ADVANCED TECHNOLOGIES FOR SMALL- AND MEDIUM-SIZED MANUFACTURING COMPANIES
Khang Hoang-Vu, Dr.-Ing.
California Manufacturing Technology Center
Regional Office - California State University, Long Beach
In the 21st Century the global competition will be extremely severe. To be successful, manufacturers will have to be able to quickly draw on a variety of skills and technologies to stay ahead. With ever improving information technologies, rapid delivery systems, and enabling factories, management and delivery systems, likewise, can reside at various locations to optimize skills, costs, marketing and sales.
Although most large U.S. corporations are well positioned to meet these challenges, medium-sized, and especially the small manufacturers and developing countries are facing financial, technological and human resource limitations.
This paper will discuss some of the technological needs , as well as the constrains small companies are facing.
By now it is obvious to any U.S. manufacturer that the market is no longer the one they used to enjoy for many decades since the end of WW II. Although the name of the game remains the same, the rules and players are different today. With billions of dollars poured into R&D, the U.S. still invents many things and receives the most patents. However, other players are getting better at making money with these inventions by quickly turning them into desirable products. After WW II the U.S. was the only industrialized nation which turned out quality products. Since then, U.S. quality has often not kept pace with other countries, so that today, U.S. companies are still trying to close the quality gap between their and foreign products. Furthermore, the U.S. is no longer the only source of new technology, capital, or production capacity. The technological and managerial know-how, once only available in the U.S., can be found in many developing countries at the moment. Consequently, an automotive manufacturing plant can be built in the middle of a rice field to produce a quality car within couple of years. In addition, with the ever improving information technology, the different activities in a manufacturing enterprise can be effectively performed at different sites around the globe concurrently.
To compete for business in the global arena, manufacturers will have to deploy advanced technologies such as rapid prototyping/tooling, integrated rapid product development, group technology, cell manufacturing, factory simulation, and Computer-Integrated Manufacturing (CIM). While most large U.S. corporations are well positioned to meet, or even take advantage of these challenges, medium, and particularly the small manufacturers are facing financial, technological, and human resource limitations. These constraints are especially true for developing countries.
THE CHANGING RULES
Some of the changing market requirements are:
The definition of quality is changing. Until recently, quality was defined by the scrap or defect rates which were controlled by final inspection at higher unit cost. Lately, final inspection has been eliminated by on-line inspection, Poka-yoke, designed-in quality, etc. Quality is now defined by what customers expect to get for a price. Thus, both McDonald’s and the Ritz-Carlton Hotel were granted the Malcomb Baldridge awards for customers’ satisfaction.
The shorter product cycles, and the pressure to be the first on market put a tremendous pressure on the product development team. Ten years ago, it took four years to bring a new passenger car on the market. Until recently, Toyota’s 24-month product-development cycles are the gold standard for the entire industry. The recently launched Ipsum’s 14.5-month development has terrified its rivals.
Inventory turns are defined as the cost-of-goods-sold divided by the inventory cost at the end of the fiscal year. Higher inventory turns prescribe a precise demand forecast, balanced production lines, small lot sizes, etc., and a Kanban/Just-in-time system which dictates a close cooperation of vendors.
Most of these new requirements such as better product quality, shorter time-to-market, lower cost were only achievable through advanced technologies. Some of technologies/techniques commonly used in larger corporations are:
In addition to advanced technologies, cash flow management is one of the issues often neglected by small companies. They operate by focusing only on sales forecast and profit/loss projection. As a result, many had to close the door because cash shortage, even though customers are still consuming their products.
Besides technologies, small companies also have to deal with some "invented-here", as well as "imported" operations management philosophies and techniques such as Poka-yoke, Kanban, Just-in-time, etc. Many of them have been successfully implemented by smaller companies in Japan and at larger U.S. corporations:
While trying to keep up with the changing market and making the end meets at the same time, small companies have to deal with a common dilemma:
When business is good, everyone in the company is busy, and no one has time to learn any new technology , adapt it to the company’s products and processes, and implement the changes. When business is slow, the workforce has to be reduced to keep cost down. Those who are lucky enough and can stay, have to wear many hats and just do not have time for any new experiment.
The challenge is to quickly identify which technology has the most positive impact on the company’s products or processes. After a thorough cost/benefit analysis, a detailed strategic/business/operations plan needs to be developed. While implementing technologies, keep one thing in mind. A fully automated factory is not necessarily the most cost effective one. Therefore, never strive for the latest technology, rather settle for the proven, "simplest" technology that can do the job.
Global competition is driving companies to improve their performance. Product quality, cost, time-to-market, and customer service are some of the factors that determine the winners. They are those that can cope with the changing market requirements, institutionalize new management philosophies, and implement advanced technologies to improve their product and process. While larger corporations are well positioned to meet, or even take advantage of these challenges, smaller companies are constrained by limited resources. With limited resources at hand they will have to quantify the impact of every change, be it technology or management technique, before they try it out. A wrong technological move could be the end of a product or even the company. Sometimes it is cost-effective to utilize external resources, form a consortium, or even a virtual enterprise.