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  1. UNIVERSITÁ DI PISA New Technology and the Organisation of Production Dr. Mario B. Curatolo Universidad Miguel de Cervantes Valladolid - España


  3. INDEX • Shift from a supply oriented to a demand oriented market • Shift from producer to consumer economies • Competitive advantage lies now less in price and more in quality • Technology as the new paradigme • Shift from economies of scale (output in volume) to economies of scope (variety of output in volume) • Economies of scope and the use of F.M.S. • The use of FMS requieres adjustments in manufacturing processes, organisation of work and the skills of the work force • Therefore: FMS imply the adoption of flexible organisations with better adaptation of man to technical systems • There is a move away from thinking of technology as an instrument to substitute people to thinking of technology as an instrument to aid people to expand production

  4. Since the 1980´s, technology has become one of the differentiating forces that has determined the competitive fitness of firms

  5. This has manifested itself in a trend by firms to: • use their scale economies to introduce technology capable of delivering products with high value-added • Productswith new attributes in terms of : function & design

  6. This meant that firms´ competitive fitness was now being determined by their capacity to beflexible: Ability to respond or react to a change with little penalty in time, effort or cost (Upton, 1994)

  7. To achieve flexibility it was necessary to: • Introduce new technology and • New manufacturing systems capable of delivering a more up-to date product

  8. However The importance of technology should not be over stressed.

  9. WHY ?

  10. Because: • there are an important number of: Intra – firm & Extra - firm Considerations

  11. These considerations could either promote or frustrate the possible advantages that technology might deliverto the firm

  12. New technology and capital investment The new competitive climatewas forcing firms to: • plan and adjust their production processes and technology much faster than ever before, given that • Industrial production life-cycleswere becoming shorter asa result of • processes and technology quickly getingoutdated and obsolete

  13. However • This adjustment process will only take placeafter firms had evaluated the future benefits from introducing the new technology at : • The process stage • The overall plant level • The strategic level

  14. Therefore The pace at which technology was introduced declined as: The supposed benefits of relating • large scale strategic investment in new technology with scale economies Became... not so evident.

  15. WHY ? • BECAUSE • There were a number of limiting factors that rendered the association between scale economies and technologyless automatic than what it seemed.

  16. What were these limiting factors? • The introduction of technologyfaced: • Constraints placed on by existing equipment that could not be replaced that easily or quickly • Constraints placed on by existing plant layout • Constraints placed on by existing market structures • Note: the case of G.M. with “Saturn”

  17. New technology and the marketplace • The question now is: • How can technology be used to help firms adapt their output to become moreflexible and thereforemore competitive in the new marketplace?

  18. The answer to this question came • With the development of: ECONOMIES OF SCOPE rather than with the consolidation of Economies of Scale

  19. Economies of Scope help firms produce a variety ofgoods involume • Economies of Scale help firms produce a singlegood in volume


  21. Technology helped firms produce a variety of output in volume through: • C.A.D. (Computer Aided Design) • C.A.M. (Computer Aided Manufacturig) • C.I.M. (Computer Integrated Manufacture)

  22. The use of C.A.D. & C.A.M. • made it possible for firms to manufacture in volume and variety • By bringing together CAD-CAM in the shape of C.I.M.: • it was possible for firms to attain a level of production flexibility far superior to that of scale economies

  23. This flexibility implies • that firms are now able to: • alter their product mix more rapidly • due to a : • Different Plant-Layout • Greater Versatility of their Machinery and Capital Structure This allows them to • adjust to the changing needs of the market much more effectively

  24. The end results of using technologies to achieve economies of scope are: • Better design of products and adjustments • Reduction in lead time from product conception to production of final version • Elimination of redundant and repetitive jobs and tasks(Traditional engineering and drafting jobs) • Rapid product properties adjustments • Cut in turnaround times from old to new product lines

  25. The result is: Flexible Specialisation This allows the generation of sophisticated quality products and consumer specific variants of those products. • Since: Advantage lies less in price and more in quality

  26. There are however some disadvantages in this process: • Design flexibility provided by technology must be matched by manufacturing flexibility • The cost advantages of economies of scope only work with products that have long life cycles • Design flexibility must be matched by a Flexible Manufacturing System (F.M.S.)

  27. FMS • This is a system that uses computer software and hardware to establish a production system that can react quickly to changing requirements of the market place

  28. FMS Technology and Flexibility • The application of economies of scope through FMS technology has allowed firms to improve their productivity ratesand reach higher levels of flexibility in adverse market conditions with: • increasingly segmented and fragmented markets • rising costs environments • decreasing product life cycle spans due to continuous technological improvements

  29. From Scale to Scope to FMS Assambly Systems Volume in limited variety Personnel Intensive Mass Production + Some use of computers Hybrid Assambly Systems Manual +Automated Workplace VOLUME FMS Volume with greater variety Job lot production Flexible Automated Assambly Systems - - + VARIETY

  30. FMS vs CAM • FMS replaces CAM in so far as it allows materials to be handled and processed automatically as opposed to manually • FMS technology allows firms product mix to meet changes in demand much more quicky • FMS allows firms to deliver variety in volume much more efficiently than CAM

  31. HOWEVER • The application of FMS is constrained by: • Lack of finance • Lack of necessary training to take advantage of it • Manufacturing problems derived from organisation-human interface

  32. THEREFORE • The usefulness of FMS flexibiliyis ultimately determined by the levels of : • Machine Flexibility • Ease of resetting • Process Flexibility • Ease with which it is possible to produce a set of given parts using different material types Tooling Fixturing Positioning Running Costs

  33. Expansion Flexibility • Ease with whch existing technology allow adjustments involving the addition/substraction of modular units • Operational Flexibility • Ease with which existing technology allows computer aided control for the delivery of parts to a particular point in the production process for assambly

  34. Product Flexibility • Ease with which existing technology allows a rapid changeover from one product type to another when a particular product mix is becoming outdated and loosing market share

  35. CONCLUSIONS • Depite the fact that FMS allows the manufacturing firm to adjust its product-mix to meet the competitive requirements of a market increasingly more segmented and fragmented, FMS remains a very costly type of advance technology to adopt. • Therefore, investment in such technology will only take place if the firm is able to guarantee:

  36. To produce a large enough product family over a sufflicient length of time to recover the cost of engaging in FMS • To balance up the production process so that investment in FMS at one stage of the process is not constrained bycapacity limitations at another stage

  37. Establish a relationship with suppliers so that they are able to deliver a mix of quality and variaty of spare parts necessary for the functioning of FMS • Invest in re-skilling the workforce so that FMS machinery is run flexibly and not underutilised

  38. Establish links with distributors so that there is closer connection between the manufacturing function and the requirements of the market • Guarantee that there is a market large enough to utilize capacity to its fullest extent

  39. BIBLIOGRAPHY • Ang, J.S. & Lin, J.W. (2001, May). A fundamental approach to estimating economies of scaleand scopeof financial products: The case of mutual funds. Review of Quantitative Finance and Accounting, 13(3), 205-221 • Bahrami H.(1992) The Emerging flexible Organization: Perspective from Silicon Valley, California Management Review • Browne J., Dubois D., Rathmill, K., Sethi, S.P. and Stecke, K.H., (1984), Classification of Flexible Manufacturing Systems. The FMS Magazine, 114-117. • Dobson, G., & Yanco, C.A.(2000, Fall). Product offering, pricing, and make-to-stock/make-to-order decisions with shared capacity. Production and Operation Management, 11(3), 293-312. • Howell, H.J. (2003, May/June). Adapting GM research to a new corporate strategy. ReseachTechnology Management, 46(3), 14-20 • Krugman, P., (1996), Making sense of the competitivenessdebate, Oxford Review of Economic • Policy, Oxford University Press, Vol. 12 (3), pp. 17-25 • Peppers, D. & Rogers, M. (1995). A new marketing paradigm: Share of customer, not market share. Managing Service Quality, 5(3), 48-51

  40. Shushil (1994), Flexible System Methodology, System Practice , 7(6), 633-651 • Sushil (1997), Flexible System Management: An evolving paradigm, System Research & Behavioural Science, 14(4), 259-275 • Sushil, (1999), Flexibility in Management, Flexible Systems Management Series, Global Institute of Flexible Systems Management, Vikas Publishing HousePvt. Ltd, New Delhi. • Sushil, (2000), Cornerstone of Enterprise Flexibility, Flexible Systems Management Series Vikas Publishing House Pvt. Ltd., New Delhi • Upton, D.M. (1994), The Management of Manufacturing Flexibility , California Management Review, 36(2), 72-89