management of new technologies in production and logistics

Robotics & Computer-Integrated Manufacturing, Vol. 7, No. 1/2, pp. 63-71, 1990 0736-5845/90 $3.00 + 0.00 Printed in Great Britain Pergamon Press plc

• Paper

MANAGEMENT OF NEW TECHNOLOGIES IN PRODUCTION AND LOGISTICS

HORST WILDEMANN

Miinchen, F.R.G.

The increase of a company's competitiveness can be compared with the acceleration of a train. In this idea the product is represented by the tractive power of the locomotive and the production system by the waggons. Until now, a powerful locomotive was considered to be the most important condition of success, which means an excellent product, leading all waggons: production, logistics and organization. Worldwide, it can be observed that even feeble locomotives (products) with easily running waggons are overtaking powerful locomotives with heavily running waggons. This requires a concentration on the speed of the whole train, taking all influencing parameters into account. The enterprise's investment strategy demonstrates an almost equal percentage of its investable funds, namely about 5 % of the return for research and development and about 6 % for new technologies. The share of new technologies in production is increased from 62 to 68 %.

The strategic potential of new technologies in production and logistics can be judged by their effects on critical factors for success like costs, quality, flexibility and time. The achievable advantages in competition depend on the level of experience and on the duration of protection against imitation, as well as on the turnover and market shares of the products involved.

To align an enterprise with the critical factors of success, the exclusive use of new technologies for automation is not sufficient. The combination of productive factors has to be rearranged frequently. Existing organizational structures, potential of employees, systems of logistics and technologies of production have to be improved considering these circumstances. They should be integratively controlled in a long-term strategy through the systematic management of technology.

1. THE ROLE OF TECHNOLOGIES IN BASIC STRATEGIC ORIENTATIONS

The European Common Market constrains companies to find new strategic orientations. With growing intensity of competition and the resulting need for larger product variety, a reorganization of factories towards a closer orientation with the customer is necessary. With new technologies, just-in-time production and factory segmentation it is possible to influence costs, quality, flexibility, delivery time, throughput time and development time in such a way that this reorganization can be realized efficiently.

In the past, production was mainly oriented towards productivity. The parameters of this strategy were wages, interest on capital employed and an efficient division of labor with the aim of automating repetitive operations. Technologies were mainly used to increase the productivity of every single workplace. This orientation culminated in the phrase "The divi- dends are lying on the edge of the steel" ("Auf der Schneide des Stahls sitzen die Dividenden") (Schles- inger, 1911).

The isolated orientation towards productivity has been replaced by knowledge of the learning curve which implies that each doubling of the production

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output is accompanied by an effect of rationalization between 15 and 25 ~o. The dominating parameters of this orientation towards the learning curve are product standardization and mass production. The role of technology consisted mainly in reducing costs and enabling constant quality during the whole production process. In this approach, not the "edge of the steel", but the "restrained creativity of the engineers" ("gebremste Kreativitiit der Konstrukteure") (Ptppel) and a worldwide market became the dominant aspects.

With increasing market saturation and the resulting urge for larger product variety in order to increase advantage with the customer, companies strive for a better market and customer orientation. The characteristics of this strategy are just-in-time logistics and production as well as concentration on time and quality. With customer orientation time especially has become just as important a~ productivity.

Short product development and processing times allow the reduction of costs, a wide range of products and the ability to cover a larger market segment. In particular with a strategic orientation towards the customer, technology has a leading position. Com- puter integration is reducing product development

64 Robotics & Computer-Integrated Manufacturing • Volume 7, Number 1/2, 1990

time. Implementation of information networks between production and suppliers and an increase in flexibility combined with higher automation allow production with lower set-up times and reduced stocks throughout the whole value-adding chain. The management of new technologies in production and logistics is therefore becoming an important factor in competitive success. The aim is to reorganize the value-adding chain in such a way that the customers' requirements concerning costs, quality, time and flexibility can be met more accurately than by competitors. Analysis of companies' investment budgets shows that investments in productivity, quality, integration and flexibility will be intensified in the near future (see Fig. 1).

This results in a broad field of activities for the management of new technologies, focussing not only on technology, but also on logistical systems as well as aspects of personnel and organization.

During the planning process for new technologies it is necessary to perceive technological gaps and to work out procedures in order to reach the technological target. Selection between alternatives requires an economic evaluation, based on an analysis of the effects of new technologies. These efforts are combined in CIM (computer-integrated manufacturing) within production, and in the concept of simultaneous engin- eering within construction and scheduling.

Technology opens a broader range of organizational possibilities for logistical systems. Increased requirements for temporal flexibility demand a change in the present systems of order processing, production and procurement. In the past, the optimization of

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these systems focussed on minimizing costs and maxi- mizing capacity utilization. The resulting structures are often inconvenient for shorter throughput times and product start-ups. The concepts of just-in-time production, manufacturing segmentation and production-synchronous procurement may be applied in order to reorganize the logistical chain from the supplier to the customer.

The structure of organization as well as the organizational rules within the value-adding chain are often unable to meet the changing requirements of the market and of the systems of production and logistics. The target-oriented development of organization and personnel is therefore included in the management of technologies. Development of organization and personnel is not considered a residual factor depending on technical changes, but represents an independent field of creative organization called management of human resources (see Fig. 2).

2. THE ARRANGEMENT OF INTEGRATED P R O D U C T I O N SYSTEMS

When arranging integrated production systems, the management of new technologies has to level out:

• preparing the technological modules necesary for integration

• fixing key points as well as the direction of integration and

• finding an adequate date for start-up.

In order to avoid isolated optima, these partial decisions must be united in a general strategy for production and logistics.

New computer-integrated production technologies allow a continuous integration of the flow of information and material. CIM can therefore lead to an optimization of flow, even with the production of small series. The results of expert interviews and case studies show that the implementation of CIM systems requires a slow process of introduction. A computer- controlled factory cannot arise as a closed entity, but only in parts. The base is the technological integration capacity of the components of automation, and their organizational and informational linkage. In order to use the strategic potential efficiently over the next decade, technology management has to initiate the introduction of CIM today.

Research has been done on which integrational goals companies pursue. The result was that only 14 % of the companies aim at partial integration. A partial integration of PPC/CAM (PPC = Production Plan- ning and Control) was chosen by 9 % and CAD/CAM integration by 5 % of the enterprises. More than 85 % of the companies aspire to a fully integrated production system or integration for the whole company. Twenty-seven per cent of them strive to introduce universal CAI integration.

A necessary condition for integration is the ex- istence of single components. Which main CIM components are used in enterprises has been analyzed.

Management of new technologies • H. WILDEMANN 65

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This analysis shows that 60 ~ of the enterprises have five CIM elements in active service. Moreover, 58 ~o of them employ networks and 80% systems for office automation. Consequently, a major part of the companies have already fulfilled the technical prerequisites with respect to CIM components. A comparison of the planned and realized integrational steps, however, shows that integration is at an early stage. Only the integration of geometrical data between CAD and CAM systems has been realized in 20 ~o of the cases. This analysis of average data makes clear that the employment of electronic data processing in industrial enterprises is still dominated by island solutions. Inte- grated systems are still a minority. About half of the enterprises interviewed have not realized integration until now. The four indispensable steps for the integration of a CIM system and the five steps for CAI implementation have not been realized by any enterprise so far.

It is therefore the first task of technology management to close the existing gaps of integration. This requires compatibility of technological components with respect to integration. Companies may choose two different directions of integration. They can follow the strategy of equipping single product spheres completely by covering all functions with data-processing technology and then realizing CIM inside of these product spheres. In this case, a successive implementation of one product sphere after another could be realized. The alternative strategy is to equip single functional areas with new production technologies first, in order to integrate these functional areas in a second step. This strategy is called horizontal data- processing penetration, while the strategy of automating and integrating one product sphere after another is called vertical data-processing penetration.

The structure of a CIM system presupposes vertical diffusion. Only if the vertical diffusion has been planned in such a way that the compatibility of different systems is assured, can partial systems be integrated using local networks. If in each functional area horizontal diffusion is realized without regard to interdependence, later integration will require great expense.

The empirical findings show that only 20% of

enterprises try to automate and integrate within product spheres. With 28 % of the enterprises, no unambi- guous diffusion is defined, while 52 ~o of the companies prefer horizontal data-processing penetration and primarily equip single functional areas completely. These cases, however, run the risk that the whole potential of rationalization due to network implementation may not be achieved.

Another problem requiring decision with respect to the organization of integrated production systems refers to the integrational focus. Empirical analysis shows that the obvious integrational focusses are related to the coupling of PPC/CAM, CAD/CAM coupling and a complete integration of geometrical data within the CAD/CAP/CAM chain. Systems of computer-integrated quality control should be exten- sively integrated with PPC, CAD and of course CAM production. Nevertheless, office automation is only closely connected to PPC/PDC systems (PDC = Production Data Capturing) and is supposed to be integrated in more than 10~o of cases with CAD as a documentary system. This analysis indicates that companies obviously concentrate their efforts on dis- tinct integration focusses and are unwilling to connect all data processing users, as some vendors hope. Due to the lower complexity of problems this procedure of building up a structured network is being preferred to the implementation of an unstructured network.

After fixing focusses and the direction of integration, the type of CIM realization has to be planned. There are two types of implementation: CIM systems are either built up by integrating user programs to a CIM system ("evolutionary thesis") or realizing CIM by an "all of one piece approach" ("infrastructural thesis"). The acquisition of a suitable solution to integration often requires the replacement of the existing hard- and software. A new infrastructure with a uniform surface is provided by the manufacturer, thus involving very few organizational units in the development.

An argument in favor of the infrastructural thesis is the possibility of an optimal adaption of the software systems' structure to the CIM requirements. Thus the best solution for integration can be reached. On the other hand, extremely high expense is necessary for


the development of the system and the reorganization of the company. Moreover, solutions are still at a stage of development and testing.

Considering the example of PPC and CIM, it is a disadvantage of evolutionary development that the bases of the system's concepts originate from the sixties. Recent developments show, however, that it is possible to integrate new methods of production planning and control into existing PPC systems on the base of traditional MRP concepts. Existing PPC systems can be developed to a CIM concept by controllable project steps, without considerable time lags and at calculable expense, using the existing data inventory. Consequently the existing PPC systems form a "robust" base for a CIM integration.

The procedure of realizing CIM is considered as a successive row of integrational steps by the majority (70 Vo) of enterprises. Thirty per cent of them try to realize two parallel integrational steps, integrating, for example, order reprocessing with CAM and geometrical data processing with CAD/CAM. A change to general integration by leaps and bounds, i.e. a simultaneous realization of every possible or planned partial integration, is not aspired to by any of the companies. This leads to the conclusion that the implementation of CIM is going to be a process of long duration, with the realization of a single step of integration requiring a period of between 12 and 24 months.

Consequently, the optimal timing of start-up is a question of considerable importance. This decision depends largely on the assessment of risks and chances through CIM by the management. Theoretically, the optimal moment for start-up is at the break-even point where the disadvantage of further waiting due to missed market chances equals the advantages from avoiding technological risks. Interviews with experts show that expected advantages of an early start-up are to achieve a long-term competitive edge and to improve the image of the enterprise. The most important risks of an early implementation are seen in the ratio between price and performance and the lack of secur- ity with respect to the success of introduction. The technological risks themselves were regarded to be only minimal.

A statistical analysis is not sufficient for determining the right moment of start-up. The problem of optimal timing results primarily from temporal changes of chances and risks concerning the employment of a technology. Waiting usually implies an improvement of the relation between benefits and costs. In a theoretical model the optimal timing can be found by considering the temporal development of the adoption with respect to costs and benefits or chances and risks.

The models and empirical results show that limiting the evaluation of the internal benefit of a technology will lead to a late start-up. This may result in a risk of losing market share.

Including the loss of market share in the theoretical approach to find the optimal moment for start-up will lead to an earlier adoption as soon as the risk of non-

application increases. Price-oriented enterprises which have been realizing their competitive edge by a low- cost production, will run a higher risk of losing market share due to new production technologies than product-oriented enterprises. Price-oriented enterprises will consequently choose an earlier moment of start- up.

The adoption of a production technology immedia- tely after its introduction to the market meets the model considerations rationally if the technology is considered to be safe, has a long life-cycle and may be applied throughout the enterprise. Under these circumstances, the costs of an early entry will be over- come by the advantage of experience. The advantages of an early start-up will, however, only be effective if the financial strength of the company is sufficient to bridge the temporary cost disadvantage and if there are various applications throughout the company. Under these premises, the innovator will maximize the cumulative benefit.

3. FLOW OPTIMIZATION OF THE LOGISTICAL CHAIN

The division of labor in the manufacturing process has led to complex systems and structures of production bringing with it various interfaces. Improvements in the production process were attempted by optimizing single functions. But this kind of organization is not flexible enough to react to short-term requirements of the market. To achieve client-oriented production, rather than the optimization of single functions, a general optimization of flow throughout the creation of value has to be focussed upon. With respect to cost aspects, a single-product enterprise realizing the prin- ciple of flow is the most favorable solution.

To take advantage of this effect in production of multiple products as well, structural changes within production need to effect a deconcentration of manufacturing relations in order to achieve a closer product orientation. These changes in structure will lead to production segments and enable the build-up of a modular factory with a suitable network of segments. Production segments stand for product-oriented organizational units of production that cover several stages of a product's logistical chain, and help to pursue a specific strategy of competition. Moreover, the production segments are characterized by their ability to integrate planning and indirect functions and they are usually organized as cost-centers.

Isolated solutions do not provide extensive deconcentration of capacities but a deliberate division of the logistical chain into organizational units focussing on product and technology. The aims of manufacture-- competitive costs, time of delivery, flexibility and quality performance--are all of equal importance. In order to avoid lay days between the segments, the average output capacities of the organizational units should be synchronized. The employees' qualifications have to be taken into account for process planning and maintenance, in order to adapt the

Management of new technologies • H. WILDEMANN

capacity to fluctuations of employment. A reduction in the division of labor, for example by combining the jobs of production, maintenance and quality control, is sought.

The segmentation of production aims at a novel method of organization by changing the concept of control. A group organization should bear the whole responsibility for the costs of a product or a special segment. Changing the organization allows the use of simple planning and information systems and the transfer of permissive actions to the organizational units. By repatriating indirect tasks to the direct sector, the apportionable costs are converted into direct cost elements.

Manufacturing segmentation can achieve a simplifi- cation of operational procedures not only by reorgani- zational measures; the use of new production technologies also plays an important part. The deconcentration of capacities that is sought requires ma- chines with small capacities. To meet the demand for flexibility within the segment, flexible plant facilities should be installed at the corresponding keypoints. When creating manufacturing segments, an investment strategy has to be formulated that defines the share of the segment's new investments to cover the needs of capacity and flexibility. Empirical results show that about one third of production segments' machinery is new. Compared to job shop production, structural bottle-necks can be avoided by investments that harmonize capacities.

The time needed to switch a manufacturing segment to new manufacturing jobs is very important for the use of its potential of flexibility. With coordinated capacities in the manufacturing segment the set-up is a) Traditional significant for short throughput times of product lots. prodoct~ao Thus investments for manufacturing segmentation cost, aim at lowering set-up times, rather than processing times. These investments automate the "change" as a constantly repeated action in the segment's production. Consequently, the necessary flexibility of flow can also be achieved by combining universal and product-specific plant facilities. Efficient concepts to reduce set-up times within the scope of manufacturing segmentation not only include the set-up of tools at the machine, but also "set-up" of organization and information flow.

Investments that improve segment flexibility not production

only concern the flexibility of plant facilities through oost concepts of control and set-up, but also very essen- tially the creation of a flexible infrastructure within the production segment. This requires investments for:

• computer integration, • stock and transportation systems, • integrated buffer stocks, • decentralized quality control, • quick variability of layout and the corresponding • data processing systems and interfaces.

The training of employees causes additional expenses because the potential technical and organiza-

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tional flexibility cannot be achieved without correspondingly educated personnel.

Measures of reorganization in common with employment of new technologies lead to an increase in efficiency through manfacturing segmentation. Case studies demonstrate that reductions of throughput times of 60%, increases in production of 20-30~o, space reductions of 5-15 ~o, decreases in quality costs of 20-25 ~o and reductions of current assets of 40 ~o are possible.

As the market requires a wide range of different product variants, a modular factory has a special cost benefit. Flexibility can be reserved in manufacturing segments for a special product spectrum, and consequently the costs resulting from variety increase less with rising product diversity than in common factories (see Fig. 3).

Another improvement in flow optimization can be achieved by extending the concept over the company's border to the suppliers. The ability to provide short- term reactions in the manufacturing segments needs a secure supply of goods from external subcontractors. An insufficient supply of material in flow-optimized production quickly leads to interruptions of the production process, because, for cost reasons, only small buffer stocks are kept at every stage of production.

An adequate supply of materials can be realized by synchronizing procurement and production, where the supplier delivers the required material at short

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notice according to a basic contract. The integration of suppliers in client-oriented production is a difficult task, because subcontractors often suspect that problems are being passed to their enterprise. They fear that poor forecasts of market demand may be passed to the subcontractors, which will then be forced to raise their stocks in order to cope with their delivery duties. This point of view contradicts the aim of flow- optimized production to create a partnership between producer and subcontractor, thus combining the advantages of a secure and economic supply for both sides. The corresponding structural changes comprise

• fixing buffer stocks in the logistical chain, including the carriers,

• a product-specific segmentation of production for the suppliers also,

• the implementation of specific information and control systems and flexible call systems,

• the arrangement of contractual relationships between producer and subcontractor.

The employment of new technologies also plays an important part in the optimization of flow by synchronizing procurement and production. On the one hand, the subcontractor has to reorganize for economic reasons and to implement a flexible production technique with small average capacities and short set- up times. On the other hand, the cooperation between producer and supplier can be simplified considerably. Backed by computer integration, orders for deliveries may be communicated, mechanical drawings for manufacturing tools may be transmitted and the state of current changes may be updated with fewer mistakes and at a higher speed.

Consequently, efforts to optimize flow in the logistical chain have to be coordinated with the integration of new technologies. In many cases, technical and logistical innovations are mutual requirements.

4. DEVELOPMENT OF ORGANIZATION AND PERSONNEL

Changes in organizational structure and organizational rules, as well as concrete measures of personnel development depend on the characteristics of new technologies. New technologies open the possibilities of decentralizing functional spheres and reducing the number of hierarchic levels in organizations. Organi- zational decentralization makes possible a rise in delegation, participation and access to information. This demands more highly qualified employees. Em- pirical results show that personnel have required additional qualifications with every process of introduction studied. An exact separation of functional areas also vanishes with the employment of integrated data processing. The temporal availability of information throughout the company dissolves the local concentration of employees needing access to the same information. Decentralized categories of projectors, controllers and design engineers may be realized. In many cases, with the introduction of new production

Robotics & Computer-Integrated Manufacturing • Volume 7, Number 1/2, 1990

technologies competence was transferred from the dispositive to the executive level. This points to stronger decentralization as one effect of new production technologies. The argument that advantages of specialization and synergies disappear often opposes the decentralization of functional units. Entrepreneur- ial reality shows, however, that a new dimension of specialization and synergy arises from opening the considerable potentials of rationalization.

The integrating effect of new technologies by multi- functional jobs can help to reduce the number of hierarchic levels of an organization. New technologies combine different jobs in a technical system, thus lowering the expense of coordination and control. Not only executive, but also dispositive tasks are transferred to the new technology. The complexity of new technologies presupposes intelligence on the shop floor. Competence, responsibility and freedom of choice have to be delegated to levels that actually control the creation of value. This requires not only a basic change of organization but also the adjustment of the local working conditions to the requirements. Nevertheless, empirical research could not confirm that new production technologies generally lead to a reduction of hierarchic levels; the structure of the organization has only been changed in 4.5 ~o of the cases.

Beside the structure of the organization, new technologies also imply changes in organizational rules. Empirical analysis shows that the introduction of computer-integrated production technologies dimin- ishes the division of labor, which is proved by the reintegration of operations. Not only are planning and the use of the freedom of organizational arrangements necessary, but also the temporal sequence of organizational and technical innovations. New Technologies can be employed to raise the pressure for necessary measures of reorganization. Proceeding in this man- ner, first the new technology would be implemented to document the necessity of structural changes. The advantage is a faster realization of organizational change. Sixty per cent of the companies investigated chose first to implement the technology and then execute organizational changes. Capital-intensive plants bear, however, the risk that the efficiency of the technology may be very low between installation and completion of structural changes.

Only 15 ~o of the enterprises investigated chose the alternative procedure that promises a very fast start- up curve of technological implementation by first preparing the organizational structure of the new manufacturing technology, followed by its implementation. This may help to reduce the start-up time, to achieve a high efficiency and possibly to avoid investments in technical systems that might become redun- dant through organizational arrangements.

To carry out the organizational development syn- chronously could combine the advantages of both methods mentioned above. Synchronized change means that the traditional successive process of tech-

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Management of new technologies • H. WILDEMANN

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nological planning with subsequent order, installation and finally organizational changes, is transferred to a simultaneous planning process. Hints of this synchronous procedure have been found in 25~o of the enterprises investigated.

The employment of new technologies in production and logistics implies a structural shift in work and qualification needed. As a result of the higher qualifications necessary with every introduction of new technologies investigated, an average of 2~o of a factory's employees were trained.

Apart from deciding the qualifications necessary, decisions about measures, methods and timing of training have to be taken. Training can be enforced preparatory or parallel to the phase of planning and installation. The third possibility is "learning by doing" in an already installed system. None of the companies that were interviewed about FMS (Flex- ible Manufacturing Systems) in 1985 found the procedure of"learning by doing" reasonable. Most (56.2 ~o) chose preparatory training as their introduction strategy, while 43.8 ~o chose training parallel to planning.

With respect to the choice of training methods, training "on the job" and "off the job" have to be distinguished. Training off the job aims to impart a general basic non-specialized theoretical knowledge, but also social capabilities. The scope of job-oriented training includes teaching and practising new knowledge and activities at the workplace.

Activities for continuous education must be centra- lized for reasons of shorter manufacturing cycles and an extended use of new technologies in production start-ups. Those production start-ups are basically characterized by learning processes that lead to an improved result of production with a cumulative rise in output. The initial expenses are determined by the

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qualifications, motivation and learning capabilities of the personnel responsible for operation and maintenance, by the quality of planning, by the quality of material, as well as by the coordination of operations. Empirical results confirm these suggestions. An analysis of the critical parameters of success for the introduction of new technologies in production and logisitics showed that the availability of qualified planners and users is the most important.

5. THE EFFECTS OF NEW TECHNOLOGIES ON BALANCE SHEET AND COMPETITION

Efficient management of new technologies in production and logistics can produce extensive effects on the parameters of success like quality, time and flexibility as well as the company's cost position.

The effects of new technologies on quality are determined by a new objective function, which aims to avoid consequential costs due to mistakes. The most important feature is a new orientation of the measures for quality control, focussing not on a posterior quality control, but on a constant control of the production parameters that are decisive for quality and avoidance of mistakes. Moreover, an adequate envir- onment of production has to be created, providing a high transparency of the production process and prompt feedbacks, so that quality control can be arranged as a decentralized, self-regulating system.

The wide-ranging effects of new technologies can also influence the time factor. Special importance is placed on the time of product introduction and throughput time of orders. Computer-aided construction and production, as well as the integration of data processing comprising several functional areas, create the technological base to escape time-traps, caused by shortened product lifecycles and the concomitant di- minishing development times and market periods. Shorter market periods demand the availability of mature products at the beginning of the market period, to allow an early introduction into the market. To limit the development period can promote a quick market introduction of new products, and is consequently a significant aspect of short product lifecycles. Companies with a late market entrance will find a considerably smaller market. Competitors have already gained experience at this moment and a good cost situation allows them to lower prices. Entering late means the company finds smaller market potentials originating from the missed possibility of gather- ing experience. High per-unit costs combined with simultaneously decreasing prices lead to lower profits. Thus, the pioneer usually guides the competition over a long period and is the most profitable company in the market.

Beside this market aspect, the shortening of development time has a second important effect: the enterprise with shorter development times can observe the market longer and adapt better to it's changes. This leads to less risky product definition.

Parallel to a shorter product development, new


technologies allow cutbacks in process development times. This is attributed to the fact that greater plant flexibility renders investment more dependent on products. With the introduction of a new product, times for process development can be generally avoided and existing plants can, for the most part, be kept in use.

Nevertheless in areas with an intensive process technology, such as the electronics industry, the oppo- site phenomenon can be observed. The technical im- pulses for the product derive from the development of the production process so that new production technologies enforce product development and establish its requirements.

To integrate new technologies along the chain of creation of value in a continuous flow of material and information, leads to a quicker handling of orders and to an acceleration in the flow of orders. An increase in the potential for change by reducing set-up times has a positive effect on the throughput time. The possibility of rapid change allows a reduction of lay days due to set-ups and an efficient production of smaller lots. On the supply side these measures are completed by a production-synchronous procurement with short and punctual delivery times.

In sum, signficant reductions of throughput times of the client's order up to its delivery can be achieved by new technologies, if they are integrated in a compre- hensive organizational concept for time reduction. The possible cutback in throughput time not only leads to improved results by lessening the working-in- process at every stage of production, but also to more flexible and punctual deliveries on the market side. Shorter throughput times also have a relevant influence on quality control, because of the possibility to build up short self-controlling loops. They establish the requirements to correct the process and make it more controllable and secure. In that way, new technologies decisively support the temporal flexibility of the company.

A lack of temporal flexibility can endanger successful enterprises. The following average reaction times were discovered in a research study: appearance of new technologies (product) 9.7 months, market changes 8.7 months, manufacturing changes 6.0 months, change in prices 1.7 months.

In contrast to the rapid reaction on changes in price, companies react to competitors' new production technologies after a long period of time (10 months or more). Successful enterprises analyze very exactly when they start with a new technology, which means entering a new market. Consequently, the market segment, opened by the new technology, may already be occupied by competitors. If the company subsequently wants to participate in the market, it has to be ready for expensive and destructive competition.

In this connection, the specific reaction to a competitors' new technology has to be mentioned. About half of the enterprises rely on imitation of a competitors' solution, another 2 0 ~ answer with a slightly

modified solution. Only 30 ~o of the enterprises develop an alternative solution of their own.

The use of new technologies leads to an increase in qualitative and quantitative flexibility. With respect to quantity, new flexible automated technologies offer the possibility of adapting to short-term capacity requirements. The peak capacity requirement of current products are covered by flexible production machinery, as are capacity requirements of newly introduced products or the remaining capacity requirements of products being phased out, while the basic production load during a product's lifecycle is manufactured with conventionally automated production machinery.

The need for qualitative flexibility is based on market demands for the availability of products in a large number of variants, which allows individual choice. Regarding cost aspects, there are basically two alternative solutions: either the number of variants is reduced or manufacturing conditions are created that cope with the diversity of variants.

Conventional strategies aim at reducing the number of variants by standardizing the product's structural components. CAD systems support this, for instance, by the reuse of already stored structural components. In these considerations of variants, a reverse curve of experience can be assumed: costs increase with a larger number of variants, by about 20-35 ~o with a doubling of the number of variants. This hypothesis points out that, beside product quantity, product variety has become an equally important influence on costs. This reflects the complexity of manufacturing and most of the resulting apportionable costs in the enterprise.

Flexible production technologies in segmented factories create a new possibility to master the diversity of variants and to avoid possible disadvantages in the market which may be connected with the standardization of products. This requires the standardization of the technical process from design to operations planning and scheduling. The machinery's set-up times need to be reduced by covering this operation extensi- vely with software. Moreover, machining operations can be made flexible by the use of numerical controls. These factors together lead to a trifling increase of costs which depends on the diversity of variants and allows the production a larger number and greater diversity of variants for the same costs. Additionally, the company has to aim at a determination of variants towards the end of the value-adding chain or, at least, to reduce it to specific spots so that the capital- intensive use of flexible production technologies may be concentrated in those places.

An empirical analysis of effects confirms the tenden- cy of these statements. The highest planned and realized effect of competition is the improvement of a company's ability to react to changing market conditions. A high efficiency has also been planned for process know-how, but not totally realized. The question whether image effects, based on a new production

Management of new technologies • H. WILDEMANN 71

technology, have an effect on the consumer goods market has been left unanswered. This competitive effect of production technologies is undisputed in the sector of capital goods, as the level of image effects demonstrates. Turnover effects in connection with computer-integrated technologies of production could only be realized in a limited scale. The companies interviewed mostly argue that single investments in new technologies seldom lead to important changes in sales.

Computer-integrated technologies of production can decrease production costs and simultaneously improve a product 's features. CIM technologies do not aim at economies of scale but at economies of scope, standing for an economic manufacturing of client-specific products in small lot sizes. Integration and automation of new technologies cause short machining times and thereby contribute to a decrease in capital locked up in current assets. The unlocked capital can, for instance, be used to finance investments.

A reduction in the expense of new technologies can be made by avoiding double operations as well as by automating functions, which become more efficient than corresponding manual transactions. Another favorable cost effect is caused by higher automation and a reduced binding between worker and machine that extends the economic life of capital intensive plants and contributes to an expansion of their useful capacities. Finally, transaction costs between organization areas decreases due to a higher degree of integration.

The empirical analysis proved that the highest cost

reduction effects are realized in direct personnel expenses just as in tied capital of current assets. Ex- penses for material, accommodation and transport as well as the apportionable personnel costs decrease only insignificantly. There is a slight increase in maintenance costs. Altogether, a significant reduction of per-unit costs could be achieved by realizing manufacturing segmentation, flexible automation and computer integration step by step (see Fig. 4).

These effects of new technologies on the critical factors of success such as quality, time, flexibility and costs lead to an improvement in competitive position if lasting and protectable advantages in comparison with competitors can be obtained. It was empirically proved that companies mostly have very little information about competitors' production technologies and their logistical systems. Advantages in production know-how are considerably easier to protect than product innovations, which can be rapidly imitated by competitors. The management of new technologies in production and logistics can effectively contribute to a company's short- and long-term securing of sales and operating results.

BIBLIOGRAPHY 1. Wildemann, H.: Strategische Investitionsplannung--

Methoden zur Bewertung neuer Produktionstechnologien. Wiesbaden, 1987.

2. Wildemann, H.: Die modulate Fabrik--Kundennahe Pro- duktion durch Fertigungssegrnentierung. Miinchen, 1988.

3. Wildemann, H. (Hrsg.): Einfiihrungsstrateoien fiir neue Technologien. Passau, 1989.

management of new technologies in production and logistics

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