Advanced manufacturing technology: organizational design and strategic flexibility

Organization Studies, Summer, 1996 by David Lei, Michael A. Hitt, Joel D. Goldhar

In numerous instances, CAD/CAM systems are able to closely link external designers and suppliers with a manufacturing firm by using a common software interface and language that feed design data and customer specifications directly into the production system (Adler 1989). Use of a common software language that is also the driver of the flexible manufacturing system allows integration of design and manufacturing activities regardless of whether they are performed in-house or externally. In effect, the flow of rich information between design and manufacturing in the firm can be extended to suppliers and designers external to the firm. Thus, CAD/CAM linkups enable a firm to examine multiple designs simultaneously by specializing the design tasks according to each supplier or designer's unique capabilities or skills. By working with several suppliers concurrently, a firm can create a 'network' of value chains that takes advantage of the specialization of different firms (Bartmess and Cerny 1993; Normann and Ramirez 1993) to pursue multiple product development opportunities in parallel. In so doing, CAD/CAM networks enhance product differentiation to satisfy different market segments. In addition, the use of multiple suppliers to help in design and component activities facilitates the development of a larger stream of new products and extend the products' life-cycles. There is a greater diversity of insights for use in product development and commercialization, thus enhancing organizational learning.

The development and implementation of CAD/CAM networks could have multiple and diverse effects on time-based competitive strategies (Stalk 1988; Hayes and Pisano 1994). CAD/CAM linkups enable firms to work with suppliers and customers regardless of their distance between locations (e.g. in different countries), thereby allowing each firm to create its distinctive network of capabilities (Bartlett and Ghoshal 1989; Bartmess and Cerny 1993). Value chains shared with different suppliers and designers can be reconfigured according to the needs of the new product design, the specific capabilities and skills of suppliers, as well as the firm's strategy, thus promoting selective and 'intermittent interdependencies' among firms. In effect, the character of the firm's value chain becomes as flexible and responsive as the nature of its investment in AMT and CAD/CAM systems. In addition, CAD/CAM linkups indirectly promote the global diffusion of innovations, thus allowing many firms, large and small, to have access to new technologies and design concepts that might not otherwise be readily available.

Proposition 5: CAD/CAM systems promote strategic flexibility by facilitating the integration of networks of internal (e.g. design, manufacturing, marketing) and external (e.g. suppliers, customers) stakeholders.

Organization Design for Advanced Manufacturing Technologies

Appreciation for the role that AMT can play in the revitalization of U.S. and European industry has increased in recent years. However, several important studies have shown that, despite the increasing investment in flexible AMT technologies, firms headquartered in the United States and some European countries have not been able to achieve the same level of benefits as many of their foreign counterparts, particularly Japanese (e.g. Jaikumar 1986; Lincoln et al. 1986; Young 1992). Although the level of technology embodied in advanced manufacturing systems is considered equal across country boundaries, some managers have had difficulty in effectively implementing these systems. Some of the initial problems encountered in implementing AMT systems resulted from the inherent complexity of introducing both flexibility and automation into older traditional processes. More important, problems resulted from the lack of a match between the new technology's capabilities and an organization design that did not facilitate rapid learning and new skill creation (Voss 1988). Investment in flexible AMT systems to achieve greater strategic flexibility (i.e. simultaneous fast response, low cost and high variety) is unlikely to be successful without the implementation of (1) new knowledge-based sources of advanced manufacturing competence, (2) a 'loosely coupled' approach to internal integration of value-adding functions and (3) a modular, 'open systems' approach to working with suppliers, customers and other firms.