Economic justification of group technology software: Documentation and analysis of current practices

Abstract Group technology (GT) software represents a type of information systems that support data analysis and decision making in connection with implementations of the GT philosophy. Thus, GT software is used for design and pre-production planning activities rather than for frequent and routine operating decisions. Considering that GT is fundamental to many modern manufacturing technologies (e.g., computer-aided process planning, design for manufacturability, cellular manufacturing), the justification of GT software systems is of particular interest. However, very little information on this process, and its related problems, exists in the literature. This paper documents and analyzes justification procedures for GT software that have been recommended in the literature or followed by GT software adopters. The major purpose is to explore and/or improve on the types of benefits that are associated with GT software, the sources from which potential adopters gain access to benefit data, and the relevance and accuracy of these data for the purpose of justifying GT software. A classification scheme for benefits is introduced to help structure this discussion. The findings are based on information collected from three major software vendors, interviews with five manufacturing firms, and published sources in the GT and information systems areas. Although there is a body of collective experience regarding GT applications that can be used to estimate benefits, this study indicates that economic justification of GT software is surrounded by great uncertainty. It is logical to call for more research on appropriate measurement systems and performanceinfluencing factors so that detailed and stratified data can be collected. However, the difficulties associated with this, and the slowness by which new data are likely to be accumulated, suggest that this is not a viable (short-term) solution to the justification problem. Rather, the insights gained from this study suggest that accuracy in economic projections requires a solid understanding of the application areas to which GT software will be applied, the nature of the potential benefits, and the conditions under which these benefits will occur. This knowledge may prevent the uncritical adoption of benefit data from published sources or from other firms. It can be noted that the linkage between economic justification (i.e., economic forecasts of implementations) and implementation strategies is usually absent or only weakly developed in the literature. This relationship needs to be explored in future research in order to fully understand technology justification processes. This is particularly important in the case of GT software since many major benefits are indirect, i.e., their realization is not based on efficiency gain derived from software usage, but on the implementation of decisions reached by analyzing data. The findings of this study should be of interest not only to practitioners contemplating adoption of GT software or researchers studying GT applications, but to anyone involved with technology justifications in general.