Increasing productivity at 3M, as described in the Challenge Case, is mainly a matter of integrating resources such as people, equipment, and materials to reduce cycle times.

Because the level of productivity at 3M was far from ideal, management, under the leadership of former CEO George Buckley and Senior Vice President John Woodworth, decided that the company had to lower its operating costs through improved productivity. The cost savings would enable profits to continue growing even during periods of sluggish sales. Basic methods of improving productivity included shortening supply chains and improving energy efficiency. Other ways to improve productivity at 3M could include more effective training programs and more selective hiring decisions.

To maintain and improve product quality even as it improves efficiency, 3M’s management could establish a quality assurance program that continually monitors components and finished products to ensure they are at acceptable levels. Quality circles could be established to involve employees in the effort to improve product and process quality. Automation also could improve the efficiency as well as the quality of manufacturing processes at 3M. Decision support software from Expert Choice has already automated the process of making production and supply chain decisions, and now the decisions are made faster and according to agreed-upon criteria.

In attempting to reduce the time it takes to complete the production and delivery of each product, 3M’s management, under the direction of Jim Welsh, is involved in operations management. The issues mentioned in the Challenge Case pertain to the “periodic updating” segment of operations management activities—selecting processes to improve, designing more efficient processes, and updating the production system to shorten cycle times, lower transportation and inventory costs, and improve energy efficiency. The periodic updating at 3M should focus on the appropriate use of company resources such as factories, inventory, and employees who have ideas for greater efficiency. Once established, new operations procedures at 3M must be continually monitored by management for both effectiveness (“doing the right things”) and efficiency (“doing things right”).

Factors that 3M’s management must consider when making operations decisions include capacity strategy, making sure that the company has appropriate resources to perform needed functions at appropriate times; location strategy, making sure that 3M’s resources are appropriately positioned for work when the work must be performed; product strategy, making sure that appropriate products are targeted and provided; process strategy, making sure that 3M is employing appropriate steps in producing its products; layout strategy, making sure that the flow of raw materials and components is desirable; and human resources strategy, making sure that 3M has appropriate people to make its products.

Operations control activities can help 3M’s management ensure that production is carried out as planned. Just-in-time inventory control, for example, would ensure that enough raw materials are in place and available just when they are needed for the next step in a production process. In contrast, putting money into large surpluses of an adhesive would needlessly tie up company resources and reduce profitability. Maintenance control would ensure that the equipment needed to produce a product line is operating at a desirable level. Cost control would ensure that 3M is not producing its products too expensively. Budgetary control would focus on acquiring company resources and using them to make products as stipulated by 3M’s financial plan.

Operations control at 3M can also include ratio analysis, or determining relationships among various factors on 3M’s income statement and balance sheet to arrive at a good indication of the company’s financial position. Through ratio analysis, 3M’s management could monitor factors such as inventory levels, production volume, and production costs to determine their overall impact on company profitability, liquidity, and leverage. To assess the impact on the financial condition of the company of producing various products at various locations, 3M’s management could track ratios over time to discern trends.

Finally, operations control at 3M would need to include materials control to ensure that materials purchased from suppliers are flowing appropriately from vendors to manufacturing plants and are meeting production requirements. For example, the goal of monitoring the adhesives or packaging provided by a contractor would be to ensure that these products are meeting the company’s specifications and quality standards, as well as arriving on schedule and in the quantities ordered.

Several useful production control tools are available to 3M’s management to ensure that products are made efficiently and effectively. First, management can have products sampled and inspected to determine which, if any, should be improved and how to improve them. Second, 3M can use management by exception to control product quality and costs. In this case, 3M’s workers would correct minor defects and bring only exceptional matters to management’s attention. To successfully use management by exception at 3M, it would be necessary to implement some carefully designed rules. One such rule might be that when 5 percent or more of components arrive late from a vendor, the inventory problem must be reported to a plant manager. The manager would then work with the vendor to resolve the delivery problem or find a more reliable vendor.

As an alternative, 3M might prefer to use management by objectives to control efficiency. For example, management has set objectives for reducing cycle time and improving energy efficiency at the corporate level. Each business unit leader has objectives for improving cycle times and energy efficiency in the business unit. With management by objectives, each level of managers and employees at 3M should also have objectives to meet that contribute to those overall objectives. If the objectives are worthwhile and realistic, even if some of 3M’s employees are not reaching them consistently, then management would take steps to ensure that they are met.

Another control tool that 3M’s management might find highly useful is break-even analysis. Break-even analysis would furnish management with information about the various levels of profit or loss associated with various levels of revenue. To use this tool, 3M would have to determine the total fixed costs necessary to operate each manufacturing facility, the price at which its products are sold, and the variable costs associated with making each type of product.

For example, if management wanted to determine how many stethoscopes have to be sold before the company breaks even on making them, it could arrive at the break-even point algebraically by following three steps. First, all fixed costs attributable to making the stethoscopes—for example, rent for the factory where they are assembled—would be totaled. Second, all the variable costs of making the stethoscopes would be totaled, and from this total, management would subtract the revenue from selling the stethoscopes. Variable costs include the pay for the workers who make the stethoscopes as well as the costs of all raw materials and components purchased from contractors. Finally, the answer calculated in step 2 would be divided into the answer derived in step 1, and this figure would tell management how many stethoscopes must be sold at the projected revenue level to break even.

An alternative way that 3M’s management could determine the break-even point would be by constructing a graph showing fixed costs, variable costs, and revenue per stethoscope. Such a graph would probably give managers a more useful picture than the algebraic method would for formulating profit-oriented production plans for the product line and the facility.

Broader operations tools that are highly useful to managers exercising the control function include decision tree analysis, process control, value analysis, computer-aided design (CAD), and computer-aided manufacturing (CAM). Decision tree analysis, which supports complex decision making, could be a component of decision-making software such as the software that 3M acquired for improving its production decisions. Process control and value analysis would be important for ensuring that 3M is maintaining its quality standards and managing its materials costs. CAD is a basic tool that 3M’s engineers could use to design products that perform as intended, and it is likely to be linked to CAM in the locations where 3M’s processes are automated.