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Int. J. Production Economics 112 (2008) 646–654

www.elsevier.com/locate/ijpe

How to organise operations: Focusing or splitting?

Alex Hill�

Operations Research Group, Kingston Business School, Kingston University, Kingston upon Thames, Surrey KT2 7LB, UK

Received 17 August 2006; accepted 19 June 2007

Available online 5 July 2007

Abstract

The concept of focus has been proposed as a method for operations to achieve superior performance by concentrating its

resources on accomplishing one strategic task. Since its development by Skinner [1974. The focused factory. Harvard

Business Review May–June, 113–121], it has become a key element within the operations strategy field. Despite the high

level of adoption and investigation into the subject, there still seems to be little empirical support for the focus concept

[Vokurka, R.J., Davis, R.A., 2000. Focused factories: empirical study of structural and performance differences.

Production and Inventory Management Journal 41(1), 44–55] and a feeling that we still do not adequately understand its

application in industry [Ketokivi, M., Jokinen, M., 2006. Strategy, uncertainty and the focused factory in international

process manufacturing. Journal of Operations Management 24(3), 250–270]. This case-study-based research paper

examines three organisations, that have organised their operations using four different approaches, to understand the

advantages and disadvantages they bring. The findings show that some approaches (process and product/market) do not

fully reduce the level of complexity within operations, whilst others do (market order-winner and qualifier/performance

objectives). It is therefore proposed that some approaches should be re-classified as ‘‘splitting’’ rather than ‘‘focusing.’’

r 2007 Elsevier B.V. All rights reserved.

Keywords: Focusing; Splitting; Operations strategy

1. Introduction

Operations strategy concerns developing thenecessary capabilities for the operations functionto compete given its overall business and marketingstrategy (Skinner, 1974; Miller and Roth, 1994) and,in doing so, determines how best to organise itsresources (Hayes and Wheelwright, 1984; Wheel-wright, 1984, Hayes et al., 2005; Hill, 2004). Focusis one approach to organising resources and is‘‘based on the highly intuitive notion that a plantcan achieve superior performance by concentrating

e front matter r 2007 Elsevier B.V. All rights reserved

e.2007.06.002

8547 2000.

ss: a.hill@kingston.ac.uk

its resources on accomplishing one task, rather thanattempting to address an endless series of demandsfrom internal and external sources’’ (Pesch, 1996,p. 32). As Hayes et al. (2005, p. 45) conclude,‘‘Different operations structures and infrastructuresare required for different missions. Therefore, asingle facility, even if equipped with the mostmodern equipment and systems, will tend toexperience both irreconcilable conflicts and lowoverall effectiveness if it attempts to serve multiplemarkets that demand different competitive strate-gies.’’

Skinner (1974, p. 114) introduced focus as a wayto link operations resources to the appropriatecompetitive factors of its business so that it has

.

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654 647

greater control of its competitive position. Hedefined it as:

�

Ta

De

Ap

Pro

Pro

Vo

Or

per

Va

Ge

learning to focus each unit on a limited, concise,manageable set of products, technologies, vo-lumes and markets; and

� learning to structure basic policies and support-

ing services so that they focus on one explicitstrategic task.

Since then it has been widely adopted in themanufacturing literature (e.g. Hayes and Wheel-wright, 1984; Pesch, 1996; Hill, 2004, Van der Vaartand Van Donk, 2004), within services (e.g. VanDierdonck and Brandt, 1988; Davidow and Uttal,1989; Kimes and Johnston, 1990; Slack and Lewis,2002; Casalino et al., 2003; Devers et al., 2003;Hayes et al., 2005) and a number of differentapproaches to creating focus have been identified asshown in Table 1. The concept has been examined ina number of ways to understand the content of afocused operation (Berry et al., 1991; Bozarth, 1993;Pesch, 1996; Pesch and Schroeder, 1996), how itperforms (Bozarth and Edwards, 1997; Brush andKarnani, 1996; New and Szwejczewski, 1995;

ble 1

scription of the alternative approaches suggested within the literatur

proach Description

cess Process-focused operations have

them. They can manufacture a r

their given process technology (H

duct/market Each unit produce one family, or

normally high and would typica

1978).

lume Products are split into high volu

effectiveness or production flexib

der-winners and qualifiers/

formance objectives

Products are allocated to a parti

that operations needs to provide’

focusing by performance objectiv

requirements of a particular mar

riety ‘‘A company may wish to segme

(usually dictated by the number

one site may concentrate on rela

another concentrates on high var

p. 101).

ography ‘‘Sometimes operations can be se

be because the characteristics of a

geographic location. Alternativel

operation is geographically limit

would fall into this category’’ (S

Safizadeh et al., 1996; Shafer and Oswald, 1996,Van der Vaart and Wijngaard, 2007) and why someoperations are not focused (Ketokivi and Jokinen,2006), but can still be high performers (Hayes andPisano, 1994).

Despite the high level of adoption and investiga-tion into the subject, there still seems to be littleempirical support for the focus concept (Vokurkaand Davis, 2000) and there is a feeling that we stilldo not adequately understand its application inindustry (Ketokivi and Jokinen, 2006). This re-search aims to addresses this by investigating theadvantages and disadvantages of the alternativeapproaches identified in the literature.

2. Methodology

A case study methodology was selected toinvestigate the advantages and disadvantages asso-ciated with alternative approaches to focusingoperations. This method was chosen because itallows the questions of why, what and how, to beanswered with an understanding of the nature andcomplexity of the phenomenon (Benbasat et al.,1987) and, by studying the approaches used in their

e

different segments of the total production process assigned to

ange of products and production volumes within and limited by

ayes and Schmenner, 1978).

range of products. The total demand for the family of products is

lly have similar process requirements (Hayes and Schmenner,

me and low volume, which permits focusing on either cost

ility (Hayes and Wheelwright, 1984).

cular unit ‘‘on the basis of different order-winners and qualifiers

’ (Hill, 1994, p. 148). Slack and Lewis (2002, p. 101) refer to this as

es where ‘‘the operation is set up solely to satisfy the performance

ket or market segment.’’

nt its operations in terms of the number of different activities

of different products or services) it is engaged in. so, for example,

tively low variety standardised products and services, while

iety or customised products and services’’ (Slack and Lewis, 2002,

gmented in terms of the geographic market they serve. This may

company’s different market segments are largely defined by their

y, it may mean that the nature of the service offered by an

ed. Most high-contact operations, such as fast-food restaurants,

lack and Lewis, 2002, p. 101).

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654648

natural setting, it is possible to extend/refine existingtheory in a meaningful and relevant way (Bonoma,1985; Benbasat et al., 1987; Yin, 1994; Voss et al.,2002).

Three case studies were researched to providesufficient empirical grounding and generalisabilityof findings, but at the same time not too great anumber to significantly reduce the depth of researchwithin each case (Glaser and Strauss, 1967; Eisen-hardt, 1989; Voss et al., 2002). The cases wereselected using replication logic to either predictsimilar results to the other case studies or producecontrary results to the other case studies but forpredictable reasons (Voss et al., 2002). For example,Rume and Langley were selected to investigate ifsplitting by product/market creates similar benefitswithin two organisations. These, in turn, wereexpected to produce contrary results to the order-winner and qualifier approach used by Norcon andLangley. Equally, the both Langley and Norconcases allowed two alternative approaches to becompared in a single setting. The resultant casestudy database developed enabled the advantagesand disadvantages from the three focus approachesto be studied and understand where their applica-tion is most appropriate.

Qualitative and quantitative data were collectedfor each case study using site visits, archivalinformation analysis, interviews and observation.Formal procedures and perceptual triangulationwere used to ensure the quality of the data collectedand links were made between the questions asked,data collected and the conclusions drawn to increasethe reliability of the information in each case study(Yin, 1994; Voss et al., 2002). For example, opinionsof executives were tested against each other and alsocompared with performance data. A detailed write-up was completed for each case researched andtables were used to categorise the data, analyse theadvantages/disadvantages gained from focusing andcompare alternative approaches across differentsituations. The overall idea was to become inti-mately familiar with each case as a stand-aloneentity and allow the unique patterns to emergebefore looking for patterns across cases (Eisenhardt,1989). The detailed report for each case study wasthen presented back to the relevant businessinvolved and performance data tracked to furthertest the findings that emerged.

Once the data have been analysed within eachcase, the research findings were then searched forcross-case patterns. This process involved selecting

alternative approaches to focusing and then lookingfor within-group similarities and inter-group differ-ences. By selecting pairs of cases and listing thesimilarities and differences between them it waspossible to develop a matrix to compare wherecompanies used alternative methods, why they areused and the resultant advantages and disadvan-tages of each approach.

3. Findings

The research found a number of advantages anddisadvantages of alternative focus approaches andthese are now outlined for each of the three casestudies.

3.1. Case A: Langley

Langley was established 40 years ago to designand manufacture products for aerospace customers.Since that time, it has grown rapidly and diversifiedinto the automotive market that now accounts for70% of its sales revenue, with the other 30%remaining as aerospace. The two markets it suppliesare significantly different in terms of the productionvolumes, length of product life cycles and marketorder-winners and qualifiers. Aerospace compriseslow-volume orders with long product life cycles.Although customers continually review price, mar-gins are generally much higher than the automotivesector. As all aerospace parts are potentially lifethreatening, there is a significant emphasis onquality conformance. This is especially so wherethe unit price of a product is small compared to thetotal cost of the aircraft. On-time delivery is animportant issue to ensure deliveries meet customers’build programmes. When a product moves to thespares phase, customer demands change to very lowvolumes with intermittent call-offs where deliveryspeed is now a key factor with price even lesssensitive than in the original equipment manufac-ture (OEM) phase.

The automotive sector is more price sensitive,especially for contracts linked to high-volume cardemand. However, in the spares phase of aproduct’s life, volume of demand reduces, deliveryspeed becomes important and price is less sensitive.As with the aerospace market, delivery reliabilityand quality conformance are necessary for both theOEM and spares contracts. The process technologydemands of aerospace and automotive are similar

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654 649

and the same operations processes can be used tomake products for both sectors.

Up to the point of focusing its resources, Langleywas structured using the principles of economy ofscale and centralised batch production processesmade products for both markets. However, inresponse to the loss of aerospace market share inrecent years and the need to meet its financialobjectives, Langley decided to change its overallstructure into two focused units: one for automotiveproducts and the other for aerospace products.

Within operations, the moulding processes wereseparated by type and allocated to each focused unitin line with the capability and capacity requirementsof the products involved. The rubber mill, blankpreparation, metal preparation and finishing pro-cesses remained as central units, as the investmentrequired to duplicate them could not be justified. Inaddition, all specialist functions were split andallocated to the relevant unit, except the financeand technical functions that remained central.

Langley found that 1 year after the reorganisa-tion, the performance of the total business had stillnot improved. Some benefits were obtained by thereduction in size, the improved communication andthe improved orientation to market segments.Aerospace profit margins increased, but the auto-motive unit was still making a loss. As a result, therewas no improvement across the whole of thebusiness.

Within the automotive unit, there was stillconflicting strategic tasks and widely differingproduction volume requirements. This meant thevarying demands of the automotive market were notbeing met. The automotive market is very differentto aerospace as it is driven by price rather thanquality conformance and delivery speed. Forexample, an aerospace product would typically be10 times the price of a similar product sold toautomotive customers. A subsequent review of theproduct/market focus approach taken was com-pleted and the decision was made to move to anorder-winner focus. The changes mean automotiveOEM sales are now allocated to one unit whileautomotive spares, aerospace OEM and aerospacespares are handled in the second unit.

The move to an order-winner focus has incre-ased Langley’s sales revenue and profit. Theseimprovements resulted, in part, from the single,coherent strategic task in each unit. The automotiveOEM unit focused on price, and the aerospaceOEM, aerospace spares and automotive spares

unit focused on quality conformance and deliveryspeed.

3.2. Case B: Norcon

Norcon makes eight groups of products for therail, automotive and aerospace markets. Eachproduct group uses some or all of a range ofprocesses. They are typically low volume in natureand highly labour intensive. Prior to focusing,processes were functionally based with all support-ing activities centrally organised providing expertisefor all product groups.

Recently, Norcon secured a large order forproduct group A, which would increase the salesrevenue of this group by 500%. Faced with thedecision of how to absorb this new business into itsexisting set up, Norcon conducted a review of itsbusiness that revealed the main order-winner forproduct group A to be price, compared withproduct design for all other product groups.

Even though there was sufficient space within theexisting facilities to accommodate the new productgroup A production line, the decision was made toput it in a separate facility owned by the companysituated about 1 km away from the main plant. Thisdecision was made because the price-sensitive natureof product group A is different to the otherproducts it supplies. By setting up an order-winnerfocused unit, Norcon was able to pursue theappropriate operations strategies for both parts ofthe business. On the one hand, it was able tomaintain and develop the technical knowledge tosupport the design requirement of its high marginproducts while and on the other, creating a leanorganisational structure and low-cost capability forproduct group A. As a result, profit targets weremet in both parts of the business and sales volumesfor group A grew whilst its other business wasmaintained.

By using an order-winner approach to focusingoperations, the business found that each unitunderstood its objectives and its strategic task.For product group A this led to reduced costs,better cost control, shorter lead times, reducedwork-in-progress inventory, simplified workflowand improved customer response.

3.3. Case C: Rume

Rume specialises in the design, development,manufacture and support for five main aerospace

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654650

product groups to both civil and military customers.Both segments comprise low-volume orders withlong product life cycles necessitating support fordecades after the OEM phase. Profit margins arerelatively high and on-time delivery is importantwithin both civil and military markets. Meetingcustomers’ build schedules during the OEM phaseof an aircraft lifecycle is a prerequisite to beingawarded a contract. However, the spares phase of aproduct’s lifecycle results in a change in customerdemands. Here price is even less sensitive, andvolumes become very low and intermittent, deliveryspeed becomes a key order-winner.

Historically, products were manufactured usinglow-volume batch production processes. Due to thespecific technical needs of its products, operationsprocesses tend to be dedicated to specific parts andare arranged into 10 areas to cope with the 40,000different products supplied. However, the growingcomplexity was proving increasingly difficult tomanage effectively. The result was an inadequateperformance on many business dimensions includ-ing below budget profits and poor delivery relia-bility performance. The main problems Rume hadwere:

�

Long operations lead times � High levels of work-in-progress inventory � Many management levels in the organisational

structure

� Poor communications throughout the company � Poor delivery reliability � Inflexible operations systems that could not

change to meet varying customer demands.

The decline in company performance and theincreased importance of the civil sector within thewhole business resulted in a review of the operationsstructure. It was decided to subcontract all demandfor spares and split the company’s operationsfunction into three product-focused units. Productswere allocated to the relevant business unit depend-ing upon their end use and any parts not sold inthese categories were transferred to other companiesin the group.

The movement to product-focused units involved,amongst other things, radical changes to the plantlayout and organisational structure. Previously, thelayout of the plant was functionally based wheresimilar processes were grouped together. Nowoperations processes were allocated to each unit.This required the purchase of some processes that

had previously been shared in order to ensure eachunit was independent of the other two facilities.

The principal downside of these changes was theincreased process investment, the correspondingreduction in equipment utilisation and the hiringof additional engineering staff to provide dedicatedsupport for each unit. However, Rume experiencedcertain benefits too. Managing each individual areawas easier as it had less products, less overall staffand a smaller physical space. Staff became moremotivated as they now felt part of a team that wasinvolved in all aspects of supplying a specificproduct range. Communication improved withinthe unit, it was easier to control and required fewergeneral overhead staff. As a result, Rume was ableto reduce waste and improve its delivery reliabilityperformance. This helped secure future contractsparticularly with its civil aircraft customers andmeant it was now able to meet budgeted profit-ability targets.

4. Discussion

The cross-case patterns within the research revealadvantages and disadvantages of alternativeapproaches to organising resources and that theorder-winner approach creates the highest level ofsimplicity. It is therefore proposed that the order-winner approach focuses an organisation, whereasthe other approaches only reduce its size. However,the process and product/market approaches toorganising resources seem easier to understand thanby order-winner and it was not necessary for abusiness to focus all products or processes toimprove its performance.

4.1. Advantages and disadvantages of alternative

approaches to organising resources

The research found that there are a number ofadvantages and disadvantages associated withdifferent approaches to organising facilities.Table 2 summarises the main ones and shows howalternative approaches can reduce the complexitywithin operations, but this often involves invest-ment for duplicated equipment and increased over-head costs from the need for more support (e.g.specialists) and lower utilisation of processes.

These findings support those of Slack and Lewis(2002, p. 102) who position the alternative ap-proaches to organising operations resources on acontinuum between being focused on resource or

ARTICLE IN PRESS

Table 2

Advantages and disadvantages of alternative approaches to organising resources

Advantages and disadvantages Alternative approaches to organising resources

Economies of

scale

Focused by

Process Product/market Order-winners and

qualifiers/performance

objectives

Advantages

High equipment utilisation |Minimal investment |Minimal overhead costs |Reduction in size

Less products | | |Less operatives | | |Smaller area | | |

Easier to control | | |Reduced range of |Production technologies |Production volumes | |

Single strategic task |

Disadvantages

Poor communication |Highest complexity |Conflicting

Production volumes | | |Strategic tasks | | |

Increased investment

Process duplication | | |More overheads | | |

Lower equipment utilisation | |

Operations focus based

on resource criteria

Operations focus based

on market criteria

Process Volume Variety Geography Product/

market

Performance

objectives

Order-winners

and qualifiers

Fig. 1. Focusing operations based on resource or market criteria (Adapted from Slack and Lewis, 2002, p. 102).

A. Hill / Int. J. Production Economics 112 (2008) 646–654 651

market criteria as shown in Fig. 1. The researchfound that resource-based focus, such as by process,is suitable when a resource is constrained either bythe level of capacity available or the investment costrequired to duplicate it. For example, in Langley therubber mill operation was process focused, whilstthe other operations were initially product/marketfocused and then subsequently order-winner fo-cused. The investment required to duplicate therubber mill meant a resource-based approach wasappropriate, whilst the excess capacity and ease ofduplication of the other operations meant a market-

based approach could be used to create units with asingle, coherent strategic task enabling them tobetter support their markets. Rume also highlightsthe benefits of a market-based approach (order-winner focus) and the resultant clarity of strategictask. This led to a decision to buffer operationsfrom the market through excess capacity rather thaninventory. The resultant shorter and more reliablelead times allowed it to greater exploit the marketand thereby increase its sales and profits. Theseexamples show how the alternative approaches toorganising operations enable it to either exploit

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654652

resources (process focused) or markets (order-winner focused), a view that is supported by authorssuch as Goldratt (2002).

4.2. Highest level of simplicity created by order-

winner and qualifier/performance objective approach

Focusing by product/market reduced the size ofthe operation, but there were still conflictingstrategic tasks within each unit. However, using anorder-winner approach not only reduced the size ofthe operation, but also created a single coherenttask as well. As such it created a higher level ofsimplicity than a product/market approach. Anexample of this was found in Langley. When itinitially split by market it found that the automotiveunit was still producing high price sensitive, lowprice sensitive and rapid response products. So,although some advantages had been obtainedthrough simply splitting operations, conflictingdemands were still being placed on the samefacilities.

After analysing the key strategic task within eachof its market sectors, the decision was made to re-split its products into two alternative order-winnerand qualifier-based units:

�

Price-sensitive unit—to support the automotiveOEM market, and typically associated with highvolumes. � Delivery speed unit—to support the aerospace

OEM, aerospace spares and automotive sparesmarkets with typically low and very low volumes.

4.3. Splittiing vs. focusing

The process and product/market focus ap-proaches to organising resources do not create bothelements of Skinner’s (1974) original definition. Assuch, they do not fully reduce the level of complex-ity within an operation. As Skinner (1996, p. 20)himself reflects, ‘‘the confusion may be at leastpartly my fault for not being more clear aboutfocused factories in that 1974 article. But it is alsodue to a popular but quite incorrect logicalsyllogism, namely to assume that because smalland simple plants seem inherently focused, that allfocused plants must be small and simple.’’ Howevera focused operation ‘‘is not necessarily small, notnecessarily simple, not even uncomplex. It is thefactory or productive unit with a manufacturing

system in which policies and structure are the resultof a management process which focuses the entireset of manufacturing policies around a clearlyexpressed manufacturing task’’ (Skinner, 1996,p. 21).

It is proposed, therefore, that the alternativeapproaches suggested in the literature actually fallinto two categories:

�

Splitting—an organisation can break up itsoperations into smaller units. However, theseunits will not be focused upon a single explicitstrategic task. For example, by process orproduct/market. � Focusing—an organisation can focus its present

facilities by creating units based on a consistentset of strategic tasks. For example, by order-winner.

4.4. Easier to understand process and product/

market approaches

The concept of focusing facilities by product/market or process appears easier to grasp than thatbased on order-winners. This seems to be becausethe market into which a product is sold and theprocess used in its manufacture can be more easilyvisualised than how a product competes within amarket. For example, products in Langley wereuniversally referred to as aerospace, or automotive,but never as price sensitive or delivery speedproducts even when those criteria were agreed toform part of the distinctive competitive differenceswithin their markets. One consequence of this isorganisations tend to more readily split theirfacilities by process or by product/market.

4.5. Not necessary to focus all products or processes

Each approach to organising resources hasdifferent sets of advantages and disadvantages. Assuch, it may not be appropriate to focus all theproducts or processes within an organisation andsometimes certain areas should be arranged usingeconomies of scale. Norcon is an example of this,where eight product groups are supplied to threedifferent market sectors. Analysis revealed thatproduct design was the major order-winner for allproduct groups apart from group A where it wasprice. As a result, they decided to create a separateproduct-focused unit for group A, while the other

ARTICLE IN PRESSA. Hill / Int. J. Production Economics 112 (2008) 646–654 653

seven product groups continued to be manufacturedtogether in a facility organised using the principlesof economies of scale. Although they only focused asingle-product group, there was an improvementthrough the whole business. They were able tocreate a dedicated unit focused on group A’srequirements, and also simplify the production ofthe other seven groups by removing the conflictingdemands of group A from the main site.

5. Implications and limitations

The concept of focus is a key element inoperations strategy and although its roots are inmanufacturing, it is now starting to be adopted inservices too. Given its importance as a concept, andthe need to more adequately understand its applica-tion in industry (Vokurka and Davis, 2000; Keto-kivi and Jokinen, 2006), this research has examinedthe practical implications of focusing operationswithin three organisations. It concludes that therehas been a misinterpretation of the focus conceptwithin the literature and that some approaches donot fully reduce the level of complexity within anoperation. Based on this, it is proposed that theprocess and product/market approaches are reclas-sified as ‘‘splitting,’’ whereas the order-winner andqualifier/performance objective approach remainsas ‘‘focusing.’’

However, this is just the first step in establishingthe practical implications of the focus approachessuggested in the literature. Further research isrequired to look at a wider sample to test thefindings that emerged. Whilst the methods ofvolume and variety were touched upon in theresearch, they have not been investigated insufficient detail to draw any substantial conclusions.These two methods and also that of geography needto be further researched to see if they should also bereclassified as ‘splitting’. Without this level ofunderstanding organisations will blindly implementstrategies unaware of the disadvantages or advan-tages that they bring and where their application ismost appropriate.

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