Searching for the sandcone in the GMRG data

Abstract

Over the last few years, several international studies have independently shown a significant correlation between the number and intensity of manufacturing practices in use and the performance of a firm. The conclusion is an unsettling: “the more the better.” This paper uses the Global Manufacturing Research Group’s (GMRG) second round database to deepen our understanding of this relationship. The shape of a scatterplot of practices versus performance resembles the shape of an American or rugby football and is often called the “performance football”. The performance football seems to be a general phenomenon so, as practices are added, a firm should garner earlier performance improvements if it followed the upper edge of the performance envelope. This is consistent with the “sandcone” model or sequential capability building model that suggests that a firm should first invest in quality practices and then add others over this base. We first demonstrate the relationship between practices and performance holds for the GMRG data and then we make detailed comparisons of the firms along the upper and lower edges of the football. The comparisons provide some evidence that there is a sandcone effect.