MANUFACTURING CAPABILITIES PRIORITIZATION TO ACHIEVE CUSTOMER FOCUS IN KNOWLEDGE- INTENSIVE ENVIRONMENTS

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18 Νοε 2013 (πριν από 3 χρόνια και 11 μήνες)

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MANUFACTURING
CAPABILITIES PRIORITIZATION TO
ACHIEVE CUSTOMER FOCUS IN KNOWLEDGE
-
I
NTENSIVE ENVIRONMENTS



Ajmal, Mian M.
, Abu Dhabi University, United Arab Emirates

mian.ajmal@adu.ac.ae


Sandhu, Maqsood
,
UAE University
, United Arab Emirates



ABSTRACT


Th
is paper explores the significance of knowledge attributes to establish a competitive
manufacturing
capa
bility by
further
developing an
understanding
of knowledge and
manufacturing strategies in small and large companies.

A theoretical framework is
develop
ed
initially. Later on an intensive survey of small and large manufacturing
companies leads

to the design of a process to prioritize manufacturing capabilities.
Result
s
show that large manufacturing companies putting higher
demand for
know
-
why
knowledge
at
tribute by considering

all manufacturing capabilities

to achieve customer focus
. On the
other hand, small size manufacturing companies putting higher
demand for know
-
what
knowledge attribute just by considering two manufacturing capabilities like

quality a
nd
delivery.

Results are

derived from

a limited num
ber of empirical
data

only in one country
,
therefore
these

cannot be

generalized. Future research with

larger samples of small
and
large manufacturing

firms
from other countries
is needed.

To be competitiv
e,
manufacturing
companies

must
reshuffle

their
production strategies

to allow the
company

to
play a part

in
global
knowledge
-
intensive
competition.
Therefore, t
hey

should incorporate
knowledge
attributes

as a way to achieve higher levels of firm performan
ce.

This
study

is among the
first and most exhaustive studies carried out in the small
and large size
firms operating in
the
manufacturing sector
.
It

provides a conceptual model of how four
manufacturing
capabilities are being
exploited

to achieve customer

focus by being specific in three
knowledge attributes like: know
-
what, who
-
how and know
-
why
.


Keywords
:
Knowledge management
,
knowledge intensive environments, manufacturing
capabilities, manufacturing companies
, production
,
and customer

focus




INTRODUC
TION


In recent years, there has been an
escalating

concentration on the knowledge
-
based
organization (Robertson and Swan, 2004) since

the world

shifts from an industrial age to a
n

information
-
based

era

(Teo
et al., 2008)
.
In order to survive and r
emain co
mpetitive, small
and large manufacturing

firms
,

require

creating

and
restoring

knowledge
continuously

(Valkokari and Helander, 2007). Knowledge has become an essential source of value
generation and sustainable competitive advantage (Teece, 2005;
Ajmal et
al., 20
0
9
). The
ability of
manufacturing

firms to create knowledge
persistently

and manage it strategically is

viewed as critical to organizational success and survival (Nonaka and Teece, 2001; Desouza

and Awazu, 2006
).


Organizations

that
build up

and lev
erage knowledge resources
attain

greater success than
firms who are more
reliant on

tangible resources (Autio et al., 2000). Knowledge
management is
ever more

becoming an
primary

busi
ness function for many firms as well as
for individual projects
(
Ajmal et

al., 2010
), as they realize that organizational
competitiveness
pivot

on the effective management and creation of knowledge (Randeree,
2006).


O
n the other hand
, competition in the manufacturing sector has increased as globalization
and customer requireme
nts have evolved. Manufacturing companies are increasingly
influenced by intense foreign competition, rapid technological change, shorter product life
-
cycles and customers ever more unwilling to settle for mass
-
produced items or services with
limited value

(Krause et al., 1998; Hitt et al., 1998; Zhang et al., 2003). Customers are
having full fledged knowledge demand greater responsiveness to a dynamic set of
requirements. Now, organizations are competing not only with their external capabilities but
also o
n their abilities to leverage manufacturing capabilities.


Increased customer requirements coupled with competitive pressure from globalization have
forced managers to ensure that their organization’s resources are well aligned not only
across all functio
nal areas but also throughout the entire supply chain. This alignment is
the
key in developing and maintaining manufacturing capabilities required in meeting evolving
customer demands in knowledge
-
intensive environments.


The primary goal of this paper is
to assess the significance of knowledge attributes for
achieving customer focus goal by taking into account the manufacturing capabilities in small
and large manufacturing companies.
The paper is structured as follow. First it portraits
theoretical backgro
und of the concepts used in the study. Second it describes research
methodology and preliminary findings. Finally, it comes with the conclusions and future
research directions.



LITERATURE REVIEW


Manufacturing

capabilities


The major theme of manufactur
ing capabilities is the manufacturers’ choice of emphasis
among key tasks. These capabilities or competitive priorities include cost efficiency, high
quality, fast and reliable delivery, and product/process flexibility (Hayes and Wheelwright,
1984; Hill, 1
994
; Krajewski and Ritzman, 1996).
Recent studies suggested that
manufacturing capabilities
are

built sequentially over time. First, a solid foundation of
quality; second, delivery; followed by low cost and flexibility capabilities. Four competitive
priori
ties, the dimensions on which a firm’s operations have elected to compete in the
marketplace (Hayes and Wheelwright, 19
84
), have been generally accepted in the literature.
They are (i) cost (ii) quality (iii) flexibility; and (iv) delivery.



Cost


Compet
ing in the marketplace on the basis of cost efficiency requires striving for low cost
production. In order to keep manufacturing costs competitive, managers must address
materials, labor, overhead, and other costs. Inventories have long been the focus of c
ost
reduction in factories and are one of the justifications of the JIT system. Therefore,
inventory and inventory
-
related items, such as improving vendor’s quality, reducing waste
of purchased materials, are considered as the indicators of the cost capabi
lity. Realizing low
inventory level, decreasing labor cost, and reducing machine time are all positive factors of
the cost efficiency construct.


Quality


Quality has been identified as a manufacturer’s capability to compete in the world market
(Hill, 199
4; Krajewski and Ritzman, 1996). Quality was defined as process quality and pre
-
sale, transactional, and post
-
sale services. Quality means superior features and close
tolerance of the product. The strength of the quality control/assurance function in the p
lant is
the indicator of quality emphasis (Evans and Lindsay, 1996). Quality also means
helpfulness, courteousness, availability of service employees, and convenience of access to
service. Pre
-
sale service enables manufacturers to get information about the
ir customers’
needs and provide what the customers want. Transactional service includes good
description, documentation, and training. Post
-
sale service includes installation, warranty,
alterations, and repair.


F
lexibility


Flexibility is the ability to
respond to changes. In this study, the construct was defined
primarily in terms of increasing and/or decreasing of product mix, volume, and product
design. Flexibility is the ability to accommodate the unique needs of each customer and
typically implies th
at the production operating system must be flexible to handle specific
customer needs and changes in design. Product mix flexibility is measured by the frequency
of occurrence of product mix changes. Volume flexibility is, on the other hand, to accelerate
or decelerate the rate of production quickly to handle large fluctuations in demand.


Manufacturing flexibility was originally defined as the ability of a manufacturing firm to
respond to environmental changes (Mandelbaum, 1978; Li, 2000). Research by Upto
n
(1995) defined manufacturing flexibility as the capability to react to market changes within a
shorter time and at less cost. Other researchers have suggested that manufacturing flexibility
is a multi
-
dimensional construct that could be measured in many
different ways (Sethi and
Sethi, 1990; Gerwin, 1993; Duclos et al., 2003; Dreyer and Gronhaug, 2004). Recent studies
have categorized manufacturing flexibility into internal and external flexibility (Upton,
1995; Chang et al., 2003). The internal manufactu
ring flexibility is relative to the need to
meet customer requirements efficiently and not directly related to market demand and
environmental uncertainties. Examples of internal manufacturing flexibility are machine,
component, material, and routing flexi
bilities.


Conversely, external manufacturing flexibility is relative to the need of customer
requirements. It is usually recognized well by customers since it directly affects a firm’s
competitiveness. Examples of external manufacturing flexibility includ
e new product
flexibility, product mix flexibility, and volume flexibility. Sethi and Sethi (1990) and
Gerwin (1993) defined new product flexibility as the ability to develop new product models

quickly and product mix flexibility as the ability to provide
product variety in the market.
Volume flexibility permits the manufacturers to increase or decrease in the aggregate
production level without incurred transition penalties. In regards to delivery, we could talk
about speed of delivery or delivery dependabi
lity. It is clear that delivery reliability deals
with the ability to meet quoted (make
-
to
-
order environment) and/or anticipated (make
-
to
-
stock environment) dates and quantities. In terms of quality, we could talk about quality of
conformance specification
s or quality of features of products, and so on.


Swamidass (1988) distinguishes machine
-
level flexibility from plant
-
level flexibility. The
former being “predominantly technology based” and the latter being derived from a
combination of technology, infras
tructure, design and engineering capabilities, and the
competitive goals and objectives of a firm. Upton (1994) defines internal flexibility as the
operations strategy and the set of capabilities a firm nurtures to respond to its environment,
and external
flexibility as capabilities possessed by the firm and used to accommodate
sources of variability to which the firm must respond and which are seen as flexible by the
market. This external dimension fits the two major strategies proposed by Hyun and Ahn
(19
92) for using flexibility: reactive and proactive. In the same vein, Gerwin (1993) also
suggests two major strategies for using flexibility: adaptive and redefinition. The adaptive
strategy refers to the defensive or reactive use of flexible competencies t
o accommodate
unknown uncertainty, while the redefinition strategy refers to the proactive use of flexible
competencies to raise customer expectations, increase uncertainty for rivals and gain
competitive edge.


Delivery


Delivery capability is a time iss
ue. Delivery is usually defined in a number of aspects of an
organization’s operations. One is how quickly a product or service is delivered to a
customer. Another is how reliably the products or services are developed and brought to the
market. The third
is the rate at which improvements in products and process are made
(Krajewski and Ritzman, 1996). Many companies seek to maintain or increase their
customer base by focusing on the competitive priorities of development speed, and fast and
reliable delivery
. With time
-
based competition managers need to carefully identify the steps
and time needed to deliver a product or service and then analyze the trade
-
off between time
and cost, and between time and quality.


Customer focus


Customer focus can be defined a
s the
degree

to which an organization
always

fulfils

customer requirements and expectations (Philips Quality, 1995). A
winning

organization
must be proverbial with

the need to
consign

the customer as the first priority in every
decision
taken

(Zhang, 2000)
. The
key

purpose

of an organization is to
keep up

an invariable
association

with the customer.
Such as
,
counting

customers’
proposals

in knowledge
creation activities, storing knowledge that is valuable to customers, reviewing customer
complaints and appl
ying that knowledge to
fulfill

customer needs and enhance customer
satisfaction (Ju et al., 2006). Bassi and Van Buren (1999)
emphasize

that the intellectual
assets of an organization are not just employees’ know
-
how, but also business process and
customer
s’ knowledge as well. Liao (2006)
explicates

that sharing the information and
knowledge about customer needs among co
-
workers or leaders could
proceed

as a
competitive advantage to the
business
. Fast learning and knowledge transfer from an

individual to an
other is what an organization must do extremely well in order to
retain

the
products and services
in front

of the needs and
anticipation

of customers (Pfister, 2002).


Stankosky (2001)
signifies

that organizations must
comprehend

that their customer’s
prob
lems and needs are
absolute

and that they are the
major inputs

of
incessant

progress

and
novelty
. The customer
-
focused knowledge strategy focuses on
incarcerating

knowledge
about customers, understanding of customers’ needs and bringing the knowledge of th
e
organization to
put up with

customer problems (O’Dell et al., 1999). Thus, we
compose

the
following
section to elaborate the significance of knowledge for manufacturing
organizations
.


Knowledge and manufacturing


Knowledge is
vibrant
, relational and bas
ed on human action (Davenport and Prusak, 1998;
Nonaka and Takeuchi, 1995).
There are t
wo
kinds

of knowledge, explicit and tacit (Polanyi,
1967; Nonaka and Takeuchi, 1995). Explicit knowledge refers to codified knowledge, which
is
effortlessly

transmitted
in a formal, explicit and systematic language. Tacit knowledge
refers to knowledge that remains much harder to transfer, formalize or codify, due to its
individual

superiority
. Tacit knowledge as
divergent

to explicit is
profoundly

rooted in
action, commit
ment and involvement in a specific situation or context (Tsoukas and
Vladimirou, 2001) and involves cognitive and
procedural

components.


The next generation of manufacturing businesses
must

be in a position to make use of
information and extract knowledge

from information system and the competitive
environment to maximize their return (Davenport and Prusak, 1998) and reuse knowledge
for innovation (Hung et al., 2005). This approach converts data to information and
transforms information to knowledge (Ajmal

and Koskinen
, 2008
) so that business
intelligence can be devised and used in the decision
-
making process. Nonaka (1994)
distinguished knowledge into explicit and tacit. Explicit knowledge is precisely and formally
articulated and codified in documents and

databases of corporate procedures and best
practices (Alter, 2002). Tacit knowledge is the practical wisdom possessed by experts that is
difficult to capture, yet repeatedly demonstrated in contexts as varied as factory floors,
research laboratories, army

basis, and corporate board rooms (Crowley, 2000). Knowledge
management has been applied in manufacturing (Paiva et al., 2002; Wang et al., 2004), new
product development (Ding and Peters, 2000), production management (Wagner et al.,
2000), continuous imp
rovement system (Beckett et al., 2000), customer relationships
management (Xu and Walton, 2005), supply chain management (Fan et al., 2000); and
online procurement (Hsieh et al., 2002).


However, little research can be found on the application of knowledg
e management
dimensions for prioritization of manufacturing capabilities in highly knowledge
-
intensive
environments. Acquiring knowledge is often associated to learning (Argote, 1999). In
manufacturing, there are in
-
process learning and off
-
line learning (
Upton and Kim, 1998).
Lapre and Wassenhove (2002) distinguished these methods as operational learning (yields
know
-
how) and conceptual learning (yields know
-
why). Following table 1 has elaborated
know
-
what, know
-
how, and know
-
why concepts which can be als
o called as knowledge
dimensions

(Ajmal et al., 2009a)
.





Table 1
:

Knowledge Attributes
.


Knowledge

Attributes

Features

Practical

Examples

‘know
-
what’

It specifies what action to take
when presented with a set of
stimuli. For instance, a
salesperson who

has been trained
to know which product is best
suited for various situations.

Least sophisticated
variety


Easy to apply


Incorporated in many
computer
-
systems

In the insurance and banking
industries customer service
representatives who use
database syste
ms to address
customer questions about
products ranging from
dishwashers to latest digital
TV sets.


know
-
how’

It is, knowing how to decide on
an appropriate response based on
a diagnostic process, whether in
sales, medicine or any other area.
It permits
a professional to
determine which treatment or
action is best.

Sophisticated variety


Not easy to apply

In the above mentioned
example when customer
service representatives
suggest the appropriate
available option that is most
suitable/appropriate for the
customers according to their
requirements.




know
-
why’

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theoretical understanding of why the components of a particular product work together to
allow

a

general

purpose of a product, i.e. research and development (Sanchez, 1996). Know
-
why knowledge exists if an organization is able to
modify

a product design or to
build up

an
innovative product design to
make

new product
substitutes

(Sanchez, 1996).


Many studies have
focused

knowledge at the technological level (Prencipe, 2005; Sapolsky,
2005).

This study has considered knowledge more
specifically in relation to manufacturing
capabilities. Next section shed light on the methodological approach of this study.



Research
Methodology


The purpose of the research
is

to refine current theory on the
attributes

of knowledge and to
propose a p
rocess for competitive manufacturing capability development. Thus, this
research is designed by composing multi criteria decision making of KM attributes so as to
find their contributions to customer focus strategy through manufacturing competitive
priorit
ies. The decision making process follows Analytical Hierarchy Process (AHP) by
seeking experts’ choices on KM attributes and manufacturing competitive priorities as
Figure 1 below.



















Figure

1
:

KM attributes priorities in supporting custom
er focus through developing
manufacturing competitive priorities
.


Data collection


Particulars

of the manufacturing capabilities
and

knowledge attributes
were

collected from
six manufacturing companies, three of those were small and three were large manuf
acturing
companies

situated in Finland.
The size of the companies was determined by the number of
employees.
As explained by the European Commission (see Table 2).
Small manufacturing
comp
anies

were with less than 50

employees
and large manufacturing compa
nies
were

with
more than 250

employees.

Sample

was taken by using same criteria for instance, the
similarity of the operations, industrial sectors and corporate cultures of

the small and large
companies
.

Operation

is defined as their daily manufacturing
ch
aracteristic here
.


Customer focus

Flexibility

Delivery

Quali
ty

Cost

Know What

Know How

Know Why


The

collected
data were

further
analyzed by using
AHP
.
The justification
to use AHP
is that
it

requires
judgment

from senior managers or directors
of

the companies
. Thus, the clear
understanding of the questions is strongly important to

guarantee the reliabilities of the data.

In addition, since the respondents are

the
key persons in th
e case

companies so that we
are
confident about its validity.


Table 2
:


Company

categorization

(source: the new SME definition: user guide and model
de
cl
aration, European Commission).


Enterprise category

Headcount: Annual
work unit (AWU)

Annual turnover

Large


㈵2


€ 50 million

䵥摩畭

Y㈵O

≤€ 50 million

p浡汬

Y㔰

≤€ 10 million




FINDINGS


Analysis is conducted by grouping co
mpanies into two categorie
s, small

and large size

manufacturing companies and we get the results as follows.


KM importance to Customer Focus
0
0.1
0.2
0.3
0.4
0.5
0.6
Know What
Know How
Know Why
KM attributes
Weight of importance
large size manufacturing companies
small size manufacturing companies


Figure

2
:

KM attributes priorities in large and small sizes manufacturing companies
.



Large size manufacturing companies
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Know How
Know Why
Know What
KM Attributes
Weight of importance
Flexibility
Delivery
Quality
Cost


Fig
ure

3
:

KM attributes priorities in large size manufacturing companies
.




Small size manufacturing companies
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Know How
Know Why
Know What
KM attributes
Weight of importance
Flexibility
Delivery
Quality
Cost


Fig
ure

4
:

KM attributes priorities in small size manufacturing companies
.


Above results show that large size manufacturing companies emphasize on Know
-
Why and
Know
-
How for small size manufacturing companies as the most important KM attributes for
support
ing customer focus. Furthermore, this research found that large manufacturing
companies putting higher know
-
why in all manufacturing capabilities as compared to small
size companies. On the other hand, small size manufacturing companies putting higher
know

what in quality and delivery. This suggests that small companies KM is emphasized
on routines for keeping their daily activities on the predetermined quality level while large
size companies move further by finding the ways to achieve customer focus at th
e most
efficient way.


Finally, this research also found that the both of small and large size manufacturing
companies putting flexibility and cost as two most important manufacturing capabilities for
supporting customer focus (Figure 5). This suggests th
at the both manufacturing companies
sizes support leagile manufacturing strategy by meeting lean (cost) and agility (flexibility)
as competitive advantage over competitors (Shariffi et al, 2006).



0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Flexibility
Delivery
Quality
Costs
competitive priorities
weight of importance
small size manufacturing companies
large size manufacturing companies


Fig
ure

5
:

Competitive priorities of large and small siz
es manufacturing companies
.




CONCLUSION AND FUTURE RESEARCH


This research summarizes conclusions according to previous
discussion:


1.

Know
-
what
knowledge

attribute is for small size m
anufacturing companies and
Know
-
why
knowledge
attribute
is
for
large

size

manufacturing companies.

2.

Cost and flexibility are two most important manufacturing capabi
lities for small and
large size

manufacturing companies.

3.

Small
manufacturing
comp
anies more emphasize on routine activities

while large
companies more emphasize on co
st efficiency in achieving customer focus.


In terms of future research, it is important to extract further
data from
small and large
manufacturing companies according to their order decoupling point in order to investigate
knowledge

attributes for differe
nt decoupling point
s
. Furthermore, extending this research to
service industry is also important
to find

competitive service strategy.




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