7-1 Manufacturing, Service Industries & IT Technology

7-2 Purpose: To Show How Technology is related to organizational structure improves the response time of organization to needs of retailers & customers Gives new competitive advantage in terms of cost, time, quality and price.

7-3 What is Technology Technology refers to the tools, techniques, machines & actions used to transform organizational inputs (material, information, ideas) into outputs (products & services). Technology is organization ’ s production process & includes work procedures as well as machinery.

7-4 What Technology Does for Different Depts. R&D:transforms ideas into product proposals Mkt: transforms inventory into sales HR: transforms attitudes which is reflected in behavior Production: converts raw materials in to products

7-5 Core Transformation Process for a Manufacturing Company ENVIRONMENT Organization Raw Material Inputs Product or Service Outputs Core Work Processes Materials Handling Milling Inspection Assembly

7-6 Woodward ’ s Study Joan Woodward: a British Industrial sociologist Study in 1950 ’ s Objective: how manufacturing firms were organized and the amount of mechanization Sample: 100 manufacturing firms Methodology: industry visit, interview of managers, examining company records and direct observation of manufacturing operations Information was organized in terms of structural characteristics (span of control, levels of management), managerial styles (written vs. verbal, rewards), type of manufacturing process and commercial success of firms. A continuum of technical complexity developed, defined as the amount of mechanization of manufacturing process High technical complexity: work performed by machines Low technical complexity: work performed by workers

7-7 Woodward ’ s Classification Based on System of Production Group I Small-batch and unit Custom work is the norm Relies on human operator Not highly mechanized though computerized machinery used for some parts but final assembly done by human operators Production (e.g. jewelry, assembled PC, DC cars) Group II Output goes in to the inventory from where orders are fulfilled Large-batch and mass production (e.g. assembly lines of cars & cigarettes) Group III Entire process is mechanized There is no starting or stopping Continuous process production (e.g. production of electricity, nuclear plants, oil refineries, distilleries)

7-8 Relationship between Technical Complexity & Structural Characteristics:Unit production Overall structure Written communication Verbal communication Centralization Formalization Worker ’ s skill level supervisor span of control Organic Low High Low High 23 (medium)

7-9 Relationship between Technical Complexity &Structural Characteristics: Mass Production Overall structure Written communication Verbal communication Centralization Formalization Worker ’ s skill level supervisor span of control Mechanistic High Low High Low 48 (wide)

7-10 Relationship between Technical Complexity &Structural Characteristics: Continuous Production Overall structure Written communication Verbal communication Centralization Formalization Worker ’ s skill level supervisor span of control Organic Low High Low High 15 (narrow)

7-11 Woodward ’ s Conclusion Different types of technology impose different kinds of demands on individual & organization. These demands are met by appropriate structure Successful firms had complementary structure & technology Structural characteristics could be grouped either as mechanistic or organic Successful small batch and continuous process organizations had organic structures Successful mass production organization had mechanistic structures.

7-12 Flexible Manufacturing Systems Computer-aided design (CAD) Computer-aided manufacturing (CAM) Integrated Information Network

7-13 CAD Computers are used to assist in the drafting,design and engineering of new parts. Computers are guided to draw specified configuration on the screen including dimension and component details Alternative designs can also be explored & can also be scaled up or down

7-14 CAM Greatly increases the speed at which items can be manufactured Permits a production line to shift rapidly from producing one product to any variety of other products by changing the instruction to the computer Enables the production line to quickly honor customer requests for changes in product design & mix

7-15 Integrated Information Network Links all the aspects of the firm (accounting, purchasing, marketing,inventory etc.) Enables managers to make decisions & direct manufacturing process in a truly integrated fashion

7-16 Flexible Manufacturing System or Computer Integrating Manufacturing Uses combination of CAD(in design) & CAM(in manufacturing) Gives precision,speed,faster switching from one product to another,quality customer service and cost cutting. E.g. Boeing 777 first paperless jetliner, IBM ’ s laptop being made with robots only. Has led to mass customization.

7-17 Lean Manufacturing FMS can give the best results when all the aspects of technology are combined with flexible management process to result in lean manufacturing Lean manufacturing involves highly trained employees who take a painstaking approach to details and problem solving to cut waste and improve quality The heart of lean manufacturing is not machine but people involvement Employees are taught to think lean which means attacking waste and striving for continuous improvement

7-18 Toyota Production System (TPS) Toyota Motor Corporation pioneered lean manufacturing TPS combined techniques like just in time inventory, continuous work flow, quick change over of assembly lines, continuous improvement, preventive maintenance, with a management system that encourages employee involvement and problem solving, designing equipment to stop automatically so that defect can be fixed. This has led to mass customization where factories are able to mass produce products as per customer specification

7-19 NEW CHOICES TRADITIONAL CHOICES Mass Production Small batch Flexible Manufacturing Mass Customization Continuous Process Relationship of Flexible Manufacturing Technology to Traditional Technologies BATCH SIZE SmallUnlimited Customized Standardized PRODUCT FLEXIBILITY

7-20 Comparison of Organizational Characteristics Associated with Mass Production and Flexible Manufacturing Systems: Structural Implications CharacteristicMass ProductionFMS Structure: Span of ControlWideNarrow Hierarchical levelsManyFew TasksRoutine, repetitiveAdaptive, craft- like SpecializationHighLow Decision makingCentralizedDecentralized OverallBureaucratic, mechanistic Self-regulating, organic

7-21 Service Firms Refer to those organizations which accomplish their primary purpose through production & provision of services Service produces an intangible output Service is abstract and often consists of knowledge and ideas rather than a physical product A manufacturers product can be inventoried for later selling, services are characterized by simultaneous production and consumption Eg. Education, healthcare, transportation, banking & hospitality

7-22 Differences Between Manufacturing and Service Technologies Manufacturing Technology 1.Tangible product 2.Products can be inventoried for later consumption 3.Capital asset intensive 4.Little direct customer interaction 5.Human element may be less important 6.Quality is directly measured 7.Longer response time is acceptable 8.Site of facility is moderately important Service Technology 1.Intangible product 2.Production and consumption take place simultaneously 3.Labor and knowledge intensive 4.Customer interaction generally high 5.Human element very important 6.Quality is perceived and difficult to measure 7.Rapid response time is usually necessary 8.Site of facility is extremely important SSS: 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

7-23 Configuration and Structural Characteristics of Service Organizations vs. Product Organizations ServiceProduct Structure: Geographical dispersionMuch (outlets)Little Decision makingDecentralizedCentralized FormalizationLowerHigher Human Resources: Employee skill levelHigherLower Skill emphasisInterpersonalTechnical

7-24 Departmental Technology Analyses the nature of departmental technology & its relationship with other departmental structure. Developed by Charles Perrow

7-25 Departmental Technology (Perrow) Task Analyzability Refers to whether work can be reduced to mechanical steps to solve problems. Problem solution can involve use of standard procedures like manuals, Some problems are so complex that they cannot have right/wrong answer Final solution is based on wisdom & experience Task Variety Refer to to the frequency of unexpected and novel events that occur in the conversion process. Higher the frequency of unexpected events higher the variety

7-26 Departmental Technologies (Perrow) Craft Analyzability low Variety low Requires extensive training and experience and use of wisdom and intuition E.g.performing arts, fine goods (pattern makers in apparel firm),manufacturing Routine Variety low Analyzability high (use of objective, computational procedures) Task is formalized and standardized e.g.auditing, clerical, sales

7-27 Engineering High analyzability (problems handled based on formulae, procedures and techniques) High variety Examples: Legal Engineering Nonroutine Low analyzability High variety Examples: Strategic planning Social science research Applied research Departmental Technologies (Perrow)

7-28 Appropriate Departmental Technology High scores for analyzability and low scores for variety means routine technology and vice versa for non routine Low variety and low analyzability means craft High variety and high analyzability means engineering.

7-29 Relationship of Department Technology to Structural and Management Characteristics (Perrow) Mechanistic Structure 1. High formalization 2. High centralization 3. Little training or experience 4. Wide span 5. Vertical, written communications ROUTINE (high analyzability, low variety) Mostly Mechanistic Structure 1. Moderate formalization 2. Moderate centralization 3. Formal training 4. Moderate span 5. Written and verbal communications ENGINEERING (high analyzability, high variety) Mostly Organic Structure 1. Moderate formalization 2. Moderate centralization 3. Work experience 4. Moderate to wide span 5. Horizontal, verbal communications CRAFT (variety low,analysalility low) Organic Structure 1. Low formalization 2. Low centralization 3. Training plus experience 4. Moderate to narrow span 5. Horizontal communications meetings NONROUTINE (analyzability Low, variety high)

7-30 Workflow Interdependence among Depts. Interdependence refers to the extent to which departments depend on each other for resources or material to accomplish their tasks

7-31 Workflow Interdependence among Depts.(Thomson) Form of Interdependence Demands on Horizontal Communications, Decision Making Type of Coordination Required Priority for Locating Units Close Together Pooled (bank branches) Low communication Standardization, rules, procedures Divisional Structure Low Sequential (assembly line)Medium communication Plans, schedules, feedback Task Forces Medium Reciprocal (hospital) High communication Mutual adjustment, cross- departmental meetings, teamwork Horizontal Structure High Client

7-32 Primary Means to Achieve Coordination for Different Levels of Task Interdependence in a Manufacturing Firm Reciprocal (new product development) Sequential (product manufacture) Pooled (product delivery) COORDINATIONINTERDEPENDENCE High Low Horizontal structure, cross-functional teams Face-to-face communication, Unscheduled meetings, Full-time integrators Scheduled meetings, task forces Vertical communication Plans Rules Mutual Adjustment Planning Standardization

7-33 Information as a Strategic Weapon Intranet ERP Knowledge Management

7-34 Two Approaches to Knowledge Management Explicit Provide high-quality, reliable, and fast information systems for access of codified, reusable knowledge Tacit Channel individual expertise to provide creative advice on strategic problems Knowledge Management Strategy People-to-documents Develop an electronic document system that codifies, stores, disseminates, and allows reuse of knowledge Invest heavily in information technology, with a goal of connecting people with Reusable, codified knowledge Person-to-person Develop networks for linking people so that tacit knowledge can be shared Invest moderately in information technology, with a goal of facilitating conversations and the ex- change of tacit knowledge Technology Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney, “What’s Your Strategy for Managing Knowledge?” Harvard Business Review, March-April 1999,

7-35 Impact of Technology on Job Design Job Design includes assignment of goals & tasks to be accomplished by employees Job Rotation (moving from job to job) Job simplification (variety and difficulty level of task is reduced) Job enlargement (expansion of the number of different tasks performed by each individual is increased) Job enrichment (greater responsibility, recognition and opportunity for growth and development)

7-36 Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities Design for Joint Optimization Work roles, tasks, workflow Goals and values Skills and abilities 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 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 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