From Fixed to Flexible: Automation and Work Organization Trends from the International Assembly Plant Survey

The paper is organized into seven sections. First, we define how we measure automation in the assembly plant study. Second, we describe the overall regional trends in the use of automation from 1989 to 1993/94. Third, we explore the patterns of usage for robotic equipment across regions, emphasizing in particular the significant move by many companies towards the replacement of fixed or "hard" automation with flexible, programmable automation. Fourth, we explore departmental differences in the use of automation, emphasizing the evolution in thinking about the most effective way to automate various tasks in the body, paint, and assembly shops. While automation levels continue to rise in the body and paint shops, a different approach is being taken in the assembly department, the most labor-intensive area of the plant and yet the place where total automation solutions have been most elusive. Fifth, we describe how trends in the adoption of flexible automation are linked to the adoption of flexible work practices that seek to boost worker involvement in production-related problem-solving. Sixth, we summarize what we have learned about the performance implications (in terms of productivity and quality) of the automation trends described here. The seventh section presents our conclusions from these analyses and our speculation about future trends in automotive manufacturing automation.The International Motor Vehicle Program and the Sloan Foundation

Performance Findings of the International Assembly Plant Study

We recently undertook the largest in-depth evaluation ever of automobile assembly plants around the world. In the Second Round of the International Assembly Plant Study, we surveyed 88 automobile assembly plants representing 20 companies and as many nations (see figure 1 for a distribution of plants by region of the world). We collected data on a host of different issues ranging from production processes and design choices to labor relations and organization of work. Here we report on our performance findings. In addition to reporting on our most recent findings, reflecting performance in 1993/4, we will compare those with the performance findings of the First Round of the International Assembly Plant Study which took place in 19892. European plants have shown the greatest percentage improvement in productivity of any region, but Korean plants, and plants in North America have also shown considerable gain. Given the minimal improvement in the average performance of Japanese-owned assembly plants in Japan, the performance gap between US and Japanese plants has closed significantly, although a differential still remains. In the area of quality, the European and US producers have shown tremendous improvement, and are approaching Japanese quality levels. However, our quality data only reflects vehicles sold in the United States, and as such, may overstate the average quality level of the European producers. The quality level of new entrant plants (particularly Korea) has not followed the world-wide trend in improvement in quality. One of our most important observations from this round is that there are tremendous performance differentials within each region of the world. This reflects different capabilities of companies operating in those regions. We are currently undertaking extensive analyses to understand the drivers of these intra-regional performance differences.MIT's International Motor Vehicle Program and the Sloan Foundatio

Dynamic Nature of Production Models

Toyota and Volvo have traditionally been viewed as anchoring two extremes of production models that companies in the automotive and other manufacturing sectors draw upon. The ‘Toyota (Lean) Production System’ drove superior organizational learning, innovation, and control with positive implications for customer-oriented outcomes. Volvo's ‘Reflective Production’ model aimed to leverage and develop workers’ unique abilities, leading to adaptability, motivation, satisfaction, and innovation at the individual and group levels, with positive benefits for employees. Through a longitudinal case study, we show that environmental pressures, in the form of increased international product market competition and labor market constraints, drove convergence across the two production systems as enacted at Volvo and Toyota, in organizational structure, work design, and to a lesser extent, technology. The result is an integration of the adaptability, motivation, and development of workers at the individual and group levels, with enhanced organizational capacity for responsiveness, variability reduction, and innovation at the organizational level. Understanding how production models evolve provides insight into their operation, their limitations, and the challenges that are associated with their study, imitation, implementation, and use

Institutional Labor Economics, the New Personnel Economics, and Internal Labor Markets: A Reconsideration

The author illustrates the utility of institutional labor economics and makes a case for a reconsideration of it. Two recent developments motivate this effort: the rise of New Personnel Economics (NPE) as a significant subfield of labor economics and the substantial shifts in work organization that have taken place since the 1990s. Understanding how and why firms have reorganized work opens the door for a renewed interest in institutional approaches. The author explains that the rules of institutional labor markets (ILMs) emerge from the competition between organizational interest groups—unions, personnel professionals, and the government—and competing views of firms’ objectives—resulting in the rise of ILMs, the slow diffusion of High Performance Work Systems, strategies used to obtain a high level of commitment from workers, the use of contingent employees, and the spread of new promotion rules in response to equal employment opportunity pressures. As such, the role of power and influence in establishing work rules is of central concern, though more conventional NPE considerations also remain important

Evolving from value chain to value grid

Mention the term value chain, and most managers will have visions of a neat sequence of value-enhancing activities. In the simplest form of a value chain, raw materials are formed into components that are assembled into final products, distributed, sold and serviced. Frequently, these activities span multiple organizations. This orderly progression allows managers to formulate profitable strategies and coordinate operations. But it can also put a stranglehold on innovation at a time when the greatest opportunities for value creation (and the most significant threats to long-term survival) often originate outside the traditional, linear view. Traditional value chains may have worked well for landline telecommunications and automobile production during the last century, but innovation today comes in many shapes and sizes — and often unexpectedly. (See “About the Research.”) This argues for seeing value creation as multidirectional rather than linear.1 Given the constant tension between opportunity and threat, companies need to explore opportunities for managing risks, gaining additional influence over customer demand and generating new ways to create customer value. Mobile phone giant Nokia Corp., for example, is legendary for having had the foresight to lock in critical components that were in short supply, allowing it to achieve significant market share growth. However, Nokia suffered a setback a few years ago when competitors used that very same strategy to take advantage of shifts in the demand for LCD displays. Protection against such fickle reversals calls for a more complex view of value — one that is based on a grid as opposed to the traditional chain. The grid approach allows companies to move beyond traditional linear thinking and industry lines and map out novel opportunities and threats. This permits managers to identify where other companies — perhaps even those engaged in entirely different value chains — obtain value, line up critical resources or influence customer demand

Theoretical perspectives on the coordination of supply chains

Supply-chain coordination relies on the availability of prompt and accurate information that is visible to all actors in the supply chain. However, new demands on the supply-chain system require changes to information flow and exchange. We undertake a case study of three automotive supply chains that face such new demands resulting from the introduction of an order-driven supply-chain strategy. We use our case study findings to evaluate the applicability of three different theoretical lenses on the multi-faceted interactions between information, physical flow, and the complex rationales driving supply-chain evolution: the resource-based view (RBV), the concept of complex adaptive systems (CAS), and adaptive structuration theory (AST). We find that each theory has a separate realm of applicability and while complimentary in nature, provides distinct insight on the structural shift in the supply-chain system. More specifically, we find that AST, a theory prominent in the social sciences, provides novel insights to supply-chain research at the firm level, particularly with respect to the difficulties in using IT systems to drive systemic change. It complements both the system-level perspective offered by the complex adaptive systems theory, as well as the concept of dynamic capabilities originating in the resourced-based view. The paper concludes with wider implications for future research in supply and value chain management

Exploring Scale: The Advantages of Thinking Small

When it comes to thinking about scale, the assumption of corporate leaders since Henry Ford's day has been that bigger is better. And in many situations, such thinking is inarguably correct because of the cost efficiencies that size provides. But sometimes efficiencies can mask opportunities. In their research, the authors found that small-scale operations provide significant advantages in four areas. They allow companies to locate hot spots and tap into local knowledge networks; they make it possible to respond more rapidly to customer needs and to trends in regional demand; they enable companies to monitor potentially disruptive technologies; and they help hold down labor costs while developing managerial talent. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches to corporate needs. They conclude that executives who develop a deeper understanding of scale and learn when it is better to think small can have a potentially huge impact on their companies' long-term success

Outsourcing Complex Business Processes: Lessons from an Enterprise Partnership

Outsourcing initiatives are key to firm efforts to focus on core competencies, alter engrained practices and attain significant cost reductions in non-core processes. Extensive thought goes into the selection of outsourcing service providers, with the aim of enlisting vendors that have the competence and reputation to lower cost and enhance service levels. However, in addition to traditional fee-for-service outsourcing, another option is to develop a new enterprise that is wholly or partially owned by the outsourcing entity to take on the activities that are externalized —a so-called “enterprise partnership.” This article examines one of the first examples of such a partnership: BAE Systems’ efforts to outsource its HR services in collaboration with Xchanging. It tracks the evolution of the resulting enterprise partnership from the perspective of both the new vendor and the outsourcing firm. The article also discusses the need for explicit contractual recognition of key phases of the outsourcing life cycle as a means to reduce inevitable in-process conflict. Understanding the divergence of interests that naturally emerge is critical to realizing the long-term promise that enterprise partnerships offe