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African Journal of Business Management Vol.5 (30), pp. 11844-11855, 30 November, 2011 Available online at http://www.academicjournals.org/AJBM DOI: 10.5897/AJBM10.1265 ISSN 1993-8233 ©2011 Academic Journals

Full Length Research Paper

The importance of project management in small- and medium-sized enterprises (SMEs) for the development of new products through E-collaboration Marjan Mohammadjafari1*, Shamsuddin Ahmed1, Siti Zawiah Md Dawal1 and Hadi Zayandehroodi2 1

Department of Engineering, Design and Manufacturing University of Malaya, Lembah Pantai, 50603 Kuala Lumpur, Malaysia. 2 Department of Electrical Engineering, Kerman Branch, Islamic Azad University, Kerman, Iran. Accepted 29 November, 2010

The research in this paper seeks ways for manufacturing companies to accomplish projects in real time with less cost. This paper describes a new model using critical success factors of implementing projects in small- and medium-sized enterprises (SMEs). The factors in the conceptual model were identified in past studies and are validated from interviews with 20 project managers in the electronics industry in Iran. Several prior researches have suggested critical success factors for reducing time and cost in the development of a new product. These factors are related to design, product, planning and procurement. However, none of these studies has proposed a model that specifies practices that should be undertaken to facilitate the progression to reduce time and cost in developing new products in SMEs. Following this, a development of a new model will likely prove important to help SMEs to understand what is required in order to be an effective global organization in terms of reducing time and cost through electronic collaboration (E-collaboration) and project management. The concept and value of E-collaboration and project management, and its strengths and weakness on SMEs, is also explained. Key words: E-collaboration, project management, small- and medium-sized enterprises (SMEs), new product, reduces time, reduce cost. INTRODUCTION The manufacturing industry plays a vital role in the economy of many countries (Mahaney and Lederer, 2009). A large number of small- and medium-sized enterprises (SMEs) make up the manufacturing industries of these countries, but they have some limitations for entrance into and sustainability in the market, especially on a global scale (Mohammadjafari et al., 2011). SMEs are often suppliers to big companies and are producers of final products for ultimate customers. In the case of their final products, SMEs cannot compete with larger companies without paying due attention to customer

*Corresponding author. E-mail: [email protected]. Tel: 0060173141328.

needs. In the current customized market environment, SMEs are able to increase product varieties, but the time for developing a new product is often more than initially thought. However, new product introduction must be very timely and cost competitive. One of the paths to time and cost reduction in new product development is to create a collaborative environment between the various departments of one factory. Four departments, namely design, production, planning and procurement, have a key role in SMEs (Bashir, 2008; Kusar et al., 2004; Roberts, 2006; Xie et al., 2002; Zhou et al., 2008). Collaboration can be established in different ways using different tools, one of which is E-collaboration (Bafoutsou and Mentzas, 2002). The use of E-collaboration technologies has become essential for supporting

Mohammadjafari et al.

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Figure 1. Project management process.

product development projects (Qureshi et al., 2005). Alternatively, in many manufacturing industries, projectoriented management has become a way to develop a better work environment (Mohammadjafari et al., 2010a). The research on which this paper is based seeks to understand how companies based in the electronics industry in Iran have approached the implementation of their projects in real time with less cost. By investigation into and interview with some of these companies, it emerges that a major problem faced in new product development by such companies is a lack of coordination between different parts of the company. If the related sections engage in electronic collaboration, led by the project manager, the information for production of a new product will be integrated, and the project will be finished in real time. Furthermore, the cost for production will likely decrease. The focus of this paper, then, is to propose a conceptual model with which to improve new product development in SMEs through E-collaboration and project management. E-collaboration E-collaboration is an active cooperation among different individuals to accomplish a joint task using electronic technologies (Cai and Kock, 2009). “E-collaboration and collaborative tools bring geographically dispersed teams together for virtual meetings across great distances” (Bafoutsou and Mentzas, 2002). “The field of collaborative computing encompasses the use of computers to support coordination and cooperation of two or more people who attempt to perform a task or solve a problem together” (Borenstein, 1992). In this study, the authors consider E-collaboration between different departments of one factory. Project management Initially, a project emerges because there is something important and complex to be solved. The project

organization then develops due to a need for a purposeful organizational effort and a high level coordination in order to execute a number of activities (Sِderlund, 2004). Project management is a methodology for managing a project (Ramaprasad and Prakash, 2003). “Project management, including the tools, techniques, and knowledge-based practices applied to manage the creation of products and services, is becoming an increasingly accepted and applied discipline across industry sectors” (Jugdev et al., 2007). Project management is “the manner of implementation, of expertise, paraphernalia, knowledge and modus operandi to an extensive range of activities for the fulfillment of prerequisite of the specific project” (Qureshi et al., 2009). Project management has become a distinctive way to manage business activities nowadays (Filippov and Mooi, 2010). Project management is becoming a key strategy for managing organizational change in contemporary organizations, with corporations, government, academia and other organizations recognizing the value of common project approaches and of educated employees for the execution of projects (Rooij, 2009). Most of all, project managers are in the front-line when it comes to assuring customer satisfaction (Kirsilä et al., 2007). By these definitions, and due to the importance of the role of project management in the success of projects, the authors consider related department collaboration on product development by the project manager through ecollaboration. Project management process All projects have a beginning and an ending, and project management has corresponding initiating and closing processes. The middle, or work of the project, is managed by planning, executing, and monitoring and controlling processes (Guide, 2004). Effective project management involves repeated performance of these processes, as illustrated in Figure 1. For this research, the project manager leads the projects through the steps presented in the Figure.

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Afr. J. Bus. Manage.

Table 1. Project management institute project management area.

Project management area Integration management Scope management Time management Cost management Quality management Procurement management Risk management Communications management Human resource management

Description Unifying the activities and resources of the project to complete. Ensuring that the project includes all the work required, but only the work required to meet the project requirements. Ensuring timely completion. Ensuring that the project can be completed within the project budget. Ensuring that the project product will satisfy the project requirements. Managing the purchasing and acquisition of outside goods and services required to complete the project. Identifying and managing project risks. Ensuring timely and appropriate project communication. Organizing and managing the project team.

Adapted from Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK Guide), 3rd ed., Project M anagement Institute, Inc., 2004. Copyright and all rights reserved.

Project management area Projects are typically part of an organization. The relationship between the project and organization varies, and that relationship affects the scope of project management responsibilities. Although the nature of project management responsibility varies by organization and by project within an organization, project management encompasses many areas. The Project Management Institute in the United States in 2004 (Project Management Institute, 2004), listed project management areas, summarized in Table 1, which provides a sense of the breadth of the project management task. The Project Management Book of Knowledge (Project Management Institute, 2004) provides comprehensive description of activities associated with each area, the interaction of the areas with the key project management processes described earlier, available management tools and techniques for each area, and input and outputs of each area (Jacobson et al., 2006). In this research, the authors attend to two areas of project management from nine existing areas, because of the operation of the conceptual model. One is integration management and the other is communications management. Small and medium enterprises in developing Ecollaboration Small and medium enterprises (SMEs) play an important role in promoting economic development (Ale Ebrahim et al., 2009a). In most countries, SMEs dominate the industrial and commercial infrastructure (Deros et al., 2006). SMEs play a very important role in national economies, providing job opportunities, act as supplier of

goods and services to large organizations, and any lack of product quality could adversely affect the competitive ability of the larger organizations (Deros et al., 2006). “Small firms are indeed the engines of global economic growth” (Acs et al., 1997). SMEs have an important role in flows of foreign direct investment (Kuo and Li, 2003). SMEs also serve as the key engine behind equalizing income disparity among workers. SMEs are increasingly internationalizing their business activities (Beck et al., 2005). According to Ale Ebrahim, there are many accepted definitions of SMEs. The classifications vary from industry to industry and from country to a country, different countries accept dissimilar criteria such as employment, sales or investment for defining small and medium enterprises. In the absence of a definitive classification, an agreement has developed around the European Commission (EC) criteria for SME classification. This definition adopts a quantitative approach emphasizing “tangible” criteria, employee numbers (up to 250 employees), turnover (less than 50 million EUR) and balance sheet statistics (less than 43 million EUR) (Ale Ebrahim et al., 2009b). Our attention in this study is focused on SMEs in Iran. While the term SME has varied definitions from different organizations, the most acceptable one is similar to the EC definition, except for financial criteria. According to these definitions and the importance of SMEs in manufacturing industries in this research, the author chose these types of companies. Strengths and weakness characteristics of SMEs in developing E-collaboration For a better understanding of SME activity, summary information of SME characteristics is listed in Tables 2


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Table 2. Strength characteristics of SMEs.

Strength Easily adaptive to new market conditions, flexible to change, developing customized solutions for partners and customers, dynamic in activities

Reference (Ale Ebrahim et al., 2009b; Aragón-Sánchez and SánchezMarín, 2005; Davis and Sun, 2006; Mezgár et al., 2000)

Knowledge creating

(Ale Ebrahim et al., 2009b; Egbu et al., 2005)

Excellent at multi-tasking

(Ale Ebrahim et al., 2009b; Schätz, 2006)

Powerfully correlated and inter-related with respect to innovation

(Bhagwat, 2006; Gray, 2006; Huang et al., 2001; Jutla et al., 2002)

Capable to answer quickly to customer requests and market changes, customers focused

(Abdul-Nour et al., 1999; Ale Ebrahim et al., 2009b; Kim et al., 2008)

Quick decision making process

(Lawson et al., 2006; Schätz, 2006)

Able of going global rapidly

(Ale Ebrahim et al., 2009b; Gassmann and Keupp, 2007)

Routine processes, flexible structures

(Bhagwat, 2006; Gassmann and Keupp, 2007; Haga, 2005)

Useful

(Beck et al., 2005)

and 3. New product development New product development (NPD) is a business process for developing new products for a company, whether it is an upgrade of an existing product or a new concept (either for the company or for the customer). It includes all activities from the development of an idea or a concept for a product, to the realization of the product during the production stage and its introduction into a market place (Hohenegger et al., 2007). SMEs need to develop their products for competing in the market, and then they need to develop new products. In that case, the authors tend to focus on new product development in SMEs.

Vandenbosch, 1996; Griffin, 1997; Roemer and Ahmadi, 2010; Selvaraj et al., 2009; Tan and Vonderembse, 2006; Xie et al., 2002). A summary of the prior studies is shown in Table 4. METHODOLOGY Model verification methodology The primary ideas on the development of a conceptual model were devised based on a brainstorming process with academics. Following the primary expansion of the conceptual model, feedback was obtained from participants in the industry and academics. The objectives of obtaining feedback on the model include:

RELATED STUDIES

(1) Identify how integration can be achieved among different parts of a manufacturing company. (2) Reduce new product development time by using the conceptual model. (3) Reduce the cost of new product development by using this model.

By investigation into prior research, the author finds one of the problems in many industries is the long time required to develop a new product. From the literature review, it is discovered that four departments are influential in reducing time and cost in new product development in manufacturing companies. These departments are those of design, procurement, planning and production (Bashir, 2008; Carter, 1997; Clift and

The validation of the conceptual model was conducted through oneto-one semi-structured interviews with 20 participants. All participants were from the electronics industry and each held a project management position. All had related knowledge and experience. The interviews were conducted via video conferencing. The duration of the interviews lasted between 50 min to 1 h. The participants were given an explanation regarding the purpose of the feedback, the purpose of the conceptual model, some background of the research that lead to the development of the model, and key

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Table 3. Weakness characteristics of SMEs.

Weakness Lagging in the export, lack the resources necessary to enter foreign markets

Reference

Weak at converting research and development into effective innovation

(Ale Ebrahim et al., 2009b; O'Regan et al., 2006)

Scarce resources and manpower

(Abdul-Nour et al., 1999; Chou, 2008, Kim et al., 2008; Westerlund and Rajala, 2008)

Strategy formulation on the basis of what available, lack a long run perspective

(Ojeda-Gomez et al., 2007; Yusuff et al., 2005)

(Jansson and Sandberg, 2008; Mahajar et al., 2006)

Limited degree of information technology (IT) implementation

(Chou, 2008; Egbu et al., 2005; Eikebrokk and Olsen, 2007; Sarosa and Zowghi, 2003)

Lack of industrial engineers or right kind of manpower to apply various statistical and managerial methods or tools

(Ahmed and Hassan, 2003; Ale Ebrahim et al., 2009b)

SMEs shy away from formal projects and long-term initiatives and instead only participate in small-scale, once-off initiatives

(Burke and Gaughran, 2006)

concepts from the literature. In the feedback process, the opinions of the industrialists and academics were obtained based on their knowledge and experience.

Methodology for review of the related articles The review is based on reliable publications. It covers aspects like scope of reduced time and cost by E-collaboration through project management approaches. The articles are collected from leadings journals and books related to the topic published since 1992. There is a poor track record of reducing time and cost by Ecollaboration through project management. Only a few studies have been conducted on this subject. In order to prove this allegation, the distribution of published articles per year extracted from the Web of Science database is demonstrated in Figures 2 and 3. However, the tendency of publication has shown that E-collaboration, SMEs, project management and new products are an interesting topic. In order to prove this assertion, the distribution of published articles per year extracted from the Web of Science database is demonstrated in Figures 4 to 7. Therefore, in order to determine the formation of active management involvement in the field, we consider a broader scale of literature. The references used contain approximately 55 articles out of 400 selected articles, which were taken from 670 pre-investigated items, shown in Figure 8.

Theoretical foundations and conceptual model As indicated by the review of the literature, it is almost universally accepted that the time needed for new product development is a major concern for SMEs (Hung et al., 2007; Langerak and Hultink, 2008; Roemer and Ahmadi, 2010; To et al., 2009). However, an examination of the interdisciplinary literatures identifies four departments that affect the completion of projects in

terms of time and budget: design, planning, production and procurement. The effects of these four departments have been studied separately under several theoretical perspectives in recent years (Mohammadjafari et al., 2011; Roberts, 2006; Roemer and Ahmadi, 2010; Selvaraj et al., 2009). However, none of these studies has proposed a model that specifies practices that should be undertaken to facilitate the progression to reduce time and cost in developing new products in SMEs. To understand the importance of coordinating these sections with the project manager and validated the model, the author interviewed 20 project managers. The majority of project managers interviewed stated that the lack of coordination between the related departments in production was the major problem in the inability to reduce time and cost. Our interviews led us to the primary conclusion that the long time required for new product development results from a lack of coordination. The companies interviewed were in the electronics industry. The purpose of these interviews was to understand the companies’ process for collaboration among four departments into product and process development and to elicit insights into how they had overcome barriers along the way. Using the information from these interviews, we developed a conceptual model that is characterized by the major activities required for interdepartmental collaboration in new product development. Our case studies suggest that companies that had achieved reduced time for new product development had more effective interdepartmental collaboration. Four critical elements of this process are captured in the explanatory


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Table 4. Numerous of influence factors for reduce time and cost based on literature review.

√ √

√

(Clift et al., 1996) (Griffin, 1997) (Carter, 1997) (Hartley et al., 1997) (Athakorn et al., 2001)

√ √ √

√

√ √ √

√

√

√ √

(Xie et al., 2002) (Kusar et al., 2004) (Petersen et al 2005) (Tan and Vonderembse, 2006)

√ √ √

√

√

√

(Roberts et al., 2006)

√

√ √

√ √

√

√

√

√

√ √

√

√ √

√ √ √

√ √

√

√

√

√

√ √

√

Reference

Speed

√

√

√

Techniques

identifying critical chain Development capacity

Setting buffers

CAD technology

Time compression Technologies

Virtual production

Supplier integration

Lead user

Source information

Project strategy Concurrent engineering Training and rewarding Simplification of structure

Product complexity Involvement of partners Concurrent product Team structure

Tool

Process

Innovation

Organization

Quality control

Planning

Procurement

Design

Product

Subject

Manufacturing

Project management

Search result

√

(Zhou et al., 2008) (Bashir, 2008) (Ahlemann, 2009) (Selvaraj et al., 2009) (Xia-Bao et al., 2009) (Lifang et al., 2009) (Vinodh et al., 2009) (Hebert et al., 2010) (Roemer and Ahmadi, 2010)

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Table 4. Continued.

√

creative software

pilot study

prototype

pattern matching

Source information

statistical

Review

www-based

Math. Modeling

Experiment

Empirical(large n)

Case study(small n)

Framework

Theory -Building

Process Model

Simulation

Research methodology

Other

variety

Quality

cost

Time

E-collaboration

Performance effect

√ √

√

√ √

√

√ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

√ √ √ √ √ √ √ √ √

√

√ √

√ √

√ √ √ √

√

√

√ √ √

√ √

√ √ √

√

√

model (Figure 9) and supported by prior researchers (Petersen et al., 2005; Roemer and Ahmadi, 2010; Xia-Bao and Li-Xi, 2009; Zhou et al., 2008). In this model, we consider four sets of hypotheses: H1: The communication between a designer in the department of design and project manager is essential before starting production.

√ √ √ √

H2: Coordination between product manager and project manager is necessary for reducing time for new production development before the start of production. H3: The procurement manager must report to the project manager about preparing equipment before starting a project. H4: The project manager must be familiar with the product plans and then the control project

Reference

(Clift and Vandenbosch, 1996) (Griffin, 1997) (Carter, 1997) (Hartley et al., 1997) (Athakorn et al., 2001) (Xie et al., 2002) (Kusar et al., 2004) (Petersen et al., 2005) (Tan and Vonderembse, 2006) (Roberts et al., 2006) (Zhou et al., 2008) (Bashir, 2008) (Ahlemann, 2009) (Selvara et al., 2009) (Xia-Bao et al., 2009) (Lifang et al., 2009) (Vinodh et al., 2009) (Hebert et al., 2010) (Roemer and Ahmadi, 2010)

manager must report to the project manager before arriving at the project in the line of product. Conclusion This paper looks at the development of a new model using critical success factors of reduce time and cost that were identified in past studies and


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Figure 2. Number of publication in field Ecollaboration, project management and new product (source: Web of Science ® 2010).

Figure 3. Number of publication in field ecollaboration, project management and SMEs (source: Web of Science ® 2010).

Figure 4. Trend of E-collaboration (source: Web of Science ® 2010).

validated from a survey. Increasingly, more studies create awareness of the critical success factors that are important in reducing time and cost in new product development. These factors are the departments of

design, planning, procurement and production. Additionally, the author presented some definitions of the value of E-collaboration, project management, SMEs and new product development. Future research can improve

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Figure 5. Trend of project management (source: Web of Science ® 2010).

Figure 6. Trend of SMEs (source: Web of Science ® 2010).

Figure 7. Trend of new product (source: Web of Science ® 2010).


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Figure 8. Schematic diagram of the literature.

Department of Design Department of Production

Department of Procurement

H2

H1

Project Manager by E-Collaboration

Reduce Time of Product

Production Line

H3

Department of Planning

Decrease Cost of Product H4

Figure 9. Conceptual model for reducing time and cost.

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