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The Integrated Enterprise

WILLIAM C. HANSON

The competitive and technological challenges that face manufacturers in the future demand that they operate in a broader, more holistic context. No company can succeed by itself. Those that try to do it alone may not survive.

The successful manufacturer will need to view itself from a new perspective. It will need to view itself in the broader context of a manufacturing enterprise and to understand that the factors that contribute to its manufacturing effort go far beyond the traditional production cycle. These factors encompass the entire range of activities that begin with market demand and end with customer satisfaction. Thus, the manufacturer must adopt a worldview in providing the utility that solves customers' problems. Developing this worldview begins by recognizing that even though all the company's internal organizations —sales, marketing, engineering, and manufacturing—operate interdependently, they have a common focus and are committed to delivering customer satisfaction. But it cannot stop there. This entity must be expanded to include outside organizations such as suppliers, consultants, research centers, competitors, and the customers themselves. Each of these groups has resources and knowledge vital to the ultimate solutions. They all must be integrated into a cohesive “enterprise” working toward shared objectives. It is this Integrated Enterprise that allows both the manufacturer and the customer to be successful.

The task of addressing all the internal and external elements of the



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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE The Integrated Enterprise WILLIAM C. HANSON The competitive and technological challenges that face manufacturers in the future demand that they operate in a broader, more holistic context. No company can succeed by itself. Those that try to do it alone may not survive. The successful manufacturer will need to view itself from a new perspective. It will need to view itself in the broader context of a manufacturing enterprise and to understand that the factors that contribute to its manufacturing effort go far beyond the traditional production cycle. These factors encompass the entire range of activities that begin with market demand and end with customer satisfaction. Thus, the manufacturer must adopt a worldview in providing the utility that solves customers' problems. Developing this worldview begins by recognizing that even though all the company's internal organizations —sales, marketing, engineering, and manufacturing—operate interdependently, they have a common focus and are committed to delivering customer satisfaction. But it cannot stop there. This entity must be expanded to include outside organizations such as suppliers, consultants, research centers, competitors, and the customers themselves. Each of these groups has resources and knowledge vital to the ultimate solutions. They all must be integrated into a cohesive “enterprise” working toward shared objectives. It is this Integrated Enterprise that allows both the manufacturer and the customer to be successful. The task of addressing all the internal and external elements of the

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE enterprise as a cohesive whole, rather than as a set of discrete functions and organizations, raises some interesting issues. One issue is the interrelationships that organizations have and the changes necessary in these relationships to create a cohesive whole. This requires new thinking about how the various elements of an organization work together, organize, behave, relate, and measure; what they value; and how they are motivated. Timely solution of customer problems requires that a manufacturer have some collective unity and focus before a specific customer need is identified. Successfully addressing this interrelationship will allow us to develop the framework for an integrated organization. This unity will come by focusing on the operating excellence required by all customers and will be recognized through an operating vision that demonstrates that excellence. This vision encompasses the following elements: Products and processes that “never fail.” Shortest cycle time in the industry. Competitiveness independent of volume. Leadership in defining industrywide manufacturing excellence. Leadership in the development of the best people. This vision can be realized only in an environment that encourages a “learning process,” the mechanism that draws knowledge from the disciplines critical for success. Finally, the elements of a manufacturing enterprise need to view themselves from the perspective of the task that must be accomplished, not the organization in which they are members. For example, a key manufacturing metric is cycle time. In traditional manufacturing, cycle time refers to the period of time required to produce the product. That is the duration of the production cycle in creating a finished good. Within the context of the Integrated Enterprise, cycle time is redefined as beginning when the customer expresses a need and ending when that need is fulfilled. It includes time for problem identification, sales, order processing, supplier delivery, design, assembly, shipment, invoice, installation, and service. Each element in this process and its relationship to other elements must be considered in order to reduce cycle time. The “ task” of reducing cycle times must be viewed in a broader context to identify all the variables that effect cycle time. Therefore, the definition of cycle time must extend beyond the traditional structures in order to encompass all the variables. A second issue concerns developing the trust required to encourage a successful team orientation. What allows individuals to act as one, is having equal access to the information and knowledge that describe and justify the task. When people are excluded from information and knowledge, they should not be expected to act in unison. A supplier unfamiliar with marketing plans and product strategies cannot fully provide the resources and

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE intelligence to help reduce time to market. Exclusion not only affects the potential efficient flow of the suppliers' material but also denies full access to their knowledge and expertise. In many cases this knowledge on improving time to market may be more valuable than the raw material suppliers provide. Although computer technology provides the means to facilitate the free flow of information, independent of geography or organization, there is still a reluctance to allow information across organizational barriers. Restricted information flows are a function of organizational behavior, not technology. The Integrated Enterprise requires that these barriers be eliminated. The Integrated Enterprise creates the framework for the successful resolution of these issues. But the architecture is only the shell unless we add one more critical piece, namely, the free flow of information unimpeded by cultural and organizational barriers. These barriers are created when each element of the enterprise views itself as an end and not as a means to fulfilling the ends of the larger enterprise. Each discipline, seeking to optimize its own operation creates its own culture, somewhat independent of other organizations in the company. In this regard the organizational structure itself can become the barrier. What must change, therefore, is how the activity is viewed within the organization, which must accommodate that view in as efficient an organizational structure as possible. The challenge is to adopt a structure that is organized around a stream of activities that transform knowledge and material into customer solutions. This implies a radical change from the traditional functional organization. The successful manufacturer of the 1990s will not have separate organizations devoted to discrete functions such as manufacturing, engineering, or marketing. Rather it will be structured and viewed in terms that relate to the customer. Customers do not buy manufacturing, engineering, or sales; they buy solutions that fill needs. The successful manufacturer will focus the organization on customer needs, not on the functional capabilities of the organization. In this way the entire enterprise is optimized around meeting the customers' needs, using the skills of each discipline, focusing on the real task, and ultimately solving the real problems. Focus on the customer versus the function does not reduce the need for excellence in the traditional disciplines. Companies must continue to require such excellence, while developing the strengths, skills, and knowledge of each individual. What is different here is that each set of skills must be treated as an embedded discipline of excellence rather than an organizational structure. The problem is that companies continually think of these areas of skills as functions. Functions unfortunately connote an organizational structure. But if these skills could be viewed instead as disciplines, as resources to accomplish tasks, companies could then free themselves from the traditional barriers that surround organizational structures.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE An additional benefit in focusing on the real task of providing the optimum customer solution is that it makes clear where resource gaps exist and which skills and information are lacking. What is implied here is that the walls of the company become limitations to success. Outside suppliers, customers, academia, consultants, and even competitors can add significant value and knowledge in accomplishing the task. These must be viewed as critical additional resources that provide valuable goods, services, or information that help define and deliver greater utility in supplying the best solutions. Implementation of a structure and articulation of a set of values are the foundation of the Integrated Enterprise. A successful implementation exhibits five principles of leadership in the management of people and technology. People leadership refers to cultures and values. Technology leadership addresses the integrated information systems that allow the electronic interchange of data and the sharing of information, knowledge, experience, and values. The first principle asserts that when people understand the vision, or larger task, of an enterprise and are given the right information, the resources, and the responsibility, they will “do the right thing. ” Doing the right thing depends on the appropriate frame of reference and a clear understanding of the task and its scope. The Integrated Enterprise, working with shared objectives, ensures that people are doing the right thing in the proper frame of reference. In this context it is critical that the members of the enterprise freely share a common understanding of the task. For example, if the problem is shorter cycle times, then a company must share that information with its suppliers. Product specifications, volumes, and scheduling within the context of broader product strategies that include inventory strategies, quality control, customer lead times, and distribution plans are examples of the information that should be freely shared. When suppliers can make proper decisions that contribute to reducing cycle times, they become part of the team that successfully completes the task. The second principle addresses empowerment of the individual. Empowered people—and with good leadership, empowered groups—will have not only the ability but also the desire to participate in the decision process. This level of involvement will enable and encourage the individual to make decisions rather than adopt a passive or reactive attitude, waiting to be told what to do. The existence of a comprehensive and effective communications network is the third principle of the Integrated Enterprise. This network must distribute knowledge and information widely, embracing the openness and trust that allow the individual to feel empowered to affect the “real” problems. But the network alone is not enough. The democratization and dissemination of information throughout the network in all directions irre-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE spective of organizational position becomes a critical fourth principle that ensures that the Integrated Enterprise is truly integrated. The results of the first four principles imply the fifth—distributed decision making. Information freely shared with empowered people who are motivated to make decisions will naturally distribute the decision-making process throughout the entire organization. The principles of the Integrated Enterprise will compel companies to reconsider their organizational strategy. By capitalizing on the democratization of information and by distributing the decision-making process, a company ensures that decisions are made where the work occurs. Note that much of the work will be outside the traditional boundaries of the manufacturer. In this context relationships become peer-to-peer, not hierarchical. People share information to accomplish tasks. The organizational structure and the behavior that results from that structure become the key element in the effectiveness of the total enterprise. Interestingly enough, the most radical change must begin inside the four walls of the manufacturer itself. Company structures must dramatically change to capitalize fully on the opportunities provided by the Integrated Enterprise. Much of our segmented and restrictive thinking begins at home. Consider the typical hierarchical company organization chart. The standard configuration would define relationships between supervisor and subordinate, placing operations at the bottom. The word operations here refers to all direct value-added operations, such as selling, designing, building, and servicing. Since a company's most valuable knowledge base is its people, and the majority of people are in operations, the operating groups logically should be self-managed and empowered. Unfortunately, companies have historically layered people (overhead) on top of operations to tell operations what to do and to mediate behavior between operations. Now if we visualize turning that organization 90 degrees, a new image, or perspective, is created. Each of the operating units is now seen servicing the needs of the larger enterprise and not the overhead layers and the functional segmentations they represent (see Figure 1 ). Consider the dramatic change in the dynamics of relationships. The peer-to-peer relationship is of the kind that exists between a customer and a supplier. The dependencies are management by dialogue and negotiation. Knowledge and understanding are both intrinsically and institutionally far more important than rank. For example, resolution of problems in the delivery of a specific product or service solution is knowledge based, not position based. Does this mean that the role of management is eliminated? On the contrary, managers must develop a new set of skills. Traditionally, the emphasis was primarily authority and decision making at a functional level.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE FIGURE 1 The organizational hierarchy of today transformed into the peer-to-peer structure of an Integrated Enterprise. Now, leadership, task definition, and resource development become the critical strengths of the new manager. Leadership should not be confused with decision making. Leadership plays the critical role in ensuring that the enterprise understands the right tasks. Good leadership must clearly define the tasks, develop the resources, and create the positive environment that allows those resources to fulfill the mission. It is important to reiterate that resources extend beyond the walls of the company. Leadership also requires that noncompany resources such as suppliers and customers are properly integrated as part of the solution. These traditional external resources are more easily integrated because of their place in the traditional value chain. But as the concept of value added

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE is expanded to include knowledge and learning, we will quickly see the need to embrace a wider resource base, including government, academia, industry resources, and even competitors. World-class manufacturers will be recognized by the leadership they provide in attacking and resolving complex customer problems. The effort needed to understand, define, and resolve these problems in an increasingly complex world intensifies the need for managers to acquire new skills for the 1990s. Complex problems will not be solved by simple solutions. Most often these problems present themselves as representing irreconcilable positions. For example, customers have always wanted high quality and low cost. But the historic conventional wisdom resolved the “dilemma” with an “acceptable quality level.” One simply determined a desired quality level and invested the appropriate cost. Another example is the trade-off between short lead times and high inventories. The dilemma, how to got both high quality and low cost, how to have short lead times and low inventories, was ignored. This is no longer true. High quality and low cost, short lead times and low inventories are essential components of success in modern industrial life. Total quality management and just-in-time methods are recognized standards of excellence that result from resolving these historic dilemmas. The successful manager of the 1990s will have the skills to define complex dilemmas and resolve them, not ignore them. This management skill, which can be defined as “dilemma management,” is a critical component of the Integrated Enterprise. The characteristics of the dilemma manager include the ability to tolerate ambiguity, to manage and, indeed, thrive on the tension that is caused by apparently conflicting demands. The apparent conflict will be valued as a stimulator for change. It will encourage new levels of creativity, and the resolution of one dilemma will create new dilemmas to solve. Once you get to one level of performance, it will be time to move to the next level. Patience and courage will be of premium importance. The successful manager will value the dilemmas and have the vision to stimulate them, not eliminate them by trying to make a trade-off between good opposing views. The emphasis is on continuous improvement. Those manufacturers whose managers can solve industry dilemmas first will have a competitive advantage. The world-class manufacturer of the 1990s will be an integrated enterprise. It will capitalize on a wider audience of skills, beyond the department, beyond the walls of the company. It will engage in strategic collaborations that extend beyond the organization and will capitalize on increased transfers of technology and knowledge. It will encourage the free flow of information throughout the enterprise and will empower large numbers of people to work cooperatively in a peer-to-peer relationship that encourages

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE and motivates dynamic distributed decision making. It will embrace “dilemma management” and, by identifying and resolving dilemmas, rise to higher and higher levels of performance. It will value and demand change that will yield continuous improvement, setting ever-higher standards of performance. It will be recognized as defining the standards of excellence to which others aspire.