revise the transcript. Another important issue regarding research quality is ethics. Both Newcastle University and University of Groningen have a duty to ensure that student projects do not harm the student, participants, the project nor the universities’ reputation (Bokhorst, 2018). Therefore, forms on research ethics and risk assessment were handed in to ensure the safety of all stakeholders involved. As already mentioned, the data gathered during this research will be stored confidential. The first way in protecting the company is not mentioning the company’s name in this paper. For the survey, respondents only had to mention to which department they belong. Furthermore, participants stayed anonymous in this research, by making use of numbers to verify a respondent. The researcher made use of a list with names which were connected to a number. As a result, from the transcript the respondent was not directly traceable. Interviewees participated voluntarily and were always free to stop their participation.

4. Findings

This chapter presents the findings based on the three data collection steps: (1) case background and context, (2) quantitative analysis of competitive priorities and (3) qualitative exploration of OS conflicts. The findings form the basis for the analysis which is described in chapter five.

4.1 Case background and context

Company size 100 employees Production size 60 employees

Production area 2000 m2

Annual turnover Approx. 15 million euro’s

Products PCB/product assembly, engineering/prototyping Variety of products 1000 PCBA’s (Printed Circuit Board Assembly)

Production system MTO

Company ownership Holding which is part of the top 10 EMS companies

Management group CEO, finance, HRM, engineering, quality, sales, operations (production, purchasing, logistics)

Customers Automotive, industrial, medical, defence, semiconductor Market A few competitors exist for this company

Competitive advantage Life-cycle partner, TCO

Table 4.1: Company characteristics

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19 and distribution, and after-sales services and repair or sometimes installation services” (Lüthje, 2002, p.229). The company characteristics are described in table 4.1. The mission of the company is to be a life cycle partner where total cost of ownership is central. This means that they try to be involved from the design phase till the phase out. In order to reach this, they really put the customer as central. As a consequence, the company created several core-values. These values are pro-active, customer focused, teamwork, flexible and creative, partnership and reliability. The primary industries where this company is focusing on are automotive, industrial, medical, defence and semiconductor. According to both the CEO and Operations Manager, the company is facing a growing demand for their products. They propose that the reason for increased demand is economic growth. However, they both state that the company is facing difficulty in acquiring components. They state that due the last economic crisis, several suppliers of components have disappeared from the market. As a consequence, the lead times of acquiring components have increased significantly. These longer lead times of supplies have major influences on the daily operations of the company under investigation.

4.2 Perceptions competitive priorities

Based on the survey response (Appendix I), table 4.2 and 4.3 provide the average of the competitive priority scales (cost, quality, delivery and flexibility) amongst production, purchasing and logistics. As could be seen in table 4.2, there was very high consensus regarding the relative importance of cost, quality, delivery and flexibility amongst the departments production, purchasing and logistics. The lowest rank is represented by a black diamond (♦), whereas the highest rank is represented by a asterisk (*) (Boyer and McDermott, 1999). All departments scored quality as the most important priority, whereas all departments scored flexibility as the least important priority.

COST QUALITY DELIVERY FLEXIBILITY Production 4,36 4,62* 4,38 4,26♦

Purchasing 4,06 5,17* 4,58 2,96♦

Logistics 4,38 4,67* 4,00 3,42♦

Total 4,27 4,82* 4,32 3,55♦ Scales where a difference of 0.50 or more occurs are presented in bold

♦ Indicates lowest value of the departments

* Indicates highest value of the departments Table 4.2: Competitive priorities totals

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20 importance of flexibility higher than purchasing and logistics score this competitive priority. The flexibility scales are made up by averaging the items corresponding to this construct.

COST QUALITY DELIVERY FLEXIBILITY Production – Purchasing 4,36 – 4,06 4,62* – 5,17* 4,38 – 4,58 4,26♦ – 2,96♦

Purchasing – Logistics 4,06 – 4,38 5,17* – 4,67* 4,58 – 4,00 2,96♦ – 3,42♦

Logistics – Production 4,38 – 4,36 4,67* – 4,62* 4,00 – 4,38 3,42♦ – 4,26♦

Scales where a difference of 0.50 or more occurs are presented in bold

* Indicates highest value of the departments

Table 4.3: Competitive priority differences between departments

Because of the significant differences between departments on the relative importance of flexibility, we analyzed the items which correspond to the construct. As could be seen in Appendix I, the flexibility construct is build up by six questions (items). The average scores on these questions are compared amongst production and purchasing (Table 4.4). Based on this comparison we found that there was a big difference in score at: (c) make rapid volume changes (4,43 – 2,25 = 2,18); (d) offer a large number of product features (4,00 – 2,25 = 1,75); (e) offer a large degree of product variety (4,71 – 3,25 = 1,46) and (f) adjust product mix (4,29 – 3,00 = 1,29).

The markings present that both production and purchasing scored quality as the most important priority and flexibility as the least important priority. Furthermore, the difference on the perception of flexibility (4,26 – 2,96 = 1,3) is quite large between production and purchasing. Also, at logistics vs. production, the markings present that both departments scored quality as the most important priority and flexibility as the least important priority. Furthermore, the difference on the perception of flexibility (4,26 – 3,42 = 0,84) is also quite large between logistics and production. Both calculations indicate that production scores the relative importance of flexibility higher than purchasing and logistics score this competitive priority. The flexibility scales are made up by averaging the items corresponding to this construct. Because of the significant differences between departments on the relative importance of flexibility, we analyzed the items which correspond to the construct. As could be seen in Appendix I, the flexibility construct is build up by six questions (items). The average scores on these questions are compared amongst production and purchasing (Table 4.4). Based on this comparison we found that there was a big difference in score at: (c) make rapid volume changes (4,43 – 2,25 = 2,18); (d) offer a large number of product features (4,00 – 2,25 = 1,75); (e) offer a large degree of product variety (4,71 – 3,25 = 1,46) and (f) adjust product mix (4,29 – 3,00 = 1,29).

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21 FLEXIBILITY (a) (b) (c) (d) (e) (f) Production 3,71 4,43 4,43 4,00 4,71 4,29 Purchasing 3,00 4,00 2,25 2,25 3,25 3,00 Logistics 3,25 4,25 3,50 2,75 3,00 3,75 Prod. – Purch 0,71 0,43 2,18 1,75 1,46 1,29 Prod. – Log. 0,46 0,18 0,93 1,25 1,71 0,54 Log. - Purch. 0,25 0,25 1,25 0,50 -0,25 0,75 Table 4.4: Items flexibility

At purchasing vs. logistics, there was a different score of the relative importance of delivery (4,58 – 4.00 = 0,58). As could be seen in Appendix I, the delivery construct is build up by three questions (items). The average scores of these items are compared between purchasing and logistics (Table 4.5).

DELIVERY (a) (b) (c) Production 4,41 4,71 4,29 Purchasing 4,00 5,75 4,00 Logistics 3,75 4,75 3,50 Production – Purchasing 0,41 -1,04 0,29 Production – Logistics 0,66 -0,04 0,79 Logistics – Purchasing. -0,25 -1,00 -0,50 Table 4.5: Items delivery

Regarding the relation logistics vs. purchasing, a large difference (4,75 – 5,75 = -1,00) has been found at (b) meet delivery promises. The possible reasons for the difference regarding DELIVERY could be found in chapter 5.2 “Perceptions related to OS conflicts”.

4.3 Conflicts – Production vs. Purchasing

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22 the quality and engineering department. However, P1 states: “if purchasing is buying bigger rolls of components, we do not have to produce manually, therefore we get better production times and quality”. In other words, the possible consequence of acquiring low amounts of components (purchasing) is that this leads to less quality of production. Regarding delivery, both departments state that they do not encounter conflicts on this theme. The reason for this is that they only start production when all components (inputs) are present. P3 states: “if not all components required for an order are present, we do not start production”. Regarding flexibility, both departments state that they do not encounter conflicts on this theme. P6 states: “we have to work according to a TPD (Technical Product Documentation)”.

Conflict type Definition Examples

Process conflict Disagreement on Producing with a machine vs. manually (cost, quality)

how work should

be performed related

to the competitive

priorities

Relationship conflict Personal or human Production worker has no sense for the price of

incompatibility among components (cost)

members within the

firm

Task conflict Disagreement on Opposing interests of costs vs. production results (cost)

objectives and

strategies related to

the competitive

priorities

Realistic group conflict Disagreement on goals Shifting a responsibility/mistake to another department

and competition over (quality/cost)

the competitive Opposing interpretation of quality (quality)

priorities

Table 4.6: Conflicts production – purchasing

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23 However, the purchasing department did not notice these fingerprints and confirmed the acceptance of the received components to its supplier. Because the purchasing department could not send these components back to its supplier, they required production to deal with these components. As a result, a responsibility was shifted to a different department.

4.4 Conflicts – Purchasing vs. Logistics

The central theme of discussion between purchasing and logistics regarding cost is that logistics strives to maintain production times, whereas purchasing is focusing on acquiring components for the cheapest price. P5 states: “sometimes logistics employees say, no matter what the cost is, we need these components”. However, P5 states that logistics should be aware that they cannot acquire components at all possible prices. Since the margins for profit are very low, they have to stick to certain prices. According to L10: “these operational discussions should be translated in a strategic discussion on how to deal with such situations”. This indicates that logistics has some concerns for how “purchasing” is working. Regarding quality, it is widely agreed that these discussions are held with the quality department and engineering department. Regarding delivery, both departments state that they have these discussions on a daily basis. P5 states the anecdotal evidence: “the customer needs the products yesterday, but we can deliver after 3 years”. Furthermore, some employees of the logistics department claimed that they encountered the purchasing department as being very rigid. With this, they provided some examples of the purchasing department being very dependent on their relative small supply base. L11 states: “if we search for a certain component on the internet, we can easily find a alternative supplier”. Furthermore, L11 claims that the purchasing department should be less dependent on certain suppliers in order to increase delivery times. Regarding flexibility, P5 and P7 mention that purchasing should have better systems that are able to adapt to planning changes made by logistics. P7 states: “if logistics is making changes to the planning, this has major consequences for our department”. With this, they mean that their system is not dynamic. Furthermore, logistics states that the relative small supply base makes them less flexible.

Process conflict Disagreement on Purchasing should expand supply base (cost, delivery)

how work should Purchasing should take production costs into account (cost)

be performed related Logistics should communicate planning-changes to

to the competitive purchasing, because the system that purchasing is

priorities working with is not dynamic (flexibility)

Relationship conflict Personal or human Logistics worker should respect production times (cost,

incompatibility among delivery)

members within the

firm

Task conflict Disagreement on Opposing interests of timely deliveries vs. costs (cost,

objectives and delivery)

the competitive

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24

Realistic group conflict Disagreement on goals

and competition over

the competitive

priorities

Table 4.7: Conflicts purchasing - logistics

Based on coding the transcripts of both relations: purchasing vs. logistics (Appendix VI) and logistics vs. purchasing (Appendix VII), OS conflicts were identified regarding cost, delivery and flexibility (Table 4.7). The process conflicts resulted from disagreements on how work should be performed. Production had two themes where they disagreed on the way purchasing was working. First, they claimed that purchasing should expand their supply base in order to increase delivery times and flexibility. Second, they stated that purchasing should take production costs into account. Since producing manually takes more time and goes hand in hand with more failures (less quality), the total cost could be less when acquiring larger rolls of components which could be placed with a machine. Furthermore, purchasing mentions that logistics should effectively communicate planning-changes. The reason for this is that they lack a dynamic system which is able to adapt to planning-changes automatically. This process conflict could also work the way around. For logistics, it is not desirable that purchasing has this very rigid way of working which is not able to adapt to planning changes. Regarding the relationship conflict, there was a frustration from a purchasing employee towards logistics. P7 provided a anecdotal example: “you cannot build a Eiffel tower in two days”. With this, he meant that logistics did not always take all production times into account. Task conflicts were identified resulting from the different interest of logistics (customer satisfaction, on time deliveries) and purchasing (buying components as cheap as possible with the prevention of stocks).

4.5 Conflicts – Logistics vs. Production

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25 worker came to me to claim that they needed a fast delivery, because of this pressure on production, the quality was at stake”. To this end, P3 stated: “despite maintenance of a machine was required, we kept on producing which eventually resulted in quality issues”. This discussion is underscored by L9. L9 states: “we see that if we put pressure on production, the number of defects increase, as a result the quality of products decreases”. Regarding delivery, both departments agreed that they did not encounter many discussions on this theme. However, there were some different insights in how work should be performed. Regarding flexibility, the central theme of discussion was that not all production employees could be allocated to all production tasks. Because only five employees could perform a certain task, this formed a bottleneck in production. Furthermore, logistics claimed that production needs to make sure that all employees can perform a wide range of production activities, in order to increase flexibility.

Process conflict Disagreement on Producing with a machine vs. manually (cost, quality)

how work should Production should implement lean-manufacturing (delivery)

be performed related Number of people who can perform a certain product test to the competitive should be increased (delivery, flexibility)

priorities Prevent lacquering bottleneck at the end of the month by

generating better production planning (delivery, quality)

Stick to procedures if there is pressure on production

(quality)

Logistics is planning based on unlimited capacity, whilst

there is a bottleneck (delivery)

Relationship conflict Personal or human Production employee had to correspond to logistics

incompatibility among employee why delivery times could not be met (delivery)

members within the

firm

Task conflict Disagreement on Opposing interest of quality vs. delivery times (quality,

objectives and delivery)

the competitive

priorities

Realistic group conflict Disagreement on goals Competition over competitive priorities (delivery, quality)

and competition over

the competitive

priorities

Table 4.8: Conflicts logistics - production

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26 to higher quality and better production times. Moreover, they state that they cannot guarantee all procedures when there is pressure on production. Furthermore, logistics states that production should implement Lean-manufacturing. At this moment, production is storing intermediate products in the warehouse. However, L11 proposes to eliminate these inventories, in order to increase delivery times. L11 provided the following example: “for the production of a certain product, we need 20 hours production time, however the throughput time is now 6 days”. Regarding the relationship conflict, P3 stated that she had to correspond to a logistics employee why a certain product test at the end of the production line formed a bottleneck. P3 claims: “I can add people to the soldering process, but since only one person can perform a product test, I cannot add more people to this process”. P3 stated that this discussion was felt with emotions (relationship conflict). Regarding task conflict, the cause was the relative different interest of logistics (focus on delivery times) and production (more focus on quality). Regarding the realistic group conflict, L10 provides an example where a responsibility of cost is shifted to production. L10 states: when the estimated production time has a great difference with the actual production time, this possibly leads to negative emotions towards our department. Production is held responsible for larger production times, despite they have no influence on the estimated production times. Another example of realistic group conflict is provided by L9. He states that whenever they put pressure on production, the quality influenced negatively. As a consequence, because logistics puts pressure on production, they shift a responsibility to the production department. This could possibly result in negative emotions towards the logistics department, since production is held responsible for the quality of the end products.

5. Analysis

This chapter describes the analysis of the findings related to the conceptual model described at the end of the literature review. First, based on the qualitative exploration of OS conflicts described in chapters 4.3, 4.4 and 4.5, a summary of the conflicts between departments (production vs. purchasing; purchasing vs. logistics; and logistics vs. production) are presented. These findings, combined with the literature presented in chapter two, form the basis for the OS conflict framework. Second, a possible explanation of the different perceptions on competitive priorities described in chapter 4.2, are presented. Third, a more holistic view related to OS conflicts is presented. The last chapter consists of reflecting the analysis with the relevant literature. This goal of this reflection is to point out theoretical contributions regarding strategic consensus.

5.1 OS conflict framework

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27 a conflict is experienced between individuals or between groups. These dimensions together form the following OS conflict types: 1) OS process conflict; 2) OS relationship conflict; 3) OS task conflict; and 4) OS realistic group conflict. The conflicts which are identified in this stage are used in order to clarify why certain differences between the relive importance of competitive priorities occur between the departments: production, purchasing and logistics.

Figure 5.1: OS conflict framework

Process conflict Disagreement on Producing with a machine vs. manually (#1, #3)

how work should Purchasing should expand supply base (#2)

be performed related Purchasing should take production costs into account (#2)

to the competitive Production should implement Lean manufacturing (#3)

priorities Number of people who can perform a certain product test

should be increased (#3)

Prevent lacquering bottleneck at the end of the month by generating better production planning (#3)

Stick to procedures if there is pressure on production (#3)

Logistics is planning on unlimited capacity, whilst there is

a bottleneck (#3)

Relationship conflict Personal or human Production worker has no sense for the price of

incompatibility among components (#1)

members within the Logistics worker should respect production times (#2)

firm Production employee had to correspond to logistic

employee why delivery times could not be met (#3)

Task conflict Disagreement on Opposing interests of costs vs. production results (#1)

objectives and Opposing interpretation of quality (#1)

strategies related to Opposing interests of timely deliveries vs. costs (#2)

the competitive Opposing interest of quality vs. delivery times (#3)

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28

Realistic group conflict Disagreement on goals Shifting a responsibility/mistake to another department (#1)

and competition over Estimated production time vs. actual production time (#3)

the competitive Competition competitive priorities, delivery; quality (#3)

priorities

#1 indicates that the example is found in production vs. purchasing or vice versa #2 indicates that the example is found in purchasing vs. logistics or vice versa #3 indicates that the example is found in logistics vs. production or vice versa Table 5.1: Examples of OS conflicts

5.2 Perceptions related to OS conflicts

The possible explanation for different scores on the relative importance of competitive priorities between production, purchasing and logistics is described in the analysis section. The reason for this is that this analysis is based on the interpretation of the researcher.

COST QUALITY DELIVERY FLEXIBILITY Production – Purchasing 4,36 – 4,06 4,62* – 5,17* 4,38 – 4,58 4,26♦ – 2,96♦

Purchasing – Logistics 4,06 – 4,38 5,17* – 4,67* 4,58 – 4,00 2,96♦ – 3,42♦

Logistics – Production 4,38 – 4,36 4,67* – 4,62* 4,00 – 4,38 3,42♦ – 4,26♦

Scales where a difference of 0.50 or more occurs are presented in bold

* Indicates highest value of the departments

Table 5.2: Competitive priority differences between departments

As could be seen in table 5.2, there are three differences identified between the departments regarding the relative importance of a competitive priority. The explanations for these differences are formed based on combining the knowledge gathered by both company visits and interviews. In order to get a better understanding of how the perceptions of departments differ, we analyzed the items that represented the construct. For this reason, table 5.3 has been presented in order to help the reader understand the analysis described in this chapter.

FLEXIBILITY (a) (b) (c) (d) (e) (f) Production 3,71 4,43 4,43 4,00 4,71 4,29 Purchasing 3,00 4,00 2,25 2,25 3,25 3,00 Logistics 3,25 4,25 3,50 2,75 3,00 3,75 Prod. – Purch 0,71 0,43 2,18 1,75 1,46 1,29 Prod. – Log. 0,46 0,18 0,93 1,25 1,71 0,54 Log. - Purch. 0,25 0,25 1,25 0,50 -0,25 0,75 (a) make rapid design changes

(b) adjust capacity quickly (c) make rapid volume changes

(d) offer a large number of product features (e) offer a large degree of product variety (f) adjust product mix

Table 5.3: Items flexibility

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29 by two engineer managers, a account manager, a logistics manager and a purchasing manager. Apparently, the production managers were not involved in these client teams. Nevertheless, there was only one competitive priority which provided a significant difference with the other departments: flexibility. In addition, it was widely agreed that production and purchasing had almost no communication. This was underpinned by P1: “95% of commutation is held with logistics, whereas 5% of the communication is held with purchasing”. Therefore, logistics formed the bridge between production and purchasing. Based on table 5.2, it is noticed that between production and purchasing a difference of 1,3 (4,26 – 2,96 = 1,3) occurs regarding the relative importance of the competitive priority: flexibility. As could be seen table 5.3, there are large differences between production and purchasing regarding the score on items that represent FLEXIBILITY: (c) make rapid volume change, (d) offer a large number of product features, (e) offer a large degree of product variety and (f) adjust product mix. Based on combining the knowledge of the survey with the data gathered during the interviews, we are able to interpret this situation. The reason for conflicts between purchasing and production on how work should be performed (process conflicts) could possibly find its origin in the different score on flexibility. Production claims that if they receive larger rolls of components, they are able to maintain fast delivery times and ensure quality of production. On the other hand, purchasing strives for the lowest cost and the prevention of stocks. However, purchasing should be aware of the fact that production is encountering flexibility as being more important compared to how purchasing is scoring this construct. As a consequence, this could mean that purchasing might have a unrealistic image of reality. With this, we mean that the actual production process most likely needs more flexibility then the purchasing department is thinking. Furthermore, it is good to mention that we can also think the way around regarding the combination of survey data and semi-structured interview data. When for example a manager should replicate the interviews, the findings on conflicts could possibly indicate that there is a lack of strategic consensus on the relative importance of the competitive priorities. This is an hypothetical example on how OS conflicts could be a very fruitful source of information for managers that try to implement strategic consensus, or verify how this consensus is affecting its daily operations.

Conflicts in Operations Strategy

Conflicts in Operations Strategy

Towards a framework for OS conflicts

Contents