Agile manufacturing in practice

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Agile manufacturing in practice Application of a methodology

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H. Sharifi Manufacturing Engineering and Industrial Management, The University of Liverpool, Liverpool, UK, and

Z. Zhang School of Engineering and Computer Science, University of Exeter, UK Keywords Agile production, Methodology, Manufacturing Abstract An evolutionary transformation of business environment, with change as a main characteristic, is taking place. Manufacturing companies, even those operating in relatively stable conditions with good market positions, are facing rapid and often unanticipated changes in their business environment. Agile manufacturing is proposed in response to the circumstances as a solution and is perceived as a vital characteristic that manufacturing companies need to have in order to maintain their competitive advantages in the new order of world business. Each company will respond in a specific and different way to the changing circumstances by deploying its own agile characteristics. Agility in manufacturing may be achieved through the implementation and integration of appropriate practices which provide the required abilities for a company to respond properly to changes. Based on this concept, a methodology for achieving agility in manufacturing organisations is developed. The methodology is applied in two manufacturing companies and data collected from the applications are used to validate the methodology. This paper provides a brief summary of the methodology and details its implementation and validation in the two case study companies. Practices are proposed to support the achievement of agility in the two organisations.

International Journal of Operations & Production Management, Vol. 21 No. 5/6, 2001, pp. 772-794. # MCB University Press, 0144-3577

Introduction At the beginning of the twenty-first century, the world is facing dramatic changes at an accelerated rate in almost all aspects, especially manufacturing. In the past ten years an increasing amount of managerial, manufacturing and technology management research has examined the emerging situation, and announced the symptoms of a new industrial age (Iacocca Institute, 1991; Hamel and Prahalad, 1994). Throughout history, enterprises have always had to deal with continuous change in their operational environment in order to remain competitive. Thompson (1967) argued that one of the most important tasks for organisations is to manage uncertainties. Drucker (1968) described the concept of entrepreneurial task as the search for changes, response to changes, and exploiting changes as opportunities. Turbulent times and uncertainty in the business environment have been recognised as the cause of most failures in manufacturing industry (Small and Downey, 1996). A diverse range of research has focused on the rapid trend of changes occurring in the manufacturing field and the necessity of employing new

visions, and revisiting the traditional philosophies and mindset about manufacturing business. These research works typically encourage a different approach beyond the conventional models that can provide manufacturing organisations with the ability to respond positively to, and take advantage of, changing circumstances. Surviving and prospering in these turbulent situations will be possible if organisations have the essential capabilities to recognise and understand their changing environments and respond in a proper way to every unexpected change. The ability to respond appropriately to changes would only be achieved by changing the way manufacturers look at their business, their relationships with customers, suppliers, and competitors (Goldman et al., 1995; Preiss, 1997). The new mindset required for this purpose should support a new strategic vision beyond the conventional systems and move to new dimensions of competition other than cost and quality. Also, making opportunistic actions to capture new markets and respond to new customer requirements are other important features for success in the contemporary business environment. It could be said that the main issue in the new era of manufacturing management is the ability to cope with unexpected changes, to survive unprecedented threats in the business environment, and to take advantage of changes as opportunities. The emphasis is now on adaptability to changes in the business environment and on adopting proactive ways of approaching market and customer needs. A new paradigm known as `àgility’’ is being promoted as the solution for maintaining competitive advantage. Agile manufacturing is perceived as a vital characteristic that manufacturing companies need in order to maintain their competitive advantage in the new order of world business. Responding to, and taking advantage of changes through strategic utilisation of managerial and manufacturing methods and tools are the pivotal concepts of agile manufacturing. Enhancement can be made to existing processes in order to maintain a competitive advantage in a continuously changing environment. It is suggested that agility in a manufacturing organisation may be achieved through the adoption of appropriate practices which provide the required abilities for the organisation to respond properly to changes in the business environment. Manufacturing practices which have already been developed and used in the past, along with newly introduced practices for the emerging agile manufacturing era, must be carefully selected and strategically aligned to bring about the ability to respond to unprecedented changes. Agility has been expressed in different ways. In one way it has been introduced as a total integration of business components (Kidd, 1995). In another way it has been represented as flexibility of manufacturing, people and organisation (Montgomery and Levine, 1996). Moreover, some other expressions such as concurrency, adaptability, use of information systems and technologies, and diverse combinations of all the above mentioned have been used in defining agile manufacturing (Kidd, 1995; Booth, 1996; Youssef, 1992).

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Until now, proposals for ways to become agile and characteristics defined for an agile manufacturer have been more or less expressed in a Utopian way. On the other hand, although no business has been reported to possess all the required specifications of agility, there is evidence to suggest that new manufacturing strategies and practices in pursuit of agility are making ground for the development of realistic and applicable models to deliver the concept of agility in practice. Such examples include work carried out by the Agility Forum in the USA. Recent research on agile manufacturing at the University of Liverpool has led to the following conclusions: . A methodology to assist manufacturing companies to enhance agility is needed. . Studying and establishing relationships between the concept of agile manufacturing and manufacturing best practices will provide the ground for a practical approach to achieving agile manufacturing. The work has resulted in the introduction of a methodology for this purpose. While the practicality of the proposed methodology was and still is a main concern of ongoing research, a preliminary attempt has been made to examine its application and verify its validity. This paper will illustrate the results of the application of the methodology in two UK manufacturing companies. The developed methodology is first explained briefly, followed by the implementation and validation of the methodology in the two manufacturing companies. Formation of a methodology The concept of agility comprises two main factors (Dove, 1996; Kidd, 1995): (1) Responding to changes (anticipated or unexpected) in proper ways and due time. (2) Exploiting changes and taking advantage of changes as opportunities. This necessitates a basic ability for any organisation that is sensing, perceiving and anticipating changes in the business environment. The question is how a manufacturing enterprise could identify the necessary tools and techniques and acquire the relevant capabilities and abilities in order to become agile. To this end a conceptual model of agility was developed and used as a basis for the formation of a methodology to help manufacturing enterprises make strategic decisions in their pursuit of agile manufacturing. The conceptual model of agility (Zhang and Sharifi, 2000), which is depicted in Figure 1, has three constituting elements. These are: (1) `Àgility drivers’’, which are the changes/pressures from the business environment that necessitate a company to search for new ways of running its business in order to maintain its competitive advantage;.


Figure 1. The conceptual model of agility

(2) `Àgility capabilities’’, which are the essential capabilities that the company needs in order to positively respond to and take advantage of the changes; and (3) `àgility providers’’ that are the means by which the so-called capabilities could be obtained. Based on this model, a manufacturing enterprise experiences a variety of changes/ pressures in its business environment which drives the enterprise to identify `àgility capabilities’’ that need to be acquired or enhanced in order to take advantage of the changes. This in turn forces the enterprise to search for ways and tools to obtain/enhance the required capabilities. Obviously, different organisations will experience different sets of changes as well as different levels of pressures resulting from each change. Consequently, different combinations of capabilities will have to be obtained for different organisations. With reference to the above mentioned conceptual model of agility, a methodology has been developed to help manufacturing companies formulate strategic policies in their pursuit of agile manufacturing. The methodology consists of three major stages, the determination of a company’s agility needs and its current agility level, the determination of agility capabilities required in order for the company to become agile, and the identification of agility providers or business practices and tools which could bring about the recognised capabilities for the company. The graphical form of this methodology is depicted in Figure 2. As it is precisely shown in Figure 2, the methodology comprises the following parts; . .

Agility drivers. An assessment model which includes two elements: ± assessment of the organisation’s need for agility; ± assessment of the organisation’s current level of agility.

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776 Figure 2. The proposed methodology to achieve agility

. .

. . .

Analysis or gap/analysis. Strategy formulation and identification of strategic capabilities required for the company to become agile, and those missing in the organisation. Identification of agility providers or agility practices. Implementation. Performance measurement and feedback.

Uncertainties, changes, and pressures, i.e. the so-called agility drivers, urge a company to search for appropriate ways to maintain its competitive advantage. As changes and pressures faced by companies may be different, the degree of agility required by individual companies will be different (James-Moore, 1996). This degree is defined as the `àgility need level’’, which is a function of various factors such as turbulence of the business environment, the environment that the company competes in, and the characteristics of the company itself. Once the agility need level is determined for a company, the next step is to assess the current agility level of the company, i.e. how agile the company is now. The difference between the level of agility required and that the company already has may then be analysed to provide a basis for further decision making. The next stage following the analysis of agility needs is to determine the required agility capabilities in order to become agile. This would require the detection, recognition and classification of changes faced by the company, as well as the analysis of the impact individual changes will bring to the company. The agility capabilities required may then be determined from the changes. The final stage in the methodology involves identifying agility providers that could bring about the required capabilities, implementing the identified providers, determining the level of agility achieved (through performance measurement), and formulating corrective measures to further improve the performance. A number of tools are being developed to assist manufacturing enterprises to carry out the above process, which have already been discussed

by Sharifi and Zhang (1998a), from which a short recollection will be made in the following sections. Assessment model for agility Based on the definition and descriptions of agility which are used by the research and explained in the introduction section, agility is a direct function of changes in the business environment. This means that the more the circumstances for doing business are changing, the more agile the organisation needs to be in order to respond to the changes positively. Therefore, the extent to which the factors introduced as agility drivers are perceived as changing and turbulent will be the indicator of the turbulence of business environment the company competes in, and hence would represents the level of agility the company needs in order to stay in business, maintain competitive advantage, and make further progresses. An assessment model is developed to study the circumstances in which a company struggles for success, and to provide a preliminary mindset for the company to move towards agility. The model is formulated based on the conceptual model of agility. It includes two practical tools, one of which is used to assess the company’s business environment to determine the degree of its turbulence, and the other is used to determine the current level of agility of the company. Figure 3 represents the agility assessment model. The first tool, referred to as tool number one, will assess the company’s business environment to determine the degree of its turbulence. This is supposed to be performed by answering questions, during which various aspects of the company’s business environment are examined. This part will result in a total average score which is designed to be between 1 and 10. The closer the score is to 10, the more turbulent is the business environment of the company and hence the more agile the company needs to be. Based on the results from the first assessment tool and considering another part of the conceptual model of agility, the second assessment tool, referred to as tool number two, is designed to determine the level of the company’s agility.


Figure 3. Assessment model for agility

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Measuring the abilities that a company has to respond to the changes in its business environment must be associated with the degree of turbulence and changes in the business environment. The factors used for determining the level of need for agility, where applicable, were recognised as suitable elements in designing tool number two for determining the level of agility. This also is supported and complemented by the capabilities suggested in the conceptual model of agility. Responsiveness, competency, flexibility, and quickness are the main components of the agility capabilities considered in the conceptual model. Another series of questions are designed considering the above incoming dimensions, which form the structure of tool number two. The result would provide an image of the company’s ability in responding to the changes in the business environment and hence the company’s agility. In scoring the question items of this tool, the corresponding item(s) from the agility need level tool, if it exists, should be controlled to see whether that item is reasonably changing and hence is important to the company. The outcome of this tool will again be an average score which contains some facts about the level of the company’s agility. As depicted in Figure 3, output of the assessment tools could be analysed and two possible outcomes could be expected. First is a gap analysis in which a speculative interpretation can be made to specify the point where the company is located on a continuum that can start from ``No need for agility at all’’, to ``High level of agility needed very urgently’’. The other is a direct result of the second tool, which will show the weak points of the company considering the situation in the business environment, and the ability of the company in responding to them appropriately. Figure 4 represents the foundation of the assessment tools. The level of agility needed for an organisation is considered to be equivalent to the degree of turbulence of the business environment of the organisation. The business environment is, as explained before, broken down into factors which are agility drivers, and for each a number of sub-factors are introduced which form the basis for designing the assessment questionnaire. The questions basically address the degree of turbulence of each sub-factor for the organisation. Also the questions have been designed to be as subjective as possible, proposing a meaningful yardstick for comparing the organisation’s position in that area. The questionnaires are not included in this paper due to page limitations, but can be provided by the authors upon request from readers. Determination of agility capabilities The determination of agility capabilities to be acquired/enhanced in a company in order to respond to the perceived changes/pressures is carried out with the assistance of a network model with which external and internal changes/ pressures that have impacts on manufacturing organisations are classified and represented as inputs. Figure 5 depicts the employed network model. The agility capabilities required to challenge and overcome the changes/pressures


Figure 4. Analysing the need for agility

Figure 5. Network to determine the required agility capabilities and providers

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are represented as the outputs of the network. The network connections between various changes/pressures and capabilities are established through an industrial questionnaire survey and a series of case studies. The lateral connections between different capabilities represent the impacts of each capability on other capabilities. Each change/pressure factor is represented by a value which corresponds to the probability the change may occur for a given company (or the significance of the pressure to the company). These values are then used as inputs to the network. At the output layer, the node corresponding to each capability calculates the weighted sum of inputs to the node (including those from the changes/pressures as well as those from other capabilities), and produces an output value representing the level of importance of the capability to the company. Identification of agility providers A list of business practices, methods, tools, and techniques, generally referred to as agility providers, that could bring about agility capabilities for manufacturing companies are formulated (Sharifi and Zhang, 1998b). These include both proven tools and practices that are already available to manufacturing organisations as well as those which are still being developed by the research community. The importance of these agility providers (or the perceived importance of those providers still under development) to various capabilities is represented by another network relationship where the connection weight between a capability and a provider corresponds to the importance of the provider to the capability. The network takes as inputs the results from the ``capability network’’ described before and produces a set of outputs representing the importance of individual agility providers to a company. Implementation of the methodology Although the methodology was developed based on a review of the literature pertaining to the subject and two empirical studies, it was seen as necessary to validate its practical applicability. However, validation of the methodology is not a trivial task due to the following limitations: .

It was not practical to thoroughly examine the methodology, considering the time frame involved in implementing the proposed tools and practices with the available resources for the research.

.

It was fairly difficult to find collaborators for participating in this stage, even in a superficial way.

.

The methodology in practical areas still needs improvements, especially in defining the relationship between agility capabilities and agility practices.

Therefore, it was decided that a preliminary study involving three main parts of the methodology should be carried out to provide a limited validation for the methodology. The three parts investigated are:

Agile manufacturing in practice

(1) The assessment model. (2) Determination of agility capabilities. (3) Determination of agility providers. For simplification, items two and three listed above are referred to as ``the practical tool’’. The methodology was applied in two companies selected from the case study companies who had responded to the previous assessment work. The application of the methodology in the companies were based on the data and information gathered from them during the previous phases of the research though some live and valid aspects of the company’s business may have been missed during the study. The preliminary application has gone through various stages of the methodology to: .

Examine the business environment of the company.

.

Determine the level of agility needed by the company.

.

.

.

.

Speculate on the strategic alternatives available for the company to pursue. Determine the abilities of the company in response to unpredictable changes. Determine the capabilities (and priorities in implementing the capabilities) required by the company to respond appropriately to changes, according to the specific circumstances surrounding it. Identify the practices that could support the company’s approach towards agility.

A summary of the results obtained from this study is given below. Implementation of the methodology for agility ± Company 1. Company number one is a leading manufacturer of domestic cookers with a high rank among European manufacturers. Apparently the company is the only manufacturer of cookers that profits from this business. Working with big retailers as main customers, managing a long chain of suppliers (about 80), and an average output of 1,250 cookers per week in almost unlimited customised and fashionable varieties define a complicated business run by the company. The assessment model As detailed in the previous section the assessment model consists of two tools. In the following sub-sections the results from applying each tool will be explained.

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Tool number one: agility need level. Average of the factors in tool number one of the assessment model, (devised for assessing the turbulence of the company’s business environment) was 6.0 (out of 10). According to the assessment model a company in such a position needs a moderate level of agility. However, as the moderate level is defined by the model to include levels from four to seven, the level for the company tends to be closer to the high end. On the other hand, the company’s perception of the agility need level, according to the respondent, is 6 (out of 10). This level is the same as the average of factors in tool number one. Factors determining the turbulence of the business environment. The preliminary assessment performed via the questionnaire indicated some factors pertaining to the company’s business environment which are very turbulent, so that they can cause a threat, or on the other hand be taken as opportunities. Table I represents some of the factors with a degree of turbulence of 7 (out of 10, 10 = highly turbulent) or above. These items should receive more attention when the company’s strategy is studied and defined. Some factors are given a turbulence level of 6, which can be considered to be less important, but still need to be looked after. There have been some factors indicated as being not related to the company’s business or not applicable to the company’s circumstances. Other factors are recognised as not important or turbulent by the company. Tool number two: assessing the current level of the company’s agility. In total, 66 factors are considered in this assessment. Application of the assessment tool in the company gives an average score of 6.4 (out of 10, where 10 = high level) for its abilities. This is achieved considering the factors related to the relevant and relatively important change factors. This score is supposed to be interpreted as the average degree of the ability of the company in dealing with the turbulent business

Factors of the tool

Table I. Some of the factors with degree of turbulence 7 and more

Trend of market fragmentation and niche market growth for the company’s products in the past five years Tendency of the company’s products to luxuries Price-consciousness of markets/customers Importance of following the fashion in product developments in order to keep its position in the market The average rate of changes in product models in the marketplace (in the area where the company competes) Speed of change in products models in the marketplace for the company Market’s power in determining the price Market’s power in determining the delivery time Market saturation (percentage of the potential markets/customers which the type of company’s products have reached)

Degree of turbulence

7 7 7 7 9 9 7 8 8

environment and coping with changes. In other words, it can be considered as the level of agility the company currently has. However, this score or level does not imply that the required level of need for agility, if it is equal to or less than the current level of agility, is already provided. In more accurate terms, the mean level specified for the current level of agility indicates the average of the company’s capabilities in different areas related to the turbulence of the business environment and changes. However, this level has a considerable association with the position the company lives in, and can relatively indicate the level to which the company can respond appropriately to changes. The perception of the company (respondent) for the current level of agility on a 1 to 10 scale was 8. This is somehow different and higher than the average score obtained during the assessment. Ability factors. Analysing the factors in the tool number two of the assessment model (for assessing the current abilities of the company) proposes that in total 42 factors have been scored for 7 and more (out of 10, where 10 = high ability), 12 factors are given level 6 and in 12 factors the company lacks sufficient or considerable strength. Table II shows some of the factors with level of 7 and more as a sample.

Factor’s No.

Factors of the tool

1 1-1

Detecting, analysing and understanding changes Detecting the changes in: Marketplace (market’s structure/demand/needs/taste or fashion) Competitors’ activities and position Technology Suppliers’ activities and position Quickness and efficiency of the company in analysing the information and data received about the changes in the business environment, and effecting them into its systems Top level management concern and commitment Top level/strategic planning of the company Exact understanding of buyers’ (market) needs Convincing (satisfying) the market with its products’ specification, quality, price, delivery time Directing market’s needs to the company’s products and services Keeping up with the changes in the products’ life cycles, and controlling its products’ life cycles in order to obtain a competitive advantage Maintaining or progressing its position among its direct competitors in local markets in the current situation Trend of change in the company’s market share in the past few years considering the intensity of competition (decreasingincreasing)

1-2

3 4 5 7

9 11


Degree of the company’s ability

8 8 7 8

8 7 8 7 7

7 8

8

Table II. Some of the ability factors on which the company has a level of 7 or more

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The following summary can be made as the result of the assessment process: . A moderate level of agility with tendency to high is needed by the company in the current circumstances. The strategy for the company with regard to agility can be: a better consideration of the growing turbulence in the business environment; taking on-time steps in becoming agile in order to sustain and maintain the competitive advantage. However, it can be said that agility is not an urgent agenda for the company. .

.

There are areas which can potentially be threatening or be considered as opportunities. These areas must be taken into consideration when defining and designing the company’s strategy. These areas are indicated in Table I. The company’s perception of its current level of agility is higher than the perceived level of need and also than the average score of tool number two of the assessment model. This does not necessarily mean that the company’s requirements for agility have already been met. The large number of highly turbulent factors and areas in which the company lacks sufficient abilities have questioned such optimistic view of the company and should be considered in formulating corporate strategies.

Applying the practical tool The results from the assessment model are used to provide a practical base for the company to move towards agility. The assessment suggests that the company needs a moderate and not urgent level of agility, which should be taken into consideration when implementing the practical tool. The practical tool is applied in three steps: (1) Determining the drivers of agility for the company. (2) Determining the required capabilities. (3) Determining the practices and actions. 1. Agility drivers. Table III lists agility drivers for the company with detailed sub-factors. 2. Agility capabilities. The ``practical tool’’ is applied to determine the capabilities required by the company to respond to the agility drivers listed in Table III. This resulted in 20 capabilities sorted according to their priorities, i.e. degrees of importance/urgency to the company. The average ability of the company to present individual capabilities in response to the drivers may also be obtained from the results of assessment tool number two. Table IV lists the 20 capabilities in the order of priorities, their corresponding levels of urgency to the company, and the company’s abilities to present them. Based on the capabilities and their priorities suggested by the practical tool as well as the relative strength of the company in presenting individual capabilities (as obtained from the assessment tool), the following points are

suggested as practical tips and guides for the company to consider in its strategies about capabilities. The company needs to improve its position for the following important capabilities in which the company has ability level of 6.5 and less. .

Sensing, perceiving and anticipating changes.

.

Immediate reaction to changes by effecting them into system.

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Strategic vision.

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Co-operation (internal and external) (joint venture, virtual organisation).

.

Products/services quality.

Agility drivers (areas)

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Average degree of turbulence

Marketplace Growth of the niche market National and international political changes Increasing rate of change in product models Product lifetime shrinkage

Average = 3.5 (out of 5) 5 1 5 3

Competition Rapidly changing market Increasing pressure on cost Increasing rate of innovation Increasing pressure of global market competition Decreasing new products’ time-to-market Responsiveness of competitors to changes

Average = 2.5 (out of 5) 0 5 1 5 4 0

Customer requirements Demand for individualised products and services Quicker delivery time and time-to-market Quality expectation increasing Sudden changes in order quantity and specification

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Average = 5 (out of 5) 5 5 5 5

Technology Introduction of more efficient, faster and economic production facilities Introduction of new soft technologies (software and methods) Introduction of new materials Inclusion of information technology in (new) hard and soft technologies

Average = 3.5 (out of 5)

Social factors Environmental pressures Workforce/workplace expectations Legal/political pressures Cultural problems Social contract changes

Average = 2.5 (out of 5) 2 3 3 3 2

0 2 0 5

Table III. Agility drivers and their degree of impact for the company

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Capabilities 1. 2. 3. 4. 5. 6.

Table IV. Prioritised capabilities for achieving agility in the company

7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Sensing, perceiving and anticipating changes Product model/configuration flexibility Immediate reaction to change by effecting them into system Appropriate technology (hard and soft), or sufficient technological ability Strategic vision Co-operation (internal and external) (joint venture, virtual organisation) Change management Products/services quality Products and services delivery quickness and timeliness Quick new products time-to-market Cost effectiveness Operations efficiency and effectiveness (leanness) People flexibility Knowledgeable, competent, and empowered people Fast operations time Recovery from change Organisation and organisational issues flexibility Integration High rate of new products introduction Product volume flexibility

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Cost effectiveness.

.

People flexibility.

Rank

Company’s degree of ability

1 2 3

6.4 7.5 6.4

4 5

7.0 6.3

6 7 8 8 9 9 10 11 11 12 13 14 15 15 16

5.0 6.9 6.3 7.5 8.5 5.5 6.6 8.0 ? ± ± ± ± ± ±

3. Agility providers/practices. Based on the ``practical tool’’, a list of agility practices are proposed to assist the company to achieve the capabilities proposed in the last section. A sample of these practices is listed in Table V. The stated practices were selected from a large number of practices which were either supported by the literature, or found to be applied effectively by companies participating in our survey and case studies. However, as it has been mentioned before, the appropriateness of a practice is subject to the specific circumstances of the organisation, the company’s strategies and many other factors. Therefore, the recommended practices should be considered as a guide list among which the necessary practices can be found. On the other hand, Table VI represents some of the practices which have been adopted by the company in the past few years in responding to the change factors. These actions would have provided some capabilities which can be extended with further actions by referring to the proposed practices. One important capability which must be considered by the company is the cost effectiveness capability. Although it only takes the ninth place in the

Agility capabilities and corresponding practices recommended for achieving them Responsiveness 1. Sensing, perceiving and anticipating changes

Practices Strategic use of information system Using Internet and other information tools for communication outside of the company Information interface with suppliers/customers Internal information network Empowerment of people Information management plan or model

2. Immediate reaction to changes

Computerised manufacturing information system Internal information network Concurrent team-working Increasing market awareness with group marketing approach Adoption of time-compact-technology methods Virtual organisation


Table V. Practices recommended for acquiring the capabilities indicated as priority for the company

Growth of the niche markets Increasing flexibility of manufacturing in both volume and configuration Providing a wide range of choices for customers in every section of the market Introduction of unlimited choice of colours and configurations Increasing the capability and capacity of the company to produce more than the present demand of the market in terms of models and configuration

proposed priority list, it has already been considered by the company in the past few years with the implementation of practices such as: .

streamlining processes;

.

lean production techniques;

.

FMS;

.

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continuous training of people and involvement of employees in all aspects of the company’s activities; critical management of supply chain.

Further efforts in this regard are needed to obtain the required level of ability given the slow nature of achieving such a goal. Implementation of the methodology for agility ± Company 2 Case study number two involves a manufacturer of high-technology electronics components and devices. As a subsidiary of a giant electronic group, the company has the main duty of supplying the mother company. The company was originally

Table VI. Actions performed by the company in response to some of the agility drivers

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established for providing the mother company with devices which are used in high-tech multi-million pound special radar systems. But extensive changes in the business environment in recent years have resulted in the contraction of this market to only 20 per cent of the company’s capacity. The remaining 80 per cent capacity is now being directed to serve other markets.

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The assessment model Tool number one: agility need level. The average score of all factors in tool number one of the assessment model (devised for assessing the turbulence of the company’s business environment) is 5.2 (out of 10). According to the assessment model, a company in such a position needs a moderate level of agility. This need is not urgent and the company’s business environment is not very turbulent. On the other hand, the company’s perception of the agility need level, according to the respondent, is 5 (out of 10). This level is almost the same as the average score obtained from the assessment tool. Factors determining the turbulence of the business environment. Table VII presents some of the factors pertaining to the company’s business environment with a degree of turbulence of 7 or more. These items should receive more attention, especially when the company’s strategy is studied and defined. Two factors shown in Table VII give a turbulence level of 6. They may be considered less important, but still need to be looked after. Again for this case there have been some factors indicated as being not related to the company’s business or not applicable to the company’s circumstances. Other factors are recognised as not important or turbulent by the company. Tool number two: assessing the current level of the company’s agility. Of the total of 66 factors, 46 factors considered in the assessment tool were found relevant and measurable (the corresponding factors in tool number one are more than five). The results of assessment give the company an average score of 5.6 (out of 10, where 10 = high level). This score can be considered as the level of agility

Factors of the tool

Table VII. Factors with degree of turbulence 7 and more

Trend of market fragmentation and niche market growth for the company’s products in the past five years Uncertainty of market needs and demand for individualised products Speed of change in products’ models in the marketplace for the company Market’s power in determining the price Market’s power in determining the quality and reliability of products Predictability of the life cycle of the company’s products (10 = unpredictable) Intensity of the competition and battle for market share in global markets Strength and responsiveness of direct competitors of the company Difficulty of gaining and maintaining competitive advantage for the company considering the competitors

Degree of turbulence

7 8 7 9 9 7 9 8 7

the company currently has. However, as discussed before, this score or level does not imply that the required level of need for agility is already met. As stated in case study one, the mean level corresponding to the current level of agility represents the average of the company’s capabilities in different areas related to the turbulence of the business environment, and can only relatively reflect the level at which the company may respond appropriately to changes. The perception of the company (respondent) for the current level of agility on a 1 to 10 scale was 5, which is almost same as the average score obtained. Ability factors. Analysing the factors in tool number two proposes that in total 31 factors have been scored for 7 and more (out of 10, where 10 = high ability), seven factors are given level 6, and in 28 factors the company lacks sufficient or considerable strength. Table VIII shows some of the factors with level of 7 and above. The following summary can be made as the result of the assessment: .

.

1 1-1

1-2

2 3 12


A moderate level of agility is needed by the company in the current circumstances. The strategy for the company with regard to agility can be: getting concerned about the growing turbulence in the business environment; and getting prepared for taking preliminary steps in becoming agile in order to sustain and maintain the competitive advantage. However, agility is not an urgent agenda for the company. The areas which are indicated in Table VII must be taken into consideration as potentially threatening factors or opportunities when defining and designing the company’s strategy. Detecting, analysing and understanding changes Detecting the changes in: Competitors’ activities and position Political/social/economic factors Quickness and efficiency of the company in analysing the information and data received about the changes in the business environment, and effecting them into its systems Top level management concern and commitment Conducting strategic, marketing, technical, financial analysis of the information in the direction of the company’s competitive advantage Producing high level of pre- and pro-sales and services and using it as a leverage Exact understanding of the buyer (market) needs Relative strength and responsiveness of the company in comparison with its competitors Quality Response to unpredicted incidents Coping with tensions and shocks in different aspects of the business

7 8

7

7 7 7

8 8 8

Table VIII. Some of the ability factors in which the company has a level of 7 or more

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.

790

The company’s current level of agility, according to the company’s own perception, is almost the same as the perceived level of need and also the average score from tool number two (i.e. the current level of agility from the assessment). This does not mean that the company’s agility requirements are all met. Those highly turbulent factors and areas in which the company lacks sufficient abilities are items which can cause problems for the company.

Applying the practical tool Based on the assessment results, a moderate and not urgent level of agility is required by the company. This must be taken into consideration when applying the practical tool to determine the capabilities and practices to be implemented in the company. .

.

Agility drivers. Table IX lists the agility drivers for the company with detailed sub-factors. Agility capabilities. The ``practical tool’’ is applied to determine the capabilities required by the company to respond to the agility drivers listed in Table IX. This resulted in a sorted priority list of capabilities. The average ability of the company to present individual capabilities in response to the drivers is also obtained from the results of assessment tool number two.

Based on the capabilities and their priorities suggested by the practical tool as well as the relative strength of the company in presenting individual capabilities (as obtained from the assessment tool), the following points are suggested as practical tips and guides for the company to consider in its strategy-making process. .

The company needs to improve its position for the following important capabilities in which the company has ability level of 6.5 and less. The list of items is sorted in ascending order according to the company’s available ability. ± Quick new products time-to-market. ± High rate of new products introduction. ± Co-operation (internal and external) (joint venture). ± Product model/configuration flexibility. ± Sensing, perceiving and anticipating changes. ± Recovery from change. ± Change management. ± Products/services quality.

Agility drivers (areas)

Average degree of turbulence

Marketplace Growth of the niche market National and international political changes Increasing rate of change in product models Product lifetime shrinkage

Average = 3.0 (out of 5) 5 1 5 1

Competition Rapidly changing market Increasing pressure on cost Increasing rate of innovation Increasing pressure of global market competition Decreasing new products’ time-to-market Responsiveness of competitors to changes

Average = 3.7 (out of 5) 5 3 5 1 5 3

Customer requirements Demand for individualised products and services Quicker delivery time and time-to-market Quality expectation increasing Sudden changes in order quantity and specification

Average = 1.5 (out of 5) 1 1 3 1

Technology Introduction of more efficient, faster and economic production facilities Introduction of new soft technologies (software and methods) Introduction of new materials Inclusion of information technology in (new) hard and soft technologies

Average = 2.5 (out of 5)

Social factors Environmental pressures Workforce/workplace expectations Legal/political pressures Cultural problems Social contract changes

Average = 1.8 (out of 5) 5 1 1 1 1


1 3 1 5

3. The agility providers/practices A series of practices which can assist the organisation to achieve the proposed capabilities are derived and listed in Table X. The recommended practices should be considered only as a guide list among which the necessary practices may be found. Table XI lists some of the practices which have been adopted by the company in the past few years in responding to the change factors. These actions would have provided some capabilities which can be extended with further actions from the proposed practices. Conclusions Agile manufacturing is an inevitable condition for survival and prosperity in the increasingly changing business environment of the contemporary

Table IX. Agility drivers and their degree of impact for the company

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Table X. Practices recommended for acquiring the capabilities indicated as priority for the company

Agility capabilities and corresponding practices recommended for achieving them Responsiveness 1. Sensing, perceiving and anticipating changes

Practices Strategic use of information system Using Internet and other information tools for communication outside of the company Information interface with suppliers/customers Internal information network Empowerment of people Information management plan or model

2. Recovery from change

Continuous re-engineering of the organisation Concurrent team-working Adoption of advanced technology Empowering people Virtual organisation

world. As we enter the new millennium, the severity of need for becoming agile is deepening, and the spectrum of organisations that need this characteristic is widening. However, like many other modern ideas for managing business, agile manufacturing is an adaptive approach, with its level of implementation depending on the level of need for it in each organisation. With full consideration of capabilities that an organisation already has, attempts should be made to identify the missing capabilities. The acquisition of such capabilities can be materialised with the implementation of providers or practices which provide the identified capabilities. It has been and will be a long and challenging process to complete the research for the exact domain of capabilities, the corresponding practices and the appropriate ways of implementing and Increasing rate of change in product models Improving response time (to customers in manufacturing, etc.), continuous improvement, developing JIT, cellular manufacturing, problem-solving techniques Increasing pressure of global market competition Reducing time-to-market Decreasing new products’ time-to-market Re-engineering processes to reduce time as much as possible Quality expectations increasing Investment in new plant to increase quality after identifying areas of improvement Taking advantage of change as an opportunity and shifting a part of the company’s capacity to satisfy demand for new commercial devices

Table XI. Actions performed by the company in response to some of the Environmental pressures Embracing new environmental standards and co-ordinating systems to them agility drivers

assessing the capabilities. Some steps have been taken by this research which have proved to be a positive movement welcomed by the case study companies. It may be concluded from this study that agility in practice may be achieved in a manufacturing organisation through the strategic utilisation of manufacturing best practices and tools. It is also found that different organisations tend to experience different sets of changes and would therefore require the implementation of different combinations of practices. A comprehensive methodological approach to strategy building with regard to agility is needed in industry and such a methodology could be developed in practice. The methodology proposed in this paper, though still to be fully developed and validated, constitutes an important effort in this regard and helps to bridge the gap between theory and practice in the agile manufacturing literature. For practitioners, the proposed methodology provides a basis for assessing their business situations and a guideline for recognising missing capabilities and building up strategic policies in pursuit of agile manufacturing. References Booth, R. (1996), `Àgile manufacturing’’, Engineering Management Journal, April, pp.105-12. Dove, R. (1994-1996), `Àgile and otherwise’’, series of articles on agile manufacturing, Production Magazine, November to July. Drucker, P.F. (1968), ``Comeback of the entrepreneur’’, Management Today, April, pp. 23-30. Goldman, S.L., Nagel, R.N. and Preiss, K. (1995), Agile Competitors and Virtual Organisation; Strategy for Enriching the Customer, Van Nostrand, Rinehold, New York, NY. Hamel, G. and Prahalad, C.K. (1994), ``Competing for the future’’, Harvard Business Review, JulyAugust, pp. 122-8. Iacocca Institute (1991), 21st Century Manufacturing Enterprise Strategy, An Industry-led View, Vol. 1, Lehigh University, Bethlehem, PA. James-Moore, S.M.R. (1996), `Àgility is easy, but effective agility is not’’, Proceedings of Agile Manufacturing Colloquium, IEE, London, March, pp. 3/1-3/3. Kidd, P.T. (1995), Agile Manufacturing, Forging New Frontiers, Addison-Wesley, London. Montgomery, J.C. and Levine L.O. (1996), The Transition to Agile Manufacturing ± Staying Flexible for Competitive Advantage, ASQC, Milwaukee, WI. Preiss, K. (1997), `À systems perspective of lean and agile manufacturing’’, Agility and Global Competition, Vol. 1 No. 1, pp. 57-72. Sharifi, H. and Zhang Z. (1998a), `À methodology for achieving agility in manufacturing organisations, an introduction’’, International Journal of Production Economics, Vol. 62 No. 1-2, pp. 7-22. Sharifi, H. and Zhang, Z. (1998b), `Ènabling practices assisting achievement of agile manufacturing’’, Proceedings of the Sixth IASTED International Conference, Robotics and Manufacturing, July 26-31, Banff.


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