Manufacturing as a service business: CIM in the 21st century

Abstract The long term future impact of CIM upon our society as a whole will be to make a wider variety of products available at reasonable prices combined with high levels of variety, customization, timeliness, newness and quality. CIM changes manufacturing from a physical and mechanical system into an information and knowledge work activity subject to the laws of economy of “scope” as well as “scale”. This means that the factory will no longer be an economic barrier to rapid rates of innovation; and sophisticated, complex and intimate vendor-customer relations. However, in addition to investing in new technology, the firm will need to develop new strategies for each business area and new tactics for marketing; more flexible organizational structures designed to implement strategies based on timeliness, innovation, variety, niche markets and product augmentation; sophisticated policies for human resource management; and very different accounting systems and financial analysis algorithms. The ultimate result of CIM will be new ways for the manufacturing industries to serve society and a new style of competition in the global marketplace. Wage rates will be irrelevant in most industry sectors, as will scale economies. CIM will “level the playing field” but as the technology for achieving flexible, low cost, high quality production becomes available to all competitors the real competitive advantages will shift from production economies to innovation—the skills needed to: identify a market niche and its special needs; to design a “product/service” that will meet that need better than anyone else can meet it and in a way that is hard to copy; to quickly design, produce and distribute the product, to be able to quickly move onto the next product; and to be able to manage the complexity of many different products and many different customers being served from the same facility and at the same time. The benefits to society will come from changes in the nature of manufacturing work as well as the greater variety of reasonably priced products available. Manufacturing firms will have to learn how to recruit, train, mange, evaluate and reward “knowledge workers”, as machines and electronic controls take over the traditional “touch labor” and even most of the plant floor “skilled” labor of the past. Firms will also need to change their concepts of strategic thinking—from a focus on products and markets to a focus on competitive advantage in terms of process technology and systems and the institutional learning that allows the firm to effectively and efficiently utilized advanced technology—in effect an experience curve based upon a succession of non-repetitive (but conceptually similar) events. This will lead to business strategies based upon complexity (rather than the tactics of simplification popular in the 1980's); in terms of short product life cycles, customization, rapid design and production cycles and close coupling with the customer over an extended period of time. From an historical perspective this might be seen as the “deindustrialization” of manufacturing; a situation that can be called “the automation of custom manufacture” where the “client” has an opportunity to participate to at least some degree in the design of the product; and to decide how much “service” in terms of custom features and speed of delivery he is willing to pay for. This new concept of manufacturing as a service will be difficult for competitors to copy—especially if it is a one-time-only custom event. In effect, institutional learning of CIM utilization skills will be the competitive advantage of the firm, the switching cost to customers, and the barrier to entry for competitors.