New Directions in Manufacturing Report of a Workshop (2004) / Chapter Skim
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Part VII Presented Papers: New Manufacturing Paradigm
Part VII Presented Papers: New Manufacturing Paradigm
22 Manufacturing in a Digital Era
Pages 115-129
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VII Presented Papers: New Manufacturing Paradigm 115
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This paper develops three arguments. First, the argument about production in a digital age is set in the context of the argument that a service economy will follow on a manufacturing economy.
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Tightly linked services would include those directly supporting the production line. There are also ancillary activities such as window washing and services that are supportive in terms of back office activities or customer relation phone services.
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We will look at the historical evolution of manufacturing in the United States, including the following phases: production and competition, the evolving model; dominance-mass production; challenges -- lean production and flexible specialization; comeback -- Wintelism; and the digital era. American Dominance: Fordism and Mass Manufacture Mass manufacture, Henry Ford and all that, was the first twentieth century production revolution.
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From page 119... ...
Lean Production Lean production, or flexible volume production, refers to an interconnected set of Japanese production innovations.5 Japanese producers created an entirely new approach to volume production that culminated in lean production models.6 The mechanisms and sources of the Japanese flexible volume manufacturing system attracted intense attention because of the stunning world market success of the Japanese companies in consumer durable industries requiring complex assembly of a large number of component parts. Japan's automobile and electronics firms burst onto world markets in the 1970s and consolidated powerful positions in the 1980s.
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Lean production was the focus of policy and corporate attention because it represented a direct challenge to both mass manufacturing and assumptions of American global economic policy. Diversified Quality Production and Flexible Specialization A second alternative to the classical American mass production model had little to do with the volume production strategies emerging in Japan.
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From page 121... ...
"Craft production or flexible specialization," argue Hirst and Zeitlin, "can be defined as the manufacture of a wide and changing array of customized products using flexible, general-purpose machinery and skilled, adaptable workers."11 Communities consisting of groups of small companies, organized in what are perceived as 20th century versions of industrial districts, are argued to be able, in at least some markets and some circumstances, to adapt, invest, and prosper in the radical uncertainties and discontinuities of global market competition more effectively than larger, more rigidly organized companies. "These districts escape ruinous price competition with low-wage mass producers," Sabel argues, "by using flexible machinery and skilled workers to make semicustom goods that command an affordable premium in the market."12 The emphases in these discussions are the horizontal connections, the connections within the community or region of peers.
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From page 122... ...
This strategic and organizational innovation, what we might now call supply chain management, means that production of even complex products can become a commodity service that can be purchased on the market. The nature of those chains, now often labeled global value chains, 14Wayne Sandholtz, Michael Borrus, John Zysman, Ken Conca, Jay Stowsky, Steven Vogel, and Steve Weber, eds.
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The digital functionality of the coffeemaker and an mp3 player rest largely on commodity chips in products that can be assembled by commodity production services. This package of market segmentation and digitally based functionality turns production into a commodity.
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Consider accounting. Accounting is a person-based service, a personal service provided by hordes of accountants depending albeit on tools from the original double entry bookkeeping system through computers.
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And there is no consistency to the answers. Dell outsources its actual manufacturing and assembly, making its supply chain management into a strategic weapon.
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And, indeed, we would include here the semiconductor industry in which the underlying production process and materials evolve radically as transistor size shrinks. In this sector the question of production, product innovation, value creation, and market control remain entangled.31 A generation ago the industry was threatened when its ability to develop and source leading-edge production equipment was weakening.
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Conventional Products with Digital Functionality and a Physical Function Certainly traditional markets will be altered by market segmentation addressed with digital functionality, as we noted above. Digital tools permit new answers to the fundamental question of how much people are willing to pay for which products.
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Digitally rooted online sales/marketing and supply chain management alters the links between a firm and its customers, as well as suppliers. The Dell story shows how innovative uses of the net that ties customers from sales through to product build can create a dramatic advantage.34 And, as development and production processes are woven together to speed time to market and improve design choices, the lines between production, design, and development blur even more thoroughly.
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As corporate strategists and national policy makers, we must help make sure that production capability is a strategic asset that we control, not one that is used against us.
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