Operations Management Literature Research Articles

Role of Production Efficiency: Inventory Leanness and Financial Outcome

The connection between inventory leanness and various dimensions of financial return has been explored in many previous research studies. However, there is still a void in the literature regarding the mechanism that is responsible for the consequences of inventory leanness on the firm’s financial outcome. Thus, the purpose of this work is to study how inventory leanness influences financial outcome, with the focus on the mediation effect of production efficiency. The empirical analysis is performed using a fixed-effect model on firm-level data of various US manufacturing industries from 2000-2018. The result on overall data indicates that the association between inventory leanness (IL) and financial outcome(FO) is partially mediated through enhancement in production efficiency. Further, empirical analysis on each industry-specific subsample reveals that the mediation effect of production efficiency varies across industries. Thus, this article contributes to the theory of inventory control in operations management literature by empirically verifying the mediation effect of production efficiency.

The perceived managerial discretion: A methodological perspective

In the healthcare sector, the link between performance and outcomes is at best tenuous. Consequently, researchers have been called to move beyond activity-based performance and adopt quality and outcome-based measures. Most of the studies in this field have focused on the measurement of outcomes for either patients or wider society, while not exploring these for managers in the healthcare field. We therefore grounded our methodological note on the performance management literature and investigated the measurement of perceived managerial discretion. Our research aims to validate the perceived managerial discretion construct through confirmatory factor analysis of the data provided by 97 Italian healthcare managers. A principal component analysis's results indicate that two items in three performance management mechanisms are sufficient to measure the perceived managerial discretion.

Antecedents of Equity Fund Performance: A Contingency Perspective

While the fund performance management literature has clearly documented that the fund size, fund family size, and net cash flow are important antecedents of equity fund performance, prior empirical studies have revealed mixed results that have not been adequately explained. Through the lens of the contingency perspective, we developed a conceptual model that examines how the expense ratio and management compensation as contextual factors interact with the fund size, fund family size, and net cash flow to affect equity fund performance. The empirical analyses were based on panel data including 690 equity funds in China over a 7-year period from 2009 to 2015. The results show that the expense ratio and management compensation moderate the effects of the fund family size and net cash flow on fund performance, and management compensation also moderates the relationship between the fund size and fund performance.

The Variance Learning Curve

The expansive learning curve literature in operations management has established how various facets of prior experience improve average performance. In this paper, we explore how increased cumulative experience affects performance variability or consistency. We use a two-stage estimation method of a heteroskedastic learning curve model to examine the relationship between experience and performance variability among paramedics at the London Ambulance Service. We find that, for paramedics with lower experience, an increase in experience of 500 jobs reduces the variance of task completion time by 8.7%, in addition to improving average completion times by 2.7%. Similar to prior results on the average learning curve, we find a diminishing impact of additional experience on the variance learning curve. We provide an evidence base for how to model the learning benefits of cumulative experience on performance in service systems. Our findings imply that the benefits of learning are substantially underestimated if the consistency effect is ignored. Specifically, our estimates indicate that queue lengths (or wait times) might be overestimated by as much as 4% by ignoring the impact of the variance learning curve in service systems. Furthermore, our results suggest that previously established drivers of productivity should be revisited to examine how they affect consistency, in addition to average performance. This paper was accepted by Charles Corbett, operations management.

The relationship between organizational environment antecedents and performance management in local government: evidence from Ghana

The study aimed to investigate the relationship between organizational environment antecedents and their impact on performance management among local government authorities and to further understand the role of the stakeholder and political support in the performance monitoring and review of local governments. The study used quantitative research design techniques in the data collection phase between May and August 2017 in the Greater Accra Region of Ghana. The sample included 850 middle level and senior managers of the Local Government Service. Multiple regression was used to analyze the data. The results of the findings indicate that there is a strong relationship between two organizational environment variables: “stakeholder participation”, political support, and performance management providing a variance of 31.8 percent of the changes in the dependent variable. However, the findings further suggest that stakeholder participation was a better predictor of performance management than political support. Additionally, employees’ age, gender, and organizational size were statistically significant in the model fit. This study is one of the first of its kind to link two organizational environment indicators (stakeholder support and political support) and their effect on two performance management dimensions (performance monitoring and evaluation, and performance review). Also, few studies have used the structural contingency theory in explaining the influence of the environment on internal business processes of organizations in the performance management literature.

Cognitive biases policy (CBP) in performance improvements – the example of benchmarking

PurposeDespite evidence showing that cognitive biases – the systematic errors made by humans during cognitive processing, are prevalent among decision-makers, there is a lack of theoretical models providing insight into how these limitations of human mind might affect decisions made during performance management. This study aims to fill this gap and contribute to performance management scholarship by proposing a conceptual framework broadening our understanding of the role of cognitive biases in performance improvements practices and by highlighting remedies for cognitive biases.Design/methodology/approachUsing benchmarking as an example, the authors integrate the knowledge from performance management and cognitive psychology literature. Examples of cognitive biases possible during benchmarking are used to illustrate how the limitations of human mind might have a critical role in performance management.FindingsThe cognitive biases might diminish the positive effect of performance improvement practice on organizational performance. As there is a prevalence of cognitive biases coupled with the inability of individuals to recognize and face them, the remedy for cognitive biases should be sought not at an individual but rather on an organizational level, in creating organizational cognitive biases policy (CBP).Originality/valueThe presented model provides new insights into the role of cognitive biases in performance management and allows seeing CBP as a safeguard against the effects of cognitive biases on performance. By referring to cognitive biases and CBP, our model also helps to understand why the same performance improvement practices might incite different opinions among decision-makers.

Exploring the dependence structure among Chinese firms in the 5G industry

PurposeThis study aims to explore the dependence structure among Chinese firms across the emerging 5G industry at different stages and to provide some strategic insights for market participants.Design/methodology/approachThis study adopt macroeconomic fundamentals and the log-returns of 45 listed firms in the Chinese 5G industry to construct the weighted adjacency matrix by measuring the correlation parameters and then use the triangulated maximally filtered graph (TMFG) algorithm to construct the dependence network. It analyses the topological structure of the constructed networks to obtain the dependence characteristics for each firm in the whole industrial supply chain at different levels.FindingsThe empirical results provide a comprehensive and concise snapshot of the industrial structure, across the whole 5G industry at different levels, rather than just a “one-to-one” pattern. Specifically, the dependence characteristics of different firms are heterogeneous, and most firms are highly connected with partners in the whole industrial supply chain, whereas a few firms that are weakly connected. Those closely connected firms are usually in the midstream. In addition, compared with firms at different levels, downstream firms usually have closer dependencies and stronger influence capabilities.Practical implicationsRegulators not only should promote stability development for those firms most intensely connected with whole industry chain but also protect those firms with weak link in the whole industry chain. Investors should better understand the embedded ties among different firms to obtain effective market information and can select multiple firms with fewer connections as backup to conduct joint investment for risk mitigation. Mangers should give priority to the central players/firms in the whole industrial supply chain and establish the alliances with closely connected firms.Originality/valueThis study contributes to both the information system and operation management literature by constructing a new network method, Copula-TMFG, to capture the dependence structure among Chinese firms in 5G industry, empirically providing some strategic insights for 5G industry stakeholders, such as regulators, investors and managers.

WeStore or AppStore: How we shop differently in Mobile Apps vs. Social Commerce

Social commerce is rapidly growing and attracting new customer segments. This channel is different from traditional retail channels in that it relies on social media platforms for product discovery and purchase. We examine customer behavior and search patterns in an emerging social commerce channel, namely WeChat mini-programs, and in retailers' native apps. We show that customers' fixed and marginal search costs and preferences differ across these two channels. Our research constitutes the first attempt to study customer behavior differences between traditional mobile apps and social media-based channels. Rather than focusing on customers' final purchases, we analyze customers' entire shopping journey using structural search models to quantify their search costs and price sensitivity across the different channels. Previous literature in operations management has estimated traditional discrete choice models to recover customers' cost parameters based on customers' purchase decisions. Instead, we use a sequential search model that characterizes customers’ entire shopping journey. We estimate fixed search costs, marginal search costs, and preferences in each channel and uncover differences in customers' search and purchase behavior across channels. We find that WeChat customers have higher fixed search costs yet smaller marginal search costs compared to App customers. Moreover, customer characteristics such as their user level and time of search impact search costs. Fixed and marginal costs are higher for customers with higher user levels on the WeChat channel. Marginal search costs are higher for customers with higher user levels in the App channel. We propose two channel-specific strategies that leverage customers' search cost differences across channels. The first strategy is to send friend referral discounts to lower fixed search costs in the WeChat channel. The second is to send search-triggering coupons to induce App customers to continue their search. Both strategies can significantly increase conversion rate and profit for online retailer JD.

Impact of Six Sigma critical success factors on productivity improvement through absorptive capacity in the manufacturing industry in Saudi Arabia

Previous studies have acknowledged the role of Six Sigma in productivity improvement, but the implication of absorptive capacity (ACAP) has yet to be fully addressed. Accordingly, this paper investigates the mediating effect of ACAP on the link between Six Sigma's critical success factors and productivity improvement. The hypothesised relationships were tested with data collected from quality managers in 167 manufacturing companies in Saudi Arabia. The result of PLS-SEM indicates that ACAP significantly mediates the influences of training and education, top management commitment and involvement, project selection and prioritisation and organisation resources on productivity improvement. However, the mediating effect of ACAP was not supported for the path between linking Six Sigma to business strategy and productivity improvement. Moreover, ACAP was significantly related to productivity improvement. The implications of our findings on the firm's productivity improvement and operation management literature were discussed, and the relevant suggestions were offered for future research.

In Control or under Control? Human-Robot Collaboration in Warehouse Order Picking

Warehouse operations are rapidly becoming more robotized to increase performance and cut costs. One important new way of working is in collaboration between humans and robots. However, even though humans and their behavior remain essential for operational performance, human factors in human-robot collaboration are still underrepresented in Operations Management literature. To contribute to the scarce knowledge in this domain, we conducted a unique real-effort experiment in a warehouse especially erected for this study. In this experiment we compare the objective outcomes of collaborative productivity, collaborative accuracy, and human pick speed between a scenario with the human leading the robot and a scenario with the human following the robot. Furthermore, we investigate the behavioral mechanism that governs the reaction of humans to the novel collaboration with robots. We find that human leading allows for superior collaborative order picking productivity compared to human following. In contrast, human following allows for greater collaborative order picking accuracy compared to human leading. We additionally establish prevention regulatory focus as the behavioral mechanism through which workers may accelerate their pick speed to bridge the productivity gap between the setups. Finally, we confirm that competence in manual order picking is directly transferable to the human-robot collaborative environment.

The role of motivation in the results of total productive maintenance

Abstract Paper aims The aim is to analyze the role of motivation of work teams in production lines in the operational results obtained with the implementation of a Total Productive Maintenance (TPM) program in a single company. Originality The areas of industrial production and maintenance require that human factors influencing performance be continuously investigated and cannot focus exclusively on the reliability of equipment and systems. Studies that contemplate these factors are relatively scarce but of great value for companies and society. Research method This is an exploratory case study that used a measurement of motivation with two teams of employees who participated in the implementation of TPM, comparing it to measures of operational performance. Unstructured interviews and nonparticipant observation were also used for data collection. Main findings The level of motivation of the team was positively associated with a change in operational performance, and the implementation of TPM had a positive impact on performance. Implications for theory and practice This study contributes to the behavioral operations management literature by showing empirical evidence that operational results may depend on motivated workers during TPM implementation. Managers must pay attention to the factors that determine the motivation of work teams when implementing improvement programs.

Enabling Smarter Cities with Operations Management

Recent development of new technologies and data analytics has unleashed the so-called smart city (SC) movement, which has been transforming the ways that cities (and their services) operate. This movement is in line with the operations management (OM) community’s pursuit of innovative research questions, and part of our community has already started working on this exciting area of SC OM. In this article, we shall discuss (i) the potential contribution that OM can make to the SC movement, that is, how OM research may help inform discussion and decision making in the public and private sectors. In particular, the core principle of making cities smarter is in line with the OM literature. We then discuss (ii) how and why SC operations can be an interesting topic that possibly expands the scope and depth of OM theory, through drawing links to the existing and new streams of OM literature. Finally, we present (iii) a few promising research directions and examples, in domains such as energy, transportation (mobility), and retail.

Exploring Environmental Supply Chain Innovation in M&A

Organisations are challenged with executing innovation for sustainable development within the context of their operations and value networks—networks which are increasingly fuelled by mergers and acquisitions (M&As), and which accounted for USD 4 trillion in global deal value in 2019. While outcomes from M&As may produce mixed results, merger synergies fundamentally change the environmental, social and governance (ESG) footprint of an organisation and its product-supply chain. These compounding challenges of innovation for sustainability and ESG product-supply chain due diligence are not adequately explored in the operations management literature or practically considered during M&As. In this article, we consider those factors that determine “how innovative is the deal?” and explore how environmental supply chain innovation for sustainability might inform M&As. A case study approach is adopted, drawing upon an exemplar deal within the global food product-supply chain for ingredient production, where high M&A deal-interest and ESG sustainability considerations exist. The theoretical lens is the resource-based view (RBV) of the firm. A deal analysis framework, integrating key concepts from strategic environmental supply chain management and the M&A process literature, is defined. These findings suggest that product design and technology selection factors represent sources of M&A value creation when exploring an innovation for sustainability deal thesis. The implication for firms with ambitious environmental agendas or motives is that the M&A process needs to be reconfigured, such that product design and technology selection, currently secondary factors, are considered primary drivers. Together, these drivers form substantive strategic considerations and new merger motives of both theoretical and practical relevance, informing a new perspective of operations sustainability targeted M&A.

Vaccine Procurement Contracts for Developing Countries

In recent years, several Global Health Organizations (GHOs) have experimented with market‐based procurement contracts to encourage pharmaceutical companies to bring late‐stage vaccines to developing‐country markets. Pharmaceutical companies often find such markets financially unattractive because the opportunity cost of capacity commitment is high, developing countries have limited ability to pay, and demand is uncertain. A contract design recently implemented by one GHO offers the manufacturer a per‐dose sales subsidy, which is paid by the GHO, on top of the base price paid by developing countries. The subsidy is required because the base price is not enough, by itself, to induce the manufacturer to commit capacity for developing‐country markets. A natural question that arises in this context is whether, within a fixed budget, alternate contract designs lead to higher capacity commitment. This study proposes and analyzes three contract designs that include the current practice and two alternatives inspired by contracts studied in the operations management literature. It also considers two types of budget constraints that may arise in practice and quantifies the impact of each type of budget constraint on the manufacturer’s capacity commitment. We show that the best contract design depends on the size of the budget, and that GHOs can increase capacity commitment (over the contract design used in practice) by choosing the budget‐appropriate contract design and optimal parameters for the chosen design.

Manufacturing strategy in small firms: unveiling the drivers of strategic consensus

Strategic consensus can be defined as agreement on strategy content and process across all levels of an organisation. Although strategic consensus is considered a major factor for the success of any manufacturing strategy, the topic has been widely neglected in the operations management literature. Moreover, the limited existing literature typically focusses on large firms in developed economies. In response, this study explores strategic consensus in 38 small companies in Brazil. Multiple company visits were combined with surveys and interviews. Responses from all operational managers (55 responses) and 117 operational-level employees (operators) were obtained. Using cluster analysis this study tests 10 research propositions regarding drivers of strategic consensus that where obtained through a systematic literature review. Results suggest that a high degree of formalisation in planning activities supports strategic consensus, that professional and decentralised decision making may be a better alternative for small firms and that the formalisation of communication channels may not be mandatory for strategic consensus, if there is, for example, a close relationship and collaboration between managers and employees.

Operational Transparency: Showing When Work Gets Done

Problem definition: Do the benefits of operational transparency depend on when the work is done? Academic/practical relevance: This work connects the operations management literature on operational transparency with the psychology literature on the peak-end effect. Methodology: This study examines how customers respond to operational transparency with parcel delivery data from the Cainiao Network, the logistics arm of Alibaba. The sample comprises 4.68 million deliveries. Each delivery has between 4 and 10 track-package activities, which customers can check in real time, and a delivery service score, which customers leave after receiving the package. Instrumental-variable regressions quantify the causal effect of track-package-activity times on delivery scores. Results: The regressions suggest that customers punish early idleness less than late idleness, leaving higher delivery service scores when track-package activities cluster toward the end of the shipping horizon. For example, if a shipment takes 100 hours, then delaying the time of the average action from hour 20 to hour 80 increases the expected delivery score by approximately the same amount as expediting the arrival time from hour 100 to hour 73. Managerial implications: Memory limitations make customers especially sensitive to how service operations end. History: This paper has been accepted as part of the 2018 MSOM Data Driven Research Challenge.

The influence of perceived host country political risk on foreign subunits' supplier development strategies

AbstractRecent protectionist trends (e.g., trade wars, Brexit) have challenged the stability of the global supply chains (SCs) of multinational corporations. While the SC and operations management (SC/OM) literature has examined how such sources of political risk influence strategic SC/OM decisions at the global level, we know little about how host country political risk influences the SC/OM practices of foreign subunits at the local level. We conducted an exploratory, multiple‐case study of western subunits operating in China to investigate whether managers of foreign subunits in a host country perceive political risk; and if so, how they adapt their SC/OM strategic choices to reduce its impact on their subunits. Our empirical findings suggest that variations in political risk perceptions create different political legitimacy goals that subunits attempt to meet by adapting their supplier development strategies. We induct a process model and identify three archetypes of supplier development strategy—self‐centered, collaborative, and voluntary—adopted by subunits to shape their legitimacy and mitigate political risk. We contribute to the SC/OM literature by theorizing SC/OM managers' perceived political risk, showing how foreign subunits may use supplier development to influence how the host government views them, and by complementing traditional “corporate” legitimacy‐seeking strategies with new “SC/OM” legitimacy‐seeking strategies.

Vehicle Maintenance Contracting in Developing Economies: The Role of Social Enterprise

Problem definition: Difficulties in healthcare delivery in developing economies arise from poor road infrastructure of rural communities, where the bulk of the population resides. Although motorcycles are an effective means for delivering healthcare products, governments in developing economies lack expertise in proper maintenance, resulting in frequent vehicle breakdowns. Riders for Health, a nonprofit social enterprise (SE), has developed specialized capabilities that enable significant enhancements in vehicle maintenance. Riders for Health has engaged with the governments and provided its services using different contracting approaches. However, the effect of such practice on improving vehicle availability—the main social mission of Riders for Health—is not well understood. Academic/practical relevance: This paper presents one of the first rigorous analyses of how SEs achieve their goals through innovations in operations. Our analysis highlights the relationship between a social mission objective and a service contract choice, contrasting it with the choice by a profit-maximizing organization traditionally assumed in the service contracting literature in operations management. Methodology: We construct and analyze a stylized model that combines the elements of reliability theory and contract theory, explicitly accounting for the SE’s social mission in her objective function. Results: We find that the “total solution” approach of providing all aspects of vehicle maintenance, including fleet ownership, is a preferred choice for an SE that prioritizes improving vehicle availability; by contrast, an organization that focuses on profit maximization would find this approach less attractive. Moreover, we show that the total solution approach induces the SE to exert more efforts on failure prevention and repair lead time reduction in equilibrium. Our analysis also suggests that the SE could further improve vehicle availability by the total solution approach if it manages a large fleet that consists of vehicles with high resale values. Managerial implications: Our findings provide theoretical support for Riders for Health’s recent move toward the total solution approach as it expands its service into wider rural areas in many countries. The insights obtained from our analysis offer actionable guidelines to other SEs operating in developing economies.

On the Structure of Bottlenecks in Processes

Process capacity and the associated notions of bottleneck activities and bottleneck resources—which are responsible for limiting process capacity to its present value—are fundamental concepts in the operations management literature. However, for processes that involve collaboration and multitasking, there is little clarity in the literature on what bottlenecks are, what they look like, and how they can be identified. In this paper, we formulate and analyze graph-theoretic optimization problems that determine bottleneck structures of activities and the associated bottleneck sets of resources in deterministic, single-product processes with possibly multiple copies of one or more resources and possibly multiple sets of resources that can perform each activity. In the presence of both collaboration and multitasking, sets of activities that are interconnected in a specific manner via shared resources form bottleneck structures that are responsible for limiting capacity. We use the collaboration graph of the process to either characterize bottleneck structures completely or identify graphical structures that must necessarily be part of any bottleneck structure. Our analysis reveals a natural hierarchy in the algorithmic approach for identifying bottleneck structures as processes become increasingly sophisticated, ranging from the “easy” case where the simple bottleneck formula correctly identifies bottlenecks to more complex cases where one needs to solve progressively complicated mathematical programs. In turn, this understanding helps us obtain prescriptive answers to several questions of interest to managers, for example, the budget-constrained procurement of resources to maximize capacity improvement and the design of processes to increase capacity without procuring additional resources. This paper was accepted by Jayashankar Swaminathan, operations management.

Destruction Decisions for Managing Excess Inventory in E-Commerce Logistics

The Internet has brought about new possibilities for innovation and radically changed business activities. Internet shopping is a prime example of increasing popularity, which is exacerbated due to the recent pandemic. It is expected that e-commerce will accommodate more than a quarter of the total retail sales worldwide in the next few years. Given the characteristics of e-commerce, inventory management is of paramount importance for an effective and timely response to the online customers’ demand. Despite its relevance, the issue of warehouse excess inventory is not sufficiently studied in the operations management literature. This study explores the factors, including sustainability and strategic considerations, that influence the inventory destruction decisions as one of the alternatives for managing excess inventory. Applying the Fuzzy Decision-Making Trial and Evaluation Laboratory (DEMATEL) method, the interrelationships between the decision factors are investigated and the decisive considerations are identified. Overall, the outcomes provide insights for the e-commerce practitioners and offer directions for modeling and managing inventory destruction decisions.