Advanced manufacturing technology: organizational design and strategic flexibility

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

Although AMT greatly reduces the amount of physical work needed to manage and operate production processes, the skills and knowledge required for smooth implementation have become much more sophisticated and require a very high degree of organizational, cross-functional integration (Hitt et al. 1993). In this sense, AMT investments heighten complexity and interdependence in the firm (Ebers and Lieb 1989), thereby often necessitating significant changes in the organization structure and approaches to learning and knowledge creation (Jelinek and Goldhar 1984; Leonard-Barton 1988; Kelley 1990). In effect, to fully utilize the capabilities of AMT, a transformation of the firm's organization design is frequently required, to include characteristics of both 'loose couplings' (Orton and Weick 1990; Hitt et al. 1993) and an 'open systems', modular perspective (Schmidt 1991; Daft and Lewin 1993) that accelerate information flow both within and external to the firm. Loose coupling allows the firm to balance the need for simultaneous centralization, decentralization and coordination of value-adding activities. High levels of responsiveness (associated with decentralization) facilitate fast response and exploitation of emerging but unanticipated opportunities. Focused development of design and technological enhancements and continuous improvement (often requiring a degree of central direction) reinforce the low-cost, efficiency features of flexible manufacturing systems. In addition, an 'open systems' perspective (Schmidt 1991) enables firms to maximize their opportunity to use CAD/CAM in working with suppliers and customers to commercialize new product designs. An open systems approach is akin to a 'modular' organization (Daft and Lewin 1993) in which the firm is able to selectively link up with other firms when their specific skills and capabilities are needed. A modular, open systems approach thus promotes a network of specialized firms.

The combination of new sources of manufacturing competence, loose coupling to promote cross-functional integration and a modular, open systems approach to establishing external linkages contribute to higher levels of organizational learning (Huber 1991). The firm's skills and capabilities are continuously refined to compete in future markets, thus increasing the firm's ability to exercise the options of AMT investments. These investments represent 'renewable resources' that serve as catalysts to learn and apply new forms of knowledge that help build sustainable competitive advantage (Zammuto and O'Connor 1992).

Sources of Manufacturing Competence

Smooth implementation of new AMT systems requires the ability to learn and apply new sources of knowledge over time (Walsh and Ungson 1991). Manufacturing processes are often perceived as barriers to product innovation (Abernathy et al. 1983), not only because of the physical limitations of older equipment, but also because organizational configurations (e.g. strict functional separations) for managing work may limit information flow (Bessant and Haywood 1988; Zammuto and O'Connor 1992). Without a concomitant effort to create new forms of skills and knowledge in the factory, the adoption of AMT is likely to aggravate existing structural problems in organizations (Hayes and Jaikumar 1988; Dean and Susman 1989). Gaining the flexibility benefits from AMT depends on how the organization design promotes flexibility and development of new forms of knowledge (Zammuto and O'Connor 1992).