The impact of some recent developments in e-business on the management of next
generation manufacturing
Fawzy Soliman, Mohamed Youssef. International Journal of Operations & Production
Management. Bradford: 2001.Vol.21, Iss. 5/6; pg. 538, 28 pgs
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Subjects:
Electronic commerce, Manufacturing, Information technology, Models, Studies
Classification Codes
5250 Telecommunications systems & Internet communications, 5310 Production planning & control, 9
Author(s):
Fawzy Soliman, Mohamed Youssef
Article types:
Feature
Publication title:
International Journal of Operations & Production Management. Bradford: 2001. Vol. 21, Iss. 5/6; pg. 53
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Periodical
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01443577
ProQuest document ID: 214411181
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9877
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http://gateway.proquest.com/openurl?url_ver=Z39.88-2004&res_dat=xri:pqd&rft_val_fmt=info:ofi/fmt:ke
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Abstract (Article Summary)
Recent developments in information technology such as the Internet, enterprise resource planning
systems, and knowledge management systems necessitate the use of these technologies in order
for the next generation manufacturers to co-evolve and survive in the new business landscape. The
purpose of this paper is to examine the impact of these technologies on managing next generation
manufacturing (NGM), and the benefits that can be reaped by effectively utilizing them. An
extension of Youssef's agile manufacturing model is presented to show how NGM companies
develop, implement, and manage these technologies to support their manufacturing operations.
The implications on this new model are discussed in detail. Analysis indicates that perceived
benefits, as well as potential business opportunities for NGM companies, are likely to become key
drivers for the use of electronic business.
Full Text (9877
words)
Copyright MCB UP Limited (MCB) 2001
[Headnote]
Keywords Manufacturing, Information technology, Agile production, Model
[Headnote]
Abstract Recent developments in information technology such as the Internet, enterprise resources
planning systems and knowledge management systems necessitate the use of these technologies in
order for the next generation manufacturers to co-evolve and survive on the new business landscape.
The purpose of this paper is to examine the impact of these technologies on managing next generation
manufacturing, (NGM), and the benefits that can be reaped by effectively utilising these technologies. We
present a model on how NGM companies develop, implement and manage these technologies to support
their manufacturing operations. Our model is an extension of Youssef's agile manufacturing model The
implications of this new model are discussed in detail. Our analysis indicates that perceived benefits, as
well as potential business opportunities for next generation manufacturing companies, are likely to
become key drivers for the use of electronic business.
Introduction
During the 1980s and 1990s, Western manufacturers were presented with both strategic and
organisational challenges to the management of their manufacturing facilities. These challenges
have led to the development of a wide range of strategies to increase firms' efficiency,
responsiveness, and innovativeness. However, the continual deforming of business landscape and
the evolution of new patterns of competition will force the global economy to rapidly evolve into an
integrated economic system. Such a system presents tremendous opportunities for next generation
manufacturers while threatening the very existence of the mediocre manufacturers.
Manufacturing managers are now realising that achieving low cost coupled with high quality is no
longer enough to compete in global markets. These two dimensions of manufacturing performance
merely reflect "qualifying criteria" rather than "winning criteria". Recent research (Gagnon, 1999)
indicates that the strategic view has moved from a "market-based" to a "resource-based" view of
competition. In the former approach, businesses are seen as adjustable systems that attempt to
successfully follow the rules dictated by markets, while the latter approach suggests that it is "more
profitable to focus on developing, protecting, and leveraging a firm's unique resources and
advantages (Gagnon, 1999).
Next generation manufacturers must realise that competition in the twentyfirst century is going to be
different than before. With developments in complexity theory and the availability of new tools for
decision making, cooperation and collaboration will shape the way we do business. For instance,
during the last decade of the twentieth century, competition has become increasingly time-based
and globalised. In addition, the turbulent environments of the 1990s have pushed uncertainty to an
unprecedented level and forced many manufacturers to utilise advances in information technology
(IT) to facilitate the co-operation between their functional units in order to increase their flexibility
and responsiveness (Youssef, 1996, 1998). In other words, NGM will require intensive knowledge
and extended use of information technology enablers for business improvement. Youssef
(1992a,b), summarised this position by indicating that ". . . as we enter the next decade, companies
must dedicate themselves to continual, rapid improvement in quality, response time, flexibility, and
value".
Scully and Fawcett (1993) suggest that decision issues, which affect competitive position, can be
classified into cost, quality, delivery dependability, flexibility, and innovation. These five areas fall
within the domain of the valueadded manufacturing and logistics. Competitive success in the new
millennium will, therefore, depend greatly on how firms manage their manufacturing and logistics
operations. Based on empirical data collected from three major industrial sectors in the USA,
Youssef (1992-1998) classified these competitive priorities into cost, quality, responsiveness, and
flexibility. Quicker response, according to Youssef, can be achieved by speed and agility in
time-to-market, from idea generation to delivering the final product to the ultimate user.
The primary resources of next generation manufacturers are not just capital, land, and plant and
equipment. Next generation manufacturing will place heavy emphasis on information, knowledge
creation and management, and more importantly on individual as well as organisation learning. In
essence, next generation manufacturers are learning manufacturing organisations. It is clear from
this extended introduction that information technology, the extensive use of the Internet in
conducting business operations, enterprise resource planning (ERP) and knowledge-based
systems (KBS) will all have great impact on the performance of next generation manufacturing.
The remainder of this paper is organised into six sections. First, we discuss the role that information
technology will play in the next generation manufacturing. We revised Youssef's agile
manufacturing model to address this aspect. Second, we examine the impact of Internet-based
e-commerce on NGM operations. We report the results of an empirical study on the critical success
factors for e-commerce. In section 3, we show the importance of knowledge management to NGM.
In this section, we discuss the processes of knowledge management in NGM, dimensions of
knowledge management in NGM, types of NGM's critical knowledge, strategies for implementing
knowledge management approach in NGM, and the role of knowledge management in product
development processes. In section 4, we discuss how knowledge-based systems (KBS) impact on
the operations of NGM. In this section we also report on the results of another empirical study on
the critical success factors for KBS. Section 5 deals with the role of ERP systems in NGM. Here we
discuss the ERP system as a tool for knowledge mapping in NGM, ERP as a facilitator for
performance sharing in NGM, and NGM's knowledge repositories. The last segment of the paper
concludes our discussion on the impact of the above mentioned technologies on the operations of
the NGM.
1. Next generation manufacturers and IT
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Figure 1.
The agenda of IT functions for next generation manufacturers is likely to become dominated by the
requirements for corporate transformation. Many management problems are likely to feature on the
IT agenda. The search for synergy across, as well as within, companies is likely to be of a higher
priority. As more manufacturers become networked to embrace customers and suppliers,
compatibility of systems is likely to become a more significant issue. According to Hum and Sim
(1994), competition, technological advancement and the ever-changing consumers' needs have led
to a constant evolution of competitive strategies. In this evolution, three components of IT have
emerged as the tools for achieving sustainable competitive advantage. These are: Internet-based
e-business; knowledge management systems; and enterprise integration using ERP systems. In
this part of the paper, we present a model that shows the role of information technology in NGM.
The model is a revised version of Youssef s agile manufacturing model. It is depicted in Figure 1.
The new model describes how time, quality and costs are central to the value adding in next
generation manufacturing. It also specifies risks (external and internal) as a critical set of factors to
the performance of next generation manufacturing.
The model also identifies information technology as a prerequisite to successful next generation
manufacturing. Recent advances in information technology and, in particular, Internet technology,
knowledge based systems and enterprise resources planning (ERP) systems make it essential that
information technology be used to reduce risks and improve value adding activities. These three
technologies are well suited to provide to next generation manufacturers opportunities to reap huge
benefits that might include: increase in productivity, ability to command a price premium, increase in
market share, and increases customer loyalty. These benefits are influenced by the ability of next
generation manufacturers to use IT to enhance the value adding activities and to minimise the risks
involved in manufacturing. This important role of IT is supported by the findings of Hum and Sim
(1994). They suggested that managerial reorientation to new priorities should recognise the
importance of information technologies, its impact on managerial and organisational strategies, and
more importantly, its impact on creating and managing the future learning organisation.
Accordingly, the proper use of these technologies would enhance the ability of the NGM to become
time-based competitors.
In summary, our new model recognises the critical role for the Internet-based e-business,
knowledge based system, and ERP systems for improving the performance of next generation
manufacturers.
2. The role of Internet-based e-business in next generation manufacturing
The development of the Internet-based e-business has emerged as a fast growing trend in
business. According to Mougayar (1997), the use of Internetbased electronic-business has quickly
become essential for companies. Next generation manufacturers' key strategies are likely to include
the implementation of Internet-based e-business in their operations. Adopting inter-company trade
over the Internet can cut costs, reduce order-processing time, and improve information flow
(Cronin, 1996). For most next generation manufacturers, the rise in trade over the Internet also
coincides with a marked decrease in telephone and facsimile use, allowing salespeople to
concentrate on pro-actively managing customers' accounts rather than serving as information
givers and order takers.
The Internet and its application tools have led to a global business information infrastructure, which
now rivals the conventional telephone systems in size, coverage and popularity. As the commercial
use of the Internet grows, it is becoming increasingly recognised that this is a very different
business environment from its physical counterpart. Common ways of exploiting the Internet as a
business tool include marketing and information distribution, electronic mail for inter-company
communication, and provision of services and products. Rayport and Sviokla (1995) also suggested
that next generation manufacturers could use the Internet to gain access to marketplaces (or
"marketspaces"), which might otherwise be inaccessible.
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Figure 2.
In reality, Internet-based e-business is about next generation manufacturers and their consumers
adopting a new process or methodology in doing business. These processes are in essence
supported by electronic interactions that replace traditional means of conducting business (Gide
and Soliman, 1998). Internetbased e-business is particularly useful in connecting suppliers and
customers with the various components on the supply chain. Figure 2 illustrates the use of the
Internet in a manufacturing setting. Basically, the Internet-based e-business process involves
taking information as raw material and producing value added information-based products or
services.
The role of e-business in next generation manufacturing is to improve the business processes and
hence improve the efficiency and competitiveness of the organisation. Therefore using e-business
could lead to enhancing the operational and strategic decisions, reducing rework, standardising
many operational practices, increasing cross functional team effort as well as ensuring concurrent
engineering in the processes of developing products and services.
Gide (1999) studied the success factors for the implementation of e-commerce and was able to
identify the following ten critical success factors (CSF) for the implementation of e-commerce in
manufacturing:
(1) Management commitment and support for e-commerce.
(2) Organisational and management objectives for e-commerce.
(3) Communication between users and e-commerce department.
(4) E-commerce system security and reliability.
(5) E-commerce department's service function.
(6) Integrating e-commerce into existing business functions.
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Table I.
(7) Change management for e-commerce system implementation.
(8) Appropriate e-commerce system applications.
(9) User participation and satisfaction for e-commerce implementation.
(10) Technological competence for e-commerce implementation.
Gide (1999) used an instrument (seven-point Likert scale) consisting of 88 Internet-based
e-commerce implementation activity items. His data collection instrument has a very high internal
consistency (Cronbach's alpha (alpha) of 0.9751). Table I shows the mean and the percentage of
variance in the data explained by these factors. It also shows the degree of reliability of each of the
ten factors.
3. Knowledge management approach in NGM
Sanchez et al. (1996) have defined knowledge as an ability to sustain the coordinated deployment
of assets and capabilities in a way that promises to help the firm to achieve its goals. Yamanouchi
(1995) has classified knowledge as either formal or non-formal. Nonaka (1990) has identified two
types of knowledge: explicit and tacit. Explicit knowledge is captured in databases, customer files,
software, manuals, and so on, and can be referred to as "structural" capital. Tacit knowledge, on
the other hand, may reside in the minds of the company's employees, suppliers, and customers,
and is also known as human capital. Human and structural capital make up the intellectual capital of
the organisation. This intellectual capital should be fostered and further developed in learning
organisations (Mohanti and Deshmukh, 1999). Some organisations engage in single-loop learning,
i.e. they learn "know why" or "know how" or" know what", without re-examining the underlying
values. When errors surface, the correction process relies on past routines and present policies as
the feedback mechanism. Argyris (1976) advocates the use of a model which corrects errors in
ways that involve the modification of the organisation's objectives, policies, and standard routines.
In other words, the model tries to activate participants to learn "know why", "know what", and "know
how" simultaneously. This in turn calls for an integrated model encompassing learning processes,
change management instruments, and strategic initiatives.
There is a voluminous literature on innovation which is now recognised to be closely connected to
various key activities within the firm (see, for example, Leonard-Barton, 1995). These may include
business processes, but are frequently less formal constructions that are often associated with
company culture. These key activities tend to predispose the company to behave in a certain mode,
and it is widely accepted that companies have an "innovation trajectory". Many authors, concerned
primarily with innovation, have suggested a number of classifications of knowledge. Vincenti (1990)
identified a number of categories. Faulkner (1994) developed a composite typology of a broad
range of knowledge. However, these categorisations are of limited use in developing and improving
KMAs. Coombs and Hull (1998) discuss the effects of knowledge management on innovation. They
present a framework for understanding knowledge management practices, and suggest that
developing these is an important research topic. Nonaka (1991, 1994) and Nonaka and Tekeuchi
(1995) studied new product development in Japanese firms and went on to explore appropriate
organisational structures for managing the knowledge creation process. They developed
constructs, which enable the concept of both tacit and explicit knowledge (Polyani 1958, 1966) to
be considered. They proposed four patterns of interaction involving both forms. As part of the
search for improved organisational structures, they argued that while new knowledge is developed
by individuals, organisations play a critical role in articulating and amplifying that knowledge
(Nonaka, 1988).
Many next generation manufacturers will produce products which are highly customised to meet
customer needs. The major business activities include tendering, design, manufacture, assembly,
construction and plant commissioning. While the products are primarily sold on performance, other
factors such as cost of ownership and the ability to customise the product will also be highly
significant. Most of business processes in design and manufacturing systems will be complex and
dynamic. The knowledge base and knowledge management activities will be increasingly
recognised as the major factors influencing the success or failure NGM operations. However, these
next generation manufacturers will rely very heavily on their fundamental knowledge base in
designing and manufacturing their products.
3.1 Processes of knowledge management in NGM
Knowledge management is grounded in the belief that in order to generate a sustainable
competitive advantage it is necessary for NGM to manage their intellectual assets as well as their
tangible assets with more emphasis on the former.
According to Vincenti (1990), Faulkner (1994), and Coombs and Hull (1998), knowledge
management activities and the associated knowledge practices can be classified under the
following three headings:
(1) Knowledge processing, such as generation, transfer, utilisation, identification, capture/retrieval,
format and codification, assurance and agreement.
(2) Knowledge domains, such as internal and external, technical area, product/process/project
focus.
(3) Knowledge formality, such as formal/informal, time and location dependency, existence of
management information system.
The processes of knowledge-based organisations are the means by which value is added to inputs
in order to create value for their clients. Specifics of this will vary substantially across industries.
However, for knowledge-based organisations the fundamental knowledge processes are
essentially the same. There are three primary knowledge processes, which are common across
knowledge-based organisations. These are:
(1) Adding value to information. This is the central function of many organisations today. It is in fact
a composite of many processes which are designed for the end-user. At the input stage, people
must filter information overload, and to do this, they engage in sense-making of information (Weick,
1995) and recognise emergent patterns. (Mintzberg, 1989). Filtering is the first key process of
adding value to information; the others being validation, analysis, synthesis, presentation, ease of
access, and customisation (Dawson, 1999).
(2) Generating, capturing and sharing knowledge. Capturing and sharing knowledge is necessary
for knowledge-based organisations to develop their capabilities and maintain or enhance their
competitiveness. To a larger degree, this involves the interplay between human capital and
structural capital. If knowledge is effectively captured this means that human capital is converted to
structural capital, while for people to be most effective at their functions they need to tap knowledge
which has been captured as information. Knowledge captured as structural capital can include both
databases of information as well as processes which enable people to perform tasks more
effectively. Generating knowledge is essential to knowledge-based organisations, as the value of
knowledge is ephemeral, and organisations must continually create new knowledge in order to
develop and maintain their competitiveness.
(3) Applying knowledge. To have value, knowledge must be applied within a specific business
context. This will be done differently, depending on the industry. However, the underlying
processes are often very similar, drawing on people with diverse expertise and knowledge both to
enhance existing value chains and to create new ones. Specific examples where knowledge is
applied to create value include product development, process enhancement, marketing, and all
client interaction.
3.2 Dimensions of knowledge management in NGM
Managing knowledge is a multidimensional concept that involves attending to each of the major
knowledge processes within the next generation manufacturer. That is, creating knowledge,
capturing knowledge, organising and accessing knowledge, sharing knowledge and using
knowledge. We briefly examine these dimensions.
* Creating knowledge. There are a number of ways that the next generation manufacturer can
create knowledge. Knowledge can be obtained from external sources (consultants, stakeholders
and academics), it can be developed as a specialised function within the research and development
function.
* Capturing knowledge. Capturing knowledge involves codifying the experiences and best practices
of the employees of next generation manufacturers. This can be a difficult task because a
significant proportion of knowledge is tacit and defies documentation. In these cases, people can
share knowledge through apprenticeships and other one-to-one approaches. In many cases, just
documenting what people know (areas of specialisation, key projects undertaken, membership of
special interest groups) in a Yellow Pages approach is an effective knowledge management tactic.
* Organising and accessing knowledge. In the instances when knowledge can be codified it must
be organised in a way for others to find and recognise its relevance. It is only when the information
is clear, relevant and useable that it can be converted to knowledge and acted upon.
* Sharing knowledge. Sharing knowledge requires trust between users. Consequently, knowledge
management programs must also address the cultural aspects of the next generation manufacturer
in order to ensure an optimal environment for frequent and effective knowledge sharing. Providing
opportunities for conversations (for example, special interest groups) or developing incentives for
people to contribute to a knowledge repository are effective techniques. Technology can play an
important role in information sharing. The corporate intranet or collaborative work tools provide
excellent mechanisms for information dissemination.
Using knowledge. Integrating knowledge into next generation manufacturers' products and services
can be facilitated by a combination of technologies, an organisational culture that values
knowledge, and access to the appropriate knowledge content to provide the greatest possible
benefit. At this point, it is essential that next generation manufacturing leaders are able to convey
what is important to the organisation to help guard against knowledge-workers falling into the trap
of pursuing knowledge for knowledge sake.
3.3 Types of NGM's critical knowledge
Not all information and knowledge available to the NGM decision-maker would be of equal degree
of importance. Although decisions could be made on the basis of critical knowledge alone,
non-critical knowledge may be required for the process of decision making. In addition, critical
knowledge can be used to create efficient operations, provide control, measure performance,
compare results with the standards, and take corrective action if necessary.
According to Duff (1996), NGM could keep critical knowledge in the hands of front-line workers
because their core operations would be more efficient. Furthermore, Mitskavich (1996) reported
that, "Immediate availability of critical information has made nearly every department more efficient,
a big factor contributing to a 20 percent increase in sales and a 30 percent decrease in inventory.
The company has also improved customer service, shortened production lead times and lowered
labour costs." Chaleff (1995) added: "at the individual level, knowledge workers need to be trained
to sort and process large volumes of information and work. At the group level, companies must
establish a process to find the balance points in information systems between distributing critical
information and performing productive work. All systems move toward growing disorder and on the
way there, they get more and more complex."
Clearly, in order to manage, NGM managers need critical information and critical knowledge that
facilitates their decision making and assists them to evaluate their department's performance,
determine short and long-range plans for their departments, and co-ordinate and control their
department's activities. The identification of the NGM's critical knowledge would the following eight
knowledge sets:
(1) The operations implementation strategies knowledge.
(2) The operational rules knowledge.
(3) The data warehousing knowledge set.
(4) The customer knowledge set.
(5) The owner knowledge set.
(6) The employee/community/legislative knowledge.
(7) The intellectual assets knowledge.
(8) The external knowledge base knowledge.
If these critical knowledge sets are embedded into a KBS, next generation manufacturers will be
able to improve their operations, increase their competitiveness, and more importantly, thrive in the
turbulent and dynamic environment of the twenty-first century.
3.4 Strategies for implementation of knowledge management approach in NGM
According to Mintzberg (1989) "The strategic data bank of the organisation is not in the memory of
its computers but in the minds of its managers." Furthermore, it is likely that the next generation
manufacturer would believe that there is trapped knowledge within the organisation that could drive
them to new heights. The only problem is where to start? The following framework examines some
of the appropriate strategies for implementing a knowledge management approach in NGM.
(1) Reviewing the NGM's drivers and strategy. This step involves gaining a comprehensive
understanding of external factors that influence the organisation. This includes competitor activity,
industry trends, customer requirements, technology trends, government reform and changing
economic environments.
(2) Gaining the NGM executive commitment and understanding. Before embarking on the
knowledge management effort, the organisation should gain complete executive commitment to the
philosophy (Skelin, 1999). In addition, the attitude of executives towards technology was shown to
be critical to the success of these projects (Clark and Soliman, 1999).
(3) Identifying knowledge management priorities in NGM. The most obvious starting point would be
in an area that is somewhat important to the organisation that would benefit from knowledge
management, that is visible within the organisation and would show obvious benefits when
knowledge management was effectively implemented. A good place to start might be in R&D,
where information exchange and knowledge management would be very beneficial. In addition, by
supplementing the project with a simple IT system that allows publishing of project information and
ideas and by giving access to this system for the rest of the organisation, other departments could
monitor and contribute to the knowledge management process.
(4) Creating a knowledge environment within the NGM. It is important to create an environment that
supports the knowledge management efforts. This is necessary to prepare the ground so that
knowledge management principles and beliefs could be more readily and easily accepted. Surveys
may be used to determine the required resources, training, cultural factors and reward structure.
The reward structure need not be monetary and should be designed in consultation with
employees. One obvious aspect to reward structure is that an objective policy is set during the
employee's annual or semi-annual review. Knowledge management issues must appear in these
objectives, as it has now become a major means of generating competitive advantage for the
organisation.
(5) Implementing knowledge management support systems within NGM. Most next generation
manufacturers would find that capturing, synthesising, and dissemination of information is easier
using software. There are some good packages that can be used off the shelf or tailored to meet
next generation manufacturers' needs. It should be remembered that knowledge management is
not achieved by installing the software. People use software to produce results and to gradually
instil knowledge management principles into the organisation. It is widely accepted that gradual
implementation can yield better results.
(6) Managing the expectation. The introduction of such a positive program will naturally lead to high
expectation. Sufficient time must be spent with staff so that they are not disillusioned and
discouraged. The staff should come to realise that set-backs are a natural part of the process of
introducing a knowledge management program. It is imperative that each of these set-backs be
shared widely so that everyone can learn from the experience. Brainstorming sessions and focus
group meetings should be held to re-focus the effort. It is a chance for the participants to assess
progress, exchange knowledge, educate one another and renew the spirit.
The three knowledge management models proposed by Nonaka (1994, 1988) could be used
together with new method for documenting the formal and informal knowledge management
activities within processes in the next generation manufacturers. It should be recognised that
knowledge management is a particularly difficult topic in which to clearly identify any improvements.
However, improved knowledge management activities will always be intended to affect a specific
area and improve certain outcomes. In other words, the performance indicator of the next
generation manufacturer should also focus on using innovation for improvement. For example,
re-usability of design data is intended to reduced lead-time in both manufacturing and design. It
should also be understood that because knowledge workers operate within defined, less formal and
often highly individual business processes, an attempt should be made to identify both the formal
and informal processes/routines through which knowledge management can be conducted. While
techniques for mapping formal business processes exist the routines are, typically, ill defined and
difficulties arise in their recording and mapping (Soliman, 1998). The identification of appropriate
techniques for recording knowledge-based interactions within the manufacturing context is,
therefore, an additional element of future study.
Within the processes and routines, formal and informal knowledge management activities could be
identified together with their drivers and actors, whether they are people or system driven.
Observations should also be made on the selection and dissemination of internal and external
knowledge. It should be recognised that the formal business processes themselves are part of the
next generation manufacturer's knowledge base and are thus the object of selection/design and
susceptible to development.
Next generation manufacturers should attempt to define existing knowledge management activities,
noting any potential for improvement, and propose new KMAs which would yield advantages. It
involves technology in the design and manufacturing systems and includes IT, the knowledge base,
information management systems and business processes. It should also attempt to
accommodate, as far as possible, the "soft" interpersonal transactions associated with the activities
of knowledge workers.
3.5 The role knowledge management in improving the product development process
Typically, the next generation manufacturer would be making products which involve a range of
customer-specified options. For example, products may consist of a variety of filtration systems
which could be sold worldwide through agents and using the Internet. The problem would be how to
improve the product development process through knowledge capture, use and re-use practices.
The next generation manufacturer would initially study both the business processes within the
design and manufacturing areas and also in sales and marketing, and assess the technologies
employed in the existing products. A number of processes could then be developed to capture the
knowledge requirements. This knowledge could later be fed back into the product development
process through a number of "innovation loops". These loops will utilise knowledge management
techniques such as creating, using, sharing and organising knowledge. The benefits of the
innovation loops could be difficult to quantify and/or measure. Improvements in manufacturing
technology and systems may be readily identified as a reduction in lead time or assembly problems
and a numerical measure applied.
The combination of meaningful resource commitments and substantial uncertainties requires
considerable knowledge building on the part of the organisation in terms of exploring and examining
options to achieve strategic payoffs such as creating value for the stakeholders (Mohanti and
Deshmukh, 1999). Moreover, today's global economies create an international competitive
environment in which commercial success of individual firms is strongly conditioned by their
belonging to a network of collectively interacting firms. As such, the knowledge building
requirement is not confined to the organisation itself, but transcends to the network of organisations
the firm belongs to, and may eventually lead to the building of knowledge about the production of
goods and services, and the organisation of this production among the collectivity of firms, referred
to as "network capabilities". Recent research by Foss (1999) states that the following questions
remain basically unanswered in most of the literature:
* What precisely is the nature of capabilities that emerge from the interaction between firms in a
network?
* How do they emerge?
* How do they contribute to the competitive advantage of the industrial district formed by the
networked firms?
Foss (1999) states that inter-firm relations are not given but develop; knowledge sharing, trust
relations, standardisation, etc. must be built up or allowed to gradually emerge. His research
concludes that firms may benefit from network capabilities, such as collective learning, when these
capabilities are:
* valuable (i.e. collective technological learning in Silicon Valley);
* rare (very seldom different networks will possess the same network capabilities);
* hard to imitate;
* non-substitutable (highlighting the need for continued process innovation);
* characterised by imperfect competition in acquisition/development, such as time compression
economies from collective learning effects relative to would-be imitators.
As knowledge management becomes a vital prerequisite for competitive management, the
efficiency of sharing across the enterprise or network of enterprises must be evaluated and
managers must devote attention to network options such as Internet, intranet and extranet services.
Snyder (1999) conjectures that multiprotocol label switching (MPLS), which forwards data packets
based on labels that are switched instead of routed, has become the new industry standard for
carrier networks in this respect. He ascertains that "the goal of creating a knowledge culture cannot
be achieved without networks that work" (Sheldon, 1997).
4. Role of knowledge-based systems in next generation manufacturing
In addition to the array of benefits that can be obtained from the knowledge management approach,
next generation manufacturers need to enhance their efficiency and effectiveness with the aid of
knowledge management tools. For example, if a problem is encountered that requires redesigning
the product and/ or the production processes, then the design has to be changed and the drawings
have to be modified. The changes must be drawn up, circulated for approval and followed by
promulgation of the new issue and recovery of the superseded issues. In such a case the designer
would be re-using much of the knowledge that already existed. A substantial part of this knowledge
could be described as explicit knowledge. Knowledge management tools such as knowledge-based
systems would suit this situation.
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Figure 3.
The application of knowledge has become increasingly "the essential competitive advantage
between corporations and even nations" (Porter, 1990). Knowledge-based systems can play a
central role in next generation manufacturers' drive for higher productivity and competitive
performance. Further-more, the commercial emergence of knowledge-based information
technology has radically transformed the world of industry and commerce and significantly affected
almost every factory and office worker. Knowledge-based systems technology provides "smarter"
work and helps to deliver higher quality outputs, which result in increased customer satisfaction.
Accordingly, knowledge-based technology can intelligently automate the next generation
manufacturer's processes using the explicit knowledge available in the knowledge base. It
increases the consistency, timeliness and reliability of results and creates opportunities to reduce
and eliminate non-value-adding work. Figure 3 shows the use of knowledge-based systems for
decision making.
Soliman and Clark (1996) have shown that managing the introduction of knowledge-based systems
is a difficult task, which requires team effort and support throughout the enterprise.
The effectiveness of knowledge-based systems has been shown to be critical to the success of
using knowledge in the manufacturing industry. Skelin (1999) investigated a number of factors
relevant to the success of the implementation of knowledge-based systems. Table II illustrates the
correlation Cronbach's coefficient a for the seven most critical factors of success obtained from
Skelin's study. Table III illustrates the percentage of variance and the corresponding eigenvalue for
each coefficient.
5. Role of ERP systems in NGM
The next generation manufacturer is likely to move from making a few products with long
commercial lifetimes to managing complex product families with multiple models and shrinking
market lifetimes for individual designs and models (Uzumeri and Sanderson, 1995). This broad
trend, when combined with accelerating process innovation, greater cross-boundary and more
aggressive restructuring of work through downsizing and integration, would be required. It seems
inevitable that future workers will have to master "multi-skilling" functions far more often. This trend
promises to produce a work environment where workers spend much of their working lives on the
steep part of one learning curve or another (Uzumeri and Nembhard, 1998). As such, next
generation manufacturers must deliver information and knowledge structures that enable workers
to learn at their maximum rate, while avoiding mistakes and a state of confusion that rapid change
too often creates. In addition to the array of benefits reported in the literature, ERP systems are
likely to facilitate the learning process, the creation of a learning infrastructure, and the innovation
and improvement loops. These are explained below:
(1) The learning process. Many studies reported on the positive relationships between the
integration of the various manufacturing functions using ERP systems and the performance of the
manufacturer. However, ERP systems could also play a vital role in addressing the question of what
strategy next generation manufacturers might employ to actively manage and accelerate the
learning process.
(2) The creation of a learning infrastructure. These studies address the detailed mechanisms or
underlying processes by which learning in manufacturing takes place, including the microstructure
of learning on the shop floor, and learning within the manufacturing process itself. There are three
primary ways to generate production knowledge. These are:
* purchasing outside knowledge external to the firm;
Enlarge 200%
Enlarge 400%
Table II.
Table III.
* conducting intensive R&D within the firm, but outside the production process itself, referred to as
"off-line" learning; and
* learning within the existing manufacturing process, referred to as "in-process" learning.
(3) The innovation and improvement loops. Organisational learning theory addresses the nature
and dynamics of learning in human organisations, such as the concepts of single-loop and
double-loop learning discussed earlier. The vast literature in this field points to the fact that learning
may itself be a dynamic activity, in which a firm "learns how to learn" (meta-learning) by a particular
mechanism, and continues to learn in this way as a result of self-reinforcement. It is widely
accepted that managers need to be aware that when choosing any improvement method, they are
not only learning about their manufacturing system, but they are also choosing how they will learn,
possibly for a longer duration than that of the current set of projects. This research opens up the
question of whether and when managers should switch their learning methods.
When the pressure to learn is driven by external changes, many workers are affected
simultaneously. One way of bridging the gap between individual learning process models and
organisational learning is a systems analysis approach advocated by various scholars, or the more
recent methodology of learning maps to build a quantitative description of learning within the
workforce (Uzumeri and Nembhard, 1998). The latter approach is intended to help managers better
characterise the distribution and real world multiplicity of learning behaviours of large groups of
people, but lacks newly defined decision-making tools to integrate this multiplicity into broader
organisational and economic decisions.
Thus far, it seems that learning in an operations resource-based framework should address
individual learning that culminates in organisational learning, across networks of firms, where
appropriate. As discussed earlier, a single "best" way of learning in an operations framework does
not seem to fit well with reality. Systems theory may serve as a methodology for bridging the gap
between individual and organisational learning. Typically, the following characteristics of a learning
organisation in a systems theory framework have been advocated as (Senge, 1990):
* There exists a shared vision that everyone agrees on.
* People discard their old ways of thinking and the standard routines they use for solving problems.
* Members think of all organisational processes, activities, functions and interactions with the
environment as part of a system.
* People openly communicate with each other without fear of criticism or punishment.
* People sublimate their personal self-interest and fragmented departmental interests to work
together to achieve the organisation's shared vision.
Recent research on how to help a business corporation evolve into a learning organisation
suggests the following process (Mohanti and Deshmukh, 1999):
* An organisation chalks out a manufacturing strategy and identifies a set of strategic manufacturing
initiatives.
* The organisation formulates real time action plans based on the strategy above and commits
resources for various initiatives.
* The organisation makes conscious efforts towards improving the quality of decisions. These
efforts are basically the drivers of a learning organisation.
The end result of such endeavour is to develop a capacity or processes for quality decision making
within an organisation to consistently maintain or improve the quality of decisions and to
emancipate the vision of capabilities required to fit the resources in the environment.
5.1 ERP systems as tools for knowledge mapping of NGM
Manufacturing and service operations articulate decisions at the strategic, tactical, and operational
level to create value for an organisation's customers, both internal and external. Recent empirical
research on evaluating manufacturing strategy for a learning organisation postulated the strategic
implications of the learning model as (Mohanti and Deshmukh, 1999):
* Outside environmental forces are the macro level interventions that affect organisations and drive
inside-in-changes for knowledge creation, acquisition and deployment.
* The source of knowledge in a learning organisation is the cumulative articulations of individuals,
triggered by proactive, interactive, and reactive learning.
* The systemic organisational development interventions accelerate applications and integration of
knowledge, leading to organisational learning.
* Organisational learning is not a one-time product of knowledge creation, but a perpetual source
for creating formal and non-formal knowledge.
* Organisational learning produces the coexistence of creativity and efficiency, apart from many
other important outcomes.
* These outcomes have a recurring and reinforcing relationship with the dynamically evolving
generic environmental forces.
These strategic implications then filter through the organisation or network of organisations to the
tactical and operational decision making processes. In developing a roadmap for learning in a
resource based competitive context, the author relied in part on recent methodologies and empirical
case work from Dutta and Manzoni (1999).
In today's competitive environment, many manufacturing and service organisations have adopted a
"process view", which communicates how an organisation "works together" to create value for its
customers, as opposed to how it is structured. Core process maps are used to represent a process
view of organisations, in which the customer is explicitly represented. Organisations choose
different core processes, the definition of which is relative and to a certain degree arbitrary. Dutta
and Manzoni (1999) mention several reasons for this:
* a process that is core for one organisation may be non-core for another;
* there is no universally accepted rule about how to set either the boundaries of processes or the
level of abstraction of their definitions, yielding the absence of a unique vocabulary to describe core
processes;
* an individual's view of an organisation's core processes may be biased by his/her position within
the firm. As a result, two groups could independently come up with different core process maps for
the same organisation.
From these observations it is clear that top management involvement in the definition process of
core processes is vital because the core process maps represent the strategic goals of the
organisation. The authors list two generic approaches to defining core processes: the internal
perspective, driven by an observation of what the organisation does now; and the external
perspective, determined by customer/market demands and leading towards what the organisation
should be doing to satisfy its customers/market. It is imperative that the two views need to be
reconciled before any meaningful action can be taken on core processes.
From this knowledge mapping, core processes are leveraged for performance improvement
through direction setting, understanding, evaluation, and eventually implementation.
5.2 ERP as facilitator of performance sharing in NGM
In today's competitive resource-based environment with shortening product life cycles, companies
must not only deliver products or services flexibly to a customer's demand, but also do so at a profit.
However, profit in itself does not capture the full complexity of an organisation's performance.
The well-known methodology of the balanced scorecard as a holistic approach to performance
measurement has been further developed as a tool for translating vision and strategy (Kaplan and
Norton, 1996). It includes four different perspectives:
(1) financial;
(2) customer;
(3) internal processes; and
(4) learning and growth.
While the concept of the balanced scorecard is well published and not the primary aim of this
research effort, it is interesting to highlight the underlying reasons as to why these perspectives
were developed and how they affect learning within the organisation. Dutta and Manzoni (1999)
classified the four perspectives as:
(1) Financial perspective. Focuses on the shareholders' interests by investigating whether the
company generates satisfactory return on investment and creates shareholder value.
(2) Customer. Companies succeed financially by creating customer value, therefore the company
must know how customers perceive its performance.
(3) Internal processes. In the extreme, a company can delight its customers all the way into
bankruptcy, so it also needs to make sure it performs well on key internal dimensions.
(4) Learning and growth. This is a crucial step for making this value creation sustainable over time.
The company may create value for customers and make excellent use of its resources today, but in
order to make sure the company will still be appreciated by tomorrow's customers and will keep
making excellent use of its resources, the organisation and its employees must keep learning and
developing. This perspective should group indicators capturing the company's performance with
respect to innovation, learning and growth.
It is clear that such a comprehensive approach to performance measurement, which goes far
beyond the traditional bottom line-measures of ROI, payback, etc., needs a clear framework for
development and communication within the organisation. Within the approach outlined earlier of
direction setting and understanding, where knowledge management plays a crucial role, it is
important that employees continually learn about and develop a better understanding of the impact
of the balanced scorecard approach on the implementation of and feedback mechanism for
strategic directives. In particular, the four sets of indicators should reflect and operationalise the
organisation's mission and strategy. For example, a company following a lowcost strategy will have
different key success factors than one creating value through very innovative products targeted at a
niche market.
While the balanced scorecard approach provides a vehicle for communicating performance criteria
throughout the organisation, the challenge remains to make these criteria meaningful and well
understood by all stakeholders in the organisation. Using these indicators centrally, taking a
"cockpit approach" piloting the organisation to success, is likely to fail. Instead, they should be
distributed horizontally in the organisation and linked to knowledge repositories for feedback.
5.3 NGM's knowledge repositories
To date, much of the work on business performance measurement has been static in orientation.
Various authors comment in passing that measurement systems need to be changed in the light of
evolving circumstances, i.e. changing markets and strategies. Organisations, or rather people in
organisations, appear happy to introduce new measures of performance, but rarely do they delete
obsolete ones (Neely, 1999).
From a knowledge management and organisational learning perspective, it is very important to
make these measures dynamic in nature. Often, business decisions are made and evaluated on
performance measures that are incapable of measuring the full impact of the decision. A good
example is the financial "payback" measure, which fails to incorporate any future discounted cash
flows beyond the payback period from the project decided on, but is still widely used in industry.
This is also a point raised by Senge (1990) in his systems thinking approach to learning
organisations, when he refers to the various "archetypes" of how decisions influence one another,
making it difficult to capture their full impact on the organisation.
A systems thinking approach may aid learning organisations to capture the dynamic nature of
performance measurement and its impact on learning. An initial step might be to dynamically
evaluate the current measures for their relevance and appropriateness to the competitive situation
at hand. Kini and Kouvelis have reported on work in this area with their development of a dynamic
balanced scorecard (Kini and Kouvelis, 1999).
6. Conclusions
Next generation manufacturers fundamental processes will be knowledgebased, and ensure that
value is created for the organisation and its clients through those knowledge processes. As the
underlying knowledge processes are highly dynamic, the capabilities used in performing those
processes must also be dynamic. It is most useful for manufacturing managers to focus on creating
and managing knowledge capabilities for their manufacturing enterprises, for competition in the
twenty-first century will be knowledgeintensive. The term "knowledge management" is used here to
refer generally to all efforts to enhance and increase the value of generating, sharing and applying
knowledge.
For NGM to compete successfully, organisations must know exactly what is happening in the plant
and be able to act on it in a quick and agile manner. They must place heavy emphasis on continual,
rapid improvement in quality, response time, flexibility, and value. As Youssef (1992a,b) indicated,
competing in global markets will need more than just minimising cost and enhancing quality. The
fast deforming landscape of business will force NGM to embrace change and to always act as if
they are poised at the edge of chaos, where creativity and innovations are most likely to take place.
The reduction in time and costs in the whole manufacturing chain makes it possible to gain
competitive advantages in price, product innovation and service. Accordingly, concurrent material
procurement can be classified as a significant factor in global competition. The effect of using a
knowledge-based systems in NGM would include: shorter opportunity to delivery (OtoD) cycle
times, clearer market focus, more reactive to environment and customer changes, and, increased
customer regard.
The role of ERP systems in the integration of NGM functional units will be possible by the
implementation of a knowledge base system. Some of the benefits from a material procurement
knowledge base system are:
* Reduction in scrap levels, reworks and non-conforming material.
* Improves communication between the various parts of the organisation.
* Improves the vendors selection method.
* Comparing various suppliers on a number of selection criteria.
* Reduction in lead time.
The future IT requirement will likely to be driven from the distinguishing characteristics of the NGM's
networks. The use of IT as itself will become a major constraint because:
(1) IT has been historically viewed as part of the overhead cost of bureaucracy. Efforts will be made
to outsource parts of the IT functions to reduce cost. Only the IT that will be seen as appropriate to
the requirements of the next generation manufacturer's organisation would more likely be
considered an investment.
(2) The focus is likely to shift from saving costs to: transforming relationships with customers and
suppliers; and support of cross-functional and inter-organisational processes and new ways of
working and learning.
(3) The IT requirements of the next generation manufacturer are likely to be different from those of
the "traditional" and more bureaucratic manufacturers.
NGM will have little interest in IT for its own sake. IT will only be perceived as relevant where it can
contribute to organisational goals. The key questions are:
* Can IT facilitate group working, learning, and new "network" relationships with customers,
suppliers and business partners?
* Are investments in IT setting an existing departmental organisation in concrete, or are they
supporting those key cross functional and inter-organisational processes which add value for
customers?
The nature of all knowledge organisations is similar in the way they apply knowledge and their
primary resources of intellectual capital to the processes through which they create value. An
organisation's effectiveness at its core knowledge processes depends on its capabilities of dealing
with knowledge, in other words its knowledge capabilities. Since the knowledge processes of all
organisations are continually evolving, partly in response to rapid changes in the external
environment, these knowledge capabilities must be highly dynamic in order to maintain and
advance the organisation's competitiveness.
Organisational strategy is the primary source of the creation of shareholder value over the long
term. The strategic capabilities on which the success of organisational strategy depends are
themselves knowledge capabilities of the highest order, which must be extremely dynamic given
the pace of change in all organisations' business environment. Manufacturers today will continue to
face greater complexity, fiercer competition and accelerating changes. Knowledge is hereby a key
source for value creation and maintenance.
A roadmap for developing meaningful knowledge management in a resource-based competitive
environment was developed, based on earlier research work. The methodology consists of
developing core processes in a dynamic competitive environment, which are then leveraged to
improve performance through the identification of high leverage-processes. This is done through a
step-by-step approach of direction setting, understanding, evaluation and implementation; each of
which has particular prerequisite conditions for knowledge building and learning.
A number of learning issues will emerge relating to the dynamic nature of performance
measurement, feedback mechanisms for current and future decision making, and the notion of how
to learn from bad and good decisions. In addition, the informal NGM should be managed or
transformed to act as an enabler for fostering open communication and true knowledge sharing.
There is a need to identify a number of issues relating to knowledge building and sharing, leaving
plenty of challenges of how to transform knowledge repositories, complex performance systems,
and new organisational structures into an enabling system of sustained knowledge creation and
improved competitiveness of NGM.
In closing, and as we repeatedly mention in this paper, NGM will be learning manufacturing
organisations, where more emphasis is placed on the intellectual capital, knowledge creation and
management, and the use of tools and methodologies offered by complexity theory. NGM will be
forced to unlearn some of the traditional POM models, where linear thinking and predictability are
the norm. Instead, decision making in the NGM will be of dynamic nature, where non-linear thinking
will prevail throughout the decision making process. NGM will see organisations operating at the
edge of chaos where creativity and innovations resides.
[Sidebar]
The impact of some recent developments in e-business on the management of next generation
manufacturing
Fawzy Soliman and Mohamed Youssef
Keywords Manufacturing, Information technology, Agile production, Model
[Sidebar]
Recent developments in information technology such as the Internet, enterprise resources planning
systems and knowledge management systems necessitate the use of these technologies in order for the
next generation manufacturers to co-evolve and survive on the new business landscape. The purpose of
this paper is to examine the impact of these technologies on managing next generation manufacturing
(NGM), and the benefits that can be reaped by effectively utilizing these technologies. We present a
model on how NGM companies develop, implement and manage these technologies to support their
manufacturing operations. Our model is an extension of Youssef's agile manufacturing model. The
implications of this new model are discussed in detail. Our analysis indicates that perceived benefits, as
well as potential business opportunities for next generation manufacturing companies, are likely to
become key drivers for the use of electronic business.
[Reference]
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[Author Affiliation]
Fawzy Soliman
University of Technology, Sydney, Australia, and
Mohamed Youssef
Norfolk State University, Virginia, USA