Manufacturing and Service Technologies Chapter Seven Manufacturing and Service Technologies Thomson Learning © 2004

Core Transformation Process for a Manufacturing Company ENVIRONMENT Organization Core Technology Noncore Departments HRM Acc. R&D Marketing Raw Material Inputs Product or Service Outputs Core Work Processes Materials Handling Assembly Milling Inspection Thomson Learning © 2004

Note How the core technology consists of Raw material inputs, a transformation work process (milling, inspection, assembly) that changes and adds value to the raw material and products the ultimate product or service output that is sold to consumers in the environment. Thomson Learning © 2004

Core technology An organization’s core technology is the work process that is directly related to the organization’s mission, such as teaching in a high school, medical services in a health clinic, or manufacturing at General Motors. Thomson Learning © 2004

Noncore technology Is a department work process that is important to the organization but is not directly related to its primary mission. Noncore work process are illustrated by the departments of human resources, accounting, R&D, and marketing. Thus, Development transforms ideas into new products, and marketing transforms inventory into sales, each using a somewhat different kind of work process. Thomson Learning © 2004

Pressures affecting design decisions The optimum organization design is based on a variety of elements: External strategic needs: Environmental conditions, strategic direction, and organizational goals, Create top-down pressure for designing the organization. The operational work processes will influence the structural design associated with both the core technology and noncore departments. Thomson Learning © 2004

How should the organization be designed to accommodate and facilitate its operational work processes? Examine how the technology for the organization as a whole influences organization structure and design (manufacturing and services technologies). Examine differences in departmental technologies and how they influence the design and management of organizational submits. Explore how interdependence –flow of materials and information- among departments affects structure. Thomson Learning © 2004

Woodward’s Classification Based on System of Production Group I Small-batch and unit production Group II Large-batch and mass production Group III Continuous process production Thomson Learning © 2004

Group I Small-batch and unit production Production of single pieces to customer orders. Production of technically complex units one by one. Fabrication of large equipment in stages. Production of pieces in small batches. Production of components in large batches subsequently assembled diversely. Thomson Learning © 2004

Group II Large-batch and mass production Production of pieces in small batches. Production of components in large batches subsequently assembled diversely. Production of large batches, assembly line type. Mass production. Continuous process production combined with the preparation of product for sale by large-batch or mass production methods. Thomson Learning © 2004

Group III Continuous process production Mass production. Continuous process production combined with the preparation of product for sale by large-batch or mass production methods. Continuous process production of chemicals in batches. Continuous flow production of liquids, gases, and solid shapes. Thomson Learning © 2004

Flexible Manufacturing Systems Computer-aided design (CAD) Computers are used to assist in the drafting design, and engineering of new parts. Computer-aided manufacturing (CAM) Computer-controlled machines in materials handling, fabrication, production, and assembly greatly increase the speed at which items can be manufactured. Integrated Information Network A computerized system links all aspects of the firm. Thomson Learning © 2004

Relationship of Flexible Manufacturing Technology to Traditional Technologies Small batch Flexible Manufacturing Mass Customization NEW CHOICES Customized Mass Production PRODUCT FLEXIBILITY TRADITIONAL CHOICES Continuous Process Standardized BATCH SIZE Small Unlimited Source: Based on Jack Meredith, “The Strategic Advantages of New Manufacturing Technologies For Small Firms.” Strategic Management Journal 8 (1987): 249-58; Paul Adler, “Managing Flexible Automation,” California Management Review (Spring 1988): 34-56; and Otis Port, “Custom-made Direct from the Plant.” Business Week/21st Century Capitalism, 18 November 1994, 158-59. Thomson Learning © 2004

Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems Characteristic Mass Production FMS Structure: Span of Control Wide Narrow Hierarchical levels Many Few Tasks Routine, repetitive Adaptive, craft-like Specialization High Low Decision making Centralized Decentralized Overall Bureaucratic, mechanistic Self-regulating, organic Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. Thomson Learning © 2004

Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Human Resources: Interactions Standalone Teamwork Training Narrow, one time Broad, frequent Expertise Manual, technical Cognitive, social Solve problems Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. Thomson Learning © 2004

Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems (cont.) Characteristic Mass Production FMS Interorganizational: Customer Demand Stable Changing Suppliers Many, arm’s length Few, close relations Source: Based on Patricia L. Nemetz and Louis W. Fry, “Flexible Manufacturing Organizations: Implications for Strategy Formulation and Organization Design.” Academy of Management Review 13 (1988); 627-38; Paul S. Adler, “Managing Flexible Automation,” California Management Review (Spring 1988); 34-56; Jeremy Main, “Manufacturing the Right Way,” Fortune, 21 May 1990, 54-64. Thomson Learning © 2004

WHAT IS SERVICE TECHNOLOGY? Is the need for technical core employees to be close to the customer. Thomson Learning © 2004

Question What are the differences between service and product organizations necessitated by customer contact? Thomson Learning © 2004

Differences Between Manufacturing and Service Technologies Manufacturing Technology Tangible product Products can be inventoried for later consumption Capital asset intensive Little direct customer interaction Human element may be less important Quality is directly measured Longer response time is acceptable Site of facility is moderately important Service Technology Intangible product Production and consumption take place simultaneously Labor and knowledge intensive Customer interaction generally high Human element very important Quality is perceived and difficult to measure Rapid response time is usually necessary Site of facility is extremely important Service: Airlines, Hotels,Consultants, Healthcare, Law firms Product and Service: Fast-food outlets, Cosmetics, Real estate, Stockbrokers, Retail stores Product: Soft drink companies, Steel companies, Auto manufacturers, Food processing plants Sources: Based on F. F. Reichheld and W. E. Sasser, Jr., “Zero Defections: Quality Comes to Services,” Harvard Business Review 68 (September-October 1990): 105-11; and David E. Bowen, Caren Siehl, and Benjamin Schneider, “A Framework for Analyzing Customer Service Orientations in Manufacturing,” Academy of Management Review 14 (1989): 75-95. Thomson Learning © 2004

Configuration and Structural Characteristics of Service Organizations vs. Product Organizations Structure: Separate boundary roles Few Many Geographical dispersion Much Little Decision making Decentralized Centralized Formalization Lower Higher Human Resources: Employee skill level Skill emphasis Interpersonal Technical Thomson Learning © 2004

Departmental Technologies ROUTINE High analyzability Low variety Examples: Sales Clerical Drafting Auditing CRAFT Low analyzability Low variety Examples: Performing arts Trades Fine goods manufacturing Thomson Learning © 2004

Departmental Technologies ENGINEERING High analyzability High variety Examples: Legal Engineering Tax accounting General accounting NONROUTINE Low analyzability High variety Examples: Strategic planning Social science research Applied research Thomson Learning © 2004

Relationship of Department Technology to Structural and Management Characteristics Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal ENGINEERING Mostly Organic Structure 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal CRAFT Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE Thomson Learning © 2004

Thompson’s Classification of Interdependence and Management Implications Form of Interdependence Demands on Horizontal Communications, Decision Making Type of Coordination Required Priority for Locating Units Close Together Pooled (bank) Low communication Standardization, rules, procedures Divisional Structure Sequential (assembly line) Medium Plans, schedules, feedback Task Forces Reciprocal (hospital) High Mutual adjustment, cross-departmental meetings, teamwork Horizontal Structure Client Client Client Thomson Learning © 2004

Primary Means to Achieve Coordination for Different Levels of Task Interdependence in a Manufacturing Firm INTERDEPENDENCE COORDINATION High Reciprocal (new product development) Horizontal structure, cross-functional teams Face-to-face communication, Unscheduled meetings, Full-time integrators Scheduled meetings, task forces Vertical communication Plans Rules Mutual Adjustment Sequential (product manufacture) Planning Pooled (product delivery) Standardization Low Source: Adapted from Andrew H. Van de Ven, Andre Delbecq, and Richard Koenig, “Determinants of Communication Modes Within Organizations,” American Sociological Review 41 (1976): 330. Thomson Learning © 2004

Relationships Among Interdependence and Other Characteristics of Team Play Baseball Football Basketball Interdependence: Pooled Sequential Reciprocal Physical dispersion of players: High Medium Low Coordination: Rules that govern the sport Game plan and position roles Mutual adjustment and shared responsibility Key management job: Select players and develop their skills Prepare and execute game Influence flow of game Source: Based on William Passmore, Carol E. Francis, and Jeffrey Halderman, “Sociotechnical Systems: A North American Reflection On the Empirical Studies of the 70’s,” Human Relations 35 (1982): 1179-1204. Thomson Learning © 2004

Sociotechnical Systems Model The Social System Individual and team behaviors Organizational/team culture Management practices Leadership style Degree of communication and openness Individual needs and desires The Technical System Type of production technology (small batch, mass production, FMS, etc.) Level of interdependence (pooled, sequential, reciprocal) Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities Sources: Based on T. Cummings, “Self-Regulating Work Groups: A Socio-Technical Synthesis,” Academy of Management Review 3 (1978): 625-34; Don Hellriegel, John W. Slocum, and Richard W. Woodman, Organizational Behavior, 8th ed. (Cincinnati, Ohio: South-Western College Publishing, 1998), 492; and Gregory B. Northcraft and Margaret A. Neale, Organizational Behavior: A Management Challenge, 2nd ed. (Fort Worth, Tex.: The Dryden Press, 1994), 551. Thomson Learning © 2004

Technology Comparison Workbook Activity Technology Comparison McDonald’s Subway Family Restaurant Organization Goals Authority Structure Woodward’s Technology Type Mechanistic vs. Organic Teamwork vs. Individual Interdependence Routine vs. Nonroutine tasks Task Specialization Task Standardization Technical vs. Social Expertise Centralized vs. Decentralized Thomson Learning © 2004