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SIMTech technical reports

Volume 7

Number 3

Jul-Sep 2006

Towards a conceptual framework of manufacturing paradigms ∗ W. G. K. Lee, T. Baines 1 , B. Tjahjono1, and R. Greenough1

Abstract – This report sets out to identify, describe, and contrast popular manufacturing paradigms and explore their fit with competitive strategies. The methodology is based on a critical review of more than 80 research papers from leading international journals. The content of these has then been used to create a conceptual framework that represents how differing competitive priorities relate to alternative manufacturing practices. Therefore, this paper reports and summarises the state-of-the-art-date with popular manufacturing paradigms and, in addition, proposes a comprehensive framework that will contribute to helping manufacturers better manage their fit with their business environment.

turing practices and competitive strategies through a comprehensive review of the ideas and concepts currently provided in the literature. In summary, six distinct manufacturing paradigms have emerged in the recent history of manufacturing. Figure 1 illustrates a chronological map of the emergence of the manufacturing paradigms.

Keywords: Agile manufacturing, Lean production, Quick-response manufacturing, Mass customisation, Mass production

Fig. 1. Emergence of manufacturing paradigms.

2 1

BACKGROUND

To realise competitive manufacture, practitioner has to interpret the linkages shown in Fig. 2 and translate these into shopfloor practices. However, the understanding of such linkages is fragmented [18] and can lead to confusion and strategic misalignment. This has resulted in sub-optimal or poor performances of the organisation [106,86,110,118]. Adoption of practices without understanding their associated competitive priorities can result in companies imitating blindly and eventually narrowing their strategic space [35]. Therefore, there is a need to relate the manufacturing practices and objectives to the strategic direction of the business. Hence, the aim of the research described in this report is to capture and contrast the popular manufacturing paradigms, with their associated practices and objectives, and link these to the competitive strategies they support.

There is wide spread agreement that manufacturing industry has undergone and continues to undergo a process of radical change [104,7,102]. Increased globalisation of markets, newly industrialised nations, advances in technology, and over-capacity in manufacturing worldwide, have all contributed to enhanced levels of competition [114]. This has put a premium on innovative manufacturing strategies [36,93,39,34,88,108] and challenged existing modus operandi and so the form of paradigms which have shaped manufacturing since the early part of the 20th century. Manufacturing paradigm can be defined as a specific set of principles that underpin the techniques and practices companies adopt, adapt or develop, according to their internal and external environment [100]. This is commonly associated with the phrase ‘paradigm shift’ which refers to a significant change in these principles [65]. Emergence of new paradigms is frequently associated with the emergence of radically different ‘best practices’. However, adoption of these practices without understanding their associated competitive priorities can result in companies imitating blindly and eventually narrowing their strategic space [35], resulting in sub-optimal or poor performances of organisations [106,86,110,118]. The research presented in this report has therefore set out to clarify the relationships between manufac∗ 1

OBJECTIVE

Fig. 2. Illustration of manufacturing paradigm, strategy, practice, and competitive strategy.

Research work had been submitted to the International Journal of Production Research for publication on December 2005 School of Industrial and Manufacturing Science, Cranfield University, United Kingdom

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In forming the research objectives, we are mindful that the key manufacturing paradigms identified are not exhaustive. Our approach has been to focus on popular paradigms that are widely discussed, adopted and reported in the literature so as to acquire an in-depth understanding of their underlying principles and their links to competitive strategies adopted. For the purpose of this research, the five of the six popular manufacturing paradigms (MP, LP, TBM, MC, AM) identified previously will form the scope of this research. On this basis, the research objectives defined are to: • Objective 1: Define the structure of a conceptual framework to capture a comprehensive description of the five popular paradigms • Objective 2: Conduct a comprehensive literature review to identify research on the paradigms that can be fitted to this • Objective 3: Form the conceptual framework to build the relationship between manufacturing paradigms and manufacturing strategies 3

Fig. 3. Structure of conceptual framework.

A manufacturing paradigm should similarly support a cluster of manufacturing objectives which are consistent with the competitive strategies as depicted in Fig. 2. An example list of possible objectives is compiled from the work of the researchers [115,36,37,78,125]. This list of objectives is also commonly referred to as manufacturing or competitive priorities and this link directly to the competitive strategy of the SBU. Porter [79] proposed the idea that all competitive strategies are variants of the three generic strategies involving a choice between overall cost leadership, differentiation and focus. Thus, the priorities on the manufacturing objectives, which an organisation placed, will be related to the market scope or the basis of the competitive advantage. In addition, their will be assumptions that a manufacturing organisations holds about a paradigm in relation to their internal and external environment. Internally, it can be viewed as the manufacturing requirements the organisations need to achieve, and externally, it can be viewed as the market conditions in which the organisation is operating. These assumptions will influence the choice of competitive strategies and manufacturing objectives adopted.

METHODOLOGY

The three objectives naturally led to a three-stage research programme. The first stage defines the structure of the conceptual framework. The purpose here was to illustrate the principal relationships between the content of manufacturing paradigms and generic competitive strategies. The second stage then collects the dataset by identifying and filtering the literature to a form suitable for the conceptual framework. This dataset was collected through a review of manufacturing literature associated with the manufacturing paradigms identified previously. Finally, the third stage analyses and formed the complete conceptual framework and, in doing so, clarifies the relationships between manufacturing paradigms and competitive strategies. The following sub-sections now describe the work carried out in each of these three stages. 3.1

3.2

Stage 1: Structuring the Conceptual Framework

The purpose of this stage was to provide a richer description of the linkages given in Fig. 2. The resulting primary framework is shown in Fig. 3 and has been developed as follows: First, there are underlying rules and assumptions associated with a manufacturing paradigm. In Fig. 3, these are shown as the key mechanisms. The second component of a manufacturing paradigm is the practices and policies associated with the generic manufacturing strategy. The researchers [92,26,37,38,87,78] have grouped these practices, techniques and policies into a set of structural and infrastructural decision areas, for example plant and equipment, capacity, production planning, product design, human resources, technology and processes.

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Stage 2: Collection of Dataset

The purpose of this stage was to populate the framework with the actual practices advocated in the literature for each of the five manufacturing paradigms. This section describes the literature search strategy, analysis, and results. The literature review was structured around the work of Dangayach [18]. As it was essential that only relevant and high quality contributions were considered, articles were identified which met the following criteria. First, they had been published in top five journals for manufacturing strategy research [18]. These journals are International Journal of Operations and Production Management (IJOPM), Journal of Operations Management (JOM), Production and Operations Management (POM), California Management Review (CMR), and Harvard Business Review (HBR). Second, they had to be relevant to the five paradigms identified. Within this scope, a total of 86 papers were reviewed.

Towards a conceptual framework of manufacturing paradigms

3.3

Stage 3: Analysis and Formulation of Conceptual Framework

Dataset collected in Stage 2 has been used to populate the conceptual framework structure shown in Fig. 3. The next section will summarise, contrast and discuss these manufacturing paradigms, with their associated practices and objectives, and link these to the competitive strategies they support. 4

RESULTS & DISCUSSION

This section discusses and verifies the content of the conceptual framework for each manufacturing paradigm. 4.1

Mass Production Paradigm

The Mass Production (MP) paradigm is typically driven to produce at the lowest cost/price [21] by drastically improving the productivity [124]. This is achieved via the adoption of economies of scale [21,23] as a key principle and economic tool for cost reduction where the total overhead of the manufacturing resources is made to share among a large volume of products. In order to cope with this intended high volume production, machine and product standardisation (resource specialisation) [12,121,24, 21,23] is deployed as the key mechanism to reduce the non-productive time of machine setup or product change over. This resource specialisation principle is also extended to the workers to increase productivity with job divisions [124,12,27] that result in different groups of workers specialising only on their own unique set of simple tasks. To further improve the productivity, mechanisation of the conveyor belt system that moves the product through the production floor is employed to minimise the movement of workers, leading to the association of continuous flow production as another key mechanism to this paradigm. This can be related to Ford’s model ‘T’ production [124] which involved the high volume production of a single item to ensure the maximum utilisation of the common resources to lower the overhead cost per car. MP paradigm is most suited for a mass market environment with stable demand for high volume and low variety products [55,12,21]. Such a market environment is typically associated with much matured products which are normally commodities in nature. Taking Henry Ford’s model ‘T’ as an example, the MP paradigm flourished in the period where cars became commodities rather than luxury goods [124]. Other modern day commodities identified as being suitable for this paradigm are solid-state memory cards (like Secure-Digital Cards, Compact Flash Cards, etc.), Dynamic Random-Access-Memory (DRAM) chips, hard-drives for desktops and laptops, blank compact and digital video disks (CDs and DVDs), batteries, papers, pens, etc. Although these products are often marketed under different brand names, they are essentially the same products with

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relatively long shelf lives. Thus, the cost of obsolescence is relatively low and the competitive base here is typically cost. Therefore, accurately predicting the demand or built-to-order is unnecessary as price and availability of products are the most important criteria to meet the most suitable competitive strategy (which is cost leadership) for this environment. These criteria can be satisfied by the practices promoted in the MP paradigm described previously, for example product standardisation, specialised machines, mechanisation of production flow, make-to-stock etc. Typical organisations adapting this approach are the semiconductor companies producing solid-state memory chips like ST Microelectronics, hard-drive manufacturers like Seagate, battery manufacturers like Energizer and Duracell, and other producers of commodity products. 4.2

Lean Production Paradigm

With the Lean Production (LP) paradigm, there is a shift in focus from a cost-driven to a quality-driven production. This is evident in the many continual quality improvement programmes that are associated with this paradigm [98,27,46,48,43,17,95,40], for examples, Total Quality Management (TQM), Total Productive Maintenance (TPM), Kaizen, Quality Circle (QC) etc. The reason for this shift in focus is the recognition of quality as the main source of problems for productivity because poor quality products or parts will result in reworks/scraps that propagate down the production process which incur unnecessary production resources. These non-value-added activities are referred to as waste and are addressed by the quality improvement programmes seen in the LP paradigm. Thus, waste reduction programmes of any form (e.g. Single Minute Exchange of Die (SMED), lot size reduction, value stream mapping etc.) are key principle identifiable with this paradigm. This principle is manifested in two key mechanisms that are evident in the LP paradigm, namely the demand-driven production and the Just-in-Time (JIT) concept [89,70,33,96,97,15,54,82,121,128,17,20,95]. In a demand-driven production, no unnecessary inventories are produced; while applying JIT, no unnecessary activities and resources are deployed. Thus, reducing waste in the overall production system. Empowerment of workforce [98,27,46,48,16,95,40] is another principle to this paradigm through mechanisms like self-directed and multi-skilled workforces. This is necessary to support the continual quality improvement programmes and also to remove the unnecessary hierarchy of shop floor supervisors by empowering the workforce directly. For the LP paradigm, the environment is similar to the MP paradigm apart from this being a less stable demand due to a higher product variety offering [121,24,16]. Such a market environment is typically associated with fairly mature products which have more variety and are much less of a commodity.

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The shelf live of such products is also relatively shorter compared to those manufactured using the MP paradigm, which also means a higher obsolescence cost. Examples of such products are computer processor chips (like the various generations of Pentium chips), cars, mobile phones, and other electronic consumer products. As the obsolescence cost of these products is substantial, it is only wise to minimise it through practices like JIT, make-to-order, Kanban systems etc., which reduce waste from excess production. Quality-driven practices evident in the LP paradigm actually yield a positive impact to the overall productivity of the manufacturing plants if implemented correctly. This is also the key reason why LP paradigm is popular even for products that are suitable for the MP paradigm, for example, computer hard-drive as evident in the recent efforts in Six-Sigma and Lean initiatives at Seagate. Typically, cost leadership is still a highly probable strategy for such environments with quality and waste reduction programmes employed as the main means in achieving this strategy. A quality-driven organisation adopting the LP paradigm will also promote the high quality of their products as a competitive base against their competitors. However, the wide adoption of quality programmes across many organisations is beginning to make quality an ‘order-qualifying’ instead of an ‘order-winning’ criterion. A focus strategy is also suggested to rationalise the product portfolio and manage the cost of product varieties offered within this paradigm. This would ensure that variety is not offered at the expense of stable demand, high volume and repetitive production [33,15,48,95]. Typically organisations adopting this approach are car manufacturers such as Toyota, top-end disk-drive manufacturers such as Seagate and other reputable consumable electronics manufacturers such as Toshiba, Samsung etc. 4.3

Time-based Manufacturing Paradigm

The Time-Based Manufacturing (TBM) paradigm shares many similarities with the LP paradigm especially in its deployment of cross-functional teams (Q-ROC), demand-driven production (POLCA system) [105] and its quality programmes (to improve lead time). However, a key difference here is the emphasis of time as waste [28,53,9,51,44,68]. In the LP paradigm, all waste is treated equally whether it is in the form of materials (scraps and inventories) or non-materials (time & non-value-added activities) but in the TBM paradigm, non-material wastes are treated with higher importance than material wastes. This differentiation thus separates the two paradigms with the TBM paradigm being delivery-driven [103,133,28,9,51,60,44,129] as opposed to quality-driven. This is evident in the differences between the POLCA and Kanban systems, where the former is a combination of a pull and push system and

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the latter is a pure pull system [105]. This implementation will encourage the holding of some inventories in the TBM paradigm as a result from the push mechanism in order to reduce lead time at the expense of some material wastes. Therefore, instead of the key principle of general waste reduction in LP paradigm, a more specific waste in the form of lead time reduction is adopted as the key principle for the TBM paradigm. The key mechanisms here will be similar to some of those found in LP paradigm like quality programmes, self-directed and flexible workforce, and value-stream mapping etc. [53,9,42,51,129,130,68] except that the focus is very much on the shortening of time to delivery, even at the expense of non-time-based attributes (excess inventory and production capacity etc.) if necessary. It is also noted that the manufacturers adopting the TBM paradigm are mainly producing high variety and highly engineered products [28,42,111,44]. This shows that product customisation is also a key principle to this paradigm. Key mechanisms to enable the fast delivery of highly customised products include, concurrent engineering, cross-function work teams, customer involvement, and rapid prototyping. Variable demand with high product variety and highly engineered products are the key characteristics of companies adopting the TBM paradigm. Such an environment represents a niche market for highly customised products. As such, volume production is not possible making both MP and LP paradigms unsuitable. Products suitable for the TBM paradigm are typically one-of-a-kind such as custom-built sports cars or bikes, engineered-to-order specialty equipment like computer servers and telecommunications equipment. A differentiation strategy to ensure a highly perceived customer uniqueness of the product is the key, and thus is the probable competitive strategy for the TBM paradigm. Customisation alone is usually inadequate and the speed and dependability of delivery is usually the competitive edge that differentiates the competition as cost is of a lower priority for these products. Therefore, lead time reduction practices like operating at below the full capacity, POLCA systems and other time-based management practices are commonly adopted in support of the delivery-driven objective. A focus strategy is also suggested because of the need to select a niche market for the products offered. Organisations adopting this paradigm are 3M Corporation, Xerox, Honeywell Federal Express, Domino Pizza, AT&T, Intel, Pearle Vision and LenseCrafters [28,42,111,44]. Other organisations suitable for this paradigm are the design and manufacture companies like Datum Dynamics, which produce customised assembly tooling, and Trek Bicycle Corporation, makers of high performance bicycles.

Towards a conceptual framework of manufacturing paradigms

4.4

Mass Customisation Paradigm

Postponement strategy is a key feature and principle to the Mass Customistation (MC) paradigm [25,22,23,131] which proposed that the customisation of final product be postponed to as late a stage as possible in the assembly process so as to consolidate the inventories of the sub-components as well as leveraging on the economies of scale from the common sub-components shared by the final products. This strategy is only possible with a highly modularised product, such as the computer, where many varieties of end products share a high percentage of common sub-components. Therefore product and process modularisation [77,25,29,23] is also a key principle to this paradigm. This paradigm is also flexibility-driven [77,25,29,60], as evident from its flexible process and product configuration, thus offering fairly varied products at a reasonably low cost. MC paradigm typically operates in an environment of high level of unique customer needs [77,25,29] such as the computer market. As such, a high level of market segmentation is the norm to cluster groups of customers sharing similarities in order to exploit the economies of scale. The environment also exhibits a medium level of variety or moderate degree of customisation [77,25,29,60] as compared to the highly customised products seen in the TBM paradigm. Typical products suitable for the MC paradigm are personal computers and other consumer electronics like digital cameras, MP3 players and mobile phones as these products consist of common electronic components like microprocessor chips, memory chips, imaging and audio processor chips, etc. These standardised modular components provide different functionalities, which can be ‘mixed -and-matched’ during the manufacturing process to provide the high product varieties required while keeping the production cost low. A focus strategy is thus suggested because of the need for careful market segmentation and clustering to manage the complexity involved in incorporating the required flexibility in the system for this flexibility-driven paradigm. Examples include Dell, Hewlett-Packard [77,25,60] and other similar computer assembly companies. Various approaches to mass customisation can also be found in companies like Paris Miki, Lutron, Planters, ChemStation [29]. 4.5

Agile Manufacturing Paradigm

Finally, the Agile Manufacturing (AM) paradigm has the key objective of coping with unexpected and rapid changes [21,81,127,41,10,11,132]. Thus, effective change management and strategic alliances are the two key principles to this paradigm [116,127,41,31]. This is evident in the infrastructural choices made by an organisation adopting the AM paradigm; for example, integration of product /production/business information, virtual enterprise, decentralised organisation, rapid partnership formation, outsourcing etc., all of which are mechanisms to

cope with the continuous changing market [21,81,127,132,31]. Strategic alliances also leverage on sharing resources to reduce risk from the dynamic environment. It is also observed that organisations adopting the AM paradigm are typically global companies with worldwide operations [116,80,11,132,31]. This is in line with the effect of globalisation which has resulted in increased competition and volatile market demand, a condition that is addressed by the AM paradigm. The scope of operations for organisations adopting the AM paradigm is also large through alliances; this is in order to provide the customer with total solution products. Thus, the AM paradigm can be identified as service-driven. Finally, the Agile Manufacturing (AM) paradigm appears to be most suited to a highly volatile and dynamic market environment, typical of a globalised economy [12,116,81,80,10,11,132,31]. Organisations adopting this paradigm typically have widely dispersed operations and are generally organised in a decentralised manner to serve the diverse needs of their large customer base [80,132,31]. Typical products suitable for this paradigm are ‘all-in-one’ solution products like warehouse management solutions offered by third party logistics companies, enterprise management software applications like Enterprise Resource Planning (ERP) systems, complex large scale simulation packages, etc. These products will capitalise on the wide core competencies of the organisation as well as localised knowledge for their competitive base. The competitive practices here are typically strategic partnerships, outsourcing, virtual integration and self-managed knowledge workers who adapt to the rapid changes and uncertainty of the environment [21,81,127, 132,31]. This service-driven paradigm will support the differentiation strategy in the form of unique full-service solutions offered to differentiate from global competition and reduce competitive forces. A focus strategy is also suggested to select the appropriate market segments to compete in, in relation to the company’s competencies and so create a sustainable competitive advantage. Organisations adopting this paradigm include Vanguard Medica, Britvic Soft Drinks, Remmele Engineering [41]. Other organisations suitable for this paradigm are third party logistics companies like DHL, ERP solutions providers like SAP and automation solution providers like Brooks Automation. 5

CONCLUSIONS AND FUTURE WORK

This report has described the formulation of a conceptual framework of manufacturing paradigm that links the manufacturing practices to the competitive strategies adopted. The research has brought together fragmented views with the literature about the paradigmatic and strategic approach to manufacturing with respect to competitive strategies.

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The result is a framework to guide the adaptation and development of manufacturing practices/tools to achieve the manufacturing/competitive objectives that are aligned with the intended competitive strategy adopted. As for the future challenges, the proposed conceptual framework is still highly theoretical as it is a product from the analytical derivation of dataset from the literature. Nonetheless, the framework will serve as the basis for future research work in the validation of this conceptual framework with empirical dataset from industrial practices. Throughout this research, the authors are mindful of the generalisations made in the analysis to rationalise the framework. Further empirical testing is therefore necessary to validate the theoretical findings. Our final thoughts on future work are that this framework will benefit from continued and cross-sectoral studies. These will help to ensure that the proposed framework is robust enough for industry-wide application. To this end, we will now go ahead with the empirical testing of the conceptual framework, and subsequently will refine and update our framework as an auditing tool for practitioners.

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INDUSTRIAL SIGNIFICANCE

The greatest impact of this research will be to the practitioners who intend to adopt new manufacturing practices/tools into their organisations. As highlighted in the research, most manufacturing organisations have so far imitated the practices/tools adopted by other successful companies without understanding much about their implications in the context of their business competitive environments. This has resulted in a strategic mismatch or misalignment between the practices/tools adopted and their intended competitive strategies, which impaired the performance of the company. This framework will be a valuable aid to help manufacturers gain insights into the choices of practices/tools they could adopt or adapt to achieve competitive advantage in their businesses.

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