Economics of operations management: A research perspective

In response to intense competition from overseas in the last two decades, U.S. companies have instituted a variety of management practices in their quest to improve their competitiveness. Among the many practices that have been adopted by a large number of firms are just-in-time, total quality management, worker empowerment, and design for manufacturability. However, there has been little systematic analysis of the organizational factors that drive the adoption of these practices as well as their successful implementation. This paper posits that the theories and methods from economics can provide a useful aid in such an analysis. Using the basic tenets of economics, a structural framework is proposed to highlight critical issues in operations management that deserve attention. Examples from industry are used to illustrate how the framework may provide answers to questions that have received little attention in the research literature.

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