Managing Operations in the Former Soviet Union: Current Situation and Future Development

Abstract

Dealing with ex‐Soviet republics, American companies desperately need reliable information about the current status of production and operations management in the former Soviet Union. Describes some aspects of managing operations in Russia and other ex‐Soviet republics. The emphasis is made on forecasting, product design, facilities layout and automation, work measurement, inventory management, and quality control. Based on this analysis, presents some recommendations for improving operations management in the former Soviet Union.

Strategic Orientation of Russian Managers

“…A survey of Russian attitudes reports both a widespread belief that the enterprise will provide social benefits and a belief among Russian managers that ''they placed a greater emphasis on providing jobs to people than did their U.S. counterparts'' (Rubens 1995, p. 77). Unchanged, pre-privatization compensation systems also contribute to this problem since they are tied to increasing quantity without any consideration of quality (Radovilsky 1994). Thus the need for quality does not serve as a driving force for the introduction of new technology.…”

“…Equipment was old; automation lacking (Linz 1997). The average equipment life cycle in the Soviet Union was twice as long as non-Soviet standards, with an average of 26 years (Radovilsky 1994). Initial privatization efforts effectively transferred ownership from the state to managers and employees, but without an infusion of new capital, managers were unable to restructure operations to include high technology production processes or to transform the existing high technology process found in the defense sectors to more commercial uses.…”

“…Even within the industrial segment, the inefficiencies of a centrally planned economy meant that industrial customers had to accept the goods provided. The IMF is reported to have classified as scarce over 90% of basic industrial goods (Radovilsky 1994). As a result firms were less diversified, with fewer product lines, offering standardized products of relatively low quality.…”

“…Despite the introduction of foreign goods, and proliferation of Russian start-ups, as late as 1994 many products could be characterized as scarce (Radovilsky 1994). Some former SOEs attempted initially to respond to these chronic shortages.…”

“…However, Radovilsky notes that consumers are not pushing the firms for new products. The focus remains on producing sufficient product to meet the expressed needs (Radovilsky 1994). Thus, while we expect these firms may make some limited product extensions, there will not be a major effort to expand product lines and introduce new products.…”