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Pathways to Agility: Mass Customization in Action
John D. Oleson
ISBN: 0-471-19175-2
Note: The Figures and/or Tables mentioned in this sample chapter do not appear on the web.
Chapter 1 Moving to the Industrial Society
H A P T E R 1 The Historical Perspective
The history of agility goes back to when hunter-gatherers were pursuing food. They needed to outsmart their prey and react to unexpected events to survive. Their days were filled with unforeseen events as they encountered the hazards and opportunities of the day. It was not a controlled environment, but instead one that required the hunter-gatherers to build the capability that allowed them to meet the unexpected. The more agile were successful in this pursuit.
Agility continued with the farmer who needed to be prepared for and respond to unexpected changes in the weather, to learn the practice of effective agriculture. In the beginning, farmers did not know the best time to plant and harvest, but eventually learned by responding to changing conditions. Uncertainty in agriculture, where unpredictable markets, weather, and crop yields affect the outcome, caused the farmer to become agile in his approach. In most cases farmers have been successful in adapting to uncertainty and producing adequate harvests. Now, the uncertainty has shifted from the impact of Mother Nature to variations in the market.
A crafts worker was a custom producer who made a single unit for a single customer tailored to the specifications developed for that customer. This practice applied to everything from furniture to clothing. The town blacksmith worked with forge and metal. The furniture maker worked with wood. The tailor worked with cloth. Specialization went further with the brewer making beer and the seamstress making women's clothing while the tailor made clothing for men. Each individual craftsperson had a specialty but adapted the product to the requirements of the customer. This did not mean that a wide variety of products was available but the adaptation occurred within the capability of the individual crafts worker. Agility and the ability of crafts workers to accommodate the needs of their customers have been characteristics that have kept craft important in our lives.
Society has seen the transition from the hunter-gatherers to the agricultural age and the dominance of the crafts worker to the industrial revolution where manufacturing became a prime driver. The industrial age moved to a mass production society-where workers were not providing the skills of their hands as much as they were providing the skills of their heads. Workers determined how the machine would do the job. They were also working in a disciplined, assembly-line world where many of the tasks were routine and did not require the skill of crafts workers, who had used tools, mind, and hand to produce the product or service. Industrialization was a continuously improving concept. History has recorded many surges in the rate of change or improvement.
Eli Whitney's invention of interchangeable parts was a major mile-stone in the evolution of the crafts worker to the concepts of mass production and worker specialization. The military people did not realize that the boxes of parts in the Whitney shop were practically rifles; they expected to get a few handmade and assembled rifles every week. This caused frustration on the part of the military procurement people. Assembling muskets from parts that were made to the same specifications started a concept that became the foundation of mass production.
M A S S P R O D U C T I O N
Mass production accelerated the industrial revolution and put an automobile in everyone's garage. Henry Ford perfected the concept of interchangeable parts starting in the early 1900s. He added the moving assembly line, with workers who focused on tasks defined for their workstation. The worker no longer needed elaborate training for the task, and the division of labor that was characteristic of the craft era was taken to the lowest possible level. A worker would perform a focused set of tasks that did not require broad or extensive training. Rather, this move to mass production required a skilled, knowledge-based worker who perfected the way things were done. These knowledge workers not only perfected the individual tasks at a workstation but also integrated all the tasks into supply chains and assembly lines. Thus the foundation of mass production was established and became the technology that lasted for more than a half a century. It was the king of the competitive world. It ruled the manufacturing enterprise and became deeply ingrained.
Mass production improved significantly after the early 1900s and became the method that resulted in the highest productivity in the industrial world. It was the method of choice for high-volume manufacturing. After World War II, however, for some countries, like Japan, high volume was not possible. Japan did not have a mass production economy as it struggled to establish itself in the industrial world. A different approach was needed, and a revolutionary concept grew out of necessity. The Toyota Motor Company, which originally was named Toyoda after the founding family, started in 1937. It produced trucks as directed by the military government. The passenger car was a dream, but it had to wait. The trucks were produced using the craft method. After the war, the company struggled to establish itself as a force in vehicle production but had produced less than 3,000 passenger cars by 1950. Its struggle appeared to be unsuccessful, and the company seemed to be on its way to extinction. It had worked for 13 years to build those few automobiles and some trucks and was floundering. Something had to be done, and Eiji Toyoda set off to study the workings of the Rouge Plant of Ford. He concluded, however, that the Ford system would not work back home at Toyota; he needed something that worked for smaller-volume production.
Under the direction of Eiji Toyoda and Taiichi Ohno, the Toyota Production System was developed. It focused on quality, productivity, rapid changeover, multitask machines, and economics. It became the envy of all those in the auto industry and beyond, beginning the revolution that changed the approach to manufacturing. It became know as lean production.
L E A N P R O D U C T I O N
Lean production challenged many of the techniques and paradigms that were deeply rooted in the modern mass production society. As with any change, the concepts were not easily adopted by others, especially in the Western world. The global manufacturing establishment needed to learn the principles of lean manufacturing and then needed to adapt them to their situation. People needed a significant amount of time to understand just what made up all of the important elements of this system. It was difficult to focus on product design in a world that was dictated by ease of production, and it was difficult to integrate quality concepts into all of the firm's activities. Integration of function was not readily understood in cultures where the individual was paramount. Japanese culture focused on people contributing to the group with an authority figure in the lead. Being part of the group was of great importance to the Japanese individual. Hard work and competing with the world for the good of the country was also a dominant characteristic of the Japanese workforce of the time. Change occurred because of these motivational forces and was not handicapped by the needs of the individual. Lean production emerged from that world as a force to be reckoned with.
The Japanese presented some different but interesting situations that would not be understood by the Western world. For example, while I was working to build a plant in the Chiba Prefecture, east of Tokyo, a Japanese engineer had a "better method" to provide heat and energy to a process unit. He convinced the group of people that the new design had significant benefit and that it would work. Design and construction proceeded and start-up was under way. However, the new heating system did not work as planned, and the Japanese engineer was under stress. An interesting thing happened. All the members of the group left the job of designing and managing the construction of the plant and joined the start-up team. The group persisted until the new design worked. At the next meeting the Japanese engineer bowed humbly and said domo arrigato (thank you). It was not clear what the consequence of the design not working was, but it was probably much more drastic than what would have occurred in the West.
Lean production became the dominant method for Japanese manufacturing. Although the culture that drove lean production made it very difficult to adapt the techniques to companies outside of Japan, the adaptation process did begin in the 1970s with the auto industry. Ford Motor Company had programs of integration aimed at concurrent engineering. Quality is Job #1, and design for manufacturing. Time for new model introduction was being reduced from five to six years to three or less. Product quality was improving, and initial defects were reduced. Workforce productivity increased as designs for manufacturing techniques were introduced. The supply chains shifted toward just-in- time (JIT) delivery to assembly plants, and suppliers were more closely integrated with the company. They were asked or were directed to improve the efficiency of their operations and deliver components at a lower cost with a higher quality. Companies moved from doubting whether the Toyota System would work to learning and adapting its concepts and principles in order to compete. Thus, the lean production concept had become a part of the industrial world in the West. It built on the concepts of mass production and used the technology developed in Japan to change the way things are done.
The movement from the hunter-gatherer to crafts worker to mass production has been greatly simplified in the preceding discourse. Like-wise, the advance of lean production has been condensed. It is not the purpose of this book to develop these concepts in detail. However, it should be recognized that each of the advancements had many people contributing, and people like Eli Whitney, Henry Ford, and Eiji Toyoda all used the thinking of others and adapted that thinking to their enterprise. Their contributions were significant, and they represent the technology change leaders in the era in which they excelled. The same will be true in future advances of manufacturing technology.
The changes mentioned in Figure 1.1 focus on manufacturing technology. The changes that have been occurring in more recent times stress the efficiency of the whole enterprise. Automation of both the manufacturing process and material movement has been occurring throughout the development of modern manufacturing technology. Concurrent activity was demonstrated in the assembly lines at Ford in the 1980s, where parts were being produced at the same time autos were being assembled. This concurrent activity had not reached the knowledge-based parts of the firm. Design was sequential with one step being completed before another. The ability to rapidly introduce new models by the Japanese automakers alerted Detroit that the linear approach needed to change. Ford's program of concurrent engineering resulted from this. To accomplish this, the Ford people focused on the workflow processes and how they fit together. The workflows dealt with the design and development of new Ford models. They needed to shift from sequential engineering to parallel, or concurrent, engineering. Ford found that many tasks could be performed during the design that did not have to interface with others and thus could go on while the critical elements were getting integrated. The parallel approach to the design of a car was based on the agility designers developed as they worked on their part of the car. This meant that it was necessary to anticipate what others were doing. A high degree of agility was required to adjust the designs so that the parts fit and nested together. The ability to anticipate what others were designing was required to make the system efficient. The result was a significant improvement in the time to market for a new model. Lean production used many of the principles of mass production but made a significant improvement that led to Womack, Jones, and Roos coining the phrase lean production in The Machine That Changed the World. Lean production became and continues to be the wave of industrial improvement, and firms are adapting to lean concepts. In Womach and Jones's next book, Lean Thinking, they extended the lean concept from focus on production to focus on the enterprise. However, they could not answer the question of what would come after lean. They saw, as they toured the world promoting their Machine book, that so much needed to be done to get lean principles adopted, that they could not envision the next wave of change. This is where agility and mass customization enter the scene. They are not just an extension of progress but impact all parts of the industrial activity. Mass customization is an extension of the work of the crafts workers. To influence mass production and lean manufacturing as people add capability to offer more variety or quicker response to the changing needs, agility is required.
A New Manufacturing System?
The competitiveness of U.S. industry has improved significantly over the last decade. Much of this has been due to the changes in information systems and the reengineering of workflows. Continued progress on the efficiency of the manufacturing processes has also contributed to U.S. industrial competitiveness. Another force has been the U.S. government's recognition that it can have a significant impact on how effective industry can be. Agility has been a important part of the improvement and will continue to be an important factor.
Although agility has existed throughout the ages in the various steps that define the progress of humankind to the present industrial state, its existence occurred to various degrees out of the necessity of the situation and it did not stress preparation for the unexpected. That is, agile responses to a situation occurred, but they tended to be coincidental. As mass customization emerged in the late 1980s agility became a more prominent part of industrial activity. It was detected in both lean and mass production as competitive pressures demanded more variety and a better fit to all customer needs. Mass customization continues to grow as industry develops the concepts of agility.
The U.S. Congress had been worried about the U.S. industrial competitiveness for many years. The surge in competitiveness from Japan with lean production had taught U.S. industry that it was not as good as it needed to be to compete. The 1984 Cooperative Research Act, which allowed companies to cooperate noncompetitively on the development of technology, was a response to this concern. Congress also provided the seed funding to catalyze the cooperation between industrial enterprises. One of the best examples was the formation of Sematech in 1987, which brought the U.S. semiconductor industry together to develop the tools of production. The electronic industry was rapidly moving out of the United States, and companies were not committed to developing the tools needed to keep it in the United States. At first the electronic companies were reluctant to cooperate. However, it quickly became evident that this approach was going to have an impact and enthusiastic participation increased. This stimulated a resurgence of confidence that made the U.S.-based electronic industry surge at the expense of foreign competition.
Indeed, the United States became a place of choice for foreign companies in the electronic supply chain. This project succeeded because of cooperation among industrial companies that initially were reluctant to work together. As a result, industry realized that it needed to improve to succeed, and cooperation was possible to leverage the technology development activity. The ability to work together for the good of U.S. industry led to some other examples of cooperation that are emerging as contributors to U.S. competitiveness. Congress has authorized putting seed money into programs in textiles and automobiles. These programs are called AMTEX and USCAR. The normal inventory investment in the textile supply chain had been very high with lead times of over a year. The thrust of AMTEX has been to focus on reducing textile companies' lead time and to produce textile goods more effectively with a closer integration with the customer. It was also aimed at keeping the whole process and supply chain in the United States.
An example of what this industry faced prior to AMTEX involved Du Pont, a material supplier to the textile industry. In the early 1980s Du Pont found it could not compete with Toray Industry in the markets of Asia with its fibers. It devised a strategy-integrating the supply chain from fiber to garment using computer information systems-to bring the manufacture of textiles back to the United States where the competition would be more balanced. By knowing what was being sold, Du Pont and the U.S. textile industry could produce the fabric and the garments much more quickly than their Asian counterparts. The improvement of the operation of the supply chain brought certain types of clothing manufacture back to the United States.
Case studies were written on the agility that was possible in order to keep up with an industry that changed from one fashion to another. These changes were made much more quickly and the Asian source could not respond. The shortening of the supply chain by providing knowledge of what customers were buying made these companies much more competitive. It was effective enough that clothing produced in Asia was shipped to the United States by air by garment producers. The time to market was that important.
With Du Pont's evidence of the value of agility and a responsive supply chain, the U.S. government funded a project aimed at making the U.S. textile and clothing industry as a whole more competitive. This effort involved coordinating information, providing new methods and tools of production, and operating the overall supply chain in a more integrated fashion. The textile industry was aiming its success at having production occur in the United States, where the pay may be $10 per hour, and compete effectively with other economies where the wages are much lower. This effort was titled AMTEX and continues today.
As mentioned earlier, the AMTEX competitive improvement thrust is to reduce lead times and to produce more effectively; AMTEX strives to accomplish this by applying advanced technology to textile industry problems. This work will provide the machines and controls that change the nature of the industry. Technological innovation is being applied to the textile industry. These are long-term programs that are funded by both industry and government with the goal of a more productive and competitive U.S. industrial society. Complete success has not occurred yet in this program, but some very interesting advances have been made and are beginning to be implemented.
Another example of bringing companies together with government seed money is in the automobile industry. The USCAR program was created to share the development of new technology for the industry as well as to improve its product and process technologies. Industry and government leaders felt that more progress on things like fuel cells would yield results faster if the technology was shared across the industry as opposed to being developed secretly in each organization. If success occurs, the competition would be in the marketplace as each firm takes the technology into commerce. This is being done at the big three automakers and their suppliers. The first hints of success are beginning to appear. The hope would be that fuel efficiency can be greatly improved and that transportation can take a lesser share of the global natural resources. Improvement through teamwork can indeed make the U.S. automobile industry more globally competitive.
These programs of cooperation used the catalyst of government support and finances to bring some reluctant industry participants together for the sake of industrial competitiveness. Traditionally, it has been a part of U.S. culture that competition was good, and if competitors got together and shared anything, it would be looked upon as a restraint of trade. The shift to a more global economy, however, made that philosophy obsolete. There was significant competition from over-seas. Our governmental leaders wisely perceived the situation and legislated a change. They not only built an enabler into the law for cooperation but also provided initial funding to break down the resistance or timidity of companies to cooperate. The 1984 Cooperative Research and Production Act will probably go down in history as a major piece of legislation. It is a success story, and industrial cooperation is the driver that will make the competitive improvement possible. Agility was a part of this drive to make the nation more competitive. The atmosphere that agility emerged in was one of intercompany cooperation and change or improvement in the way industry worked. Technology in the production processes and supply chains was the focus, and government was providing the leadership for the change.
In the spirit of enhanced U.S. industrial competitiveness that had emerged in the late 1980s, the Secretary of Defense Manufacturing Technology (Mantech), through the Office of the Assistant Secretary of the Navy, searched out a way to redirect industry toward agility. They found the seeds of the current concept at Lehigh University, which had initiated work on industrial competitiveness. The government sponsored an effort in 1990 - 91 to better define what the next enterprise strategies should be. Dr. Roger Nagel of Lehigh University's Iacocca Institute was contacted and the initial effort to define the strategies was started. The effort was led by Roger Nagel and Rick Dove as coprincipal investigators. They brought together a team of industry executives from a broad segment of the U.S. industrial world. Within a short time, the topic was brainstormed and creatively developed. It resulted in a two-volume publication titled 21st Century Manufacturing Enterprise Strategy. Editors of the two volumes were Steven Goldman and Kenneth Preiss, both from Lehigh. This effort resulted in the coining of the title of what the next industrial change would be. They used the term Agile to describe the key characteristic of competitiveness. The key points that were summarized on the first page of volume 1 are shown in Figure 1.2.
These key points highlighted the changing demands of the consumer and others along the supply chain. Expectations were being developed that required a different response from the service or product supplier. The enterprises that responded would have the competitive edge. Higher quality and customized product and services with competitive prices would increasingly become the norm, and enterprises would need to change to meet the expectation. These key points are as valid today as when they were developed in the volumes that coinvestigators Dove and Nagel put together in November of 1991.
They also called attention to a role for the Department of Defense (DOD) as an agent of government to play in making the transition to industrial agility. In 1992 the National Science Foundation (NSF) and the Advanced Research Project Agency funded a proposal defining the initial structure of the Agile Manufacturing Enterprise Forum, which is discussed in the next section. It was an organization driven by a passion for enhancing U.S. industry's competitiveness. The consequence of not advancing to new manufacturing and service technology and competitiveness would be to put the U.S. standard of living at risk.
Defining Agility's Role
Agility was being put forth as a new manufacturing system that would be the next wave, or stage, of industrialization. However, unlike former industrial advances, agility can exist within the mass production or lean stages of industrialization. This intellectual conflict has made it difficult to understand what agility really is and how to manage it. The important lesson that I have learned through years of involvement is that agility exists in all stages of industrialization-crafts worker, mass, lean, and now custom manufacturing. A more agile industrial world will emerge with an increasing competitiveness that occurs because of many improvements across all of industry and society, one of the more important ones being the creation of an industrial workplace that can easily respond to unexpected but anticipated change. The Agility Forum is playing a key role in defining how agility can contribute to the competitiveness of industry. Some of the Forum's history and present activities are presented in the next paragraphs.
The activities of 1990 through 1992 led to the establishment of the Agility Forum. The Agility Forum was initially funded in the fall of 1992 by the National Science Foundation and Advanced Research Project Agency. The idea and concept were deemed creditable and further participation from industry resulted. Texas Instrument became an early participant, although involvement quickly expanded with representation from companies across U.S. industry. A research-oriented structure evolved and much discussion, interaction, and many site visits have occurred. Each participant strived to obtain a better under-standing of agility and how it was or was not working in industry.
In the early years of the Forum's existence, I became involved in the activities and made many trips to see what others were doing to make their enterprises more agile. It was here where I saw the need for doing business differently from the way it was being done. In each visit I gained new knowledge; I saw my role as adapting that knowledge to my firm in the process industry. Benchmarking was critical to understanding the practical side of agility. This early sharing among companies was a very important role of the activity. The visitors not only saw what the host was doing but also talked among themselves and built an understanding of direction and difficulties that each was experiencing. The whole effort allowed for the development of a database of case studies that are extremely valuable in managing change. Many of those experiences are captured in this book and reflect the personal experience of the companies we visited.
The Agility Forum provided a focal point for many of the efforts that are working to make the U.S. industrial enterprise more agile. Indeed, agility is creeping into the capabilities of many firms and the case studies of good practices are expanding. As in the other activities from hunter-gatherer to lean manufacturing it becomes a blend of activities until the proper emphasis is arrived at. The agility effort, which came out of Congress's desire to increase U.S. industrial competitiveness, has established a firm foundation and is spreading, but it needs further emphasis and must become a key change tool or attribute at most corporations with a focus on the supply chains that they run. Much needs to be developed and written on the successes of the concept, because it may still be classified as a phenomenon that is searching for understanding. Agility exists in all the elements of industrialization. It has existed with the crafts worker, mass production, and lean manufacturing, and it will be required in mass customization. Agility will continue to exist across industry. The discussion of agility needs to be expanded so that companies understand how agility gives an enterprise or a supply chain a competitive edge. Writing the history of agility is not finished. It will be continuously recorded as U.S. industry enhances its ability to compete. Agility will be a key element in the continued drive to mass customization.
The Importance of Managing Change Change is a crucial factor in implementing agility and mass customization. The changes that the business world will encounter will be very significant. Firms must shift from a reactive to a proactive mode to set the stage for how business will be done within the segments where they compete. Firms cannot sit back and watch something happen and then react to it. They must be looking at other industrial segments to see what is working and whether they should adopt a particular business practice. The concept of benchmarking outside one's area of business will become increasingly important as companies shift to become more agile operations. Since all change builds on the improvements in the past, it is important to understand their significance and apply modern thinking to changes of today. A significant challenge will be to see how the information age will influence the future. Concepts of automation of information flow will require foresight. Other trends will need to be assessed carefully to see how they apply to firms for the future.
An important lesson is to ensure that one is not stuck in a paradigm that looks back. The change agent or business strategist must be forward thinking. Ian Morrison and Greg Schmidt in their book Future Tense described that frame of mind in the box that follows. This concept of using foresight and applying it to the business situation and strategies of a firm must be kept in mind. Organizations need people who are setting the direction and making the big changes that will make the difference. The continued improvement of competitiveness is essential to the future of the firm. Agility and mass customization will be essential to the future competitiveness and combined with other trends should provide a change strategy that has the firm moving to "where the puck will be." The Gretzky Effect (Figure 1.3) should be remembered and used as part of the direction setting for change; that is, change programs must anticipate the events and timing of the future to lead the firm to a more competitive position. However, foresight must also be looked at as being well ahead when the change is complete but not so far ahead that others, like customers or suppliers, are not also a part of the change.
This chapter has introduced the importance of preparing for the strategic change that must occur within a firm to make it competitive in the future. The next chapter will talk about the strategy of change in an industrial world as well as the corporate culture and its ability to change. The chapter will focus on the processes for change management. It will deal with assessing the best business practices and determining how a firm desires to do business. It also will discuss agile and custom manufacturing as one of those business practices. Last, the chapter will describe an agile strategic business planning process that includes the strategic change elements as part of the operational activity of the firm.
