In 1991,
agile manufacturing, a flexible way of creating a product while
keeping the customer involved in the process, debuted as a
conceptual framework for efficient manufacturing and greater
productivity.
The overriding strategy supporting agile manufacturing is mass
customization. "The key is to be able to respond to the individual
needs of customers, while still engaging in mass production," says
Steven L. Goldman, an Andrew W. Mellon distinguished professor in
humanities at Lehigh University in Bethlehem, Pa. "The basic idea
(in mass customization) is to get the right product to the right
person, at the right time," echoes Peter G. W. Keen, author of the
book Every Manager's Guide to Business Practices.
Agile manufacturing also takes advantage of strengths in
information technology. "Earlier production didn't require IT,
although IT was used," Keen says.
Key IT enablers for agile manufacturing strategies include
enterprise resource planning, product data management, object
technology, supply-chain software and intranets and extranets.
One-on-One
Thanks to global networks and telecommunication capabilities,
businesses can deal with customers and suppliers on an individual
basis, says Roger Nagel, a senior fellow at Enterprise Systems
Center, a Harvey E. Wagner professor at Lehigh and former executive
director and CEO of Lehigh's Iacocca Institute.
"We now see employees sharing data across the world, examining
everything from engineering drawings to legal documents on two-way,
PC-based video and data conferences," Nagel says. "Similarly, senior
executives are using these same means to reduce the costs of
managing global businesses and in nurturing relationships with
clients, partners and suppliers."
The major catalyst for agile manufacturing was the rise of
overseas competition, particularly from countries like Japan and
Germany. Under pressure from Congress to award weapons contracts to
U.S. manufacturers, the Pentagon turned to the Iaccoca Institute for
thoughts on how to help increase industrial efficiency and
productivity.
After convening more than a dozen top U.S. manufacturers, the
Iacocca Institute issued a report in 1991 outlining a long-term
vision for agile manufacturing.
"Essentially, manufacturing needed to become a service," Goldman
explains. Companies trying to compete on manufactured products alone
were getting undercut by competitors offering similar products at
lower prices. Services, on the other hand, could be sold at much
higher value.
And if you take the opportunity to insinuate service into a
product, Goldman says, you'll have better luck holding on to your
customers. Services that have shown success include timely delivery,
as well as giving customers the chance to personalize products by
choosing from a list of options, Goldman says.
"Even as far back as five or six years ago, American
manufacturing looked like a disaster zone. Today, though, U.S.
productivity is comparatively very good," Keen notes. Big
practitioners of agile manufacturing include General Electric Co.,
Ford Motor Co., The Boeing Co. and Caterpillar Inc., Goldman says.
Modularization is another way of doing agile manufacturing. It
involves building products from components. Customers can then pick
and choose the components that will appear in the items they
purchase.
GE was one of the first companies to pursue modularization. "In
the mid-1990s, GE's locomotive division was in the doldrums,"
Goldman recalls. Then GE began selling railroad car "components" in
a choice of color combinations, a tactic that turned out to be a big
hit with the division's mainly overseas customers. At the same time,
the locomotive division cut its time to market roughly in half.
Modularization is supported by business strategies like
concurrent operations, in which company divisions such as
manufacturing, design and marketing work collaboratively, often
sharing things like product ideas and production schedules over IT
systems -- product data management, for example. Increasingly,
concurrent operations are being extended outward to partners like
suppliers and subcontractors through technologies such as
supply-chain software and Web-based e-commerce.
Caterpillar took the notion of modularization one step further by
replacing the 80-page manual previously used for configuring its
earth-moving equipment with a software-based product configurator.
Another model within agile manufacturing is virtual
manufacturing, which means a company doesn't do all its own
manufacturing. Instead, it outsources some or all the work to
subcontractors. Most car companies are adhering to the virtual
manufacturing model. That allows the car company to focus on
services like product design and marketing. "Car companies have
become auto assemblers, as opposed to auto manufacturers," Goldman
says. DaimlerChrysler is already manufacturing less than 30% of the
parts used in its cars; Volkswagen AG, less than 12%.
Toyota Motor Corp. is looking at "the five-day car" and possible
sales of autos over the Internet. U.S. manufacturers are feeling
pressure to reduce their current production cycle of about six weeks
to one week or less.
So one of the latest trends is to further speed up time to market
by outsourcing not just the manufacturing of individual auto
components, but also the assembly of multiple car parts into
subassemblies.
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