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Judging OPERATiOns PERfORmAnCE AT An OPERATiOnAl lEvEl? 61

example the reputational risk of cost cutting

There is a good reason why most electronic components are made in China. It’s cheap. Com-
panies such as Taiwan’s Foxconn, who produce many of the world’s computer, consumer elec-
tronics and communications products for customers such as Apple, Dell, Nokia, and Sony, have
perfected the art and science of squeezing cost out of their operations processes. But, although
Foxconn is known for having an obsession with cutting its costs and has moved much of its man-
ufacturing into China and other low-cost areas with plants in South-East Asia, Eastern Europe,
and Latin America, it has been criticised for pushing its workers too far. In 2010, there was a
cluster of suicides at its factories, with 18 workers throwing themselves from the tops of the com-
pany’s buildings; 14 people died. The firm operates a huge industrial park, which it calls Foxconn
City, in Shenzhen, just across the border from Hong Kong, with 15 multi-storey manufacturing
buildings, each devoted to one customer. This is where the suicides took place. It prompted
Foxconn to install safety nets in some of its factories and to hire counsellors to help its workers.
However, Boy Lüthje of the Institute of Social Research in Frankfurt says that conditions at
the firm are actually not that bad when compared with many others. Food and lodging are free,
as are extensive recreational facilities. But workers routinely put in overtime in excess of the 36
hours a month permitted under Chinese law and plenty of people seek jobs with the company.
Moreover, the suicide rate at the company is lower than that among the general population in
China. Yet the deaths raised questions about working conditions in electronics manufacturing
in general, and in particular at Foxconn. Nor was this the last time concern was raised over work-
ing conditions. In 2012, around 150 workers at Wuhan threatened to commit suicide by leaping
from their factory roof in protest at their working conditions. They were eventually coaxed
down by managers after two days on top of the three-floor plant. ‘We were put to work without
any training, and paid piecemeal’, said one of the protesting workers. ‘The assembly line ran very
fast and after just one morning we all had blisters and the skin on our hand was black. The factory was
also really choked with dust and no one could bear it.’ Some reports indicate that Foxconn is more
advanced in designing its processes than many of its competitors, but it is run in a regimented
fashion that is not always popular with workers.

operation, the shorter the gap between obtaining the materials and having products
and services ready for sale. This argument may also apply to information processing
or even customer processing operations if operating expenditure is associated with the
information or customers entering and progressing through the operation process.

the internal and external effects of the performance objectives
The whole idea of generic performance objectives is that they can be clearly related to
some aspects of external market positioning, and can be clearly connected to the inter-
nal decisions that are made concerning the operations resources. Because of this, it is
worthwhile examining each of the performance objectives in terms of how they affect
market position outside the operation and operations resources inside the operation.
Table 2.4 identifies some of these effects. What is interesting is that whereas the con-
sequences of excellent performance outside the operation are specific and direct, the
consequences inside the operation are more interdependent. So, for example, a high
performance in terms of speed of delivery outside the operation gives clear benefits to
customers who value short delivery times for products or queuing times for services.

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