18 Jun 2001  Research & Ideas

Caught in the Cogs:
When Manufacturing and IT Meet

Manufacturing and information technology these days go together like bread and butter. But it wasn't always so.

As Professor David Upton pointed out in a Global Alumni Conference panel titled "E-Commerce and the New Operations," it wasn't that long ago that manufacturing managers focused all their attention on running the factory, while leaving IT concerns to others. Now, he affirmed, "IT is not something you can use as support to help get the 'real work' done; instead, it has become integrated with the whole manufacturing process—something that has to be managed every day in operations."

Fair enough. But how can that actually be accomplished? With the help of Bart Blackburn (HBS MBA '97) of SupplierInsight, Paul Deninger (HBS MBA '84) of Broadview, and Ted Fischer of SCB Enterprise Solutions, Upton set out to answer that question.

When it comes to finding help for their IT problems, Upton explained, managers are faced with a "spectrum of solutions." At one end is packaged software available off-the-shelf to all comers, including your competitors. Trouble is, when the same product is in the hands of various companies in a particular industry, there's no competitive advantage and, accordingly, no upturn in the bottom line.

At the other end of the spectrum, Upton continued, is the do-it-yourself approach, which prevailed among manufacturers for many years. "You'd hire an army of coders to create software that was exactly right for your company," he said. "It was such a time-consuming process, however, that by the time they were finished, the product was out of date."

Find your spot on the spectrum

Holding the middle ground of Upton's continuum are two solutions that he described as "best of breed" and "custom assembly." In the former, managers pick an existing manufacturing system here, a human resources and finance system there, and bring them together to serve the operation's needs. In the latter, bits and pieces of code are pulled off the Internet and utilized in such a way as to create "something distinctive" for a particular organization.

Given this wide range of possible IT solutions, Upton advised, a key task for companies is figuring out "where they want to sit on this spectrum."

IT is not something you can use as support to help get the 'real work' done; instead, it has become integrated with the whole manufacturing process
—David Upton

But once that decision has been made, "sitting" is far from the operative word for IT systems, which require the same kind of continuous improvement that has become a mantra in manufacturing. Thus, according to Upton, the days of installing a system, letting it languish over time until it becomes dysfunctional, and then undertaking a huge, expensive, and exhausting overhaul are gone forever.

Replacing this old-fashioned "periodic" approach to IT development, he said, is a "path-based" process that comprises many small projects, that evolves to meet the emerging demands of the ever-changing marketplace, that allows for frequent experimentation, and that delivers value on an ongoing basis. "Several decades ago, we learned that manufacturing models had to get better every day in small, incremental steps," said Upton. "The same holds true for information technology."

In the wake of the Internet and advances in IT have come a host of service firms, including the three represented on Upton's panel: SupplierInsight, founded last year to offer companies comprehensive and shareable information on their suppliers; Broadview, a global M&A adviser and private equity investor focusing exclusively on the IT, communications, and media industries; and SCB Enterprise Solutions, an off-site provider of a wide array of integrated IT services, from 24/7/365 technical support to network management and disaster recovery.

Start with simple steps

SupplierInsight's Bart Blackburn warned that the reams of information flowing from the Internet did not, in fact, make the manager's job less difficult or the organization more efficient. "The truth is," he asserted, "more highly skilled individuals will have to work even harder to make sense of all the material now available to them. And even though e-commerce, IT, and the Internet bring with them great opportunities, the advantages are far from easy to capture. For best results, it helps to start with simple steps that don't require long cycles of implementation."

In his remarks, Paul Deninger of Broadview examined some of the forces of change at work in manufacturing today, including an influx of communications technologies, globalization, shrinking product life cycles, and the need for mass customization. In the midst of all this added complexity, he said, the large, vertically integrated organization, involved with everything from Research and Development to customer delivery, is passing from the business landscape. "Companies need to focus on their core competencies in order to compete as efficiently as possible for customers and build the enterprise's value," Deninger said.

The new business model delegates non-core activities to various specialized partners, creating what Deninger refers to as an "extended enterprise" that depends on a high level of collaboration to be successful. Based on new kinds of technologies such as structured data exchange, "these collaborative commerce solutions," he said, "will allow firms to plan, integrate, and execute all aspects of their operations more efficiently and effectively."

Going forward, he predicted, the speed of new product introductions will accelerate the complexity of running extended enterprises, which in and of themselves will present managers with ever-greater challenges. All the while, technology will remain a make-or-break competitive weapon. But managers must not lose sight of the importance of e-business collaboration, Deninger affirmed. "All the trends in the marketplace point to that as a key factor in the future success of businesses in the manufacturing and operations area."

Ted Fischer of SCB Enterprise Solutions concluded the panel presentation with an explanation of his firm's capabilities in providing manufacturers with an integrated approach to IT outsourcing, a development in a field where specialization has long been the rule of thumb. With this new model, he explained, clients rely on just one company to "deploy, host, manage, and service their entire IT operation in a proprietary environment in a single remote location. Freed from the burdens of day-to-day IT management," he said, "companies can devote more of their time to the strategic thinking that will enable them to improve their e-commerce initiatives in the future."

The Internet has made operations and information technology inseparable. The task before both scholars and practitioners at this point is to make sure their lives together are as productive as possible.

About the author

Jim Aisner is Director of Media Relations for Harvard Business School.