Manufacturing Strategy MGSC 602 Prof' Saibal Ray

1
Manufacturing StrategyMGSC 602Prof. Saibal Ray

• Module 2 - Operations Systems and Information
  Technology
• Introduction
• Handout 5
• Session 6

2
Stages of Information Revolution

• Automated transactions
• Automation of individual functions
• Cross-activity integration
• Integration of the value chain
• Optimization of the value chain in real time

3
Effects of Information Revolution

• Transforming the value chain
• Changing the industry structure
• Creating competitive advantage by giving
  companies new ways to outperform their rivals
• Spanning whole new businesses
• Ability to have Richness and Reach simultaneously

4
Effects on Industry Structure

• Bargaining power of suppliers
• Bargaining power of buyers
• Threat of substitutes
• Barriers to entry
• Rivalry among competitors

5
Caveats

• However, all technologies are enabler
• Fundamentals of competition remains unchanged
• Focus and fit becomes even more important
• What to do?
• - Understand the role of IT in the business
• - Identify how IT can create competitive
  advantage or new business
• - Develop a plan for taking advantage of IT

6
Information Technology in Operations Systems

• Growing competitive importance
• Increasingly short life-cycles
• Customization
• Need for quick response
• Distributed operations
• More information to manage and greater
• advantage to those who manage it well

7
Operations Managers and IT

• 87 of operations managers now cite at least
  joint responsibility for IT with central MIS
  group
• Great promise of computer-integrated operations
• National Research Council found computer
  integration projects could provide
• 30-60 lead time reduction
• 40-70 increased productivity
• Factor of 2 to 5 improvement in quality
• however

8
Operations Managers IT

• Very broad frustration with information
  technology
• Project cost and schedule overruns
• Inflexibility of installed systems
• Faster changing than existing manufacturing
  technologies
• Skills are distant from familiar skills
• Benefits are often revenue generation rather than
  mere cost reduction
• Unfamiliar ground for many operations managers

9
Stages of Operations Technology

• Craftsman (Pre 1870)
• Mass Manufacturing (1870-1945)
• Scale strategy
• Variety strategy
• Automation Technology (1945-Present)

10
Operations Technologies

• Hard Technologies
• Production Automation Technologies, e.g., NC,
  CNC, Robotics, Automated Assembly
• Infrastructure Technologies
• - Information Technologies, e.g., machine
  vision, sensors, communication
• - Material Handling, e.g., AGV, AS/RS
• Service Automated Data Processing, Call
  Centers, POS system

11

• Soft Technologies
• JIT, TQM, BPR, Group Technology, ..
• Appropriate Operations Technology?
• - For hard technology it is easy
• - Soft technology is harder to choose
• Comparison of capabilities Humans versus
  automated machines

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Key themes in the module(we will revisit these
at the end)

• Central role of IT in operations
• Shaping Operations Information Technology to the
  competitive environment
• Open, flexible architectures
• Systems that substitute for people versus systems
  that help people do their jobs
• Improvement-Driven IT versus IT-driven improvement

13
Operations IT hierarchy

• Operations issues addressed by IT
• Is there a supplier that can make this?
• Who in the network has a CAD file for this part?

Are we making a profit? What are our average
delivery times?
What is todays schedule? What is our average
machine downtime?
How do I make this component? Is the process in
control? What lot is run next?
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Competitive Role of IT

• Does the technology
• Reinforce an existing order winner?
• or Change the way the operation competes
• A change in the competitive advantage the
  operation aims to deliver will certainly mean a
  reexamination of other elements of the operations
  strategy
• Even reinforcement often requires significant
  operations strategy changes

Capacity Facilities Process Technology Sourcing
Workforce Quality Work Planning Organization
15
A Framework

• At what level does the technology operate?

Network/Industry Level
Reinforce existing competitive focus
Change Competitive role of the operation
Business Level
Shop/Factory Level
Process Level
What is its competitive objective?
16
Module progresses up the hierarchy

• 10. Aerotech Service Group
• 9. Deere Co
• 8. Kanebo
• 7. Vandelay
• 6. DEC
• 5. EGG Rotron
• 4. FASTech Integration
• 3. Motorola Bandit
• 2. Cybertech
• 1. John Crane

Network/Industry Level
Business Level
Shop/Factory Level
Process Level
17
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18
Some Driving Questions

• How should an operations manager introduce IT
  into operations?
• How should operations strategy be coordinated
  with IT strategy?
• What is the value of computer integration?
• What is an open system? What considerations
  should be made when deciding between open and
  closed technologies?
• When should IT be shaped to fit an improvement
  path and when should an improvement path be built
  around a particular IT?
• Why do so many operations spend so much money on
  IT and realize no apparent benefit?