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ASSESSMENT OF PRODUCTION PLANNING AND CONTROL SYSTEMS

J.M. Vilas-Boas da Silva


Universidade Catolica, Portugal and Cranfield University, UK
J.M.Kay
Cranfield University, UK
Abstract
Research into Production Planning and Control Systems (PPCS) has shown
serious concerns about success not always being achieved. Current operational
practices have failed to support intended strategic goals and have shown a lack
of ability to predict the performance of PPCS. Most of the work in the area has
being driven by operational concerns ignoring the alignment of PPCS decisions.
The research to be presented addresses the placement of PPCS within the
context of business strategy under a contingent, holistic and strategic approach.
As an outcome, a richer picture of the relationships between PPCS and IS/IT
strategy, manufacturing strategy and organisational structuring is drawn. This
broader span provides a stronger basis to suggest research propositions and
leads to a future discussion of which strategic dimensions should be included in
the development of metrics for assessing the performance of PPCS.
Keywords: Assessment; Production planning and control systems;
Performance; Metrics.

Introduction
Despite the link between the relative performances of PPCS, manufacturing and business most
of the research in the area has being driven by operational concerns. Recently, successful
exploratory research, e.g., Davies et al, (1996) targeted issues such as: strategic integration of
operational practices and business objectives; qualitative assessment of the achievement of the
requirements for success; and, internal consistency of practices and performance measures.
Nevertheless, these top down approaches still allow room to further development.
On one hand, PPC is linked to Business Manuf. strategy
business strategy both through External environment
strategy decisions
manufacturing strategy (MS) •globalization Strategy
•turbulent/saturated markets
Emergent IS/IT strategy
(Skinner, 1985) and information •increased competition
•information-age strategy decisions
systems/information technology •increased IT investment
•time and speed
Decision
making PPC
(IS/IT) strategy (Ward & Griffiths, Internal characteristics Intended
strategy
•age and size
1996). On the other hand, it is part of •technology Organisational
•power and culture Structure design
the decision making of organisational •past patterns parameters
Organisational
structuring (Mintzberg, 1979). theory
Therefore, the links between PPC,
MS, IS/IT and organisational Fig.1 - The analytical framework
structure should be investigated, as well as the links among business strategy (BS), MS, IS/IT
strategy and structure. This broader span should provide a richer picture of the relationships of
PPCS both in the strategic scope and in the context of organisation theory (OT) and, a
stronger basis for discussing their performance. This vertical dimension should be understood
as complementary and integrative of the above mentioned operational dimension. Figure 1
presents the analytical model that supports the approach described in this paper.
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The purpose of the enquiry is exploratory, once it attempts to assess PPCS performance
qualitatively, looking for new insights of what is happening in order to ask relevant questions.
Moreover, the methodology is based in a broad literature survey from several theoretical
backgrounds, whenever possible focusing competing rival explanations for the approached
phenomenon in order to achieve improved construct validity.
The construct of the analytical framework
Environment, strategy, structure and decision making
Debate in OT has been concerned about what determines structure (Robbins, 1990). The early
theories on organisational structuring missed the context, the type of organisation and the part
to which they apply, as well as the relationships between the structure and functioning of the
organisation (Mintzberg, 1979). According to Robbins (1990) Barnard’s work was one of the
first to treat organisations as systems and to challenge the hierarchical view of authority.
Moreover, Robbins (1990) argued that Woodward’s work denied the existence of universal
principles of management/organisation and, that it also represented a transition from a
principles perspective to a contingency theory of organisations. Furthermore, Hatch (1997)
made the point that the traditional theorists conceived relationships which form an
organisation’s structure as static or routinised; therefore, change only occurred when
management decided to redesign it. More dynamic views introduced new organisational forms
such as networks and virtual organisations. Finally, Woodward (1994) found two groups of
organisations: those in which formal organisation had arisen imperceptibly and gradually from
informal organisation, and those in which it had been consciously planned. She added that
conscious planning produced better results in some kinds of industry than in others.
The contingency approach has been the most popular of the views on the environment-
structure relation. Within it, external environment is one of the determinants of structure. The
others are strategy, size, technology and power. Robbins (1990) excluded power because he
saw the selected structure as the one that maximised control, but Mintzberg (1979) included it.
In this paper the environment was conceptualised as the totality of physical and social factors,
either internal or external to the organisational boundary that are taken directly into
consideration in the decision making behaviour of individuals in the organisation (Duncan,
1972). The internal environment is referred to as internal characteristics in Figure 1.
The influence of the external environment
Hatch (1997) defined three levels for the organisation’s external environment: i) the
interorganisational network, which consists of suppliers, customers, competitors, unions,
regulatory agencies, and special interests; ii) the general environment made up of social,
cultural, legal, political, economic, technological, and physical forces; iii) the international
and global environment which includes aspects that are organised on a global scale.
Furthermore, Duncan (1972) classified environment uncertainty according to two dimensions:
complexity and stability. Mintzberg (1979) added market diversity and hostility and assumed
that the environment was uniform. Finally, Duncan (1972) pointed out that uncertainty was
not a constant feature because it depended on the perceptions of the organisation members.
A brief survey of the current environment found that it has been characterised by an
information-age economy (Jih & Owings, 1995) where markets are more turbulent, more
difficult to forecast, more saturated and more competitive. The information-age economy
originated a globalization trend which changed the patterns of international competition.
Market globalization was related to IT growth rates. IT allows better control across distance
and time (Edwards & Peppard, 1994). This explained why IT expenditure between 1983 and
1993, increased ten-fold for PCs and, doubled for mainframes (Jih & Owings, 1995).
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Mintzberg (1979) and Robbins (1990) summarised the relationship structure/environment, as


follows: stable and complex environments give rise to decentralised and bureaucratic
organisations relying on standardisation of skills as the coordinating mechanism; dynamic and
complex originate decentralised and organic structures based on mutual adjustment; stable and
simple create centralised and bureaucratic organisations based on the standardisation of the
work; and, dynamic and simple environments ask for organic and centralised structures
supported on direct supervision. Therefore, the stability dimension is a more important
contributor to uncertainty than complexity (Duncan, 1972). Mintzberg (1979) associated
hostility with unpredictability and argued that hostile environments demanded fast reactions
by the organisation. He also found that markets would range from integrated to diversified and
argued that market diversity affected the variety of work to be done.
The influence of the internal characteristics
The effect of an organisation’s age and size
Older organisations tend to have more formalised behaviour which impacts unit size
positively. Moreover, the structure exhibits signals reflecting the age of founding of the
organisation (Mintzberg, 1979). Robbins (1990) considered size the most important condition
affecting the structure, but he also mentioned researchers which concluded that, neither
complexity, nor formalisation could be implied from size. Khandwalla (1977) added that the
organisation’s goals become more flexible and their structure less flexible with age.
Moreover, he stated that older organisations tend to be in more stable environments, to have
lower aspirations and to be more conservative in their policies and philosophies. The effect of
increased size, holding constant technical system and environment, may be summarised
(Khandwalla, 1977; Mintzberg, 1979; Robbins, 1990) as greater division of labour and unit
differentiation and, more hierarchical levels. These issues imply less need for intra-unit co-
ordination and more need for inter-unit co-ordination.
The effect of technology
Mintzberg (1979) found regulation and sophistication as the main dimensions of technical
systems. More formalised operating work and more bureaucratic operating core structure were
required, as these became more regulating. More sophisticated technical systems would
originate the need for larger and more professional support staff and greater use of liaison
devices. The automation of the operating core transformed a bureaucratic administrative
structure into an organic one.
Woodward (1994) assessed the effect of technology upon organisation, based on the
classification of firms with technical characteristics in common. She found three major groups
across a scale of increasing technological complexity: i) unit and small batch production; ii)
large batch and mass production and iii) process production. Thompson’s typology for
technology added a second conceptual dimension, the level of standardisation of the inputs/
outputs, as follows: pooled, sequential task and reciprocal task interdependencies (Hatch,
1997; Robbins, 1990). Perrow analysed task variability as function of the degree of
systematisation of the methods and found the following classification for the level of
technology routinisation: engineering; routine; non-routine and craft (Robbins, 1990).
Woodward (1994) presented as the main conclusion of her research the existence of a link
between technology and structure in the following elements: length of the line of command;
span of the control of the chief executive; ratios of managers to total personnel, of
administrative staff to manual workers, of direct to indirect labour, of graduate to non-
graduate supervision in production and, the management levels’ number in direct production
departments. Woodward (1994) also found well developed PPCS in batch production.
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Robbins (1990) concluded that non-routine technology is likely to lead to: i) narrower span of
control, i.e., lower unit sizes; ii) increased vertical differentiation; iii) higher horizontal
differentiation; iv) more trained professionals. Routine technology was found significantly
associated with higher formalisation of behaviour through detailed job descriptions and rules.
New technologies can perform in non-determinant ways, being hard to control, creating
incomprehensible unexpected failures and, showing up randomly non-repeating patterns. They
promote the organisational change, encourage/support innovation and, rise concern for
productivity improvement. Therefore, resistance from people can arise (Hatch, 1997).
The effects of power and culture
Mintzberg (1979) considered three power contingent factors - ownership, members’ personal
needs and fashion. Requirements for external control, e.g., choosing the chief executive
officer and imposing clear standards, originated more centralised and formalised structures. In
addition, the power needs of the members also generated structures more centralised. Ford
was quoted as an example. Finally, structures following ‘the fashion’, proposed by periodicals
and consultants, might not be the best for all organisations.
Organisational culture, create a common understanding of the organisation and of its members
behaviour. Robbins (1990) found culture as a substitute for formalisation, because it can
create predictability, orderliness and consistency without the use of written documentation.
Strategy and the strategic process
The most important schools of thought in strategy are prescriptive in orientation, treating
strategy as a process of conceptual design, formal planning and analytical positioning. They
promoted thought independent of action, leading to the separation of formulation from
implementation, ignoring learning coming from the trial process (Mintzberg, 1987;1990). He
also disagreed that structure should follow strategy and be determined by it. Mintzberg (1985)
suggested that deliberate and emergent strategies form the poles of a continuum along which
real-world strategies should fall (Fig. 1).
In the design school approach (Johnson & Scholes, 1997) strategy analysis is concerned with
the strategic position of the organisation; strategic choice regards the formulation, evaluation
and selection of possible courses of action; and, strategy implementation concerns the
planning and management of change. The fit view on strategic management identifies threats
and opportunities in the competitive environment and then develops the required business
resources. The stretch approach develop views of the future in which competences unique to
the organisation as a whole provide advantages over competition or create new
opportunities/markets (Prahalad & Hamel, 1990). This view presented a way to depart from
generic strategies and expanded the classic strategic contents.
The choice of the competitive priorities for the business should support Porter’s generic
competitive strategies: differentiation, focus and cost leadership. The marketing strategy is
implicitly assumed in the choice of both these generic strategies and the competitive criteria.
Quality, cost, delivery dependability, flexibility, design, technical support/after-sales service,
and time are some of the core competitive priorities required in order to win orders in a
market, for a period and for a product family (Hill, 1993). Prahalad & Hamel (1990) argued
that these criteria were only attributes of current end products in the short term. For global
markets, in the long run, competitiveness derived from an ability to build, cheaper and faster
than competitors, the core competencies that spawn unexpected core and end products.
Manufacturing strategy (MS)
MS is the functional strategy that links the business strategy (BS) and the PPC choice (Fig. 1)
(Hayes & Wheelwright, 1984). General approaches to MS formulation pursue the fit view of
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the design school being prescriptive, analytical and rational (Platts & Gregory, 1990).
Therefore, manufacturing capabilities and priorities should match the relevant competitive
criteria for the outputs supporting the competitive advantage of the business (e.g., Skinner,
1985; Hill, 1993).
Information systems/information technology (IS/IT) strategy
IS/IT strategy was considered in Fig. 1 because: PPC systems process data and make use of
IT; innovation and high rate of change in IT; IS/IT strategy concerns all the technology the
organisation employs, therefore requiring a mutual consistency check with MS decision areas.
IS/IT strategy issues are, as follows (Ward & Griffiths, 1996): potential of IS/IT from a BS
view; information as a strategic resource; IS/IT driven by internal/external factors;
investments in IS/IT business driven/led; adding value besides reducing costs and,
involvement of top managers. Peppard (1993) added the increasing expenses in
maintenance/investment; the long term nature of expenditures; the impact on the way
organisations are structured/managed and the impact on the organisation’s external interfaces.
Approaches to IS/IT strategy clearly followed the design school (Ward & Griffiths, 1996;
Earl, 1989) and, both the fit and the stretch views, depending on the type of IS. To sort out
the IS strategy, i.e., to answer the question “what is required?”, IS were classified according to
the contribution to the business success rather than to the required tasks. The McFarlan
framework has been used, as follows (Earl, 1989; Ward & Griffiths, 1996): support IS - little
impact in the present or future, average investment and occasional senior management
attention; factory/ key operational - crucial to operations, but not at the heart of the strategic
development; turnaround/ high potential - IT and systems being planned will be critical to
survival and, strategic - IS have always been critical and the future is dependent on them.
IT strategy concerns the planning and exploitation of the IT infrastructure, supporting BS. It
should satisfy the needs of the IS strategy through the delivery of the applications in the
portfolio, as an alternative to the reactive technological development (Ward & Griffiths,
1996). They also considered the following elements for the IT infrastructure: physical
infrastructure, architectures, policies, management processes and support services.
The organisational structure
Two approaches to address the relation structure-contingency factors were found. Mintzberg
(1979) and Robbins (1990) argued that effective structuring required a close fit between the
contingency factors and the design parameters. Mintzberg further stated that causation could
not be determined, but it would be more feasible to change structure than the contingency
factors. As a counter-example, he stressed the attempts to create more favourable
environments, through tools such as marketing. There are less restrictive views such as the
one of Hatch (1997) and the 7-S framework that conceptualised organisations as a set of
factors - technologies, social and physical structures and cultures - that overlay and
interpenetrate each other within the context of an environment. On the other hand, the
organisation structure is seen as a result of the strategic process planning and analysis
exercise. Real world cases are positioned in between these rival approaches (Fig. 1).
Mintzberg (1979) defined the structure of an organisation as the sum total of the ways in
which it divides its labour and then achieves co-ordination among them which includes the
reporting relationships and interaction patterns. He identified five co-ordinating work
mechanisms, as follows: mutual adjustment; direct supervision; standardisation of work
processes, of outputs and of skills. Robbins (1990) defined organisation design as being
concerned with constructing and changing an organisation’s structure to achieve its goals.
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The organisation has been described by an organisational chart representative of the formal
authority (Mintzberg, 1979). However, the view of the organisation as a network of regulated
flows, - well-ordered functioning system of systematically controlled flow processes - remains
dominant in the literature of planning and control systems. The regulated flows are vertical
channels up and down the middle line that managers interrupt to make decisions (Mintzberg,
1979). Moreover, organisations function in complex ways because substantial activity takes
place outside the systems of formal authority and regulated flow processes.
Complexity, formalization and centralisation were identified (Robbins, 1990) as the core
dimensions of organisational structure. Mintzberg (1979) named them as job specialisation,
behaviour formalization, training and indoctrination and, vertical/horizontal decentralisation.
Moreover, he also considered as core dimensions the unit grouping, the unit size, the planning
and control systems and the liaison devices. These are the design parameters that should be
taken into consideration in the definition of the structure.
Analysis of the PPCS positioning in the framework
A contingent approach means that structure will change to reflect changes in the independent
variables Robbins (1990), either through a deliberate strategy or through an emergent strategy
(patterns realised despite intentions) Mintzberg (1985). The contingent factors impose
constraints on the organisation, place uncertain demands for adaptation as a price for survival
and create a dependence relationship (Hatch, 1997). The environment imperative has been
discussed because some large companies can create the external environment that reflects the
structure from which it is seen (Robbins, 1990). Proposition: «PPCS performance is
dependent on the satisfaction of the demands placed by the structure determinants».
The environment is changing beyond recognition and information systems are part of that
process. Speed was pointed out as the major driving force of the 1990s and time as the next
source of competitive advantage (Hum & Sim, 1996). Proposition: «PPCS performance is
dependent on their contribution to improve responsiveness through the innovative use of
IT».
Hatch (1997) related the resulting level of uncertainty to the expected information needs, as
follows: stable and complex environments generate moderate uncertainty and information
overload; dynamic and complex are characterised by high uncertainty and unknown
information requirements; stable and simple result in low uncertainty and, known information
requirements and availability and, dynamic and simple environments are characterised by
moderate uncertainty and constant need for new information. Moreover, hostility powers
uncertainty and market diversity increases complexity both of them increasing uncertainty.
Proposition: «The performance of PPCS is dependent on the ability to reduce perceived
uncertainty in decision making in line with the type of environment».
Some controversy is associated with the size effect, originating several different conclusions
depending on either the type of sample/case or methodology used (Robbins, 1990). However,
increased size appeared to result in: i) more formalised behaviour and more use of planning
and control systems which lead to a structure more bureaucratic and, ii) decentralisation
(Mintzberg, 1979). Moreover, small businesses presented both unique problems and structural
solutions. Proposition: «The performance of PPCS is dependent on a break-even point in
the organisation size and, when size increases, on the contribution to control
decentralisation through formalisation»
Woodward’s typology revealed structure was related to performance but only when the types
of technologies the organisations used were considered (Hatch, 1997). Woodward (1994)
detected the greatest difficulties of exercising effective control in unit production, where it
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was almost impossible to predict the results of the work. Robbins (1990) argued that routine
technology can be considered vertically decentralised, if formalisation is high. Otherwise, it
would lead to vertical centralisation, as regards the concentration of formal authority.
Proposition: «The performance of PPCS is dependent on the type of the technology, on
the level of standardisation of the I/O and on the routinisation of technology».
If power is concentrated at the strategic apex, personnel procedures would be tighter, work
processes would be more standardised, communication would be more formal, reporting more
regulated, planning would increase and adaptability decrease (Mintzberg, 1979). This
concerns both ownership and members needs. Robbins (1990) suggested that the stronger an
organisation’s culture, the less management need be concerned with developing formal rules
and regulations to guide employee behaviour. Proposition: «The performance of PPCS is
dependent on the power needs of ownership and members; on the culture effectiveness
of the organisation and, on the best practice pressures».
Although the process of strategy implementation influences the deliberated business strategy
through the rise of the emergent strategies, an intended business strategy should be pursued to
provide a broad direction to the business progress and to guide the process of change. Both of
them are influenced by the existing structure, i.e., the patterns the organisation pursued in the
past (Mintzberg, 1987). Proposition: «The performance of PPCS is dependent on the
approach to business strategy and on the past organisational patterns». While distinctive
capabilities are visible to competitors and so vulnerable over time, core competencies cannot
be imitated (Tampoe, 1994). Proposition: «PPCS performance is dependent on the support
provided to both competitive criteria and core competencies».
The most popular writers largely agreed on the contents of MS. This included PPCS in the
currently named infrastructural decisions. The type of support required from MS to BS was
defined as internally/externally neutral or internally/externally supportive by Hayes and
Wheelwright (1984) Proposition: «PPCS performance is dependent on: the support
provided to BS by MS; the level of match between PPC and the decision areas of MS;
and, the degree of fitness among manufacturing and the other functional strategies».
High potential and strategic applications match a stretch approach because support views of
the future in which unique competencies should provide advantages over competition. Key
operational and support applications are closer to the fit view of the design school because the
most important is to avoid competitive disadvantage by the improvement of efficiency
through low cost and long term solutions (Ward & Griffiths 1996). Propositions: «PPCS
performance is dependent on the way they are positioned in the applications portfolio
that also drives the criteria for performance assessment» and «Some of the conclusions
for assessing PPC systems should be valid to other processes of innovation».
In using IT proactively new opportunities for the business can be created (Peppard, 1993).
Proposition: «PPCS performance is dependent on: the degree of fitness between IT and
IS strategies, between IT and manufacturing strategies and between the elements of the
IT infrastructure; the level of planning and management of the IT infrastructure; the
synergy between several different technologies».
Managers favour the informal system, spending in it most of their time. Often the regulated
channels are slow, unreliable and too limited. The soft, intangible and speculative information
is ignored in the formal MIS and as a result managers bypass it, building networks of informal
contacts (Mintzberg, 1979). Proposition: «PPCS performance is dependent on the task co-
ordinating mechanisms that determine the formal structure, regulate the flows and
shape the informal system of authority».
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Mintzberg (1979) proposed the configuration hypothesis, that stated that «effective structuring
required an internal consistency among the design parameters». Proposition: «PPCS
performance is dependent on the achievement of the configuration hypothesis».
Finally, it is proposed that «PPCS performance is dependent on the degree of fitness
between the MS, IS/IT strategy and structure».
Conclusions
Many decisions concerning PPCS are still made on: a functional basis, following a best
practice approach, stressing the more popular/obvious factors, being responsive to the highest
and short term pressures or determined by operational concerns in strictus sensus. The
implementation of these decisions might eventually lead to poor performance.
This paper proposes some reflection on the approaches which several branches of the
literature have taken on factors that might influence PPCS performance. Moreover, several
competing theories were addressed to build a richer picture of the analysis. This practice
attempted to construct a pluralistic non-biased analytical framework for positioning PPCS
through the cross-referencing of multiple sources. This can help to identify the most suitable
PPCS option in context, to make predictive judgements on its performance and to explain
PPCS failure/success. Nevertheless, care must be taken to avoid side-tracking, unnecessary
complexity and complication coming from the large scope of the view undertaken.
As further work, it is recommended that the propositions which are suggested as the outcome
of the analysis section are developed in more detail, related to the several types of PPCS and
linked to their main activities. This exercise should be attempted taking into consideration the
concern to harmonise the relative contribution of the design parameters and, of both the IS/IT
and manufacturing strategic decisions to the design, choice and assessment of PPCS (Fig. 1).
Therefore, the relationships between these three main factors should also be addressed (dotted
arrows in Fig. 1).
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