The Effect of Information Technology on High Volume and High Variety Production

The level of competition continues to rise in manufacturing industry, where successful companies are those that operate with the latest information technologies. They gain competitive advantage through flexible manufacturing systems that facilitate designing of high quality products, within a shorter duration and in a way that pleases customers. This study investigated the ability to perform high volume and high variety manufacturing activities under a single facility, in the presence of intelligent information technologies. The study employed mixed research approach to enable gathering of qualitative and quantitative data. Questionnaires were used to collect quantitative data while qualitative data was collected through semi-structured interviews. Volume variety or product-process matrix was the main theoretical model in the study. Research findings showed that off-diagonal operations are possible in manufacturing industry. The results also indicated that operations outside the diagonal would present great challenges to the concerned firms but using the right technological innovations and proper management would help a company. Organisational culture was also reported to have significant influence on adoption of information systems. The study concluded that high volume and high variety production could be conducted under a single manufacturing facility. Additionally, intelligent manufacturing framework was found to be the most appropriate for companies that need to modernise their manufacturing systems. However, the study recommends that future studies should focus on this area in order to determine effectiveness of smart/intelligent manufacturing framework.

Key words: volume variety matrix, intelligent information systems, high volume yet high variety production, manufacturing industry

INTRODUCTION

Businesses that sell physical products depend on manufacturing processes to create the products which they supply to their customers. Small-scale enterprises can easily create the products by hand or employ workers to help with the tasks but big companies require large-scale manufacturing operations to enable them produce thousands of goods each day (Lafou et al 2015, p. 94). High volume is similar to mass production, where large amount of products are manufactured to meet high demand. Example of high volume manufacturing process, which is also the focus of this dissertation, is the assembly lines. Here, goods are joined using human labour or machines or both (Hayes and Wheelwright 1979, p. 137). Advantages of high volume manufacturing include the ability to produce goods faster and achieve more sales. There is also possibility that overall costs of production are reduced when employees work together in an assembly line. However, high volume production hinders manufacturers from providing goods that match customer needs. Additionally, high-volume products can have low quality.

In attempt to solve the problems with high volume production, companies of the 21st

century have adopted the belief that they can compete effectively by focusing on high-variety product line (Mleczko and Dulina 2014, p. 2). Focus on variety assures businesses of the likelihood that each customer will find exactly what they prefer, also termed as customization strategy. Furthermore, more variety in the assembly line allows customers to enjoy diversity of goods over a time period. The general idea is that individual demands of customers have become a priority for manufacturing companies. Ability of a company to adopt constant changes that are in line with customer needs ensures customers are satisfied with the goods offered and the newly introduced designs will be dependent on specifications of consumers. It also implies that companies can respond to changes quickly. Mleczko and Dulina (2014, p. 3), however, explains that high variety faces customization challenges. For instance, rapid growth in demand of a given option can result in shortages while a sudden drop during a phase of high production can make an organisation incur losses due to lack of sales.

This research assumes that manufacturing companies can benefit more if their operations concentrate on high-volume and high-variety production under a common facility, with one support structure. Justification for this proposition is that combining these two operations in production will solve major challenges each category experiences while running alone and will enable the manufacturing firms to become more efficient in processing products or services. The challenge, however, is that volume and variety share an inverse relationship so that high-volume means low-variety while high-variety implies low-volume production. Hayes and Wheelwright (1979, p. 135) refers to this as the ‘trade-off’ between volume and variety. This study aims to address “the gap between high and low volume production” (Synnes and Welo 2016, p. 26) hence investigates the ability of information systems or information technology (IS/IT) to bridge the gap. In other words, this study investigates the ability of information systems to support high product volume and mix under one manufacturing facility. The manufacturing segment of focus is small motor manufacturers or companies in electro-mechanical assembly.

Business Context

Parvalux was launched in 1947 in Essex as a seller of motor rewinds. Ten years later, it opened a branch in Bournemouth where it advanced to designing and producing full units of gear-motors (Parvalux 2017). As years went by, the company expanded variety of products it offered in order to sell in different markets across the globe. Parvalux takes a top position in manufacture of motor and gearboxes that match customer specifications. Moreover, they can customise either motor or gearbox they are provided with at little or no additional expenses. While the products manufactured by the company are useful in several industrial applications, they are concentrated in healthcare, transport, mobility and leisure machinery. The company is presently run as a private family business but plans to introduce various power ranges to current products alongside launch of new products for industrial application (Parvalux 2017).

Parvalux was initially a low volume high variety manufacturer. After conducting business analysis, the company realised that its Information Systems were inadequate and hired a Business System Director to help the company improve its technological aspects. This was about eight years ago. Today, Parvalux has moved to a new line of production in which it produces high volume yet low variety fractional horsepower motors. During the eight years, all firm operations were brought under one facility. The company thus faces challenges such as low quality of products and inability to meet customer specifications, which can only be provided under high variety production (Mleczko and Dulina 2014, p. 2). The present Operations Director, who is also the former Business Systems Director, is pursuing an objective of ensuring that the company achieves mass customization by investing in intelligent information systems. Duray 2011, p. 29 explains that mass customisation eliminates the inverse relationship between volume and variety hence enables a company to perform both high volume and high variety production.

Hayes and Wheelwright postulated that a natural match takes place between product and process arrangement along the diagonal of the product-process matrix. Companies moving away from the diagonal, however, develop unusual features which make them different from competitors (Hayes and Wheelwright 1979, p. 135). The latter statement describes the current business situation. Today, giant manufacturers have achieved their competitive advantage through differentiation strategies that empower them with capabilities that their competitors do not have. Looking at this situation through product process matrix, it can be said that off the diagonal locations can succeed as long as they are aligned with competitive strategy of a company. Meyer and Vereecke (1996, p. 6) reported that Japanese manufacturers had succeeded in this type of production, which includes variety production in flexible and systematic environments. This indicates the possibility that a company can actually move above or below the horizontal line. For the purpose of this paper, this implies that there are issues that need to be identified and resolved in order for Parvalux to succeed in its off the diagonal position.

The situation in manufacturing industry not only defies the movement along the diagonal but also disobeys a second statement by Hayes and Wheelwright that companies from a given industry will be concentrated at a particular point on the diagonal (Meyer and Vereecke 1996, p. 5). Increased differentiation has moved big companies away from the diagonal. Duray (2011, p. 33) explains that companies decide to move below the diagonal because of easy access to better production channels and especially the ability to achieve cost advantage. This location is where Parvalux is currently operating at. The position is characterised by high level of machinery application and high volume production but there is no flexibility (Duray 2011, p. 33). However, the company might encounters uncontainable challenges due to alterations in market demands because this position makes operations capital-intensive. While maintaining its current location in which manufacturing process is a major focus, Parvalux intends to reach competitive advantage above the diagonal where customer specifications control the nature of production. According to Hayes and Wheelwright, however, off-diagonal movements will cause alterations in product volume or variety and bring negative effects on a company’s profitability (Meyer and Vereecke 1996, p. 7). The current Operations Manager at Parvalux is looking for a way of maximizing profits for the company and believes that mass customisation is the most appropriate approach. This study thus aims to investigate if information systems will enable Parvalux achieve this goal.

Research Aim

The purpose of this study is to determine ability of a single manufacturing facility, run by a common structure, to support high volume and high variety production. Product/process matrix is the main model in this study and research will either support or disapprove it based findings from investigation of manufacturing activities of Parvalux. Parvalux is a company that manufactures small motors. In other words, this study intends to test effectiveness of the volume variety matrix in predicting activities of companies in manufacturing industry. Along with this, research purposes to give Parvalux an opportunity to learn about factors that affect operational performance and employee conduct. The project also aims to introduce an important model which can be implemented to ensure successful future operations in manufacturing sector.

Research Objectives

i) To confirm or disapprove with evidence that high volume and high variety can be operated in a single facility supported by one structure

ii) To investigate if there exists dissimilarities in behaviour of employees when conducting repetitive tasks and when performing variable manufacturing roles

iii) To identify most appropriate one size IT/IS framework of operation that can address complexities resulting from production based on low batch and high amounts.

Research Questions

i) Can high volume and high variety production be operated in one facility with a common support structure?

ii) Is there any behavioural dissimilarity in employees when working on repetitive or variable tasks?

iii) What is the best range of IT/IS operational framework that can effectively contain production challenges due to production based on low variety yet high volume?

Significance

Manufacturing companies are continuously seeking for information technologies that will help them compete successfully in the industry (Lafou et al 2015, p.94) but technologies that enable high volume and high variety operations under a single facility are few. This study will be among the few that have addressed this topic. Moreover, it will be the first research to have investigated possibility of high volume yet high variety production and provided a manufacturing model that can help organisations achieve this goal. The research also offers a list of other technologies and manufacturing models that companies can employ to promote efficiency of production. This study offers relevant information to both researchers and policy makers. Policy makers can use this research to identify and recommend IT/IS operational models for manufacturing companies. Researchers, on the other hand, can choose to conduct more studies on this same topic or concentrate on individual models to determine their relevance and/or possible future modifications.

INDUSTRY AND MARKET

All global industrial companies are currently operating in a competitive environment characterised by frequent and unexpected alterations in demands for products. Automation industry is important as it reduces labour input in processes by decreasing amount of applicable labour and costs. Reduction of monotonous duties enables an organisation to allocate its resources on better investments, especially in research and development (International Trade Administration 2016, p. 3). International Trade administration (ITA) explains that industrial automation market is directly connected to end-user industries that require high-volume output and repeatability of processes. Major markets for automation products thus include automotive, packaging, pharmaceuticals, foods and beverages, metals as well as oil and gas. Automotive is the largest end user industry for the automated equipment because it focuses on mass-production hence many suppliers of components and subcomponents are required per vehicle (International Trade Administration 2016, p. 4). ITA notes that motor vehicle assembly is greatly automated.

Competitive Advantage

Many sectors can use automated products and any investment in a process-intensive industry opens a market for automated equipment. However, main challenge encountered by the automation companies is tariffs which affect selling of goods in various countries. It is also unfortunate that tariff reduction to open market is a strategy that some countries are yet to adopt. In many circumstances, therefore, sellers of automated products increase prices for customers to cater for high costs they pay to supply products in various domestic markets. This, however, impacts cost-competitiveness of the imported goods and might also create distortionary effects on the concerned market. There are other countries where tariffs are used to secure politically-sensitive local industries by making cost for external competition very expensive. ITA gives the example of the United States, which desires to promote trade in automated products. The US strives to open market access by promoting expansion of free trade agreements (FTA) across regions as well as establishing multi-lateral relations such ass World Trade Organisation (International Trade Administration 2016, p. 6).

It should be noted, however, that the global market for automation is undergoing continuous growth. According to Grand View Research (2017, p. 5) overall world electric motor worth was approximated to be US$ 107.5 billion during the year 2016, and was expected to undergo significant growth. The growth would be fuelled by rise in usage of electric motor products in commercials, industrial and residential appliances. Examples of systems which used the automated devices included elevators, fans, refrigerators, compressors, and pumps. Customers of the electro-mechanical assembly are often concerned about stability against fluctuating voltages, low maintenance costs, energy consumption efficiency and durability. The market for electric motors is further expanded by the unresolved increase in fuel prices and growing need to reduce air pollution. Electric motors have offered high reliability in creation of energy-efficient constructions in residential and office settings, as well as in warehouses and hotels. Transformations in the agricultural sector such as need for efficient irrigation and technological transfer offers a potential market for the devices. The current rise in demand is facilitated by the incorporated technological advancements. In electric vehicles, the devices are more efficient than standard motors and help to save costs due to reduced energy consumption. Further demand is created by higher prices of electrical components compared to these electric motors, which are relatively affordable. Figure 1 below, presents the expected trend in North American electric motors between 2014 and 2025. As can be seen from the graph, continuous growth in the market size is expected.

Figure 1: Electric Motors Market Forecasts for the Period from 2014 to 2025

Grand View Research (2017, p. 12).

According to ITA, demands for integrated and scalable items were highly demanded by customers towards onset of the year 2016. What’s more, the trend was not restricted to the developed nations because developing nations have been observed to abandon old technology and adopt technology that is trending at present time. ITA also explains that information and communications technology (ICT) hardware plays a major role in speeding up pace improvements and data processing hence enables advancement at global scale. It thus advices automated industries to consider investing in ICT hardware so as to drive both short- and long-term sales (International Trade Administration 2016, p. 5). When justifying this statement, ITA stated that traditional IT principles continue to be incorporated into manufacturing sector hence competitive advantage will be measured by specialisation in “digital factory” (International Trade Administration 2016, p. 8). This implies that information systems (IS) or information technology (IT) can be implemented in manufacturing to speed processes. But can using IT/IS really support high-volume and high-variety in one facility within one support structure? This question should be answered by the end of this study.

INFORMATION SYSTEMS

A manufacturing company has to ensure that the items produced are of high quality, have competitive prices, meet customer’s expectations and are availed on time (National Research Council 1995, p. 1). This sums up the features of high-volume and high-variety under one manufacturing facility. In other words, high-volume ensures mass production of given items so that customers find them in stock whenever they are needed while high-variety meets expectations with regards to quality, performance and competitive pricing. The National Research Council indicated that all manufacturing companies are challenged by the ability to create a balance in quality, cost, performance and timely delivery of products into the market. In the 21st century, information technology (IT) that is relevant to operations in the manufacturing sector comprises of hardware, software and interfaces (National Research Council 1995, p. 2). Appropriate hardware should have ability to compute data and communicate with other devices. The software, on the other hand needs to be more complex in order to perform the intended duties such as providing data, information, knowledge and control hardware, simultaneously. The interfaces should be set up between computers and machines used for manufacturing processes.

A large amount of information is often created and utilised in the process of designing products, manufacturing it, as well as when supplying it to meet needs of customers and environmental standards. This creates space for information technology (IT), which can bring several benefits to the manufacturing business. IT can support operation, organisation and manipulation of information-intensive manufacturing processes and activities by integrating them. Moreover, IT can link and integrate equipment and stations found in a factory, manufacturing business together with networks of involved suppliers, investors and customers in all parts of the word. Information technology can also help an organisation achieve goals that are crucial in the future of manufacturing such as quick shifts between products, faster adoption of new concepts in to production process and delivery of items to consumers, encouraging in-depth interactions between company and customers, complete use of capital and human resources, and focusing operation on important business requirements while reducing unnecessary activities.

Available Solutions

Several configurations can be applied to manufacturing systems based on how flexible a company is. The configurations presented in this section are gathered from studies that focus on manufacturing system. The broad categorisation of system configuration places them into synchronous and asynchronous groups (Lafou et al 2015, p. 95). Synchronous systems comprises of procedures that allow parts to pass from phase-to-phase following a uniform interval. The synchronous channels are preferable for production in high volume hence is frequently applied by manufacturing companies that do not deal in variety production. Synchronous systems are also capable of supporting operation of different sequences simultaneously, within one line. They are popular in assembly lines, which are basically serial and connected to feeders from various subassembly serial sections. Configuration can involve a single process so that products follow similar flow path or have variable-process that enable products to go through non-identical paths. Proper preparations and planning must thus be done to establish the required number of configurations. Depending on the number of machines configuration systems can take three forms: i) serial, ii) parallel, or iii) hybrid. The appearance of the systems is as represented in the Figure 2, below. Serial system comprises of a single line of operation while parallel system works with two lines at the same time. Hybrid system, on the other hand combines both the serial and parallel configurations.

Figure 2: Configuration Systems for Manufacturing Companies

Source: Lafou et al (2015, p. 95)

In order to improve level of production, manufacturing companies are currently in need of technologies that offer flexibility, allow for mass customization, and enable creation of high quality products. This need is promoted by market demand for highly personalised products within a limited lead-time. Zhong et al (2017) identified three main categories of innovations that can help manufacturing firms achieve their goals: intelligent/smart, Internet of Things enabled (IoT-based), and cloud techniques. These three models are the focus of this research which intends to identify a relevant and appropriate manufacturing operations framework for solving low batch yet high volume production situation currently experienced at Parvalux. There is also a discussion of three most important technologies in material handling system.

Intelligent/smart Manufacturing Model

This fully utilises enhanced technologies in information and manufacturing to improve efficiency of production and product arrangement (Zhong et al 2017, p.618). This new framework of manufacturing operations is developed by intelligence science techniques that empower it to customize structure, creation, management and unification of the entire product life cycle. The product life cycle is accelerated by intelligent sensors, flexible blueprint for making decisions, sophisticated resources, and computation of data. In turn, these techniques enhance efficiency of manufacturing and improve quality of products or services.

A manufacturing firm thus gains capacity to adapt to rapid changes in market demands and enhances its competitive advantage. Zhong et al (2017, p.618) explained that manufacturing companies are focusing on bringing changes to the traditional manufacturing processes so that they are developed into smart structure. The technology identified as intelligent manufacturing system, abbreviated as IMS, applies service-based architecture over the Internet so as to offer integrative, customised and flexible services. It creates a manufacturing system characterised by greater collaboration between human and machines. Additionally, IMS results in smooth flow of manufacturing practices of an organisation through all levels including technical areas and management system. The authors also explained that IMS contained AI, which performs most human roles hence requires less use of human labour. It can automatically handle tasks related to selecting combination of raw materials, appropriate production system and manufacturing processes.

IoT-based Manufacturing Model

The framework defines a complex manufacturing model in which ordinary materials for production are empowered with sensors, interconnection ability and collaborative abilities that enable them to perform manufacturing operations automatically (Zhong et al 2017, p.618). In this technological model, associations are observable among humans, between a human and a machine and between machines. This implies that IoT-based manufacturing can deliver on-demand applications and promote efficient allocation of resources. Moreover, the model incorporates more advanced information technology to facilitate data collection and distribution hence is appropriate for manufacturing environment. The technology comes with radio frequency identification (RFID) and codes for unwired information exchange to enable real-time gathering of data and sharing of information among organisational elements such as workers and machines (Zhong et al 2017, p.618).

Cloud Manufacturing Model

This turns out to be a more sophisticated manufacturing framework as it combines cloud computing with IoT, service-based techniques and virtualization. The combination of technologies empowers the system to convert manufacturing materials into services which are clearly distributed and communicated broadly (Zhong et al 2017, p.618). The model captures the entire product life cycle while enabling effective and intelligent management of production resources. Similar to intelligent/smart manufacturing model, therefore, cloud manufacturing framework allows for on-demand application of manufacturing services to all groups of end-users. Furthermore, it can make use of IoT elements like RFID or barcodes to facilitate automatic management and coordination of production resources in order to encourage sharing. The authors also explained that a variety of clouds are available for manufacturers depending on the services they concentrate on. However, this model requires creation of architectural models as well as develops external protection to enable ceaseless application of production resources and information (Zhong et al 2017, p.619). This can be very difficult to achieve because of the complexity that is likely to result from the combination of high number of manufacturing elements and standards.

Material Handling Systems

Manufacturers of today have to deal with customers who demand high quality products within a limited time period and want the product to match their specifications. Companies have been forced to arrange flow of production materials in a way that raises productivity and delivery in order to gain competitive advantage. However, manufacturing firms acknowledge that streamlining flow of resources is very difficult (Akincilar and Rad 2013, p.2). One major problem in assembly lines is lack of adequate space for collecting and transporting production materials from the stores. Productivity is also affected by decrease in numbers of unemployed staffs as well as the growth in wage rates for employees with great skills and experiences in manufacturing. Secondly, labour costs contribute greatly to overall manufacturing expenses because several individuals are employed to move materials from the stores to different plants or departments (Akincilar and Rad 2013, p.3).

Material management can also be a challenge because if not careful, managers can purchase larger amounts of materials than needed or run out of stock. All these situations affect outcome of production and might disappoint customers. Material handling is also affected by safety concerns and breakage of machines. In order to achieve smooth flow in material handling, Akincilar and Rad recommend that improvements to the material handling systems be coupled with building of information exchange channels. This can be effective because it will promote communication through updates from time to time so that cases of shortage or excess inventories are eliminated. Different equipment or strategies can be used to improve systems for material handling. Three such technologies are discussed below.

Kanban

This instrument has been applied in “lean production” and “just-in-time” theories. In manufacturing environment, Kanban is a solid instruction card that assists manufacturers to make decisions and controls concerning type of products to produce, appropriate time for production and the correct volume to produce. Today, however, electronic kanban or e-kanban is most popular because it eliminates events of errors or misplacement of cards (Akincilar and Rad 2013, p.21). Information is also easily availed at the shop floors on time and movement of production materials from warehouses is monitored.

Wireless Scanners

A wireless scanner is a program that recognises a product without touching it. It employs wireless communication strategies that enable sharing of information throughout the entire organisation and enables visualisation, thereby, improving supervision (Akincilar and Rad 2013, p.22). Additionally, these technologies facilitate reconfiguration of IS infrastructure.

RFID Technology

This technology works like wireless scanners by linking organisational systems to encourage information flow during material handling. It presents several benefits to companies, including: cost reduction, increased productivity, greater visibility, and enhanced accuracy (Akincilar and Rad 2013, p.22). RFID generally improved production efficiency and delivers better services to customers.

Effects of Organisational Culture on Adoption of Information Systems

Organisational culture comprises of ethical behaviour and beliefs of people who belong to an organisation (Dasgupta and Gupta 2012, p. 3). The authors explained that organisational culture is all-inclusive, is developed through historical events, contains anthropological aspects, and is soft but not flexible. They also acknowledged that culture has significant influence on implementation of technologies such as information systems because organisational culture impacts work behaviour of an employee. For employees with demanding tasks or which require expertise, organisational culture along with professional values is more influential. The authors also postulate that organisations ought to analyse benefits of their