POM Managing Technology

7/31/2019 POM Managing Technology

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CHAPTER - 3

MANAGING TECHNOLOGY

Application of technology has significantly transformed functioning of every industry and servicesector during the last two centuries. It has enabled industry to gain competitive advantage bysatisfying customer needs. It has created new industries and dramatically changed the landscapein existing industries. Use of technology development and innovation can provide a firm aunique expertise that is hard to match. Competitive advantage happens by adoption of newtechnology and integration with existing technologies. The speed at which new technologies aredeveloping is astounding. A few decades from now so many new technologies will emerge andmake many existing technologies redundant. Therefore, managers have to be vigilant about thelatest innovations for efficient production. They will also face the challenges of protectingenvironment for a better present and future for the society.

THE MEANING AND ROLE OF TECHNOLOGYTechnology may be defined in a number of ways. It is the use of science to a need. Technologyis a combination of the know-how, experience, skills, tools and equipments, soft wares,

procedures and processes necessary to convert inputs into outputs, i.e., products andservices. Advances in technology include ideas, knowledge, experience, and their uses to createnew and better ways of doing things. It is a means of using our knowledge for solving practicalproblems.

Know-howis the knowledge and judgment of how, when, and why to employ tools, equipmentsand procedures in processes.

Tools and equipments include various types of general-purpose and specialized machines, tools,computers, scanners, ATMs, or robots, etc.

Procedures are the rules and methods for operating machines for executing the work.

Technologies do not operate in a vacuum but need a very strong support networks. Asupportnetwork includes the physical, informational, and organizational relationships that make atechnology complete and allow it to function as desired.

Before selecting a technology the manager must be aware of all the available technologies in themarket. Since a host of technologies are available in the market these days the manager shouldchoose a correct and appropriate technology as it affects not only production but otherresources such as capital, human resources and information systems.

TYPES OF TECHNOLOGYSome of the experts divide technology in two categories: hardware machines, tools, equipmentsand computers that are used to produce goods and services; software information systems thatare used on hardware. However, other experts divide technology as product, process and

information technology.

Product Technology: Developed within the organization primarily by engineers and researchers,product technology translates ideas into new products and services. Researchers developnewknowledge and techniques of creating and performing jobs, merge them with conventionalcapabilities, and convert them into specific products and services to satisfy customerneeds.

Process Technology: The ways by which an organization conducts various activities is knownas process technology. Many process technologies have been very successful and transformed

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the entire industry like the use of robots in auto sector but many process technologies havemiserably failed despite their huge cost.

Information Technology: Information Technology implies use of computers and software tomanage information. Managers use information technology to acquire, process, and transmitinformation with which to make more effective strategic and operational decisions forsatisfying customers needs and improve all components of value chain. Informationtechnology pervades every functional area in the work place. It has revolutionized work in allbranches of offices such as the main offices, branch offices, back offices, front offices, sales offices,or functional area offices. Office technologies include various types oftelecommunicationsystems, word processing, computer spread-sheets, computer graphics, e-mail, on-linedatabases, the Internet, and the intranet.

In addition to offices, information technology brought unparallel transformation in products andprocesses. The success story of Asian paints, BHEL, BMW, Indian Oils and a host of othercompanies in a wide range of sectors owe their remarkable performance to the use of informationtechnology.

MANAGEMENT OF TECHNOLOGYManaging technology means managing what adds value to the product. It is the management of

innovation in products, services and processes and its implementation in the company. It impliesidentifying technological potentials that should be pursued through R&D, choosing from bothinternal and external sources the technologies to implement and then following through theirsuccessful implementation as products, processes, and services. Thus, management of technologyintegrates R&D, engineering, and management in the processes of planning, developing andimplementing new technological capabilities that can carry out corporate and operations strategies.

Technology is inherently difficult to manage as it is constantly changing in unpredictable manner.The number of technologies available in the market is mind-boggling, yet managers must be awareof those technologies that can be used in their operations. Managers are expected to know howthe technology works and what is behind it.

The major issues relating to the management of technology are:

Strategic planning of technological products

How should technology be integrated in the objectives of corporate strategy

How to assess technology

How to reduce development time of a new product or process

INFORMATION TECHNOLOGYInformation technology is crucial to operations everywhere along the supply chain and to everyfunctional area. That is why most of the firms employ some or the other form of computer-basedtechnology. Computers are spawning a huge proportion of current technological changes andinnovations, either directly or indirectly. Computer-based information technology is used tocommunicate with customers, employees and suppliers. For this purpose various informationsystems have been developed such as management information systems, decision support

systems, artificial intelligence, internet and intranet, wireless communication and automaticidentification systems. IT has greatly influenced how operations are managed and how officeswork. Office workers can now do things that were not remotely possible a short time ago, such asaccessing information simultaneously from several locations and diverse functional areas.Information technology makes cross-functional coordination easier and links a firms basicprocesses. In a manufacturing plant, information technologies can link people with the workcentres, data-bases, and computers. Companies like Titan, Hero Honda, Amul, etc., have usedsoftwares like SAP, Baan, and PeopleSoft for cross functional integration. This has resulted inincreased efficiency and decreased cost.

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COMPONENTS OF INFORMATION TECHNOLOGYHardware include computer, gadgets connected to it and monitor.

Softwares are computer programmes that make hardware work. There are a number ofapplication softwares. Softwares are available for almost all types of operations. Softwares arenecessary to many processes such as CAD/CAM, robots, etc. They also provide variousexecutive support systems, including management information system.

Databases: A data base is a collection of interrelated data for information stored on a datastorage device, such as a computer hard drive, a floppy disk or tape. Master Cards and VisaCards use data base for billions of customers around the world.

Telecommunications: For communication networks we need fiber optics, telephones, modems,fax machines and their related components. It has become possible to communicate directlywith people sitting at distant places at a very low cost through such networks. Not only the successof many businesses has become possible because of telecommunications but the life of a commonman has also become comfortable. It has revolutionized banking systems around the world.Maruti-Suzuki has a strong telecommunication network with all its suppliers and majority oftransactions are now done online.

THE INTERNET AND E-COMMERCEGlobal access to the Internet gives companies a vast market by connecting businesses and finalconsumers. The Web has a huge impact on how firms interact with their suppliers, customers,employees, and investors. Electronic Commerce (e-commerce) is the application of informationand communication technology anywhere along the entire supply chain of business processes.Both whole processes and sub-processes nested within them can be conducted as e-commerce. Itis sharing of business information, maintaining business relationships, and conducting businesstransactions by means of telecommunications networks. It is, however, more than simply buyingand selling goods electronically and includes the use of network communications technology toperform processes up and down the supply chain, both within and outside the organization. E-commerce the paperless exchange of business information allows firms to improve theirprocesses that give competitive advantage by cutting costs, improving quality, and increasing thespeed of service delivery.

THE INTERNETInternet is the fundamental enabling technique of e-commerce. The internet is network of networksthousands of interconnected communications networks and millions of users. It ismedium of exchange of all forms of digital data, texts, graphics, audio, video programmes,faxes. It is also an infrastructure for providing various services such e-mail, EDI, file transferprotocol, World Wide Web.

THE WORLDWIDE WEBOne of the most popular Internet services is World Wide Web, which emerged in 1993. The WorldWide Web consists of software called Web Servers running on thousands of independentlyowned computers and computer networks that work together as part of this Internet service.Users request information form the Web using software called Web browsers. A Web

Browser such as Microsoft Internet Explorer is a software that allows users the Web. Most searchengines have developed in portalsWeb sites that provide a variety of services. Yahoo andGoogle are examples of widely used portals.

E-Business can be grouped in the following classes:1. E-marketplace companies2. E-service providers3. E-retailers and wholesalers4. E-producers

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There are a large number of E-marketplace companies that provide an exchange wherebuyers and sellers can transact electronically. In India there are many portals in the field ofproperty where property deals can be made. These companies maintain and update a huge database and provide low cost but fast service.

E-service providers provide fast and convenient service. Make my trip.com, Easy Cab areE-service providers in the field of tourism and travel. Many insurance companies in India alsoprovide E-service. E-service providers also extend personal dialogue and help in case customerwishes so.

The most popular type of E-business is E-retailers or wholesalers. In India the number of E-retailers and wholesalers is growing rapidly. They offer a variety of products such asartificial

jewelry, electronic goods, kitchen wares, personal care products, and so on. They offerproducts at much lesser rate than the market price. They pass on the benefits of low inventorymanagement cost, showroom cost and personnel cost to their customers.

E-producers is the fourth category doing e-business. They receive orders through Internet andin turn procure components electronically. Dell Computers is the most popular example in thiscategory. Many automakers receive orders from their distributors and in turn place inventory ordersto suppliers. Electronic connectivity with customers and suppliers provide tremendous efficiency to

these producers in terms of speed, convenience and cost.

HOW E-COMMERCE AFFECTS PROCESSESE-commerce is recorded tremendous growth and altered the traditional brick and mortar businessscene at breathtaking speed. E-commerce provides speed, convenience, global market without anyboundary, instantaneous services, cuts costs, improves inventory management, automates fax-and-phone procurement processes, and provides inexpensive sales, marketing and customer supportchannels. Its capacity of connecting various business partners at great speed is amazing. E-Commerce is revolutionizing the entire business spectrum.

BUSINESS TO CONSUMER E-COMMERCE AND BUSINESS TO BUSINESS E-COMMERCEThousands of firms and millions of customers are now doing business through B2C and B2B.

Gillette, Nokia, Maruti-Suzuki, GE are some of the firms that follow B2C and B2B and haverecorded phenomenal growth in business and reduction in cots. It ensures convenience, costreduction in terms of petrol and parking, storage space and speed, better inventory management.

ENTERPRISE RESOURCE PLANNINGEnterprise Resource Planning (ERP) refers to a large, integrated, computer-basedinformation system that supports many business processes and data storage needs. Anenterprise process is a companywide process that cuts across functional areas, business units,and geographic regions, and product lines. ERP encompasses all functions of the firm. Itscapacity is tremendous. When an order is booked and fed in the system it automatically goes tothe operations department, purchasing, accounting, finance, HR, suppliers, marketing, shipping anddistribution systems and converts the order in respective units relevant to each department. Ittracks the transaction from its origin at the customer until it is complete. Decisions made at

one functional level will automatically be reflected at all functional levels. SAP and Oracleare the two very popular ERP soft wares.

Since ERP soft wares run ERP systems in a particular way that may not match with the legacy(existing information systems). Designing an ERP system requires that a company carefullydefine its major processes so that appropriate decisions about the integration andcoordination of legacy systems and new software modules can be made. Processes to beused by ERP applications must also be fully specified. In many cases, a companys processesmust be reengineered before the company can enjoy the benefits of an integrated informationsystem.

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WHAT ERP DOESBy integrating functional areas, ERP systems allow a firm to concentrate on enterpriseprocesses rather than functional boundaries. For example, suppose that an Indianmanufacturer of three-wheelers has an ERP system and than an Spanish-based salesrepresentative wants to prepare a customer quote. When the salesperson enters information aboutthe customers needs into a laptop computer, the ERP system automatically generates a formalcontract, in Spanish, giving specifications of the required vehicles, delivery date and price. After thecustomer accepts it, the sales person makes an entry, whereupon ERP verifies the customerscredit limit and records the order. The next application takes over to schedule shipment using thebest routing. Backing up from the delivery date, it reserves the necessary materials from inventoryand determines when to release production orders to its factories and purchase orders to itssuppliers. Another application updates the sales and production forecasts, while still anothercredits the sales representatives payroll account for the appropriate commission. The accountingapplication calculates the actual cost of production and profitability in Indian rupees, and reflectsthe transaction in the accounts payable and accounts receivable ledgers. Divisional and corporatebalance sheets are updated, as are cash levels. In short, the system supports all of the enterpriseprocesses that are activated as a result of the sale.

TECHNOLOGY CHOICE

Before accepting any new technology it is advisable for the firm to have a technology strategywhich is linked with the corporate strategy of the firm. An appropriate technology is one that fitscorporate and operations strategies and gives the firm a sustainable advantage. If the corporatestrategy is to manufacture low-cost products, the most suitable technology is that enables low-costproducts. On the other hand if the corporate strategy is to produce differentiated products, the firmshould go in for such a technology. Moreover the technology strategy should not be a one timestrategy but a long term comprehensive strategy. Technology strategy deals with more than justtechnological choice. It also determines whether an organization should be a leader or follower intechnological change.

Another aspect of technology choice is the financial return on investment. Some of the techniquesfor financial evaluation are net present value and internal rate of return. While deciding atechnology a careful funds flow analysis should be made. A technology howsoever good it may be

cannot be adopted if unable to provide a pre-set minimum rate of return on investment.

The choice of technology should also be viewed from its effect on employees. In the pasttechnology selection was done first and then handed over to employees for implementation. Nowthe strategy has changed and a new technology is also evaluated from the point of view of itsconsequences on the firms human resources. There are many libraries that have introduced bar-coding system on books but it could not be implemented because of non availability of trained staff.

Evaluating radically new technologies should consider financial, human resource, marketing,information flow and its impact on cross functional processes. It is risky to go in for untestedtechnologies; therefore, preference should be given to implement a proven technology. On thebasis of the above discussion the following issues are relevant for a technology choice:

1. There are a large number of technologies in the market but the company should choose

only the right kind of technology suitable to its products.2. A support system comprising of relevant processes, equipments, employee training mustbe made available for implementing the acquired technologies.

3. Employees should be briefed about new technologies.4. Continuous evaluation of new technologies should be carried out to judge its success and

handle emerging problems.5. Product and service qualities should be regularly monitored.

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BENEFITS AND CHALLENGES OF TECHNOLOGYA new technology should create some kind of competitive advantage. Competitive advantageincludes:

1. Increasing the value of the product; increased product variety: more product features2. Improved quality: automated inspection and reduced variation in output3. More production, new products and new market creation4. Reducing the costs direct cost material by using exiting materials more efficiently or

enabling the use of high tolerance materials and labour costs by replacing people withrobots, enabling fewer employees to operate semiautomatic machines.

5. Quicker delivery times6. Smaller inventories and use of JIT inventory management7. Pollution control noise8. Higher productivity, higher income of employees because of higher technical knowledge

and higher standard of living9. Creates new industries like biomedicine and wireless communications10. Improved customer service that leads to higher customer satisfaction because of speed

and flexibility and availability of new products and services11. Bettersafety and protection of employees. Dangerous jobs (like painting and welding)

are now performed by robots.

RISKS AND CHALLENGES1. Risk of obsolescence: more so when an untested technology is used.

2. Risk in operations: it may disrupt established operations, may demand more resourcesfor which the firm may not be ready.

3. Organizational risks: The organization may not be ready to accept the sudden disruptionsand that may result in complete abandonment of the new technology.

4. Market or environment risks: New technology oriented product may not be very welcomein the market unless fully tested. Example battery operated cars in India. A new technologymay not be very environment friendly unless fully tested.

5. Higher costs: Technology induced products and services cost higher that is why manycompanies shift to low cost locations in other countries.

6. Return of goods or cancellation of services. The biggest problem of E-Commerce is

the return of goods because many firms do not have enough infrastructure of acceptingreturned goods. Similarly in E-service recovering money of cancelled services is a bigproblem as in case of recovering ticket cost in case of cancellation of journey.

But introduction of new technology can sometimes be prohibitively expensive. It may generateemployee resistance, lower morale and increase turnover. Thus, operations manager must sort outthe many benefits and costs of different technological choices.

EXERCISES

1.What is the role of technology in operations management?2. What are the components of information technology?

3. What the implications of B2C and B2B on operations management?4. What is ERP? Discuss various applications of ERP?5. What are the benefits and challenges of technology?6. How to make a technology choice? What are the main issues involved in technology

choice?

7. What is E-commerce? Explain its different categories.

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POM Managing Technology