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Manufacturing, Service Industries

& IT Technology

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Purpose: To Show How Technology

is related to organizational structure

improves the response time of organization to needs of retailers & customers

Gives new competitive advantage in terms of cost, time, quality and price.

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What is Technology Technology refers to the tools,

techniques, machines & actions used to transform organizational inputs (material, information, ideas) into outputs (products & services).

Technology is organization’s production process & includes work procedures as well as machinery.

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What Technology Does for Different Depts. R&D:transforms ideas into product

proposals Mkt: transforms inventory into sales HR: transforms attitudes which is

reflected in behavior Production: converts raw materials

in to products

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Core Transformation Process for a Manufacturing Company

ENVIRONMENT

Organization

Raw MaterialInputs

Product or ServiceOutputs

Core Work Processes

MaterialsHandling

Milling Inspection

Assembly

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Woodward’s Study Joan Woodward: a British Industrial sociologist Study in 1950’s Objective: how manufacturing firms were organized and the

amount of mechanization Sample: 100 manufacturing firms Methodology: industry visit, interview of managers, examining

company records and direct observation of manufacturing operations

Information was organized in terms of structural characteristics (span of control, levels of management), managerial styles (written vs. verbal, rewards), type of manufacturing process and commercial success of firms.

A continuum of technical complexity developed, defined as the amount of mechanization of manufacturing process

High technical complexity: work performed by machines Low technical complexity: work performed by workers

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Woodward’s Classification Based on System of Production

Group I Small-batch and unit Custom work is the norm Relies on human operator Not highly mechanized though computerized machinery used for

some parts but final assembly done by human operators Production (e.g. jewelry, assembled PC, DC cars)

Group II Output goes in to the inventory from where orders are fulfilled Large-batch and mass production (e.g. assembly lines of cars &

cigarettes) Group III

Entire process is mechanized There is no starting or stopping Continuous process production (e.g. production of electricity,

nuclear plants, oil refineries, distilleries)

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Relationship between Technical Complexity & Structural Characteristics:Unit production

Overall structure Written

communication Verbal communication Centralization Formalization Worker’s skill level supervisor span of

control

Organic Low High Low Low High 23 (medium)

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Relationship between Technical Complexity &Structural Characteristics: Mass Production Overall structure Written

communication Verbal

communication Centralization Formalization Worker’s skill level supervisor span of

control

Mechanistic High Low High High Low 48 (wide)

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Relationship between Technical Complexity &Structural Characteristics: Continuous Production

Overall structure Written

communication Verbal

communication Centralization Formalization Worker’s skill level supervisor span of

control

Organic Low High Low Low High 15 (narrow)

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Woodward’s Conclusion Different types of technology impose different

kinds of demands on individual & organization. These demands are met by appropriate

structure Successful firms had complementary structure &

technology Structural characteristics could be grouped

either as mechanistic or organic Successful small batch and continuous process

organizations had organic structures Successful mass production organization had

mechanistic structures.

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Flexible Manufacturing Systems

Computer-aided design (CAD)

Computer-aided manufacturing (CAM)

Integrated Information Network

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CAD Computers are used to assist in the

drafting,design and engineering of new parts.

Computers are guided to draw specified configuration on the screen including dimension and component details

Alternative designs can also be explored & can also be scaled up or down

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CAM Greatly increases the speed at which

items can be manufactured Permits a production line to shift rapidly

from producing one product to any variety of other products by changing the instruction to the computer

Enables the production line to quickly honor customer requests for changes in product design & mix

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Integrated Information Network

Links all the aspects of the firm (accounting, purchasing, marketing,inventory etc.)

Enables managers to make decisions & direct manufacturing process in a truly integrated fashion

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Flexible Manufacturing System or Computer Integrating Manufacturing

Uses combination of CAD(in design) & CAM(in manufacturing)

Gives precision,speed,faster switching from one product to another,quality customer service and cost cutting.

E.g. Boeing 777 first paperless jetliner , IBM’s laptop being made with robots only.

Has led to mass customization.

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Lean Manufacturing FMS can give the best results when all the

aspects of technology are combined with flexible management process to result in lean manufacturing

Lean manufacturing involves highly trained employees who take a painstaking approach to details and problem solving to cut waste and improve quality

The heart of lean manufacturing is not machine but people involvement

Employees are taught to think lean which means attacking waste and striving for continuous improvement

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Toyota Production System (TPS) Toyota Motor Corporation pioneered lean manufacturing TPS combined techniques like just in time inventory, continuous work flow, quick change over of assembly lines, continuous improvement, preventive maintenance, with a management system

that encourages employee involvement and problem solving,

designing equipment to stop automatically so that defect can be fixed.

This has led to mass customization where factories are able to mass produce products as per customer specification

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NEW CHOICES TRADITIONAL CHOICES

MassProduction

Small batchFlexible

ManufacturingMass

Customization

ContinuousProcess

Relationship of Flexible Manufacturing Technology to Traditional Technologies

BATCH SIZESmall Unlimited

Customized

Standardized

PR

OD

UC

T F

LEX

IBIL

ITY

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Comparison of Organizational Characteristics Associated with Mass Production and

Flexible Manufacturing Systems: Structural Implications

Characteristic Mass Production FMS

Structure:

Span of Control Wide Narrow

Hierarchical levels Many Few

Tasks Routine, repetitive Adaptive, craft-like

Specialization High Low

Decision making Centralized Decentralized

Overall Bureaucratic, mechanistic

Self-regulating, organic

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Service Firms Refer to those organizations which accomplish

their primary purpose through production & provision of services

Service produces an intangible output Service is abstract and often consists of

knowledge and ideas rather than a physical product

A manufacturers product can be inventoried for later selling, services are characterized by simultaneous production and consumption

Eg. Education, healthcare, transportation, banking & hospitality

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Differences Between Manufacturing and Service Technologies

Manufacturing Technology1. Tangible product2. Products can be inventoried for later

consumption 3. Capital asset intensive4. Little direct customer interaction5. Human element may be less

important6. Quality is directly measured7. Longer response time is acceptable8. Site of facility is moderately

important

Service Technology1. Intangible product2. Production and consumption take

place simultaneously 3. Labor and knowledge intensive4. Customer interaction generally high5. Human element very important6. Quality is perceived and difficult to

measure7. Rapid response time is usually

necessary8. Site of facility is extremely important

SSS: Airlines, Hotels,Consultants,

Healthcare, Law firms

Product and Service: Fast-food outlets, Cosmetics,

Real estate, Stockbrokers,Retail stores

Product: Soft drink companies,

Steel companies, Auto manufacturers,

Food processing plants

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Configuration and Structural Characteristics of Service Organizations vs.

Product Organizations

Service ProductStructure:

Geographical dispersion Much (outlets) Little

Decision making Decentralized Centralized

Formalization Lower Higher

Human Resources:

Employee skill level Higher Lower

Skill emphasis Interpersonal Technical

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Departmental Technology Analyses the nature of

departmental technology & its relationship with other departmental structure.

Developed by Charles Perrow

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Departmental Technology (Perrow)

Task Analyzability Refers to whether work can

be reduced to mechanical steps to solve problems.

Problem solution can involve use of standard procedures like manuals,

Some problems are so complex that they cannot have right/wrong answer

Final solution is based on wisdom & experience

Task Variety Refer to to the frequency

of unexpected and novel events that occur in the conversion process.

Higher the frequency of unexpected events higher the variety

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Departmental Technologies (Perrow) Craft Analyzability low Variety low Requires extensive

training and experience and use of wisdom and intuition

E.g.performing arts, fine goods

(pattern makers in apparel firm) ,manufacturing

Routine Variety low Analyzability high (use of

objective, computational procedures)

Task is formalized and standardized

e.g.auditing , clerical, sales

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Engineering High analyzability

(problems handled based on formulae, procedures and techniques)

High variety Examples:

Legal Engineering

Nonroutine Low analyzability High variety Examples:

Strategic planning Social science

research Applied research

Departmental Technologies (Perrow)

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Appropriate Departmental Technology High scores for analyzability and

low scores for variety means routine technology and vice versa for non routine

Low variety and low analyzability means craft

High variety and high analyzability means engineering.

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Relationship of Department Technology to Structural and Management Characteristics

(Perrow)

Mechanistic Structure1. High formalization2. High centralization 3. Little training or experience4. Wide span5. Vertical, written communications

ROUTINE (high analyzability,low variety)

Mostly Mechanistic Structure1. Moderate formalization2. Moderate centralization 3. Formal training4. Moderate span5. Written and verbal communications

ENGINEERING (high analyzability, high variety)

Mostly Organic Structure1. Moderate formalization2. Moderate centralization 3. Work experience4. Moderate to wide span5. Horizontal, verbal communications

CRAFT (variety low,analysalility low)

Organic Structure1. Low formalization2. Low centralization 3. Training plus experience4. Moderate to narrow span5. Horizontal communications meetings

NONROUTINE (analyzability Low, variety high)

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Workflow Interdependence among Depts.

Interdependence refers to the extent to which departments depend on each other for resources or material to accomplish their tasks

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Workflow Interdependence among Depts.(Thomson)

Form of Interdependence

Demands on Horizontal

Communications, Decision Making

Type of Coordination

Required

Priority for Locating Units Close Together

Pooled (bank branches)Low

communication

Standardization, rules, procedures

Divisional StructureLow

Sequential (assembly line) Medium

communication

Plans, schedules, feedback

Task ForcesMedium

Reciprocal (hospital)High

communication

Mutual adjustment, cross-departmental meetings, teamwork

Horizontal Structure

High

Client

Client

Client

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Primary Means to Achieve Coordination for Different Levels of Task Interdependence in

a Manufacturing Firm

Reciprocal(new product development)

Sequential(product manufacture)

Pooled(product delivery)

COORDINATIONINTERDEPENDENCEHigh

Low

Horizontal structure,cross-functional teams

Face-to-face communication,Unscheduled meetings,Full-time integrators

Scheduled meetings, task forces

Vertical communication

Plans

Rules

MutualAdjustment

Planning

Standardization

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Information as a Strategic Weapon

Intranet ERP Knowledge Management

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Two Approaches to Knowledge Management

ExplicitProvide high-quality, reliable, and fast

information systems for access of codified, reusable knowledge

TacitChannel individual expertise to provide creative advice

on strategic problems

KnowledgeManagement

Strategy

People-to-documents

Develop an electronic document system thatcodifies, stores,disseminates, and allowsreuse of knowledge

Invest heavily in informationtechnology, with a goal ofconnecting people withReusable, codified knowledge

Person-to-person

Develop networks forlinking people so thattacit knowledge canbe shared

Invest moderately ininformation technology,with a goal of facilitatingconversations and the ex-change of tacit knowledge

Technology

Source: Based on Morten T. Hansen, Nitin Nohria, and Thomas Tierney,“What’s Your Strategy for Managing Knowledge?” Harvard BusinessReview, March-April 1999, 106-116.

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Impact of Technology on Job Design Job Design includes assignment of goals

& tasks to be accomplished by employees

Job Rotation (moving from job to job)

Job simplification (variety and difficulty level of task is reduced)

Job enlargement (expansion of the number of different tasks performed by each individual is increased)

Job enrichment (greater responsibility, recognition and opportunity for growth and development)

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Design for Joint Optimization

Work roles, tasks,workflow

Goals and values

Skills and abilities

Design for Joint Optimization

Work roles, tasks,workflow

Goals and values

Skills and abilities

Sociotechnical Systems Model

The Social SystemIndividual and teambehaviors

Organizational/teamculture

Management practices

Leadership style

Degree of communicationand openness

Individual needs and desires

The Social SystemIndividual and teambehaviors

Organizational/teamculture

Management practices

Leadership style

Degree of communicationand openness

Individual needs and desires

The Technical System Type of production technology (small batch, mass production, FMS, etc.) Level of interdependence (pooled, sequential, reciprocal)

Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure

The Technical System Type of production technology (small batch, mass production, FMS, etc.) Level of interdependence (pooled, sequential, reciprocal)

Physical work setting Complexity of production process (variety and analyzability) Nature of raw materials Time pressure