Changes in The Role of Production and Operations Management in the New Economy

THE FlAgSHIP RESEARCH JOuRNAl OF INTERNATIONAl CONFERENCE
OF THE PROduCTION ANd OPERATIONS MANAgEMENT SOCIETy
Volume 1• Number 1• January - June 2008
Changes in The Role of Production and
Operations Management in the New Economy
Henrique Luiz Corrêa
Professor of Operations Management
Crummer Graduate School of Business, Rollins College
hcorrea@rollins.edu
ABSTRACT: The paper analyses how the area of production and operations management (POM) in Bra-
zil should change/adapt in order to remain relevant in the so called “new economy”. Drawing from
insights coming from both the relevant literature and a survey, a preliminary research and teaching
agenda is proposed.
KEY WORDS: Production and operations management, research agenda, teaching, new economy, future
INTROduCTION
activities remain relevant and really contribute to
the betterment of businesses and institutions per-
The forces behind the development of the so-called
formances in the new economy?
“new economy” are substantially changing the ways
in which the economy in general and the business
world in particular operate. The early XXIst Cen-
BRIEF RESEARCH METHOd CONSIdERATIONS
tury literature reflects this notion and Hayes (2002),
Teece (1998), McGee and Bonnici (2002), Walters and
Given the novelty of the research subject, this study
Buchanan (2001) and Walters (2004) are but a few
is exploratory in nature and, given the dynamics of
good and representative examples. But what are
the current business environment, to a certain extent
the implications of this new economy for the way
speculative – and so is the research methods used.
in which we should manage production and opera-
First, an extensive and exploratory (given the scar-
tions? Unfortunately, in this regard, the literature is
city of literature references dealing with the issues
not as plentiful as it is in announcing the changes. In
involved in the research questions) literature review
an attempt to fill this gap, this research more specifi-
was done. Content analysis and affinity diagrams
cally tries to answer the following questions:
were used here to try and come to grips with what
would the new economy be in more researchable
• What are the main changes brought about by the
terms. Then, a semi-structured internet-based survey
new economy to the corporate world in general
was performed involving Brazilian senior POM re-
and to production and operations management
searchers and professors aiming at identifying their
(POM) in particular?
perceptions with regard to which would be the POM
• Which sub-topics, within the general field of
sub-topics that would require further research vis-à-
POM have been (and in the future are likely to
vis the changes brought about by the new economy.
be) most affected by the changes brought about
A Brazilian-only sample of professors was used be-
by the new economy?
cause at the outset we wanted the study results to be
particularly useful for Brazilian professors and re-
• What would be a research and teaching agenda
searchers in designing or re-designing their research
for the next years so that we, POM researchers
agendas and teaching content. Conclusions are then
and teachers can increase the probability that our
drawn from both sources: literature review and sur-
1

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
2
vey outcomes resulting in an initial contribution
• Great emphasis on information and telecommu-
to the effort of establishing research and teaching
nication technology in the development and man-
agendas for the field of POM in Brazil vis-à-vis the
agement of both products and processes (Farrell
growing importance of the so-called new economy.
2003; Sahlman 1999). What was said above is also
It is needless to say that this study does not intend
valid here: the old economy has a long history
to be exhaustive or definitive. Rather it intends to
of companies whose businesses rely heavily on
add to the continuous debate on how we POM pro-
these technologies (the traditional telecom com-
fessionals should go about continuously redefining
panies such as AT&T and IT companies such as
our field so that it remains relevant now and in the
IBM, for instance are the obvious examples, but
future.
other traditional companies like Sears & Roebuck,
for instance also built business empires long ago,
in the beginning of the XXth Century, based on
lITERATuRE REvIEw
catalog sales, which relied heavily on telecommu-
New economy
nication technologies). However, what changes
in the new economy is the extent to which these
Businesses, markets and above all technologies in
technologies are being increasingly made avail-
accelerated and constant evolution for many de-
able and used in attaining competitive advan-
cades have come to create an environment of which
tage by both traditional players and new players
dynamics, challenges and opportunities are un-
and across the board of industrial sectors – this
precedented in history. According to the literature
has in many situations changed the rules of the
(although each reference in the literature is usually
business game. The internet, for instance, made
biased toward its own focus of study) the general
it possible that completely new business models
notion of “new economy” generally includes:
were created. An example is Skype (www.skype.
• Great emphasis in networks of relationships and
com), a company founded by an individual with
their effects (Van den Ende and Wijnberg 2001;
very little capital investment a little more than a
Fjeldstad and Haanes 2001; Srinvasan, Lilien
decade ago which in a couple of years became a
and Rangaswamy 2004). This does not mean that
formidable competitor in an industry tradition-
the old economy did not have network-based
ally dominated by giant telecom companies and
businesses and corresponding effects (consider
their huge capital assets – their physical networks
companies such as Avon Cosmetics and Tup-
for instance – which are not anymore the entry
perware, who historically built mighty corpora-
barriers that once kept their markets relatively
tions based on the so-called network marketing
protected. Examples of traditional companies
or the traditional Japanese “keiretsus”, which
that have reinvented their operations with the
are the tightly woven networks of suppliers that
intensive use of the new technologies are also nu-
work in unison with large focal companies such
merous – such as the airlines who use technology
as Toyota Motor Co. for instance). What changes
to bypass a traditionally important tier in their
in the new economy is the extent to which these
distribution channels – the travel agencies – to
“network” effects appear and are used to gen-
sell tickets directly to end users.
erate competitive advantage in the launch, pro-
• Great knowledge content in the companies’ as-
duction and delivery of both physical products
sets, services and physical products (Hayes 2002;
and services (a high profile example is eBay.
Sahlman 1999; Farrell 2003). Once again, this
com, the largest internet-based auction company
does not mean that in the old economy we did
whose business model is exclusively based on
not have companies that based their competitive-
linking millions of sellers and millions of buy-
ness on knowledge intensive assets and prod-
ers – in other words, on facilitating and manag-
ucts (nearly centenary consulting firms such as
ing gigantic networks of buyer-seller relation-
Booz-Allen & Hamilton, for instance have had
ships. Another wonderful example is Wikipedia
this characteristic ever since they were founded).
(www.wikipedia.org) an open source encyclope-
What changes with the new economy is the ex-
dia based exclusively on a network of hundreds
tent to which not only new companies but also
of thousands of independent contributors that
traditional companies are adding knowledge to
work to create and maintain what is today the
the traditional value package that they offer their
largest encyclopedia in the world);
customers. In order to achieve that, they have to

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
3
value much more the knowledge factor in their
It is important however to establish a caveat here.
own assets. Here the traditional elevator manu-
Maybe the terms “new economy” and “old econo-
facturers, such as Schindler, can provide a good
my” are not totally adequate and maybe they can
example. They have added for instance remote
not fully capture the essence of the ongoing changes.
monitoring and decision making software – in
It is not true that what is happening is a substitution
other words, “knowledge” – to their products so
of the new economy by the old economy. The old
that preemptive action can be taken sometimes
economy and its assumptions remain present and
even before breakages occurs, taking mainte-
some of them, totally valid and current. Steel or
nance efficiency and product availability to levels
flour will continue having to be manufactured – as
never though possible before – in order to achieve
well as other products which are less affected by the
that, Schindler and other elevator companies had
phenomena described here – for them, much of the
to enhance substantially their knowledge base in
traditional operations management body of knowl-
terms of for e.g. the operation and use of their
edge developed and perfected along the last more
products by their customers. Fertilizer manufac-
than two centuries (Corrêa 2003) remain valid and
turers like Bunge in Brazil, provide another good
useful. However, as the changes amass and as the
example. They keep on selling “old economy” fer-
markets affected by them become increasingly im-
tilizer to farmers, but they also can provide “new
portant for most developed and developing coun-
economy” detailed information and knowledge
tries economies, it is essential that the field of POM
about what, and how much to apply of fertilizer
prepare and develop complementary approaches
directly to the farmer’s applying tractor, based on
which can then, together with the more well estab-
global positioning system technologies that iden-
lished POM tools and techniques, be able to effec-
tify the position of the tractor and then, based on
tively deal with the old and the new economies. This
the Bunge knowledge base, the characteristics of
is actually the main argument of this paper.
that particular soil that needs correction. Knowl-
edge became possibly the most valuable part of
Sub-topics within the POM body of knowledge
the value package and of the asset pool of this
company.
With the objective to analyze the possible impacts
of the new economy in the field of POM, first of all
It seems undeniable that, despite the importance of
we will establish the “confines” of the mainstream
the other reasons and characteristics behind the de-
POM current body of knowledge, by reviewing a
velopment of the new economy, the weight that the
number of leading POM text books authored by ex-
new technologies has is disproportional as a change
perienced authorities in the field. Here the assump-
engine. However, what frequently happens is that
tion is that current or recent editions of these text
the discussion about the new technologies revolves
books adequately reflect the POM approaches and
exclusively around the internet-based technologies
techniques that are being taught in good business
whereas the scope of the discussion should be much
and production engineering schools, if not in depth,
more comprehensive. It should include the develop-
at least in scope, at the undergraduate and graduate
ment of increasingly sophisticated, customized and
degree-granting and, executive levels. As text books
powerful software and hardware, with capacities be-
new editions nowadays are launched frequently (in
ing measured in tera-bytes and giga-hertz, and tele-
some cases, yearly), we also consider that the appli-
communication technology making it possible that
cable recent research results will also be present in
information be transmitted with richness, frequency,
the most recent leading books. We analyzed 12 text
speed and inter-activity never seen before. This al-
books, including the Brazilian (Corrêa and Corrêa
lows for new ways to develop, produce and distrib-
2006), European (Slack et al. 2007) and American
ute products, for instance in the multi-billion enter-
(Heizer and Render 2008; Stevenson 2005, Chase;
tainment industry, where music, games and video
Jacobs; Aquilano 2006) top sellers together with 7
are developed by groups of developer teams whose
other also relevant text books.
members are scattered around the globe communi-
cating via teleconferences, e-mails, video-conferenc-
In total, we analyzed [1] Chase; Jacobs; Aquilano
es and other e-means, copied electronically and al-
2006; [2] Stevenson 2005; [3] Slack et al. 2007; [4] Reid
most instantly (instead of traditionally manufactured
and Sanders 2002; [5] Gaithier and Frazier 2002; [6]
in factories) and downloaded by customers instead of
Melnyk and Denzler 1996; [7] Dilworth 2000; [8]
physically transported on hard media.
Heizer and Render 2008; [9] Starr 2004; [10] Russel

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
4
and Taylor 2000; [11] Corrêa and Corrêa 2006; and,
We received 36 usable responses (16.4%). The results
[12] Wild 1995, trying to find out which POM sub-
probably cannot be considered statistically repre-
topics are more frequently found in their content. A
sentative (given that the usable resulting sample is
detailed content analysis was performed by using
not random) of the 219 professors who received our
affinity diagrams (because not always the same sub-
survey invitation and they are even less likely to be
topics are called the same way across the different
representative of the universe of Brazilian POM pro-
text books) which resulted in Table 1.
fessors. However, the analysis of the responses gave
us a number of valuable insights and, most of all,
Table 1- Frequencies of POM Sub-Topics Found in
the specific topics that the professors suggested that
the Analyzed Text-Books
should be developed can help in the development of
an agenda of broad directions for POM research and
Reference
teaching for the POM area in Brazil (for a detailed
POM Sub-Topic
[11] [8]
[2]
[5]
[1]
[4] [10] [7]
[3]
[9]
[6] [12] Total
Capacity management
1
1
1
1
1
1
1
1
1
1
1
1
12
account of the survey research findings please refer
Forecasting
1
1
1
1
1
1
1
1
1
1
1
1
12
Production scheduling
1
1
1
1
1
1
1
1
1
1
1
1
12
to Corrêa 2006).
Inventory management
1
1
1
1
1
1
1
1
1
1
1
1
12
Quality management and Six sigma
1
1
1
1
1
1
1
1
1
1
1
1
12
Just-in-time and Lean production
1
1
1
1
1
1
1
1
1
1
1
1
12
Project management
1
1
1
1
1
1
1
1
1
1
1
11
The sub-topics that were most and least frequently
Plant layout
1
1
1
1
1
1
1
1
1
1
1
11
Supply chain management
1
1
1
1
1
1
1
1
1
1
1
11
MRP and ERP
1
1
1
1
1
1
1
1
1
1
1
11
present in the professor’s responses as obsolete
Aggregate production planning
1
1
1
1
1
1
1
1
1
1
10
Theory of constraints
1
1
1
1
1
1
1
1
1
1
10
when considering the new demands brought about
The future of POM
1
1
1
1
1
1
1
1
1
1
10
Product development and process selection
1
1
1
1
1
1
1
1
1
9
Process analysis and re-design
1
1
1
1
1
1
1
1
1
9
by the new economy are shown in Figure 1.
Work organization and reward systems
1
1
1
1
1
1
1
1
1
9
Location
1
1
1
1
1
1
1
1
1
9
Simulation and decision making models
1
1
1
1
1
1
1
1
8
Operations strategy and competitiveness
1
1
1
1
1
1
1
1
8
Figure 1 – Most and least Frequent Topics in the
Performance evaluation and Productivity
1
1
1
1
1
1
1
7
Technology in operations
1
1
1
1
1
1
1
7
Professors’ lists
Ethics and the environment
1
1
1
1
1
1
1
7
Maintenance and reliability
1
1
1
1
1
1
6
Total 23
23
21
20
20
20
19
19
18
18
13
11
Sub-topics which were most frequently mentioned by the respondent professors as
having obsolete current techniques and approaches when considering the demands of
SuRvEy RESERACH wITH POM PROFESSORS:
the new economy
Performance evaluation and Productivity
26%
dEvElOPMENT
Product development and process selection
23%
Work organization and reward systems
23%
Production scheduling
20%
Sub-topics that have been obsolesced by the new
Operations strategy and competitiveness
20%
Inventory management
17%
economy according to the survey
Location
17%
Ethics and the environment
17%
Taking into account the list of the most frequently
Sub-topics which were least frequently mentioned by the respondent professors as
found sub-topics of the POM body of knowledge
having obsolete current techniques and approaches when considering the demands of
the new economy
identified in the analysis of the text books described
Just-in-time and Lean production
6%
Theory of constraints
6%
above, an internet-based survey was performed in-
Maintenance and reliability
6%
Project management
6%
volving 219 POM (and POM-related areas) profes-
sors (all doctors) of Brazilian teaching and research
Specific topics requiring development according to
institutions. They are the group of professors who
the survey
usually help as blind referees for the articles submit-
ted to SIMPOI (the International Symposium of Pro-
Below are some illustrative examples of the specific
duction and Operations Management, yearly hosted
topics suggested by the respondents as deserving
by Fundação Getulio Vargas Business School, in Bra-
development / further development so that the ob-
zil). A questionnaire was sent in 2005 to the profes-
solesced sub-topics of the POM body of knowledge
sors where we initially defined what we would con-
can better serve the needs of organizations that oper-
sider as the new economy in this research and pre-
ate in the new economy:
sented the identified list of POM sub-topics to them.
Performance evaluation and Productivity
We then asked the participants to elect the three
sub-topics that they considered as the ones whose
• Indicators for service operations
current POM techniques and approaches were most
• Data envelopment analysis to measure and ana-
obsolesced (or that are most prone to become obso-
lyze network ‘nodes’ performance
lete) by the new economy. For the three elected sub-
topics, we then asked the respondents to list 1 to 3
• Methods to evaluate effectiveness in new econo-
specific issues (within each sub-topic) that would re-
my service operations
quire inclusion / change / development so that they
• More balanced methods between profit and hu-
could better meet the needs of the new economy.
man values to evaluate performance

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
5
Product development and process selection
• Work ethics in hyper-competitive environments
• Early involvement of suppliers and co-design
• Incorporation of ethical values in new economy
techniques
operations management
• Technology/knowledge-based product develop-
Supply chain management
ment techniques
• Impacts of RFID technology in supply chain man-
• Outsourcing in product development
agement and inventory management
Work organization and reward systems
• Collaborative planning in new economy supply
chains
• Work organization studies based more on indi-
• Implication of the extension from the ‘chain’ to
vidual specialization than on links with institu-
the ‘network’ concept in new economy supply
tions
management
• Virtual service operations management – net-
• Partnerships as leverage factors in cultural change
works of independent experts serving specific
between nodes in supply networks
markets
• Techniques to determine total (rather than local)
• Organizational structure in modular system sup-
costs in new economy supply networks
ply networks
• Models for global logistics
• Organization and knowledge management in
new economy operations management
• Better models for the make-or-buy decision in the
new economy
• Work organization of virtual work groups work-
ing remotely
• Reliability and risk in global and virtual supply
chains
• Performance analysis and reward for innovation
• Organizational clustering and value chains
Production scheduling
• New economy service supply chain manage-
ment
• Planning and scheduling methods using actual
data, with immediate feedback
• The role of new actors (e.g. 3PL) in supply net-
work management
• Production planning in modular production systems
Process analysis and re-design
Operations strategy and competitiveness
• Process mapping for less structured productive
• Company competitiveness principles extended
processes
to the competitiveness of networks
• Process management with telework
• Strategic alignment between markets and opera-
tions in new economy services
Forecast
• Methods for evaluating the strategic impact of ac-
• Demand forecast for highly innovative products
tions in new economy operations
• Sales forecast with information sharing among
• New taxonomy for operations, more appropriate
supply network partners
to the new economy
• Flexibility and reliability in new economy opera-
It is interesting to notice that however Supply chain
tions management
management has not had an expressive number of
votes as an obsolesced sub-topic (present in only 11%
Inventory management
of the respondent’s lists), it was by far the one with
the largest number of specific topics to be developed
• Inventory management models reviewed for new
in the view of the researched professors (28% of the
economy supply chains
total number of specific suggestions related to Sup-
Ethics and the environment
ply chain management). This probably means that al-
though the professors do not consider the sub-topic
• Ethical impacts of the use of technologies (e.g.
obsolete, they urge it to mature, since Supply chain
privacy issues)
management is still a relatively young and develop-

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
6
ing area. Other sub-topics with large numbers of
edge in operations that are increasingly knowledge
specific suggestions are Work organization and reward,
intensive? Knowledge is an asset that is different in
Ethics and the environment and, Performance measure-
nature of other assets: the more you use, the more
ment and Productivity.
you have it and not the opposite. Another important
aspect of knowledge that affects operations manage-
ment is the knowledge value. How different meth-
ANAlySIS ANd RESulTS
ods of knowledge and intellectual capital valuation
We now analyze the impact of the changes brought
affect decisions in POM? In an analysis of capital in-
about by the new economy on the POM body of
vestment, for instance, how do the different levels of
knowledge, based on the two main sources of this
learning associated with different capital investment
study: analysis of the relevant literature and survey
alternatives should be taken into account in decision
research with Brazilian POM professors. For each
making? The possibility of telework increasingly
of the main sub-topics, we then propose some basic
possible and adopted with the new economy also
research questions/ observations that can represent
poses interesting questions regarding work orga-
possible directions for research and teaching POMS
nization and performance measurement. Possibly,
in Brazil so that we provide our students and practi-
models for performance evaluation that are much
tioners with tools that will allow them to better face
more based on results than on physical presence
the challenges presented by the new economy.
will be necessary to be further developed and this
certainly represents a big departure from traditional
models. It is also clear that the new economy brings
Work organization, and reward systems / Performance
with it much larger flow of innovation. In operations
measurement and Productivity
in which the main assets are knowledge and infor-
The new economy substantially changes the orga-
mation, the capacity to innovate becomes a funda-
nizations’ assets and products making them much
mental characteristic. How to organize and motivate
more information and knowledge-intensive. This,
teams for innovation? What motivates the product
together with the new levels of connectivity made
and process innovators? How to attract them and
possible by technology advancements, substantially
retain them?
altered the relationship between individuals and
The service organization networks which are territo-
organizations. It is possible today, for instance, that
rially dispersed, made possible by the new economy
an academic institution assemble their courses to
developments, also require new approaches for pro-
be taught remotely by individual professors with
ductivity measurement. How to compare the pro-
expert knowledge, without necessarily developing
ductivity of small design offices scattered around
institutional links with them. The same way, a pro-
the world, each under different contour conditions?
fessor can be part of the pool of instructors of several
More sophisticated productivity measurement and
educational institutions without having traditional
management techniques such as data envelopment
formal links with any of them. What type of work
analysis need to be developed and incorporated
organization an operation like this requires? What
into the tool box of the POM professional. Broadly
type of motivational techniques can be used to get
speaking, substantially new approaches for perfor-
the best out of this pool of professionals sometimes
mance measurement should be developed so that
scattered around the globe who are not anymore
operations in the new economy can be more effec-
part of a group of co-workers who gather around
tively managed.
the water fountain? How to coordinate them so that
they convey the consistent messages that will dif-
ferentiate each of the various teaching institutions?
Operations strategy and competitiveness
The same is valid for other types of companies who
sometimes use the expertise of independent engi-
Possibly one of the most affected sub-topics of POM
neers and analysts with whom very thin institution-
with the upcoming of the new economy is Opera-
al links are developed. How to retain the talents in-
tions strategy and competitiveness. This is a relative-
volved in these virtual pools? How to make sure that
ly young sub-topic (the seminal articles, on “manu-
sensitive information is kept inaccessible to com-
facturing strategy”, by Professor Wickham Skinner,
petitors with such weak links? These are questions
from Harvard University, date from the 60’s and 70’s
that we should try to help answer. Other interesting
– Skinner 1969; 1974). However probably because of
questions in this sub-topic: how to manage knowl-
its very origin, its development still revolves around

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
7
manufacturing operations in well defined manufac-
Product development and process selection
turing units. The techniques and approaches of Op-
erations strategy need to be developed so that they
Here, the traditional methods of product develop-
incorporate the strategy design and management of
ment (that emphasize the development of physical
networks of productive operations that not neces-
products) should be complemented by methods that
are able to deal with “value packages” (Corrêa et al.
sarily generate only physical products but a pack-
2007) that include physical goods and also informa-
age that also includes services. To the traditional
tion / knowledge / service components that the new
basically “top-down” approach (present in most of
economy technology allows and the new economy
the current operations strategy frameworks), also a
markets require. This substantially affects the very
“bottom-up” approach should be added in which
way products are developed. Concepts such as “de-
emerging and resource based strategies should help
sign for manufacturability” should be expanded
consider the more knowledge-intensive assets of
to include “design for effective use” and “design
new economy operations. Traditional Operations
for reuse/recycling” because some times the prod-
strategy approaches also either adopt the “trade-
ucts in the new economy incorporate information/
off” approach to performance attributes (Skinner
software/ knowledge to facilitate its use (as in the
1969) – in which one assumes that an operation can-
case of the Bunge example in a previous section of
not improve simultaneously in all performance at-
this paper). Simultaneous engineering in two di-
tributes or adopt the “best practice” approach (that
mensions – product and process development and
sometimes make believe that there is no such thing
in three dimensions, including the simultaneous
as “trade offs” in operations). When facing the new
development of product, process and supply chain
economy conditions however the learning aspect of
(Fine 1998) should now consider a 4th dimension for
the strategic process gains importance and less static
development: the customer experience/ relationship
concepts that incorporate the learning aspect such
dimension. In product development processes of the
new economy the “timing” of the product introduc-
as the concept of dynamic capabilities (Teece and
tion and the so called “time to market” are essential
Pisano 1997) can be helpful but still needs further
aspects. Some times arriving earlier in the market
development for practical use. Traditional opera-
is more relevant than arriving with quality perfec-
tions strategy frameworks also normally ignore the
tion or lowest price but late in the market. In order
possibility of cooperation with competitors (some-
to be successful given these conditions, maybe new
times called “coopetition”). With the highly dynam-
approaches are needed. On top of it, consider the
ic environment in which the new economy operates,
need to deal with complex networks of cooperating
with windows of opportunity opening and closing
organizations (that many times include competitors
quickly, the agility of virtual multi-company organi-
– for e.g. competing pharmaceutical companies fre-
zations that might include competitors in coalitions
quently join efforts in the expensive activity of new
to seize temporary opportunities should be seen as a
drug development). These new approaches must be
real possibility for the operations strategic processes.
studied, researched and taught to managers going
Another issue that certainly deserves further inves-
to the market in the era of the new economy.
tigation is the use of information intensive assets to
explore the possibility of achieving superior levels
Supply chain management
of agility, security and reliability brought about by
the possibility of acquiring, monitoring and tracking
This sub-topic is subjected to the influence of many
100% of transaction information in operations net-
of the new conditions of the new economy. It is now
necessary for instance that the activity of production
works in real time, continuously and at affordable
process selection ceases to be performed in an iso-
costs. However, we now have to learn how do deal
lated stand alone fashion, inside a productive unit
with universes of data rather than with samples of
to be performed in coordination with the process
data. In many situations it is not substantially more
selection of other production units in the network.
costly to acquire all information about a process
The network of operations should now be the unit
than it is to acquire samples of information. This is
of analysis and it is the production process selec-
wonderful, but we need slightly different statistics
tion of the network that should be aligned with the
and different tools to help managers digest the gar-
market needs. For instance, if one unit of the net-
gantuan volumes of data that are now available.
work chooses an efficient but not-so-flexible pro-

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
8
cess and the subsequent one selects a flexible but
the high level of complexity of some products make
not-so-efficient process, these misaligned decisions
it impossible to wait until perfection is attained and
will certainly come at a cost for the supply network
then launch the product. If the product was devel-
performance. The POM body of knowledge has ma-
oped considering that it should be easy to gradually
ture and well established models to help with pro-
update, correct/ improve, and with easy download
cess selection - e.g. Hayes and Wheelwright’s (1984)
of new releases/ patches, it is even possible to count
product-process matrix – for the strategic selection
on the contributions of millions of users as “quality
of a production unit process. Not much however has
inspectors” providing valuable information about
been developed in terms of frameworks to help se-
product correction and improvement.
lect processes for the operations networks of which
the new economy is made (there are exceptions
Consider for instance the launch of a new opera-
though that confirm the rule such as Fisher 1997).
tional system by Microsoft. Differently from the old
Another decision that deserves more research atten-
economy, it is quite plausible that Microsoft prefers
tion in the new economy is the “make or buy deci-
to launch a new operational system without having
sion” – in other words, what part of the overall pro-
tested it to get rid of 100% of the flaws, because it
cess will be performed by the company in analysis
is so crucial that they get to the market in the right
and what part will be delegated – or “outsourced”
window of opportunity. They then use the ease of
– to partners. What are the variables that should be
connectivity to continuously collect data on flaws
taken into account when making this decision so that
from their huge pool of users and also continuously
each of the network partners gives the network per-
update and correct their system remotely some-
formance its maximum contribution? This decision
times without the user knowing it. We are certainly
increasingly requires that a more strategic approach
not advocating one or another approach to quality
is adopted than simply deciding based on marginal
(wait until the product is flawless and then launch or
costs of making in versus sourcing.
launch a somewhat flawed product and then gradu-
ally correct it). We are just trying to make the point
that the new economy brings countless substantial
Quality management and, Simulation and decision mak-
changes that at least challenge some of the tradi-
ing models
tional paradigms of POM. Researchers and profes-
In terms of productive process quality “improve-
sors should acknowledge this fact and help develop
ment”, the easy, cheap and fast (many times, in real
and incorporate new approaches into the body of
time) access to the universe of information related
knowledge of POM so that our students do not get
to the networks of operations and their flows can
surprised when they get to the job market because in
substantially contribute to fast identification of al-
some instances of the new economy some traditional
terations/ imperfections in the flows of materials,
approaches and techniques are used very differently
products, customers and information, allowing for
or ignored altogether.
much shorter control and correction cycles. With
shorter control cycles and the corresponding accel-
Production planning and scheduling
erated learning, the improvement processes can also
be accelerated and intensified. All this is desirable,
This sub-topic is very affected by the changes of the
no doubt, but how to really get the most value out of
new economy. In practical terms, the whole field of
the data universes now available without suffering
production planning, scheduling and control, de-
from “data asphyxia” is something that still requires
veloped mainly after the II World War, focused on
development in the field of operations management.
productive units and assumed that access to infor-
Another area that deserves further attention is qual-
mation was highly constrained. With the changes
ity management. In the old economy, the total qual-
in these basic assumptions, new approaches started
ity paradigm preached that, if one day before the
to be developed, mainly after the 90’s. These started
launch of a product, a defect or flaw was identified,
to take into account that logistic flows suffer from
the product should not be launched, the aim was to
some network-related effects that are not possible to
have a “perfect” launched product. What prevails to-
analyze if the adopted unit of analysis is the produc-
day in some markets however is the attitude that the
tion unit in isolation. One example is the so called
aim is to obtain a product with minimum levels of
“bullwhip effect” (Sterman 2000). These effects hap-
quality “acceptability” by the market, because pres-
pen because of the lack/ difficulty of coordination
sures to shorten the “time to market” together with
among network partners. Although the connectiv-

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
9
ity technology needed to allow for coordination is
ronmental costs and benefits. This has always been
largely available nowadays, what is still missing is
true and important but, with the new economy, with
actually how to get the best out of the available tech-
the ease with which companies re-design their pro-
nology. The constraint is not anymore the technol-
duction network configurations and flows, the prob-
ogy per se, but maybe the managerial aspects that
lem intensified tremendously.
surround the use of technology: are the incentives
of the partners of the operations network aligned so
Forecasting
that they agree to share information and coordinate
decision making processes? Are the cultural aspects
The sub-topic of sales forecasting is one that is bound
surrounding cooperation in place in the relation-
to be substantially altered by the new economy.
ships along the network of operations? Is the right
Nowadays, there are companies (e.g. www.genexis.
level of trust present in the network? How to foster
com) that specialize in collecting, consolidating and
and maintain trust among partners that for a long
treating transaction information in specific indus-
time have gotten used to conflict rather that coop-
trial sectors, obtaining not samples but 100% of the
eration in network relationships? These are aspects
transactions between partners in a supply network.
that need to be addressed if the field of POM intends
This allows that short term forecasts, for instance,
to remain relevant in the new economy.
can be updated almost on-line, in real time, after ev-
ery new transaction. We need that analytical models
be developed and taught which are able to deal with
Ethics and the environment
such universes of data so that operations managers
The intensive use of information technologies in
can quickly identify patterns that are relevant to the
operations management causes interesting ethical
operations-related decision making processes in the
issues to surface. It is increasingly possible to track
middle of this ocean of data.
all the steps that an individual takes during his/her
day-to-day life based on the transactions he estab-
Project management
lishes with several information systems (for example
by using his/her credit card) in commercial transac-
The changes of the new economy have made Proj-
tions, financial movements, etc. Companies are creat-
ect management grow in importance. An example
ing mega databases with detailed information about
can illustrate this point. The pharmaceutical com-
people’s lives without careful discussions of the im-
panies can easily spend US$ 500 million in develop-
plications of it to individuals’ lives and to society as a
ing a new drug. Production and distribution costs
whole by our government officials and law makers.
of the resulting medicine (that contains the drug)
What is the limit, for instance, that companies should
in its package, therefore become relatively less rel-
respect when collecting, selling and using such de-
evant. Project management tends then to be relative-
ly more relevant than process management in this
tailed information? To whom do an individual’s data
particular circumstance that holds true not only for
belong? This is but an illustrative example but the
the pharmaceutical companies. The high technol-
ethical and environmental considerations of this and
ogy sector tends to work under similar conditions:
other aspects of POM is something that have been
an Intel plant (which manufactures the processors
insufficiently discussed in the current literature. We
that equip computers) is designed to last 4 years –
should not forget that POM is a wonderful discipline
after that the technology changed so much that the
dedicated to the creation of value. However it is also
plan is rendered obsolete. If the project management
a field that encompasses decisions that if poorly
behind the building of this new plant fails, one of
made have the potential of causing severe damage to
the following three will certainly happen: either the
individuals and to the environment. Consider Mattel
costs (sometimes several hundred million dollars)
and the largely publicized problem they had in 2007
go up possibly by millions, or the dead lines are
with lead paint used by some of their Chinese sup-
not met (with possibly disastrous consequences for
pliers to finish some of their toys and the potential
the “time to market” of the products) or the speci-
health problems it could have caused to thousands
fications of the plant are not met (also with poten-
of children. An apparently simple outsourcing deci-
tially disastrous consequences to production levels,
sion turned into a public health problem. We need
quality etc). The POM body of knowledge included
to prepare our students to make right decisions not
project management, no doubt. However maybe we
only from the viewpoint of corporate costs and ben-
should rethink about the emphasis we give to it in
efits but also from the viewpoint of social and envi-
our courses.

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Corrêa, H. L.: Changes in the Role of Production and Operations Management in the New Economy
Journal of Operations and Supply Chain Management 1(1), pp.1-11, © International Conference of the Production and Operations Management Society
10
FINAl COMMENT
Gaither, N.; Frazier, G. (2002), Operations Management. 9th. Ed.
Cincinnati: South-Western.
The new economy brings very interesting challenges
to the field of production and operations manage-
Hayes, Robert H. (2002), “Challenges posed to operations man-
agement by the new economy” Production and Operations
ment. It is our (researchers, professors and practi-
Management. Vol. 11, No. 1, Spring., pp. 21-32.
tioners) duty now to face this challenge competently
so that the field of POM continues to give its valu-
Hayes, Robert H.; Wheelwright, Steven C. (1984), Restoring our
able contribution to the continuous improvement of
competitive edge. New York: The Free Press.
the efficiency and effectiveness of the value adding
Heizer, Jay; Render, Barry (2008), Operations Management. 9th Ed.
processes of our society. Although we started this
New Jersey: Prentice-Hall.
research with the objective of finding out elements
Krajewski, Lee J.; Ritzman, Larry P. (2004), “Operations Manage-
to define research and teaching agendas for the new
ment”. Reading: Addison Wesley.
economy POM in Brazil, we believe that the findings
can be reasonably generalized to other regions too.
McGee, John; Bonnici, T.A.S. (2002), “Network Industries in
the New Economy”. European Business Journal. Vol. 14, pp.
116-132.
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