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Going with the flow - but which way is the flow going?

Going with The Flow-But Which Way Is The Flow Going?

The many changes in production processes, operating practices, and distribution functions that have occurred within the manufacturing environment can, in many organizations, be attributed to management's acceptance or or reaction to competition or technology. Yet, through the years, it may have been the development, acceptance, and implementation of new ideas and operating practices that have contributed more than their acknowledged shares to a company's growth and expansion.

This technological innovation has contributed to a number of changes (both positive and negative) in organizational or manufacturing environments. These changes may include the design, development and introduction of new manufacturing practices or products, a revision in organizational and manufacturing strategy, structure, procedures and practices. Within a company, we can also see an increased emphasis on personnel practices, quality assurance and control, as well as the introduction and expansion of the information and control systems. This continual revision and expansion has become one of the cornerstones in the economic growth and diversity of both organizations and the manufacturing base through the development or expansion of new companies, ideas and products.

However, these changes have also had a significant effect on the definition and development of a company's internal operating structure, including the delegation of authority and accountability, the structure of the managerial hierarchy, the formal and informal communication and reporting structure, the individual reporting accountabilities, personnel practices, policy and practice manuals, and so forth.

We can objectively trace these changes through the various "industrial revolutions," or expansionary periods in the different regions throughout the world. As organizations evolved through technological, political, economic, or organizational influences, similarities developed in their organizational structure and development. This includes the development of individual crafts as they evolve into a more formal business environment as a sole proprietorship or a partnership. From this initial start, a few companies expanded into a small batch or unit production organization. This movement may be a direct result of the products that they are providing, their market competition and acceptance, and the managerial and financial resources of the company.

It may also be possible to identify or anticipate actions by other companies as they develop a mass-production process. Again, depending upon their products, an additional step may be into a continuous process operation through the introduction of new manufacturing processes or technology.

As new or enhanced technology is introduced within a nation, market, or industry, a company's management team is faced with a number of decisions. One of the more significant of these is identifying the new operating technologies or practices that may work for that company. A second decision is recognizing the specific operating requirements that would indicate the timing for either an immediate or delayed introduction of these practices into the company.

Elements that must be considered in this decision process include balancing the need to remain competitive or, perhaps in the long run, to survive, against the availability of financial resources, and the lead time for the installation of a new operating practice.

Internally, these changes may be reflected in the organization's structure, processes, or operational priorities. Externally, the company may have to reevaluate its market position, suppliers, or customers. This analysis may even extend into the specific markets that it (or its primary competitors) is serving or will serve.

From a competitive perspective, these changes may require a re-evaluation of both the organization's internal resources and potential, as well as the product's overall market potential and competition. In some nations, a company's ability to compete may be enhanced or restricted by domestic or foreign legislative actions.

When a company is in a period of organizational or operational stress, one of the more common short-term responses focuses on product differentiation, quality, service, corporate image, wage and labor concessions, or price. Yet it is the development and implementation of a long-term response that will ultimately determine if the company is to survive. This survival may or may not be in a form that is similar to its present structure and operating philosophy.

Organizations are required to compete for a finite amount of resources, including personnel, proprietary processes, material, and capital. This requires that they become more efficient, effective, and productive in their demands for and use of these resources. They must also be able to identify and prioritize the specific resources that are required to assit them in reaching their goals.

A formal analysis must be made to identify the specific processes and resources necessary for teh organization's operating strategy. This review will allow the company to define where it is, where it wants to be, and the timing of the specific resources that it will require to achieve this objective.

But, perhaps more importantly, this review will also tell them what specific tools, techniques or operating practices they do not need. One of the more effective competitive weapons that a company can have is the ability to avoid the adoption of new tools or technological practices that do not have a material, long-term financial or operational impact on the organization's product or operating process.

This is not to say that a company should ignore these developments. The company should define a specific level of technical and organizational sophistication that it can afford and that allows it to remain competitive. It should then maintain that level and exploit the specific competitive advantage that this sophistication allows. Introducing a new technology or operating process for "bragging rights" in the popular or business press has traditionally not provided a competitive weapon or advantage.

A company must make sure that the operating programs and practices that are put into place are reviewed regularly. This review must include all aspects of cost, operational effectiveness, and maintenance as well as technological competency. The company must minimize the risk of being left behind by the introduction of a new technology that provides a higher level of quality, economies of scale, and operational effectiveness.

The long-term considerations to this challenge include new technological improvements, additional products, expanded product lines, and organizational complexity. These and other elements may be seen in organizations within their design, testing, and manufacturing practices and processes, their information and control systems, the formal and informal organizational and reporting structure and practices, personnel functions, cost structures, or distribution functions.

While the extent of the operational difficulties in these examples depends on the individual characteristics of each company, a number of common elements can be identified and evaluated. One of these is the infrastructure, or the basic operating practices, managerial philosophies, physical facilities and so forth, within each company.

Wickham Skinner has previously discussed some of the problems that may develop within a company's infrastructure:

"The most typical serious condition in most manufacturing plants is that of inconsistencies existing within the infrastructure. Different sectors of manufacturing policy are implicitly set up to accomplish conflicting objectives. It is as if an automobile engine were designed for Indy racing, the transmission for fuel economy, the tires for comfort, the suspension for road race maneuverability, and the trunk space for camping.

The same phenomena exist in factories where there is no clear design objective or set of priorities. Further inconsistencies also come about either because of growth, product development, marketing pressure, management, organizational changes, or the influence of professionals in the company who earnestly seek to optimize their own traditional professional goals that are normally in conflict. Frequently lacking is a concept, scheme, or broad outlook that binds together all of the elements of the infrastructure."

Although this example is specific, it holds true for many industries.

We must address (or, at least acknowledge) the organizational structure, and the internal political issues that occur within an operating environment. The emphasis on manufacturing practices has not only contributed to the complexity of our organizations, but also to their operating environment, and to their abilities to respond to challenges and opportunities.

Within a company, how many managers still concentrate on the operational issues and have yet to appreciate, much less, define, or evaluate the infrastructure questions raised by Skinner? What is the long- and short-term impact of this "oversight" on a company's ability to attract resources and market share; to survive, compete, and grow in todays' environment? If these questions are not answered, what opportunities is the company missing? Does the operating manager or the company even know they are missing them?

There are, or course, a number of ways in which a company may approach a different or new operating environment. Robert Hayes, Stephen Wheelwright and Kim Clark ("Dynamic Manufacturing: Creating the Learning Organization") have been exploring a number of ideas that included:

"Confronted with a highly complex factory environment--dozens of production stages, products, material flow patterns and inventory locations, together with unreliable product designs, equipment, workers, and suppliers--one can react in one of two ways. One can attempt to develop a highly sophisticated (and usually computerized) information and control system to manage all this complexity and variability. Or, one can set about reducing them. In effect these two approaches concentrate on opposite ends of the control spectrum: the former on the reactive side; the latter on progressive and dynamic control.

"American--both managers and academics--with all their technical sophistication and computer skills, seem to be attracted to the former approach; the Japanese, with their intense pragmatism, to the latter. As a result, we have spent more than a decade and hundreds of millions of dollars developing elegant Materials Requirements Planning (MRP) systems--of which, recent studies have concluded, less than a third are ultimately successful. Meanwhile, worldclass Japanese companies have concentrated on simplifying and clarifying their factories, eliminating error and confusion to the point where material control can often be managed manually with a handful of Kanban cards. Moreover, the same emphasis on creating clarity has facilitated the high rate of learning that has brought Japanese companies productivity up to--and beyond--their U.S. competitors in a number of critical industries."

These changes may come at a cost. Unfortunately, there are difficulties in the identification and tracking of these costs. For example, in "Made in America: Regaining the Competitive Edge (MIT Press)," several researchers have evaluated the growth and complexity of production processes and mass production and the resulting decline in the more traditional craft methods and skills. They observed a competitive advantage in those countries (West Germany, Japan, Italy) in which the traditional craft methods and skills were still encouraged and remained strong. Individual organizations in these countries had been more successful in pioneering new forms of workplace structure or organization, more-flexible technologies, and patterns of production that efficiently identified and satisfied some of the demands that occurred in specific, limited segments of the marketplace.

By combining their own traditional expertise in the individual craft skills with a thorough understanding of product differentiation, market segmentation, quality and customer service, (before and after the sale), a few companies have been able to survive, and indeed prosper. These activities may have been forced upon them by other resource constraints, yet their success cannot be overlooked.

There is, of course, a significant difference in the cultural, working, social and political environments in Japan, West Germany, Italy, and the United States. However, recognizing that we can not transplant one idea or operating philosophy in total from one plant to another, companies are beginning to make an attempt to evaluate and to integrate a number of different operating philosphies into their own operations.

Management's problem (or opportunity) is in selecting only those ideas, technologies or operating practices that can be successfully implemented within the operational, political, competitive, or financial constraints of their company.

The objective, of course, is obtaining a long-term competitive edge that will allow them a delivery, cost, quality, or production advantage.

Further Reading

Andrews, Kenneth R., The concept of Corporate Strategy, Irwin, Third Edition, 1987.

Berliner, Callie and James A. Brimson, editors, Cost Management for Today's Advanced Manufacturing, Harvard Business School Press, Boston, 1988.

Detroezos, Michael L., Richard K. Lester, and Robert M. Solow, Made In America, Regaining the Productive Edge, The MIT Commission on Industrial Productivity, The MIT Press, Cambridge, Massachusetts, 1989.

Hayes, Robert H., Steven C. Wheelwright and Kim B. Clark, Dynamic Manufacturing, Creating the learning Organization, The Free Press, New York, 1988.

MIT Commission on Industrial Productivity, Working Papers of the MIT Commission on Industrial Productivity, The MIT Press, Cambridge, MA, 1989.

Richard M. Morris III, a senior member of IIE, is president of R.M. Morris and Associates Inc., management consultants in Dayton, Ohio. He is involved in research and management control systems, planning, and organizational analysis. He is past president of IIE Dayton chapter 2.
COPYRIGHT 1990 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Support Systems
Author:Morris, Ricahrd M., III
Publication:Industrial Management
Date:Jan 1, 1990
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Next Article:The performance management question in the organization of the future.

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