.M414
Jd^tlAW^
SHIFTING ECONOMIES:
CRAFT PRODUCTION TO THE FLEXIBLE FACTORY
Michael
May
6,
1988
A.
Cusumano
Michael A.
Cusumano
M.I.T. Sloan School
of
Management
SHIFTING ECONOMIES: CRAFT PRODUCTION TO THE FLEXIBLE FACTORY
Contents
:
Introduction
Craft Shops to the Conventional Factory
The Conventional Factory to Flexible Design and Production
Product-Process and Organizational Options
Conclusions
INTRODUCTION
The
first part of this
perspectives,
models.
In
all
of
paper looks
at
production organizations from several
which treat the evolution of craft or job shops to factory
general, companies have pursued factory approaches as
moving beyond customization
of
single products for single customers,
where they can capture economies
point
related to scale of output and operations.
of
various
much
of
sorts,
software development seems
at
low prices.
of
to the
especially
These have enabled firms
customers products with standardized features but
criteria,
means
a
those
to offer
By usual
inappropriate for conventional
factory practices, and reported resistance to factory practices by programmers
can be explained
in
terms of this incongruence.
The next two sections discuss
as
well
better
as
different
combination
flexible design
and manufacturing techniques
product-process and organizational options that seek
of
efficiency
and
flexibility,
with
the
flexible
a
factory
emphasizing semi-customization and economies of scope as much or more than
scale.
The software factory
production
organization
is
also introduced as a type of flexible design
contrasting
approaches to software development.
with
traditional
job-shop
or
and
craft
CRAFT SHOPS TO THE CONVENTIONAL FACTORY
For most products, design and production require several distinct steps or
phases, proceeding more or less sequentially, with some iterations and overlaps.
An individual worker, or members
of teams or
generated by consumers, manufacturers,
an
define
existing
concepts and create
detailed design,
into prototypes.
or
a
future
departments, begin with an idea,
suppliers,
customer
that seems to
or others,
They then experiment with
need.
This must be translated into
formal concept proposal.
a
and the resulting documentation or blueprints are then made
When the designers and prototype builders are
completed design becomes
satisfied, the
production model, which can be tested and refined
a
further.
The sequence ends with the production model
one product, one customer.
make
are "customized"
it
workers that
in
In this
if
there
case, the product and the process needed to
an organization one might
in
many ways resemble the craftsmen
call
is
more than one potential customer,
a
"job
a
or artisans
variety of products before the advent of the modern factory
there
only one job--
is
in
shop," by
who made
the 1800s.
a
If
firm can create different types of
organizations aimed at replicating this design with varying degrees of efficiency
and output volumes, from
Developing
a
a
few (batch production) to many (mass production).
mass production or replication system may require
thought and money.
Once
this
system
is
in
a
great deal of
place, the final production process
phonograph record or copying
a
software program, or relatively difficult, such as assembling an automobile or
a
might be relatively simple, such as pressing
video
recorder.
Difficulty
depends on
a
the
nature
and
number
of
the
components, production or assembly processes, customer requirements, and other
factors.
From the customers' point
of view,
a
product
is
customized only
if
it
is
From the producers' point
tailored for their specific needs.
Some new designs they customize or
there are several options.
scratch," while
reuse
needed
Volume
as
managers,
--
prescriptive purposes
and thus the
factories,
types
and
as
well
production,
coordination
the
as
some
are
product-development
of
reuse or non-
of replication,
variables
production
and
These distinctions are important because observers from several
well
as
characteristics,
manage design
to
different
distinguishing
organizations.
fields,
process
components,
of
"make from
others producers reuse designs, components, tools, processes,
in
or particular people from other projects.
mechanisms
however,
of view,
have
used
them for descriptive
to explain the principles
as
well
as
behind both job shops and
which suggests what processes and methods of
logic
organization seem most appropriate for particular situations.
Historians
have seen the factory
as
emerging when the maturation
of
certain product technologies created opportunities for firms to focus on process
present
the
environment
degree
of
whether
There again
aimed at capturing greater economies of scale.
innovations
notion
--
that
degree of
specific
characteristics
divisibility of processing
of
an
industry
firm can or should
a
While
managers have considered
move
to
--
it
most determine
factory-oriented modes of design and
manufacturing
factory
its
equipment and operations,
product and process standardization or complexity
production.
and
is
can
be
highly
economically feasible only with
efficient,
usually
high production
volumes, due to the large capital requirements usually needed to introduce this
type of
a
system.
The most widely
cited
definitions
of
different
types
of
production
organizations has come from industrial organization literature and the work of
Joan Woodward
in
particular.
She identified three basic types:
unit or craft
production (job-shop and small-batch), large-batch and mass production, and
continuous processing operations as
chemical manufacturing ^
in
shop production has non-standard inputs and outputs
product, and the components that go into
managers
make
a
to
standardize
it,
each finished
i.e.
tend to be different.
materials
or
development
formalize
product; to allow workers to make these adjustments, managers exert
control only at
low level, that
a
usually by first-line supervisors.
is,
seems important for supervisors and workers to be highly skilled
label "craft"
seems appropriate for this mode of operation.
shop or small batch production, the lack
managers
Historians
work
itself.
in
In
as firms
also
hence the
in
job-
processes and
in
requirements, make
skill
it
scope economies.
have suggested that factory systems tended
of production
centuries
to find either scale or
--
It
general,
In
of standardization
products, and management controls, as well as high
difficult for
modes
Therefore,
Job-shop organizations typically require many "ad hoc" adjustments
processes.
to
unable
are
Unit or job-
.
--
to
replace craft
learned how to rationalize product designs and
describing the evolution of factories during the 18th and 19th
Britain,
Europe and the United States,
industry and then gun-making,
initially
in
the textile
Alfred Chandler noted how managers
raised
worker productivity and lower unit costs by standardizing and then integrating
production processes
components;
specializing
closely
labor;
in
large, centralized facilities; developing interchangeable
coordinating
mechanizing
the
or
flow
each
of
automating
process;
tasks;
and
dividing
imposing
and
rigid
managerial, accounting, and other types of controls. "^
Another way
to interpret this evolution, as
done by John Hunt,
of distinct "ages," such as from craft to machinery,
steam engines
in
is
in
terms
exemplified by the use of
factory mass production during the 18th century, to the power
age after the introduction of electricity.'^
David Landes similarly describes this
transition -- often labelled "the industrial revolution" -- as involving primarily
human
the substitution of mechanical devices for
skills,
human or animal strength, and marked improvements
processing.
inanimate power for
materials extraction and
in
"^
But while factory
provided
organizations
higher
worker and
capital
productivity, the nature of the processes, equipment, and worker job routines
made
it
difficult
introduce
to
new products
or to meet the demands
economically,
or
processes
Because new technologies or product and processes variations continue
in
and because not
most industries,
and
quickly
customers with distinctive tastes.
of
to
appear
customers want commodity products,
all
factory-oriented design and production has never completely replaced the craft
Market segmentation thus provides opportunities for firms
or job shop.^
compete through
differentiation,
mixing
combinations
price
of
and
to
product
performance levels, supported by different types of processes and organizations.
Firms
competing through standardized products and factory production
usually enjoy considerable economies of scale -- the situation where average
production
per
costs
production for
output
to
at
firm
a
to
tend
least
decline
as
total
to a certain
limit.
to
up
facilities
volumes
need to operate
be able to justify their cost.
of
Economists
One involves the concept
several factors.'
Many machines or
"indivisibility."
for
of
product increase,
a
phenomenon
attribute this
volumes
unit
at
of
particular
Some equipment or
processes are designed with minimum and maximum operating ranges, so that
they
are
products.
not
to
smaller
volumes
of
a
number
of
different
Automated equipment especially can vastly improve both productivity
and quality, but
rates.
adapted
easily
is
usually expensive to introduce, thus requiring high utilization
Suppliers face these same constraints, and may not deliver materials to
firm unless there
is
a
minimum
size order,
for larger orders or long-term contracts.
a
and offer their customers discounts
It
is
also
to
the
advantage
of
a
firm to spread fixed and variable costs related to equipment, land, research and
product development, administration, and various "overhead" expenses, among
numbers
large
This
of units sold.
the notion of scope
--
is
another form of scale economy, although
spreading costs or resources across different products--
applies here as well as scale.
Yet another reason for the drop
When production volumes
labor.
a
costs
it
can
and more quickly
specialize,
assigned tasks.
Through
this
is
specialization and division of
particular product or component are high
often becomes possible to divide
enough,
Workers
methods
for
in
a
process into
accumulate
a
their
type of analysis, firms often found more efficient
Taylor demonstrated, although, once
of production, as
series of tasks.
experience for
set, there usually
are few opportunities for workers or managers to alter or improve the process.
This
is
another reason why factory production tends to be rigid and poorly
suited to accommodating change
Writers
on
in
general.
and operations management such as Abernathy,
production
Utterback, Wayne, Hayes, and Wheelright have been especially concerned with
the characteristics of different processes, and the specific product and market
characteristics
conclusions by historians,
sort of "life cycle."
In this
over time, allowing firms
less on
accompany each.
should
that
is
A
key
notion,
that industries (or products) tend to mature,
to take
advantage
of
moving from project or job-shop modes
then
in a
accumulated experience and focus
product development and more on process innovations aimed
and
to
interpretation, product innovations usually decrease
unit costs while standardizing quality."
processing
similar
various
types
of
at
reducing
At the facility level, this has involved
of
and production
design
large-scale
engineering
to
batch
and factory
manufacturing (Figure 1.1).
A key problem, however,
is
the inflexibility
a
firm often encounters while
.
moving toward large-scale factories and continuous production, because designs
and processes became
for example,
in
difficult
and expensive
to
used the experience of Ford and
the 1920s to demonstrate how
a
change.
its
Abernathy and Wayne,
Mode! T production
facilities
company can face bankruptcy by pushing
process rationalization and scale economies too far
--
for example,
assuming
product technology or consumer tastes were more stable than they were, and
making
periods
investments
of
techniques
time
to
in
expensive and
change
to
rigid
factory
accommodate
systems
that
took
long
new models or production
Figure
Competitive
priorities
lu)*.
Process Siniccu
Process Life Cy
Siagr
ind key
tasks
on the product-process matr
Another school
management and organization
of
research,
contingency
theory, explains the existence of different types of production organizations as
a
function
situations
J^
demands or conditions,
environmental
of
There seems
to
or
be no one appropriate structure for
situation or technology, although specific types of organizations and
coordination and control should
historical
specific
fit
a
given
methods
example, Henry Mintzberg and others have characterized the environments
which firms operate as
An environment
that
is
a
rather
complex and dynamic should be met with organizational
than
factory-type
in
If
--
structures
characteristics such as "machine bureaucracy" and
(Figure 1.2).
in
mixture of stable or dynamic, and simple or complex.
responses of "adhocracry" and "mutual adjustment"
operation
of
particular conditions better than others. For
denoting craft modes of
that
would
better
fit
work process standardization
these characteristics determine which products should be made
what organizations, then new and unstandardized technologies, or products
customized for particular users, would seem to be poor candidates for factory
production.
might result
A mismatch between the product and the process organization
in
an
inability
to
meet customer needs adequately or adapt to
change, and might even cause employees to resist incongruent structures, such
as factory-type standards
and controls
in a
dynamic and complex environment.
Figure 1.2:
ORGANIZATIONAL ENVIRONMENT AND STRUCTURAL FIT
Environment
STABLE
DYNAMIC
Professional Bureacracy
Adhocracy
(skills standardization)
(mutual adjustment)
Machine Bureacracy
Simple Structure
(process standardization)
(direct supervision)
^
Characteristics
COMPLEX
SIMPLE
The brackets indicate the
Note:
basic
method
of
coordination
for
each
structural configuration.
Various disciplines have thus suggested reasons why the factory evolved
and how
like
for
it
offered managers
more
efficient
organizations, but with limitations.
all
means
of production than craft-
The factory has never been appropriate
types of products but worked well for designs suited to mass production
and mass consumption.
less
a
efficient process
The
but,
craft approach, typified
by the job shop, offers
a
despite the introduction of factory production for
commodity products, continues
to
serve specific markets niches, such as new
technologies or products tailored for individual needs.
Table 1.1 presents
a
simplified comparison of the basic strategies, characteristics, and tradeoffs that
might accompany
a
conventional factory and job-shop type of organization.
10
Table 1.1:
CONVENTIONAL JOB SHOP AND FACTORY COMPARISON
JOB-SHOP
Strategy:
Meet Individual Customer Needs with Differentiated Products
Characteristics:
Non-Standard Materials (Inputs)
Non-standard Processes (Tools, Procedures)
Non-Standard Final Products (Outputs)
Little Division and Specialization of Labor and Equipment
Low Level of Automation
High Worker Skill/Knowledge
Low Level of Management Control
Few or No Economies of Scale
Some Economies of Scope
Tradeoff?
Product-Process Flexibility vs. Process Efficiency
FACTORY
Strategy:
Raise Worker/Capital Productivity to Lower Unit Costs
Characteristics:
Standardized Inputs
Standardized Tools and Procedures
Standardized Final Products
Integrated Management of Production Processes
Division and Specialization of Labor and Equipment
Mechanization and/or Automation
Reduced Dependence on Worker Skill/Knowledge
High Level of Management Control
High Economies of Scale
Some Economies of Scope
Tradeoff?
Process Efficiency vs.
Product-Process Flexibility
THE CONVENTIONAL FACTORY TO FLEXIBLE DESIGN AND PRODUCTION
notions of the factory assume that organizations
Conventional
this
type
flexibility
production system accept
of
which
processes,
in
But
produced (see Figure 1.1).
machine
tools,
in
the
adopting
more efficiency versus
variety
less
products that can
of
be
including automobiles,
several industries,
semiconductors, office equipment, and software, new techniques
and technologies have been reducing
The general
tradeoff
a
affect
--
effect
to
is
shift
this tradeoff of flexibility
competitive
emphases
from
and efficiency.
either
production or production differentiation to differentiated products
low-cost
at low cost,
achieved not through simple economies of scale based on the mass production of
particular products, but through economies of scope based on the optimal use of
resources
and about the firm across
in
One technique
pioneered
in
facilitating this
variety of products.
a
shift can
Japanese automobile
the
be termed small-lot production,
industry
after
subsequently adopted by firms throughout the world
This
involves
manufacturing
final
the
in
mastery
of
largely
and then
in
have workers
allowing
is
to
efficient
standardize as many components
in
modules so they can
in
and machines assemble the components
final
assembly, with
Producers of machine
many other products
flexibility in
and
different ways, develop tools and workers that are versatile,
variety of products
quality).
II
variety of industries.
in a
techniques
and production methods as possible, design components
be configured
War
rather than large batches or lots of components and
small
An underlying concept
products.
manual
World
have
tools,
used
little if
textile
similar
any
to
make
a
loss in productivity (or
machinery, office equipment, and
approaches
to
combine job-shop
end-product variety with the productivity, standardized quality, and
low cost structure of large conventional factories.'^
A second technique can be termed group technology, the
12
idea of putting
problems,
together similar parts,
or tasks
layouts,
arranging factory
production,
The underlying principle here
engineering.
facilitate
scheduling of parts
rationalizing
product design and
to
or
is
clearly economies of scope, rather
than of scale measured by the number of identical components produced through
a
given process.
Critical to
any group-technology scheme
similar to library references, that makes
example,
in
a
coding system,
For
engineering, parts might be classified by geometric similarities, and
matched with process plans and machines capable
specifications.
Or designs for certain categories
of
making parts
to
those
coded and
of parts might be
so that engineers would have ready access to old drawings and not have
filed,
to
is
possible to classify characteristics
purchasing, or other functions.
engineering,
related to manufacturing,
it
"reinvent the wheel"
processing
capacity
more than once.
and
in
programming
Recent developments
sophistication
in
have
computer
facilitated
development of the coding and retrieval systems needed for group technology to
work
well for large
numbers
of items,
The basic concept, however,
firms.
A third technique
is
leading to extensive monetary savings
is
cells.
support
of semi-customized
products from
This resembles small-lot production, but employs coding schemes
relying on what are,
for
in
'*^
the use of tools for computer-aided, integrated design
and manufacturing, focused on the building
standard
interchangeable parts.
as old as
the
essentially,
selection
and
group technology concepts, and automation
modification
of
standard
Integrating
cells.
computer-aided design tools with flexible computer-aided or computer-integrated
manufacturing systems (referred
to test different design
to as
CAD/CAM, FMS, CIM) makes
and processing ideas on
a
it
possible
computer screen, and then
transfer completed digitalized designs to automated manufacturing tools,
little
with
or no penalty associated with low production volumes, because automation
largely eliminates costly labor-intensive processes.
13
The
result
is
that customers
do not have to pay high prices for fully customized products; nor do they have
to
put up with standardized commodity products that are inexpensive but do not
their needs satisfactorily.
fulfill
addition
In
demonstration
to
of
(ASIC) design, one
One method
out
in
is
fixed
to
of
of the fastest
in
software,
an
important
integrated
application-specific
in
circuit
growing areas of the semiconductor industry.
Another approach
is
to develop standard cells,
which can be configured
and
"megacells"
standardization
--
such
is
graphics
as
the
fit
different
which contain small
different ways.
in
laid
which follows
tool
rules to create "custom-routed" connections to
abstraction
standardized
is
A designer then uses an automated
rows.
logic combinations,
level
capability
mass produce gate-array chips, which contain transistors
programmed design
applications.
automated program generation
this
At even higher
alternative
controllers,
of
building
arithmetic
logic
unitors, or microprocessors -- which, using computer-aided design tools, can be
configured easily into different chip designs.
CAD
tools
can select routing
combinations or configurations on the basis of programmable rules, as well as
perform simulations and testing functions to aide the design process.
company, VLSI Technology,
tools
Inc.
(VTI), has even standardized around design
simple enough for non-specialists to use,
refers to as an
One U.S.
and created what management
ASIC "design factory":
Design engineers are the bulk of the work force now at VTI's
dispersed design centers
One needs rudimentary knowledge of how to
use the work station software -- as a CAD or drafting tool -- to
copy schematics onto the system. It requires care and attention to
-- but not extensive engineering training.
detail
A technician with
high school or associate degree is adequate.
a
We can save
engineering time for better use, and partition the design "production"
process into a more elaborate division of labor, utilizing both
Work can move
computer and human resources more efficiently.
The
along like in a factory, from person to person, task to task.
manager maintains line balances by allocating human and computer
'^
resources [italics added].
.
.
.
14
Another way
prominence of the worker, not
developments
these
interpret
to
in
production, but
as
is
a
return
to
the
design of products and the
in
design of tools and systems for automated support of product development and
manufacturing.
Jaikumar gives an example of this evolution through
R.
discussion of process control
in
the machine tool industry.
a
Because production
volumes are usually low and customers often require customized products, some
firms
continue to use craft approaches,
development
According
provided
have pioneered
in
the
automated flexible design and manufacturing systems.
of
to
Jaikumar, general-purpose tools invented
century required considerable
but
while others
major
skill
advances
in
the latter 18th
on the part of individual workers to operate
in
Single-purpose equipment,
precision.
interchangeable components, and industrial engineering techniques pioneered by
Frederick Taylor around 1900 largely removed the need for worker
skill
discretion, and replaced this with precise procedures and standards defined
management.
In
more dynamic
precision,
by
the next stage of development, companies introduced statistical
process control techniques that were less rigid
for
and
quality,
changes
in
work
and other aspects
in
processes
of
the sense that they allowed
response
in
to
data
about
machine or worker performance.
In
recent decades, numerical control equipment has removed information processing
from the work floor,
while
design tools and flexible,
intelligent
integrated manufacturing systems have again made
have broad
skills.
Accordingly, as
given workers more discretion
use these systems to make
In
summary, while
a
a
in
in
it
computer-
necessary for employees to
early craft production, management has
defining work tasks and outputs, so they can
variety of products efficiently.'^
history of manufacturing
15
Is
beyond the scope
of this
chapter,
it
is
important to recognize that concepts of design and manufacturing
have been changing.
making mixes
for
such as
as
products where economies of scale are difficult
industries that are new or
in
production
of
Traditional factory approaches clearly appear unsuitable
is
less
important than scope
in
rapidly changing,
or where scale
computer-aided technologies,
efficiency even
in
a
have made
in
design and supporting functions such
But new concepts of manufacturing and design,
testing.
to achieve,
it
supported by
possible to combine flexibility and
single factory.
Table 1.2 summarizes some of the features one might expect
in
a
design
and manufacturing system emphasizing standardized but versatile processes and
modularized components, and the production of semi-customized products.
tools,
If
integrated
as a
in
a
single organization, this approach might also be referred to
"flexible factory," capable of offering customers
a
variety of products at
potentially lower prices than traditional craft production.
design
and manufacture
industries,
of
semiconductor
including software,
chips,
indicate that this
is
machine
Evidence from the
tools,
and other
not an abstract model but
has been applied by firms seeking some combination of efficiency and flexibility
in
production and product variety, or efficiency and adaptability to changes
market demands or technology.
in
:
:
Table 1.2: "FLEXIBLE
FACTORY" DESIGN AND PRODUCTION SYSTEM
Individual Customer Needs with Differentiated
Products; High Worker/Capital Productivity to Lower
Unit Costs
Strategy
Meet
Implementation
Semi-Standardized Inputs
Standardized Tools and Procedures
Semi-Customized Final Products
Integrated Management of Development/Processing
Some Division and Specialization of Labor and Tools
Flexible (Programmable) Automation
Dependence on Worker & System Skill/Knowledge
Low Level of Management Control
Some Economies of Scale
Large Economies of Scope
High System Development and Training Costs vs.
Process Efficiency and Product-Process Flexibility
Tradeoff?
PRODUCT-PROCESS AND ORGANIZATIONAL OPTIONS
A simple way
conceptualize the distinctions among craft or job-shop
to
organizations, conventional factories, and flexible design and production systems,
is
to view
tailoring
segments.
them along
spectrum reflecting how much emphasis each places on
a
products or production
In
processes
the spectrum
practice,
is
to
specific
customers or market
probably continuous,
but
it
can be
thought of as containing three basic options:
(1)
Customization:
design and manufacture unique products, where each
is
different and each process -- tools, components, specific work rules, team
members
(2)
--
are also different.
Semi-Customization
product, where
a
:
design
semi-customized
a
standard procedure
from stock and configure them
in
is
to reuse
(or
semi-standardized)
some or
all
components
different ways for different customers.
(3)
Standardization: design and manufacture
a
commodity-type product, where
components are interchangeable, or where components and
are mass produced,
using
a
final
products
standardized process.
Customization and standardization apply most directly to industries clearly
segmented among users who desire either fully tailored products or low-priced
commodities.
still
But even
customers demand different products, managers might
if
find they can recycle at least some designs or components for some period
of time, as well as reuse procedures, controls, tools, tests,
and documentation.
Therefore, unless each product, and the process and people required to design
and build
it,
are entirely different, semi-customization, benefitting from at least
some economies of scope,
Furthermore, even
should be possible.
not scale,
if
making commodity products for the mass market can choose
firms
components or other inputs.
option
Thus semi-customization
seeking to meet the needs of
that firms
a
reuse
product-process
a
is
to
broad range of customers
might select.
The
notion of
Figure 1.2),
a
"professional bureacracy," suggested by Mintzberg (see
might also characterize
The environment
software development.
flexible
a
is
factory as
in
the context of
sufficiently complex so that workers
need to be skilled professionals and use considerable discretion
in
their jobs,
such as semiconductor chip designers or software programmers, but also stable
enough
that
so
some
type
of
bureacracy,
involving
a
formalization
or
standardization of skills, processes, and organizational structure, might arise to
provide
a
higher measure of
organization
Toshiba,
(Figure 1.3).
NEC,
and
efficiency
than
The case studies
Fujitsu,
however,
18
an
unstructured
process
and
of software factories at Hitachi,
suggest
several
differences
from
description
Mintzberg's
workers
to
of
a
bureacracy.
professional
Japanese firms train
become professionals rather than hire them from the market; they
appears to rely more on formal structures and planning than Mintzberg thought
necessary for groups
for example, doctors; and standards are not entirely
of,
derived from external professional associations but are also, to some extent,
internally generated, or at least selected. '°
Nonetheless, the model described
Figure 1.3 does apply, and would seem to suggest that
a
semi-customization and the flexible factory approach only where there
for professional-level
skilled
environment, for example,
operating
systems
and
in
workers but with
application
input/output
at
least
is
a
some stability
requirements as well as
interfaces.
in
firm might introduce
in
need
the
in
computer
Semi-customization
as
a
product-process option would thus allow the firm to capture repeatable elements
for
some period of time, while allowing for the addition of new components,
tools,
or
processes
to
meet
accommodate incremental changes
Figure
1.
3:
the
in
distinctive
needs
or
customers
or
technology or markets.
ORGANIZATIONAL ENVIRONMENT AND PRODUCT-PROCESS PIT
Environment
DYNAMIC
STABLE
Characteristics
COMPLEX
SEMI -CUSTOMIZATION
CUSTOMIZATION
Flexible Factory
Job Shop, Laboratory
(Professional
(Adhocracy)
Bureacracy)
SIMPLE
to
STANDARDIZATION
CUSTOMIZATION
Conventional Factory
Job Shop, Laboratory
(Machine Bureacracy)
(Simple Structure)
19
.
As
in
conventional product-process matrices (see Figure 1.1), the typology
and organizational options should be available
in
any market where there
is
some segmentation and at least some temporary standardization of needs, basic
and development processes.
technologies,
the high-end, custom segment,
In
firms might focus on optimizing product performance and process flexibility;
there probably are few economies of scale or scope, but customers should pay
On the other end
premiums for differentiated products.
might attempt to maximize economies of scale
through small margins on high sale volumes.
of the
spectrum, firms
production, achieving profits
in
the middle, where semi-custom
In
might characterize both products and processes, firms would need
design and production
skills,
to
master
although the potential rewards are high.
Firms
might also implement these different options using either manual approaches or
more automated
flexibility
tools,
the
in
Customization
including computer-aided systems with large degrees of
number
products variations they can
different
of
semi-customization,
or
for
example,
through manual processes or through automation
In short,
and
process
--
be
can
CAD/CAM
as
software
would
components as possible, and/or adoption
as well as linked
require
of a
either
tools (Figure
the factory model as applied to a new technology or to
such
handle.
achieved
standardization
a
of
standardized process and
1
.4)
product
as
many
tool set,
procedures for worker training, quality control and testing,
process improvement, control, and the
like.
It
should be possible
to
make semi-
customized products for some customers usually asking for customized products,
or
for
customers dissatisfied with
typically are part of factory
division of labor,
well
a
firm
can
commodity products.
management
or automation --
"modularize"
--
such as worker specialization and
may or may
not apply,
and mechanize the tasks
development and other functions.
20
Other issues that
depending on how
involved
in
product
Figure 1.4: Typology of Product- Process Development and Organization
Market
Needs
Product- Process
High-End
Type
Custom
Product- Process Organization
Design
Production
Maximize:
Software or Conventional
Products:
Product
Performance
and Process
JOB SHOP. CRAFT
Flexibility
Product
& System
Engineering
of Scale or
Few Economies
Software or
Products:
FLEXIBLE
Medium
Semi-custom
Batch
Production
Scope, but
Customers Pay
Premiums
With
any factory-type approach,
there
Management might standardize or automate an
standardize and automate around
recovering investment
in
a
benefits.
as
inefficient process or system, or
still
On the other hand,
maintain some flexibility, such
evolutions
seem
that
likely
to
be
few years.
Another risk with factory-type approaches, especially
factory workers are highly skilled professionals,
managers might not
well
programs that are reevaluated periodically and
accommodate future technical
introduced within
as
technology that becomes obsolete before
a
process and
a
as standards, tools, or training
to
risks
developing that process or system.
there are ways to rationalize
built
are
in a field
where the
that workers and perhaps
is
constrained environment. Employees might leave the
like a
company, or simply not follow rules, and managers might not enforce them.
Worker and manager training programs, which
certain
restrictions
to
improve
average
socialize
levels
of
employees
performance
A more
organization, might counteract some of these tendencies.
of
measures would be the type
of
restrictive
of
to
a
accept
whole
forceful set
employment systems existing
in
large Japanese firms, where workers are hired "for life," promoted and given
raises primarily on the basis of seniority,
would also encourage employees
of disgruntled
workers
The basic problem
introduce
a
and not hired
in
mid-career. These
comply as well as counteract the tendency
to quit.
is
structure that
the market, or does not
to
fit
not
is
solved,
however,
if
management attempts
the current culture or organization of the firm. For
example, craft-oriented professionals resisting
a shift to
factory-type practices
has been documented for Denmark's data processing industry.
Finn Borum,
tried
to
a
to
inappropriate to the state of the technology and
According
to
Danish scholar, the resistance occurred when some companies
introduce factory practices such as standardized procedures,
22
close
employee
supervision,
and
divisions
between
labor
of
system
analysis
and
programming. There may have been some "cultural" elements involved, seen
years
of
debates
development
is
among
more
like
programmers
an
art
or
and
craft
engineering or factory-like discipline and
however,
applications,
requiring
that
is
at
least
hoc
ad
software
in
production than factories.
reflecting
a
mismatch
than
an
control.
programming
Denmark, seemed
responses
academics
to
suitable
data
processing
be very dynamic and complex,
--
Thus he interpreted
more
this
in
the
lack
of
mode
of
craft
acceptance as
between the requirements of the technology and the
environment with the factory process:
By imposing standardization and supervision of the specialists'
practice at least two objectives were pursued.
One was to reduce
costs, another to reduce the dependency on the individual specialist.
By making their working methods conform to certain norms, and their
products to certain standards, the expropriation of craft knowledge,
and the replaceability of the individual specialist were obtained. .The
division of work between programmers and analysts also falls within
this repertoire of control measures.
.
However, these efforts that essentially deskill the IT- [Information
Technology] specialists was resisted by the specialists in several ways.
One was to leave the organizations, if control measures that implied
a formalization beyond the specialists' threshold of tolerance were
imposed.
The second type of resistance was to bypass the rules and
regulations imposed.
This is a common story from the installations
with well-developed methods and standards: that they do exist, but
To enforce the rules and
are only utilized to a limited extent.
methods is time-consuming, difficult, and in most organizations run
counter to the efforts to terminate projects with a tolerable
exceeding of the time and resource schedule.
.
for
Borum's explanation,
commercial
for
and adjustments
whether
activity
in
software
.
.
.
Thirdly, rule enforcement is complicated by the fact that the [dataprocessing] managers and supervisors in nearly all cases are ITspecialists themselves.
Thus they know the problems connected with
strict rule adherence, and perhaps share .the craft values of the
specialists they are supposed to supervise. ^°
23
another option
Of course,
firm
a
where they may be
rationalizations
segments
for
to
will
pay
a
competing
either
high premium.
Model-T car or
a
a
maximize the creativity of designers
low-priced mass market.
this
for
Firms
in
standardized product,
word-processing package, managers might
still
want
and organize by job-shop oriented
projects or laboratories, but with the objective of developing
succeeds,
market
in
flexibility
any industry, might stress highly skilled workers and process
in
At the low end, for customers desiring only
flexibility.
a
by
require
process
introducing
At the high end, this would be to develop customized
or innovative products for which customers
this segment,
avoid
inappropriate
where the customers and processes
efficiency but not both.
such as
to
is
On the other hand,
if
a
product for the
the semi-customization strategy
might capture customers from the low and high ends of the
market.
CONCLUSIONS
A major problem
among
that companies face
their competitive strategies,
--
suitable
for
determine an appropriate
Whether or not
software development
context of management objectives,
the skills
a
factory type of
meaningful only
in
the
and resources available
to
the
is
organization, as well as characteristics of customers and the technology.
managers
need
not
always
do
is
choose either efficiency and
products, or flexibility and differentiated products.
segmentation
in
a
fit
such as the characteristics of markets,
or the technology they are dealing with.
is
to
organizational structures and capabilities,
and external or environmental factors
organization
is
market or even
temporary
As long as there
stability
in
24
is
technology
customer needs, there are options. Taking advantage of reuse
What
standardized
of
some
and
design and
inputs
production
productivity
broad
a
in
sense
way
simple
relatively
a
is
improve
to
engineering and manufacturing types of operations through
in
economies of scope.
If
choose
firms
to
pursue
"rationalization"
of
product
and
process
development, the question then becomes, within the existing market segments
and areas
of
systematic
in
stability
--
process improvement
like.
and
in
rather
or scale,
as
well
than
to build
from
does not seem necessary
facility
investing
or
in
in
itself to
and
tool
methodology development.
along with
processes
and
In
components,
'
process
work best.
to
in
and
tools
general, semi-customization as a product-process
more conventional factory concepts (standardization
tool
worker training,
support,
computerized design technologies, make
"flexible factory
general
improve scope economies,
although scale may be important to justify the financial investment
strategy,
in
products from "off-the-shelf" components
scratch,
development and then standardizing around technologies that seem
A large
more
to be
as
productivity, quality, scheduling, budgeting, and the
One approach might be
tools,
how
technology and customer demands,
capturing economies of scope,
it
etc.),
more feasible for firms
to
and
of
new
emphasize
approaches that combine process efficiency with variety
end
in
products and some adaptability to change.
Some firms
in
industry may choose to compete perpetually as job or
an
batch shops, making, for example. Rolls Royces instead of Model T cars.
passage
of time
may thus be important mainly
maturity" brings with
to
move from
job
it
enough experience and
shops to factories with
in
The
that experience or "industry
stability for at least
varying
levels
of
some firms
flexibility.
challenge for managers of relatively new technologies not yet standardized
A
in
features or development processes might be how to use strategy, technology,
and organizational
structure
to
move beyond job-shop or
25
craft
modes
of
operation
.
There
level.
Over
is
also the
time,
issue of sustaining competitive advantage at the firm
facilities
produce semi-customized
in
the middle of the spectrum may become able to
products
superior
in
products and similar to customized products but
development may thus provide
managers need
to ask
a
firm with
performance
at
less cost.
deemphasize economies
themselves continually
of
scope as
and processes, and reuse
of
in
commodity
considerable strategic advantage,
if
they are doing
improve their product development and production operations.
tools
to
Since process
process standardization,
all
If
they can to
some firms
integration of
components, while focusing essentially on the
individual engineer, the individual tool, or the final product, then they
be fully
cultivating
--
that
is,
compared
to
may not
some of their competitors--
organizational capabilities to maximize the performance of their technical people
and redeployment
of resources across a
26
broad range of products.
REFERENCES
1. For basic discussions of the product development process see Glen L. Urban
and John R. Hauser, Design and Marketing of New Products Englewood Cliffs,
,
NJ,
Prentice Hall,
1980.
Theory and Practice London,
Joan Woodward, Industrial Organization:
Oxford University Press, 1965, Joan Woodward, ed.. Industrial Organization:
Behavior and Control London, Oxford University Press, 1970.
2.
.
,
See Alfred D. Chandler, Jr. The Visible Hand: The Managerial Revolution in
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Skinner, Manufacturing: The Formidable Competitive Weapon New York, John
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,
,
Institution
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1981.
4.
John W. Hunt, The Restless Organization
5.
David S. Landes, The Unbound Prometheus
Press,
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.
Wiley International,
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Cambridge, Cambridge University
1969.
Henry Mintzberg, The Structure
Prentice Hall,
1979,
p.
of Organizations
,
Englewood
Cliffs,
NJ,
252.
For a discussion of economies of scale or returns to scale, see, for example,
Edwin Mansfield, Microeconomics: Theory/Applications New York, W.W. Norton
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,
&
Company,
1985.
William J. Abernathy and James Utterback, "Dynamic Model of Process and
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Wheelright, "Link Manufacturing Process and Product Life Cycles," Harvard
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Competitive Edge: Competing through Manufacturing New York, John Wiley &
Sons, 1984; Roger W. Schmenner, Production/Operations Management: Concepts
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,
,
.
William J. Abernathy and Kenneth Wayne, "Limits of the Learning Curve,"
Harvard Business Review (September-October 1974), 109-119.
9.
10. Paul
R.
Lawrence and Jay W. Lorsch, Organization and Environment:
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Jay Galbreath, Designing Complex Organizations Reading, MA, Addison-Wesley,
1973 and Organization Design Reading, MA, Addison-Wesley, 1977; W. Richard
Scott, Organizations:
Rational. Natural, and Open Systems, Englewood Cliffs,
NJ, Prentice-Hall, 1981. p. 208; Stephen R. Barley, "Technology as an Occasion
for Structuring:
Evidence from Observations of CT Scanners and the Social
Order of Radiology Departments, " Administrative Science Ouarterly 31 (1986) p.
,
,
,
,
27
,
107.
n Source for figure is Finn Borum, "Beyond Taylorism: The IT-Specialists and
the Deskilling Hypothesis," Copenhagen School of Economics, Computer History
(CHIPS) Working Paper, September 1987, p. 5, adapted from Mintzberg, p. 286.
.
12. See, for example, Michael A. Cusumano, The Japanese Automobile Industry:
Technology and Management at Nissan and Toyota Cambridge, MA, Harvard
University Press, 1985; Yasuhiro Monden, Toyota Production System. Norcross,
Ga., Industrial Engineering and Management Press, 1983; and Richard J.
Schonberger, Japanese Manufacturing Technigues. New York, The Free Press,
1982.
Also, see Ramchandran Jaikumar, "Flexible Manufacturing Systems:
A
Managerial Perspective," Harvard Business School Working Paper #1-784-078
(January 1984) and "Postindustrial Manufacturing," Harvard Business Review
(November-December 1986), 301-308; Michael J. Piore and Charles F. Sabel, The
Second Industrial Divide: Possibilities for Prosperity, New York, Basic Books,
1984; Charles F. Sabel et al., "How to Keep Mature Industries Innovative,"
Technology Review (April 1987), 27-35; and Diane Palframan, "FMS: Too Much,
Too Soon," Manufacturing Engineering (March 1987), 34-38.
.
Nancy L. Hyer and Urban Wemmerloc, "Group Technology and Product
Harvard Business Review (July-August 1984), 140-149.
13.
14. Harvard Business School, "VLSI Technology,
Design," Case Study 0-686-128 (1986), p. 15.
Inc.
(A):
vity,
Automating ASIC
15. Ramchandran Jaikumar, "From Filing and Fitting to Flexible Manufacturing:
A Study in the Evolution of Process Control," Harvard Business School Working
Paper
16.
.
February 1988.
Mintzberg, pp. 348-379.
See, for example, Frederick P. Brooks, Jr., The Mythical Man-Month:
Essays in Software Engineering Reading, Ma., Addison-Wesley, 1975; Oscar
Hauptman, "Influence of Task Type on the Relationship Between Communication
and Performance:
The Case of Software Development," R&D Management 16
(1986), 127-139; and Martin Shooman, Software Engineering: Design. Reliability,
and
Management New York, McGraw-Hill, 1983.
17.
,
.
Borum, pp. 8-9.
6 7
3B
Q7 2
28
^/lioi
Date Due
SF2 5'89
APR
1
2 1990
JUN 19 1990
NOV
BBC.
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2-^"*^
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