Traditional static benefit-cost methods were useful when evaluating transaction

processing systems. Strategic benefits are more difficult to evaluate, since they involve
dynamic interactions between customers, suppliers, and rivals. In an attempt to gain a
competitive advantage, there is a strong incentive to be the first implementor of new
technology. However, information technology (IT) costs decline overtime, so there is an
incentive to delay implementation. A model is developed that enables managers to
evaluate this trade-off and choose the best implementation time. The model emphasizes
competition between large firms in a regional (or national) market, interacting with
firms in a local market. The model is illustrated with an application to the banking
industry. It compares the implementation times of larger regional banks vis-à-vis
smaller local banks, and shows how the banks might use technology to respond to
various changes in the banking industry.

CIM as an Integrated Manufacturing Strategy

The CIM approach to manufacturing system integration is quite different from the
JIT approach. Proponents argue that CIM integrates the organization by
automating the flow of information among interrelated processes and
organizational functions (islands of automation) using advanced information
technologies. In addition, flexible manufacturing technologies — such as robotics,
NC or CNC machines, automated guided vehicles, and automated storage and
retrieval systems — reduce production throughput times by quickly processing a
broad range of products in small batches.18 Thus the main approach used in the
CIM system for dealing with organizational variability is to increase the level of
flexibility in order to handle variability at the point of impact (within
manufacturing). Both integration and variability handling within the CIM system
are essentially assumed to be purely technological issues rather than organizational
issues. In the following sections, we examine these assumptions in detail.

Assumptions about Integration

Underlying the concept of technological integration are several assumptions about

the nature of organizations and manufacturing information that seem to be at odds
with actual practice.

Manufacturing Information Can Be Handled by Computer Systems.

CIM assumes that most relevant organizational information can be effectively
coded into a form computers can handle. This may not be the case. Computer
systems are adept at handling large amounts of simple numerical data, but little of
the information used within manufacturing organizations can be coded into such a
format. Manufacturing organizations rely to a large extent on “soft” data about
such issues as future customer demand, human performance, and the expected
output of a particular machine. For example, in one study, researchers compared
the existing operations research and artificial intelligence approaches to modeling
production scheduling with the actual approaches used by schedulers in
manufacturing settings. They found that the models captured only a fraction of the
reality of the scheduling task. They were too simplistic and based on unreasonable
assumptions about the nature of the manufacturing environment.19
Furthermore, even when manufacturing data generated in one unit of the
organization can be coded into forms computers can handle, often they cannot be
appropriately translated into forms that are relevant to another unit’s needs. Many
of the difficulties traditionally encountered in the design of management
information systems are related to an inability to appropriately transform
information from a common database to meet the specific needs of different
decision makers. Manufacturing managers commonly complain, for example, that
their performance is judged on the basis of irrelevant accounting data. Thus,
simply putting financial or production data on-line does not necessarily make that
data relevant to all decision-making situations within the organization.

Reduced Information Transmission Time Implies Reduced Throughput Times.

As information technologies are supposed to reduce throughput times by

increasing the speed of data transmission, it is worth considering the degree to
which transmission time contributes to throughput times. In information
terminology, the throughput time between any two processes A and B consists of
both the information transmission time and the information processing time at A
and B. When one considers that information processing for such activities as
design engineering, marketing, and accounting can take weeks, months, or even
years (in the case of new product development), it becomes apparent that focusing
on high-speed information transmission misses the critical bottleneck entirely. To
reduce administrative throughput times, the focus of improvement must be placed
on the information processing portion of the equation. To reduce processing times,
the actual activities performed by various functions must be coordinated.

Organizations Lack Appropriate Information Transmission Technology.

CIM implies that organizations are not integrated because they lack appropriate
information transmission technology. This is clearly not the case. One need only
 examine manufacturing organizations to recognize the wide range of technological
options for transmitting information, including fax machines, electronic mail
systems, even telephones. A design engineer who wishes to obtain information
about the manufacturability of a potential design has many avenues available, the
most direct of which is face-to-face communication with manufacturing engineers
and production people. Lack of integration is not, therefore, the result of a lack of
information transmission technology or even a lack of available information. It is
rather a lack of motivation on the part of individuals to use the available options, as
discussed in the next section.

Information Transmission Equals Integration.

The CIM literature assumes that information transmission equals integration, as if

organizations have a basic desire to be integrated and will become integrated when
the necessary information is available. That is, it assumes that functional units
share a higher goal that could be achieved with the availability of the correct
information.

The reality is that most large organizations behave as loosely coupled systems in
which functional units often have little desire to integrate their activities with one
another.20 Each component has its own goals, and the extent to which they overlap
or correspond to overall organizational goals is at best questionable. We have
identified four reasons for differing functional goals:
1. Different Functional Perspectives. Members of each functional unit may have
unique perspectives on their contribution to the organization’s outputs. Design
engineers may feel that their main objective is the elegance or performance of a
product design. But this goal could conflict with the manufacturability of the
product, thus creating difficulties for the production unit.
2. Survival Techniques. Functional units are often interested above all in the well-
being and survival of their units; they may pursue their own goals at the expense of
organizational goals. For example, one unit may be most interested in departmental
growth and may draw resources away from units with more pressing needs.
3. Performance Measurement Systems. Units attend to those aspects of their activities
that are measured as performance indicators. If a purchasing department is
evaluated on the basis of how inexpensively it can purchase materials or how low
it can keep its raw material inventory levels, it will pursue those goals even if they
cause problems for production.
4. Means and Ends Inversion.21 The means for achieving an organizational goal can
eventually take on the characteristics of a goal in its own right to the detriment of
the overall organization. For example, in one organization, design engineers were
provided with computer-aided design (CAD) systems to improve design
effectiveness. The designers used the systems to incorporate complex design
features that had been impossible to draw before. These features added elegance to
the designs but also added significant costs to the manufacturing process. The
designers had replaced the goal of creating effective designs with the new goal of
using the CAD systems to their limit.
Given such goal differences, it is difficult to argue that the mere availability of
information will increase organizational integration. In fact, the opposite may be
more likely. An increase in information may lead to an increase in its misuse or
abuse. For example, freely available information about the difficulties of
maintaining product quality on a particular production line could be used against
manufacturing by another department to its own political advantage. Given such
possibilities, units may begin to withhold or even fabricate information.

In short, we question whether CIM can be implemented without a consideration of

organizational implications. Differences in functional goals produce myriad
incongruent activities, which are a major source of variability for the production
system. Production and administrative throughput times can be reduced only if
functional goals are aligned. The most effective means of aligning them is
redesigning the organization structure such that members of different functional
groups work together more closely.

True organizational integration amounts to correcting the problems that have

created poorly integrated, loosely coupled organizational systems in the first place.
If these problems — which are essentially organizational rather than technological
— are ignored, CIM implementers run the risk of institutionalizing ineffective
organizational procedures and communications linkages by automating them rather
than correcting them.

Designing for Integration

To reduce production and administrative throughput times, organizations must
create an integrated manufacturing system, which is essentially an issue of
organizational system design rather than technological system design. Now we
examine some issues that must be addressed as organizations attempt to design
truly integrated manufacturing systems, regardless of the techniques or
technologies they use

Implications for Future Factories

We have argued that in order to take best advantage of CIM and JIT techniques
and technologies, it is necessary to examine these systems within the
organizational context. Such an examination not only can improve the design of
such systems, it may also increase the likelihood of successful implementation.
CIM implies many assumptions about the capabilities of information and flexible
manufacturing technology as well as the outcomes of its usage. Most of these
assumptions have been unquestioned in the literature, although many of them are
difficult to defend. Thus, we believe that researchers and manufacturing managers
should rethink the use of advanced technologies.

It is important to recognize that major changes in manufacturing systems, such as

those represented by CIM and JIT, have direct implications for the overall
organizational design. Thus, it may be more productive to redesign the
organizational structure before implementing available technology than to hope the
technology will bring about manufacturing effectiveness. In summary, JIT
emphasizes variability reduction; it creates an environment in which the level of
variability is inherently more manageable. On the other hand, CIM emphasizes
variability handling, suggesting that manufacturers can use flexible technology to
handle an unmanageable situation.

We advocate an approach that begins by examining the interdependencies that

exist among functional units within the overall manufacturing organization. The
sources of production system variability generated by different functions need to
be identified and corrected before variability handling is addressed. Investments in
flexible technologies should then be considered as a last resort and used to handle
variability that cannot be reduced through more efficient means.
ABOUT THE AUTHORS
P. Robert Duimering is a research associate and Frank Safayeni is associate
professor, department of management sciences, University of Waterloo, Ontario.
Lyn Purdy is assistant professor, Centre for Administrative and Information
Studies, University of Western Ontario.
REFERENCES (36)
REFERENCES (36)
1. An earlier version of this paper was presented at the Eighth International Conference on
CAD/CAM Robotics and Factories of the Future. See: “Future Factories and Today’s
Organizations,” Proceedings of the Eighth International Conference on CAD/CAM Robotics
and Factories of the Future, Metz, France, 17–19 August 1992 (Amsterdam: Elsevier, 1992).
2. Y. Monden, Toyota Production System (Norcross, Georgia: Industrial Engineering and
Management Press, Institute of Industrial Engineers, 1983).