New rules emerging in manufacturing
EDITOR'S NOTE: This column begins a series of columns based on the book, Future Capable Company: What Manufacturing Leaders Need To Do Today To Succeed Tomorrow, by Dr. Tompkins. These excerpts are provided through special arrangement with the publisher, Tompkins Press. Copyright c 2001 Tompkins Press.
From the 1950s to the 1970s, science fiction showed us a future filled with rocket ships traveling to distant planets. Most analysts and writers of that day regarded computers as huge mainframes that rattled and whirred in the backrooms of office buildings, if they thought of computers at all. They certainly did not think they would have much impact on the future.
At the end of the 1970s and the beginning of the 1980s, computers began to infiltrate everyday living. Software began to appear in factories and warehouses around the world to keep track of inventory and to handle planning and scheduling.
In 1969, the U.S. government created ARPANET, which eventually became the Internet. In 1990, Tim Berners-Lee proposed an Internet-based hypermedia initiative for global information sharing. He called this initiative the World Wide Web. In 1994, the Internet had more than 200 million users and has since been growing at an estimated rate of 25% per month.
Personal and networked computers, the Internet, and the World Wide Web have changed everything. We are all connected, and information is instantaneous. This has blurred and eliminated boundaries.
Because of these developments, companies can no longer focus solely on creating the best and highest-value products; they must make sure the products are being created with the ability to be customized to meet as-yet-undefined customer requirements, being produced at low cost and high quality while maintaining speed and nimbleness. They must become Future Capable companies, responding to the forces of change while using the proper application of technology. To understand how this is done, let’s take a closer look at change and how it is affecting us.
Change: All assumptions are wrong
Changes are coming too fast and furiously for anyone to grab onto for any length of time. Companies must establish strategies that will be sufficiently flexible and modular to meet the requirements of the future, even though future requirements cannot be clearly defined. Today’s customer-centric and global business environment simply does not allow us to blindly accept assumptions because all assumptions at some point will be wrong.
People and technology are the two primary drivers of change. People are driving change because there are so many of us now. Not only is the world growing, but it is growing at an increasingly rapid rate. There are more countries and more products, creating fragmentation — a marketplace broken into small segments. At the same time, the world’s economy is no longer driven by capital; instead it is driven by knowledge. In some cases, the focus is no longer value-added, but knowledge-added.
Meanwhile, technology has been exploding even more rapidly than the population. Consider computer power. Today, there is more computer power in your car than in the first manned spacecraft. Today’s home video camera has more power than the IBM 360. My own PC has more power than all the computer power on Earth in 1950.
The Web is the most noticeable instrument in the change that has occurred in the last two decades, not only because it has grown so quickly, but because it is becoming so widely used. On the Web, buyers can easily compare products, prices, and services, as well as communicate with far more people than they have in the past. New relationships are forged daily and, when they are vendor-customer relationships, the playing field is leveled, reducing the value of branding and accelerating margin pressures. The importance of providing quality service and high levels of customer satisfaction becomes paramount.
Other advancements, such as digital and wireless technologies, have changed the methods of doing business. Thanks to these technologies, corporate power has shifted from within the company to outside the company. Customers are offered a wide range of choices and can shift from one option to another almost instantly.
The explosion of both population and technology has also introduced major changes in workplaces and work processes. For example, factories may now be focused factories or even virtual factories. A focused factory is defined around a product family that requires similar manufacturing equipment. In other words, it is specialized rather than generalized. Virtual factories are virtual enterprises that gather, organize, select, synthesize, and distribute information and parts with information technology, be it Electronic Data Interchange (EDI), wireless, the Internet, or a combination of all three.
Also, direct-to-consumer delivery channels, customer satisfaction, customization, shorter cycle and lead-times, cellular and flow manufacturing, and small lot sizes are emphasized as more and more companies and customers look to the Web for products and information for the entire supply chain. As a result, Build-to-Order (BTO) is being viewed as a viable alternative to mass production, which cannot provide the speed and customization today’s customers require.
BTO manufacturing and virtual factories have also created a surge in outsourcing. Outsourcing is the transfer of a defined “non-core” competency to an identified partner so a company can exploit the partner’s expertise while concentrating on its own core competencies. Deverticalization is another reality of today. Deverticalization is a form of outsourcing in which the vertical integration that was the focus of conglomerates in prior decades is segmented, resulting in the conglomerates’ divesting many of the supply chain links that were not truly core competencies.
So, what does all this mean? It means that change is change is change. It means that we live in exhilarating times that demand a new set of rules. It means that the word “company” has a new definition. According to Robert B. Reich in his article “Your Job is Change” (The American Prospect Online, Aug. 21, 2000), it now refers to a “living organism competing, collaborating, and co-creating in a network of other companies.”
Therefore, to succeed, a company must take on the role of a “change insurgent,” emphasizing organizational readiness rather than specific products or markets. It must seek technologies for business applications, or “killer apps,” and look at other organizations with a view to capturing newly emerging technologies and markets at the speed of light. It must be flexible and modular, ready to suddenly change direction. It should source services and supplies through the Web, give suppliers equity, and rely on performance-based pay, stock options, project teams, and contract workers. It should, in short, be a Future Capable Company.
New breed: New rules
Today’s company is morphing into a diversified entity, exploring different revenue sources that add value and increase profits. This is changing the rules of competition and shaking up entire industries. Some of these new rules include:
Using the right mix of old employees, new talent, and technology to generate creative tension, disturb the status quo, and propel the company forward
Establishing direct links with customers to listen to their needs, complaints, opinions, and suggestions
Creating alliances between IT (those who create and morph technology) and the salespeople (those who communicate with customers on a regular basis)
Emphasizing that change is constant and should neither be feared nor resisted, but embraced
Establishing new measures of success
Embracing continuous improvement as a prerequisite for success.
No longer can manufacturing be contained in a large factory that owns raw materials plants, manufactures parts from those raw materials, assembles them, creates buffer stock from the assemblies, and ships them to the warehouse. No longer can manufacturing exist in a vacuum as one link not fully synthesized in the supply chain.
Today’s factory may very well be virtual, with manufacturing functionalities existing in every link in the supply chain. Suppliers, manufacturers, and customers must cooperate and collaborate together to survive in the war of supply chain vs. supply chain. They must practice Supply Chain Synthesis (SCS), which is the holistic, continuous improvement process of ensuring customer satisfaction from the original raw material provider to the ultimate, finished-product consumer. Therefore, a critical portion of the Future Capable Company’s organizational readiness is making sure it is ready to achieve SCS.
Author Information Dr. James A. Tompkins is the president and founder of Tompkins Associates, a leading global consulting, implementation, and integration firm focused on total operations success. Future Capable Company is available from Tompkins Press, 2809 Millbrook Rd., Raleigh, NC 27604. Phone 800-789-1257, fax 919-872-9666, tompkinsinc.com. $24.95.
Change is not obscure, hidden, or mysterious. It’s everywhere.
In 1956, there were 7000 periodicals published in the United States. Today, there are more than 22,000.
In 1989, the average supermarket stocked 25,000 items. Today, there are more than 30,000 items.
From 1892 to 1982, there was only one Coke. Today, there are seven varieties.
In today’s automobile, the microelectronics cost more dollars than the steel.
Someone who wanted to buy running shoes in 1970 might have found five styles from which to choose. Today, there are 300 to consider.