P R O D U CT I O N P L A N N I N G & C O N T R O L , 1998 , V O L . 9, N O .

3, 241 ± 249

E conom ic v iew of CI M sy stem architectu re
Y U L I U CH E N , M I T CH E L L M . T SE N G and J . Y I E N

K eyw ord s CI M , sy st em a rchitectu re, m odellin g, A BC ( A ctiv ity Based Costin g ) , A H P ( A n a lyt ica l H iera rchy P rocess) A b st rac t. Th e sy n erg istic a dv a nt ag e of sy st em s int eg ra tion for Com p u ter I nt eg ra ted M a nu fa ctu rin g ( CI M ) h as b een a p ow erfu l th ru st behin d t he p rodu ctivity a dv a ncem en t in recen t deca des. H ow ev er, th e d ep en dency am ong com p on en ts, th e inta n gib le bene ® t s a n d com plexit y of th e sy stem ha v e been a b ar rier for sy st em d ev elop ers a nd t he b usiness com m u n ity . T h is p ap er rep orts a system a tic ap p roach t o a ssess econ om ic m er its of t he CI M sy st em . I t projects CI M system d esign s on a m u ltip le

la yer ar chitectu re w ith consid era tion of project life cy cle. I t introd uces a m od el ling form a lism t o p resen t a structu red v iew of th e econo m ic a sp ect of th e CI M system . T h e m u ltip le criteria ’ s a sp ec t of CI M justi® ca tion w as trea ted w ith th e A H P ( A n a ly tica l H iera rch y P rocess) m eth od. Th e com p lexity of va riou s cost fa ctors is redu ced th rou gh a pp licat ion of th e A BC ( A ctiv ity Based Cost ing ) m et hod . T h e b en e® ts of low lev el a ctivities, b ot h ta n gib le a nd inta n gible, a re th en h ierar chica lly ag g reg a ted int o high er level system ob jectiv es. I t a lso p rov ides t he n ec essa ry lin ka g es b et w een th e econo m ic a nd oth er v iew s. A sim ple ex a m ple w a s used t o illustrat e th e ap p roach.

A utho rs : Y . Ch en , D ep ar tm en t of A u tom at ion, Tsin gh ua U n iversity , Beijin g , Chin a ; M . M . T sen g a n d J . Y ien , Depa rtm ent of I nd ustrial E ng ineering a n d En g ineerin g M a na g em en t, H on g K on g U n iversity of Science a n d T ech n olog y, H on g K ong . Yuliu Chen g rad ua t ed from Dept of E E, T sin g hu a U n iversity , Beijing , in 1959 . H e ha d h is a d va nced st u dy a t U M I ST a nd U n iversity of Strat hclyd e, U K from 197 9 to 1982 . U p to n ow , h e h a s been tea ching an d resea rch ing in T sing h ua U niv er sit y for 38 y ea rs. Before 1987 , h e m ajor ed in a u tom a tic con trol sy st em s, especia lly la rg e-sca le sy st em s th eory a n d its a pp lica t ion s. A fter 1987, h e ha s been concen trat ing in th e resea rch an d im plem en ta tion of Com p u ter I nt eg ra ted M a nu fa cturing . H e ha s w or ked for t he CI M im p lem en ta tion of sev era l large Chinese com p a nies, a n d d id resea rch on CI M desig n an d im p lem en ta tion m et hod olog y. H is cu rrent resea rch interest lies in CI M sy st em ar chitectu re an d cor resp on d ing m od ellin g m eth od s, as w ell a s ju sti® ca t ion criteria of CI M im p lem en ta tion . H e is a sen ior m em b er of I EE E, a nd a fellow of H ong K on g I nstit ut e of En g ineers. H e ha s p ub lish ed fou r b ook s an d m or e t ha n 90 p ap er s.

Mitchell M. Tseng join ed t h e H K U ST fa cu lty a s th e fou nd ing d ep ar tm en t h ea d in 199 3 a ft er h olding en gin eerin g ex ecu tiv e posit ions at X erox a nd D igita l E qu ip m ent Cor pora tion for a lm ost t w o d ec ad es. H e ha s been t ea ching a nd consult ing on b u sin ess p rocess d esig n , A I ap p lica tion s, m a na g ing techn olog y a n d system s d esig n. H is B.S. d eg ree is from Na tion a l T sing h ua U n iv er sit y ( H sinchu , T a iw a n) . H e ea rn ed b oth h is M SI E ( 1973 ) an d P h .D . ( 1975 ) degrees from P urdu e U n iversity .

J. T. Yien is w ork ing a s a con su lta n t in t he CA D Cent er of th e H on g K on g P rod uctiv ity Coun cil, H on g K ong . H is resea rch int er est s includ e d esign of m a n ufa cturing a n d ent erp rise syst em s, b usin ess process reen gin eerin g, a xiom a tic desig n an d sup p ly cha in m a n ag em en t. H e h a s earned h is b a chelor a n d m a st er deg rees in ind u st ria l en g ineering a t t he U niv er sit y of W ind sor, Ca na d a a nd is curren tly a P h .D . can d ida te in ind ustrial eng ineering a nd en gin eerin g m a n ag em en t a t th e H on g K on g U n iv er sit y of Science & T ech nolog y .

0953-7287/98 $12 . 00


1998 T a ylor & F ran cis L td .

T hese CI M architectu res prov ided im portant fram ew ork s for pra ctitioners to plan and im plem ent CI M system s in industry . expressions from di eren t perspectives. T hrough w hich. GI M ( GR A I 1992 ) . . St air-lik e CI M sy st em a rchit ect ure. I n Section 3. it enables the CI M project team to prioritize the large num ber and som etim es con¯ icting priorities of CI M initiatives. T he integration of CI M system s striv es to deriv e synergism am on g di erent elem ents in the m anufa cturing system s. CI M OSA ( 1993 ) . m od els are used to extra ct the m ain system chara cteristics for describing and analysing the system s. T he cont ents of SL A and the ro le of the econom ic v iew 2. F inally . the econom ic v iew w ill be described in detail in this paper. attem pts to prov ide som e rem edy for ov ercom ing this di cu lty. on e of the di cu lties arises from the gap in the dy nam ic natu re of the dev elopm ent life cy cle and the econom ic reality of the CI M system . Intr oduction Y ul iu C he n et al. dy nam ic changes during the life cy cle of the CI M system im plem entation are also considered in this research project. I n this proposed archit ecture. this schem e of system architecture includes six v iew s in the conceptual dev elopm ent stage.242 1. I n the next section . are exam ples of CI M archit ectures often m entioned in the CI M research com m unity . Sev eral representations of CI M system archit ecture hav e been proposed in recent y ears. in this paper referred to as v iew s. both ca pital and hum an resources. function al requirem ents for op erating the system w ou ld be described in function v iew by the I D E F 0 m ethod . a theoretically sound process. decision and organization v iew s are describing di erent aspect s of the global system . resource v iew provides the necessary resourses to support the realization of function al requirem ents. the A H P m ethod w ill be introduced to treat the inta ngible factors. on e ca n apply the A naly tical H ierarchy P rocess ( A H P ) . H ow ev er. inform ation. it prov ides a fram ew ork for both business m anagers and technical profession als to better com m unicate the business needs and technical op portunities. I ntegra tion of the m anu facturing system has been a v ery im por ta nt subject in m anufactu ring industries in the last tw o deca des ( Chen 1991) . Because CI M system s hav e m any di erent aspects. C I M s y s te m ar chit e ct ur e A na ly sing the problem of global CI M system integra tion w ill usually start from establishing a system archi- tecture ( Chen 1992 ) . to decom pose the system ob ject ives and evalu ate di erent system altern atives according to m ultiple criteria. an econom ic v iew is explicitly incorporated. Com pounding the com plexity of the system design. F igu re 1. I n Section 4. 2. proposed by Chen ( 1996 ) . etc. A ctivity Ba sed Costing ( A BC) is also adapted here for connecting k ey cost driv ers in m anufacturing enterprise w ith the business ob ject ives.e. E ach individual com pon ent. regard less of its size of investm ent. I n essence. R eturn s of CI M system inv estm ent . I t also serv ed as a road m ap for dev elopers to design system com pon ents. F inally . ca n be elusiv e. I n form ation. function. I n particular the econom ical im plications of system integra tion hav e dra w n a signi® ca nt am ou nt of interest from aca dem ics an d pra ctitioners. T his paper reports som e of ou r ® ndings and uses a sim pli® ed exam ple to illustra te the approach. decision. resource ( phy sica l) . A Stair-L ike CI M Sy stem A rchitecture. F irst. ba sed on the relationships w ithin SL A . sim ply ca lled SL A . A CI M system architecture ca n be de® ned as `a s e t of st ruct ur e d m ode ls that r e p r e s e nt di e r e nt as p e cts of the w hole ente rp ri s e ’ ( A M I CE 1993) . i. a proposed m od elling form alism w ill be ex plained. T he proposed system atic approach starts w ith projecting a CI M ( Com puter I ntegra ted M anufacturing) syst em in a m ulti-layer system architecture. P E R A ( W illiam s 1992 ) . often ca n not be justi® ed on its ow n m erits. are im portant to de® ne the system s w ith clarity .1. the intercon nection s am on g di erent v iew s are explain ed and a brief conclusion given. A s show n in ® gure 1. organization and econom ic v iew s. they are still far from general acceptance. The ob jectives of this research are sev eral fold: it provides a system atic approach to ev aluat e di erent design op tions for m anufa cturing system s. the ap plied CI M architecture w ill be introduced and the role of the econom ic v iew describ ed. T hen.

a num ber of data w ere ob ta ined based on estim ation or referred to sim ilar existing data. cost /bene® t ana ly sis could be ca rried ou t. analy sis. designers ca n choose the num ber of v iew s as required. by com paring the sam e perform ance indices of T O -BE m od els w ith that of A S-I S m od els. the function m od el of the system m eans that it is an abstract representa tion for the functionality of the system . Because the job of a w ork ing team for CI M im plem entation w ou ld be considered com p lete w hen the glob al integra ted system starts to op erate norm ally . accu rat e and directly realiza ble. T he second axis show s P roject L ife Cycle. the inconsistent problem s. D epending on the com plexity of the system s. project de® nition. I t is v ery com m on in the old practice to focus on prod uct costs that are deriv ed from ® xed and v ariable costs. T ra ditionally . m anufacturing. This w or k help s to identify those non -valu e added or little v alu e-added processes. the system architecture. T he ou tcom es of detailed design are speci® c system s speci® ca tions. detailed design an d im plem entation. I t is often dra w n by re¯ ecting the existing system s constru ction under a CI M architectu re. I t is a necessary iteration. H ow ev er. I n pra ctice. m od els of the existing system ( A S-I S) should be built to analyse the problem s that need to be re-engineered.3.e. The graphical modelling languages make the w ork much easier and clearer than only using descriptive analysis.2. actual costs of new facilities an d other resources w ou ld be ob tained. conta ins di erent ty pes of m od els for analy sis. and to set priority for those processes w hich need to be reengineered. or con¯ icts. designers shou ld m ap these con tents in the m od els of the new system to a detailed technical speci® ca tion. T hen. a return on investm ent. F irst. T hen. T hese shou ld be solv ed or im prov ed in the design of the new system.g. D i erent v iew s are also ca ptu red in m od el description so that analy sis ca n be ca rried ou t. T hen. A total of six v iew s ca n be considered. F or realizing all the requirem en ts in this speci® ca tion. E ach axis. the cost/bene® t di erence betw een the A S-I S and T O-BE m od els indicates the im provem ent of establishing the new system . By check ing the consistencies and coh erence of those A S-I S m od els of di erent v iew s. w ou ld be found. Often there are interactions am on g di erent view s and so could not be com pletely orthogon al. A lthou gh it does not represent the entire system . T his is the contents of prim ary system design. T hen. and hum an and organization. should be produced for this new system . 2. F ixed costs are those w hich are insensitive to the sales v olum e. it can be called a v iew of the global system . it prov ides a v ery useful m eans to m od el a particular perspective of the entire system for analy sis. i. in essence. T he A S-I S system m od els are built to serv e as a snap shot representation of the ex isting system . Based on the A S-I S m od els.4. it is necessary to have com plete and tru e ® nancial inform ation for a justi® ca tion purp ose.1. it facilitates the decision m ak ing process. T he third axis is for stepw ise realizat ion. com plete and accura te. M odellin g for m alis m of econom ic v iew 3. I t represents an aspect that is interesting to the analy sis. W hy is the A B C m e thod chose n f or this m odelling f orm alism ? The ob jective of the econom ic v iew m od elling is to analyse and help justify the ® nancial aspect s of CI M system s. prim ary design. 3. I n this sense. T hey com plem ent each other to m ak e the w hole representa tions. Since CI M system s inv olv e a huge am ou nt of inv estm ent. inform ation. a set of desired futu re m od els shou ld be designed to express the propert ies of the T O-BE system . a detailed design in three con cret e dom ains. T his is sim ilar to the engineering dra w ings that di erent v iew s are exp ressed to describe a com pon ent or assem b ly . T O BE m od els are used to describe the design of new system s.e. F or exam ple.e.E cono m ic vie w of C I M s y s te m a rchi te ctur e 243 2. i. i. i. T he m aintenance stage is not considered in this architecture.L i k e C I M s y st em ar chite ct ur e T he Stair-L ike A rchitecture ( SL A ) contains a three axes fram ew ork ( ® gure 1) . D uring the prim ary system design stage. the focus of CI M architecture is in the area of project form ulation and dev elopm ent. 2. cost accounting has play ed a role to prov ide such ® nancial inform ation to show how di erent processes con tribute to the pro® tability of a business. all of them are useful in describing the sam e system . E ach v iew has its ow n propert y. . A S-I S and T O-BE m od els. A p p ly ing C I M ar ch ite ctur e f or analy si ng s y s te m inte g r ation CI M im plem entation often starts from tw o m od els. N o m ore abstract m od elling w ou ld be needed for this stage and later. T he char act er is ti cs of S tai r. T he existence of di erent v iew s m eans that the global system ca n be analy sed from di erent perspectives. e. T hey are concrete. T he r ole of econo m ic vie w The decision to go ahead and im plem ent CI M often requires detailed justi® ca tion. Sim ilarly . m od elling analysis is usually used for conceptu al analy sis and prim ary design. Substituting those para m eters into the econ om ic m od el to correct the original estim ations w ill help the designer to get m ore accura te results.e. T he ® rst axis prov ides the v iew s for designers perform ing m odelling analy sis. A fter the detailed design.

serv ices. instead of being exchanged for products. So. and cost v alue. F or instance. a business becom es com petitive not beca use of produ cts on ly . the cost m od el form s a hierarchy exactly like the I D E F 0 m od el. T he b as is of A cti vity B as e d C ost ing A ctivity Based Costing is a technique to accura tely ca lculate the cost and pro® tability of products. the v ariety of products w as sm all and dem and of cu stom ers w as relatively low . T hese processes m ay not produce ta ngible ou tputs as production processes do. L ikewise. . I n addition . this accou n ting m ethod ca nnot tell w hether CI M technolog y is justi® ed to m eet the business requirem ent s. I t is im portant to note that cost s in A BC structure are exchanged for resources to com plete a process. Of these cost ob jects. H ere. coordination shou ld be m od elled as an activity of that level too. T his conv entional cost accou nting m ethod w orked w ell in the past becau se business in the old day s w as m uch sim pler than now aday s. A chieving the balance betw een process ow ners and resource ow ners by CI M system design becom es the job of system designers and system integrators. process ow ners set their op erational goa ls and these a ect the selection of resourses. T his m od el ca n be decom posed as a hierarch y equivalent to I D E F 0 hierarch y .2. I n the A BC stru cture. costs w ill not be ev enly allocated. distribution and cu stom er dem and handling use up m ore and m ore resources today . activity nam e.3. I t is a quanti® able and op erating m easurem ent of resource utilization and cost intensity . T hus. such that production of products w as the m ain activ ity. Once produ ct costs w ere determ ined. the com p lexity of enterprises has increa sed as the dem and of cu stom ers and the dy nam ics of the m ark etplace increase. are related through costs. the im portant indices such as pro® t and loss. Since A BC focuses on process. w ith the sales data . w hereas the latter tw o are to be de® ned by designers. H ow ever. costs incu rred for serv ices or serving cu stom ers w ill never be allocated to products. I n fact. cost driv er. T he A ctivity Based Costing ( A BC) m ethod ( L ew is 1993) is thereby selected and applied in the SL A econom ic v iew . T herefore. T hese item s are referred to as cost ob jects. These costs are de® ned by identify ing the costs of activities and the resources consum ed. and so does the I D E F 0 m ethod . and return on inv estm ent could be com puted. I n other w or ds. since costs are incu rred for resources and resources are dem anded by activities. serv in g cu stom ers and business sustaining. w hich a ects both tim e and cost of the activity . T here are four attribut es in each m od el block : nod e num ber. resource ow ners need to upgra de and m aintain the quality of their resources. P r inc i p le s of A B C m ode l ling f or m al is m f or the S L A e cono m i c view A m od elling form alism is dev eloped to app ly activit y based costing in the SL A econom ic v iew . I n order to accu rately assess how CI M technology bene® ts enterprises. Sub-p rocesses are de® ned dow n to bottom -level activities that are the m ost basic elem ents. on e of the cost drivers of an order processing activity is the num ber of orders. Cost v alu e of a parent process m ust be the sum of the cost v alu es of all its low er-lev el sub-p rocesses or activities. serv ices. 3. T he ® rst tw o attributes are taken directly from the I D E F 0 m od el. I n a com plex organization like a CI M enterprise. I f there is a cost for coordinating activ ities of the sam e level. A nother im por tant concept of A BC is an activity or cost driv er. the I D E F 0 m od el has been extended to include activity based cost data . but other processes as w ell. cu stom ers and m ark eting support. a costing technique that considers not on ly production. w hereas variable costs are those w hich vary w ith sales v olum e. T hese cost ob jects and activities are those upon w hich the A BC technique w ill assign cost s based on the m easurem ent of resources con sum ed. 3. Therefore. A s show n in ® gure 2. w hich is a netw ork of related activities. This concept brings us to a higher-lev el applica tion of A BC that re-eng ineers the enterprise practice. A BC assigns costs to products. ® xed costs could all be allocated to products for total cost calcu lation. production is no longer the on ly prim ary activity . quality assura nce. A lso.244 Y ul iu C he n et al. T he m od elling form alism is based on I D E F 0 m ethod . P rocesses such as sales and m ark eting. I t ca n be assured that no activity w ill be m issed for cost assignm ents w ith the integration w ith the I D E F 0 m od el. but also other processes is required. a separa te econom ic m od el tha t is correspon ded to the function v iew ’ s I D E F 0 m od el w ill be constru cted. m aterial acq uisition. tw o parties: process ow ner and resource ow ner. the tra ditional cost accounting m ethod that has focused on ly on product costs ca n no longer prov ide a true and com plete ® nancial picture for m anagem ent to ev aluate the business and m ak e business decisions. The follow ing are som e guidelines for constru cting an econom ic m od el: N o attribute ca n be left em pty .

then the activity costs at the bottom lev el and follow ed by rem aining activity costs v eri® ca tion. V eri® ca tion refers to exa m ining syntax of the m od el. `production of part A s’ . shorter lead-tim e.4. as show n in ® gure 2. the cost driv ers of the process `deliv ery of part A s’ . `preparation of N C program ’ . `m achine set-u p’ and `m achining’ are de® ned. A cost hierarchy is form ed in a top -d ow n m anner. I t is noted that in order to deliv er a product. corresp on ding to the I D E F 0 function m od el. m echanism s are the m ost concern from the costing perspective. A w ide v ariety of projects can be bene® ted. D e® ne the cost driv ers for all the processes and activities. so that higher-lev el activity cost v alu es ca n be consolidated and assigned accordin gly. they becom e the targ et of exchange by costs. reduced . and ® nally the cost needed for `deliv ery of part A s’ is determ ined. T he nod e nu m bers and process nam es should be directly tak en from the I D E F 0 m od el. A fter the m od el hierarchy is constru cted. T he cost assignm ent is started from the bottom lev el and is proceeded upw ard . F or exam p le. but are not lim ited to. either phy sical facilities or hum an sta and labou r. Of 4. I n fact. Tangible bene® ts include. `m achine set-u p’ and `m achining ’ . con trols and m echanism s. the de® ned cost driv ers w ill be v alidated ® rst. T he m ode ll ing p roce dur e Bu ild I D E F 0 m od els for function v iew of SL A .E cono m ic vie w of C I M s y s te m a rchi te ctur e 245 F igure 2. including the coordinating activity as a separa te activity to be considered as A 4 show n in ® gure 2. the upper-lev el costs w ill be determ ined easily by adding up the low er-lev el costs. it w ill be di cu lt to estim ate costs accura tely. T he ob ject ive is to accura tely ca pture or estim ate the project costs. the cost valu e for `production of part A s’ ca n be ca lculated by sum m ing up the A 2n ’ s cost v alu es. ou tputs. w hereas v alidation assures the m od el content re¯ ects the reality. w e w ill de® ne the inputs. Sim ilarly . T he entire hierarchy is com pletely built w hen the m ost basic activities are de® ned . the cost v alues for `prepara tion of raw m aterial’ . processes lik e production planning and shipping are necessary . I n the I D E F 0 m od el. on ce the bottom lev el activit y costs are com puted. `purchasing m aterial’ . T he next step is to assign cost v alu es for `prepara tion of N C progra m ’ . A ssign the cost v alues to all the processes and activities. Incorp orating analy tic hier ar chy proces s m ethod into the jus ti® cat ion fr am ew or k 4. `prepara tion of raw m aterial’ . V eri® ca tion and v alidation are v ery im por ta nt to every m od elling e ort. H ence. A ssignm en t of cost v alu es shou ld be don e in a bottom -u p m anner. Exa m ple of a cost h iera rchy . V erify and valid ate the accura cy of the cost m od els. A ll the processes and activities are speci® ed in the I D E F 0 m od el. and thus the costs for these processes w ill be added up to determ ine the total cost of a prod uct. em ploy ed by the process. Bu ild the corresponding m od el hierarchy . I n this m od elling proced ure. I t is also recom m ended to set up a w or king team for the m odelling w ork and an audit team for v eri® cation and validation . 3. cost v alu es are com puted and assigned. E cono m ic jus ti® cat ion f r am e w or k f or C I M Bene® ts that CI M technology provides ca n be classi® ed into both tangible and inta ngible.1. these chara cteristics of a process or activity . W ithou t clear speci® ca tion of these m echanism s. I t is noted that this A BC m od elling m ethod can be applied to the existing processes as w ell as estim ating costs for new system s. I t is noted that cost driv ers shou ld be m easureable so that the cost v alues ca n be com puted later. cost drivers for processes and activ ities at all lev els are de® ned now . Since the de® ned m echanism s are the resourses. `purchasing m aterial’ and `work order control for part deliv ery ’ are assigned. A hierarchy w ill be form ed in a topdow n m anner. O nce all the cost driv ers are de® ned. `w ork order control for part deliv ery’ .

and the principle of logical consistency . w e still com pare in pairs. the team has com e up w ith three areas that require adv ancem ent so that the abov e cha ra cteristics ca n be realized. Th e h iera rchy of ad v an cem ent inv est m en t. 4. but also the e ects of not investing in CI M require to be thou ght through. T he A H P m ethod is em ploy ed by the team to decide w hich area should be allocated the initial fund. K ey stra tegies to keep the com pany grow ing are identi® ed as to increase m arket share and enhance pro® tability . im prov em ent in on -tim e deliv ery and higher serv ice level. inform ation technolog y and product design ca pability . on ly on e of them ca n be inv ested. but m ore tha n on e pair. A H P has been w idely used to ana ly se a w ide range of problem s that inv olv e qualitative criteria. ou r concern turn s to the accura cy of these com parisons. it w ill be m ore e cient and e ective to break dow n a com plex problem or subject into di eren t aspects and form a hierarchy for analysis. I n order to fairly justify inv estm ent for CI M . I n order to identify the m ost prom ising op tions. hierarchies are na tura lly form ed. E xa m ples of intangible bene® ts that m ay lead to increased m ark et share and higher pro® tability are quick er respon se to m ark et needs. . there are three pairs to com pare w hen there are three op tions and six pairs for four op tions. T hese op erational m easures shou ld be deriv ed from the com pany goa ls that align w ith the corporate stra tegies. A n am ou nt of fund is reserved for the ® rst stage of advancem ent. I n addition . w e hav e to set priorities of ou r preferen ce. the principle of establishing priorities. the reserv ed fund is not adequate for all of them in the ® rst stage. T he activity based costing technique discussed in the last section tak es ca re of the tangible aspect and deals w ith the secon d question. identify and constru ct things and ideas in lay ers that are decom posed into details.2. A fter all. T he question s are: w hether the invested technology ca n e ectively bring the business to the targ et. H ow ev er. T hey include m anu facturing technolog y . A hierarchy of the adv ancem ent inv estm ent problem is constru cted as ® gure 3. F or instance. L ogical consistency now com es in place to ensure the accura cy . analy sts and engineers is asked to m ak e an inv estm ent proposal. in fact. F or instance. and therefore. T hese three principles constitute the basis of the A H P m ethod . F igu re 3. thou gh they m ay not be a com plete set. 4. One e cient w ay is to use num erica l sym bols to express the priorities. inv entory and low er product costs. Our ratio betw een op tion A and op tion C needs to be check ed against the consistency . characteristics of the business are de® ned. how w ell and w hen the intangible bene® ts w ill be realized cannot be easily pred icted. T he b as is of the A naly tical H ie r ar chy P r oces s m e th od T here are three principles that underlie the A H P . then op tion A shou ld be six tim es better than op tion C. A n il lus tr at ive e x am p le A m anufacturing com pany is launching a project for adva ncem ent in order to k eep the com pany grow th. the ® rst question w ill be hand led by using the A nalytical H ierarchy P rocess ( A H P ) m etho d ( Saaty 1980 ) . E v entu ally . T he team is con v inced that the four de® ned chara cteristics are the k ey to the success. T hus. and if the inv estm ent is econom ically sound. Since inv esting in CI M is not for the sake of the technology itself. A fter the com parisons. on ly focusing on tangible bene® ts w ill not be adequate. To select from m ore than tw o options. a team of m anagers.3. T o achieve these. it is im portant to hav e the resulting business and m anu facturing processes m eet the targ et perform ance. not on ly the e ects of investing in CI M need to be evalu ated. H ence. people natu ra lly com pare them in pairs. cost and ben e® t analy sis ca n be perform ed by integra ting the results of A BC and A H P . and op tion B is three tim es better than op tion C. H ow ev er. T hey are: the principle of constru cting hierarchies. D ue to the lim ited budget for the ® rst pha se. Because of the ability to quantitatively ev alu ate altern atives. I t is ob serv ed that people perceive. w hen op tion A is w eighted tw o tim es better than op tion B. A m on g di erent op tions to a problem .246 Y ul iu C he n et al. A sim pli® ed illust rative exa m ple is given in the next sub-section.

The A naly tical H ierarchy P rocess m ethod has w eighted the con tributions of the alternatives to the goal. A ll the priority v ectors are then integra ted by sum m ing up the w eighted priorities. prod uct quality ( Q) . 7 and 3.91 0.17 0. 76.28 0.76/4.12 0. it is ob serv ed that product cost. w here n is the num ber of alternatives.26 = 0.48 0.76 0. A H P p riorit y m at rices for char ac terist ics.02 0. H ere. an d cu stom er serv ice ( S) .65. w here m anu facturing technology is found to be the m ost im portant aspect for investm ent in the ® rst stage. w hich is the com pany grow th. inform ation technolog y ( I T ) and design technology ( D T ) to product cost ( C) .31 1. production or dev elopm ent lead tim e ( T ) .19 0.e.59 0.33 0. all the priorities are tak en ca re to arriv e at the prior ities of the alternatives to the com pan y grow th.E cono m ic vie w of C I M s y s te m a rchi te ctur e 247 P ro® ta bility 1 1 Ð P riority v ec tor 0. product quality and custom er serv ice are contributing to m arket share increm ent and pro® tability enhancem ent di erently . A H P p rior ity m a trices for a lterna t ives.28 T im e MT IT DT MT 1 1/2 1/2 IT 2 1 3 DT 2 1/3 1 GM 1. bene® t indices P riority v ect or 0.84 P riority v ect or 0.82 1.11 1. H ow ever. w hereas production or dev elopm ent lead tim e refers to the tim e spent on the production ¯ oor. and ® gure 7 show s the priority of those chara cteristics. P riority v ectors for di erent characteristics are com pu ted similarly .26 2. 2.60 S MT IT DT MT 1 7 3 IT 1/7 1 1/5 DT 1/3 5 1 GM 0.31 0. F igu re 4 show s the four m atrices. . T he geom etric m ean is the cu bic root of the pro3 ê(ê 1ê ê *ê 7ê ê *ê 3ê)ê = 2 .19 P riority vector 0.16 3. approxim ations that com pensate the inconsistency are com puted and result in the priority v ectors in the last colum n of the m atrices.36 1. M a rk et sha re C Q T R C 1 3 1/5 3 Q 1/3 1 1/7 3 T 5 7 1 7 S 1/3 1/3 1/7 1 GM 0. A H P p riorit y m a t rices for strat eg ies.48 0. the team tries to prioritize these three aspects. and the geom etric m eans are the n th root of the product of each colum n v alue. A m atrix is therefore form ulated for each of the chara cteristics. I n term s of cost and bene® t analy sis.32 0.31 2. F igure 5 presents the priority v ectors of these chara cteristics against the tw o stra tegies w here the sam e procedure as abov e is applied.55 1. F igure 6 show s the priority of the tw o strategies against the com pany goa l. F inally .55 0. T he ® nal priorities are show n in ® gure 8. A di erent environm ent and m anagem ent team m ay com e up w ith di erent results. Sim ilarly .46 0.08 0. that is.32 F igu re 4.58 P ro® t a b ility C Q T R C 1 1/3 1/2 1/5 Q 3 1 3 1/2 T 2 3 1 1/7 S 5 2 7 1 GM 3.47 P riority vector 0. I t shou ld be noted tha t this priority analy sis for the bene® ts of alternatives is heavily based on subjective expertise judgem ent. the ® rst row ’ s elem ents of the m atrix that evalu ates against cost are 1.19 0. F ou r m atrices are used to ev aluate the contrib ution of m anu facturing technology ( M T ) . production lead tim e. H ence. i. product cost refers to m aterial cost and direct labou r cost.04 F igu re 5.5 T hu s.13 0.24 P riority vect or 0.14 Q MT IT DT MT 1 1/7 3 IT 7 1 5 DT 1/3 1/5 1 GM 1. F or inst ance. increasing m ark et Com p a ny g row th M a rk et sh a re P ro® t ab ilit y M ar ket sha re 1 1 GM Ð F igu re 6.5 0. T hese approxim ations are ob tained by norm alizing the geom etric m eans of each row .98 P riority v ec tor 0.65 0.35 C MT IT DT MT 1 1/7 1/3 IT 7 1 5 DT 3 1/5 1 GM 2. the priority of êê êê êê êê êê duct. Since the w eights show n in the m atrices m ay not be con sistent. M T is the norm alized v alue. Ï share and enhancing pro® tability are contributing di erently to the goal.07 0.

8 for investing M T . I T alone and D T alone are 1. m anufacturing technology is the ® rst in the adv ancem ent agenda based on the abov e analy sis. Cha ra cter ist ics p riorit y ta b le. H ow ever. paper. T his ca lculation tak es into account the intangible bene® ts by using A H P . I D E F 0 m od el. som e ta ngible bene® ts w hich are saving in costs are already re¯ ected.46 0. there are other factors and ra tios that need to be considered as w ell to m ake a sound judgem ent on inv estm ent. T o form com bined indices. T he ® nal com bined indices are 1.5) 0. decision and organization v iew s.35 + + + P rod uct qu a lity ( * 0. T he in ter connections betw een econom ic v iew and other v iew s F rom the view point of system architecture. respectively .5) P rodu ct cost P rodu ct q u alit y P rodu ction lea d tim e Cu stom er serv ice 0. I f som e function al activities have been found as non -valu e-added or little v alue added. secondly . 1. T his is on e of the hints for im prov em ent s. T hat is.28 0. C oncl usion The m od elling analy sis of the econ om ic v iew is very im portant for industrial peop le to accept the CI M system P rod u ct cost ( * 0. the process inv olv ed w ith those activities w ou ld be put under consideration of BP R . T hese tw o lists ca n be used to ca lculate the direct and indirect cost of inv estm ents.65 0.5.36 F igu re 8.39 0. inform ation technology and design technology shou ld be determ ined. such that the savings are uncov ered.248 M a rk et sha re ( * 0. R eturn on investm ent is on e of them . like the ca se in this 5. it is necessary to clearly describe the interconnections betw een the econom ic view an d other view s. I n fact. F irst. R esource v iew w ill prov ide tw o sum m ary lists of both hum an resources and non hum an resourses needed.1 m illion. U nless it is approved by the glob al consideration from top m anagem ent for stra tegic requirem ents by using A H P analy sis. respectively . H ere. a direct link w ith econom ic v iew .32 P riority vect or 0.1 and 2. there are v ery little interconnection s w ith econom ic view.16 0. I n addition .25 0. H ow ev er. T he cost indices w ill be de® ned using the A BC m ethod . w e m ult iply the A H P priorities by the reciprocals of A BC indices.09 and 0.04 Y ul iu C he n et al. T herefore. the m ost favou ra ble alternative in A H P could incu r the least cost that is re¯ ect ed in A BC ana ly sis.24) 0.22. but on e ca n only ta k e ca re of the tangible aspect . that are represented by the A H P priorities are de® ned. som e further study shou ld be conducted to justify the inv estm ent. in som e cases.45. I t is ob v ious that this v iew has inherited the basic skeleton from function v iew . I T and D T.08 0. T hese cost com pon ents shou ld include the process costs on ce the particular technolog y is inv ested. 0. F or som e expensiv e facilities. Ov er all p riorit y of a ltern at iv es. A s for inform ation. T hen.23 and 0. I n conclusion . the norm alized indices are 0. T he A BC m od elling m ethod discussed in the last sect ion ca n be app lied.31) 0. the total cost ca n be com puted. A fter the I D E F 0 hierarch ies as w ell as the cost hierarchies are built. the results from A H P w ill be con sistent w ith the results from A BC. T he ® nal conclusion has pointed ou t the e ects of evalu ating intangible bene® ts that over-ride the analy sis based on pure cost data.58 + + + + P ro® t a b ility ( * 0.28 + + + P rod uction lea d t im e ( * 0. P riorit y v ec tor 0. .29) M a nu fa cturing techn olog y I n form a tion tech nolog y D esign techn olog y 0. the total annual ru nning costs for the op erations w ith M T alone. global analy sis and design m ust be ba sed on the consideration of all aspects and their interaction s.02 0.60 + + + Cu st om er serv ice ( * 0.19 0.55 0.24 0. F or instance. cost com pon ents of inv estm ent of m anufacturin g technology . 1.17 0. 6.13 0.48 0.31 0. ev en som e `one to on e’ relationsh ips shou ld be established.29 0. resource v iew has. and the tangible bene® ts by using A BC. re-check ing of the necessity of inv estm ent w ill be suggested.07 0. inform ation technology ca n lead to m ore sav in g than m anufacturing technology for the entire enterprise and this is re¯ ected in A BC data.31 F igure 7.12 0.16) 0. I t ca n reduce the possible bias ca used by the high ca pital costs.32. ca pita l cost m ay be left to the return on inv estm ent calcu lation.32 0. Since the resulting A BC indices cov er the op erating costs. T he tangible bene® ts ca n be explicitly highlighted w hen the cost is com pared w ith the existing cost data.

) P ro cee ding s o f F A I M 6. pp . T. William . G I M M etho d ( lectu re n ot es) . P urd ue E nter pr ise R ef er ence A rch itectur e s ( I n st ru m ent Societ y of A m erica ) . this m ethod is still under developm ent. Chen.. 1992. it is im possible to prov ide a real ca se in a short paper. Social scien ce aspect of CI M . L.. M ay 1996. I n L . T his paper proposes a m odelling form alism com bin ing w ith application of A BC and A H P m ethod . T. Chen.O S A : O pe n S y ste m A r ch itecture f or C I M 1992 . J. C hina C I M 91 W ork sho p. R. T he critical advice that the authors w ou ld like to propose is about the selection of team m em bers for cost/bene® t estim ation .. W h at is CI M a rchitectu re ( in Ch inese) . Lewis.. China . Y. C I M . J. Y. Y. 1991 ... Beijin g. A t lan ta . 1993.b as ed C os ting f o r M ark eting M a nuf act uring ( L on d on : Qu oru m Books) . 1993. D ue to the space lim it. A pra cticab le sch em e of CI M sy stem ar chit ect ure. During application in different circum stances. M ulticrite ria D e cis ion M a k ing : T he A naly tical H ie rar ch y P r oce ss es ( M cG ra w -H ill) . a nd Saaty. A ctivit y . ( ed . M cGin n is et al . I t cou ld not be considered as a m ature thing. 3± 6. On the other hand. ( Berlin : Sp rin ger V erla g ) . 1980. 1996 . I t w as dev eloped based on industrial experim ents. correspon ding m od i® cation s w ou ld be natura l. M a chine T ools . T hey m ust be experts in the ® eld in question and m anagers w ho k now the com petition env ironm ent of this enterprise w ell. 3. a nd Xia Z. GRAI Laboratory. the estim ation m ethod for intang ible factors w ou ld be the m ain ob stacle for its success. H ow ev er. Chen. . 1992. 621± 632 ( N ew Y ork : Begell H ouse) .E cono m ic vie w of C I M s y s te m a rchi te ctur e 249 architecture for their syst em integration. R efer ences AMICE.

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