managing it for world-class manufacturing- the indian scenario

International Journal of Information Management 20 (2000) 29}57

Managing IT for world-class manufacturing:the Indian scenario

K. B. C. Saxena*, B. S. Sahay

Management Development Institute, Mehrauli Road, Sukrali, Gurgaon 122 001, India

Abstract

The success of Indian manufacturing in meeting global competition will depend on its speed to move itselffrom a protected domestic to a world-class global manufacturing status. This paper analyses a surveyconducted for the purpose of determining world-class status of Indian manufacturing companies andidenti"es important issues that need to be addressed in order to be a world-class manufacturer. The analysiscompares the manufacturing intent to be an agile manufacturer and their information technology (IT)infrastructure in terms of scope of use, extent of use and integration of IT-based systems. The "ndings of theanalysis are somewhat alarming as they show that most of the companies have fragmented (rather thanintegrated) information management systems which may not enable them to deliver superior value to theircustomers and lead them to world-class status. They must, therefore, align their IT initiatives towardsfacilitating agile manufacturing rather than introducing IT to merely automate their conventional opera-tions. ( 2000 Elsevier Science Ltd. All rights reserved.

Keywords: World-class manufacturing; Information technology management; Computer-integrated manufacturing;Manufacturing strategy

1. Manufacturing: a paradigm shift

Of late, the environment facing developing countries has become increasingly more turbulent,dynamic and complex. A combination of external and internal factors including populationgrowth, weak infrastructure, foreign debt, asymmetric world relations and increasing inequalitiesbetween individuals, groups and regions has prevented many developing countries from achievingsigni"cant socio-economic improvements. Some developing countries such as India have,

*Corresponding author. Tel.: #91-124-340153; fax: #91-124-341189.E-mail address: [email protected] (K. B. C. Saxena)

0268-4012/00/$ - see front matter ( 2000 Elsevier Science Ltd. All rights reserved.PII: S 0 2 6 8 - 4 0 1 2 ( 9 9 ) 0 0 0 5 2 - 3

1Before liberalisation of the Indian economy, many industries were heavily regulated through licensing and permitrequirements, and quotas were "xed for raw materials and "nished products by the government. Business, therefore,concentrated on getting the license for production rather than product quality and/or marketing.

therefore, made economic management their prime agenda. They are going through a process ofrestructuring their economy to emphasize competition, integration with global markets andincreasing level of privatisation.

Consequently, the Indian manufacturing industry has been thrust from the protected environ-ment of the `license-permit-quotaa1 regime to an uncertain environment of global competition andglobal markets. Global competitors operating in global markets almost always tend to haveworld-class performance. World-class manufacturing has often been characterised by three corestrategies of customer focus, quality and agility (i.e. the ability to quickly, e$ciently and e!ectivelyrespond to change), and six supporting competencies * employee involvement, supply manage-ment, technology, product development, environmental responsibility and employee safety, andcorporate citizenship (Kinni, 1996). However, we have characterised world-class manufacturingwith the fact that the organisation may have presence in global markets. Thus, in order to competein global markets, Indian manufacturing necessarily needs to acquire world-class performance.Oddly enough, countries such as India, China and Brazil themselves constitute a huge marketwhich might attract many world class players from other countries to sell their products in thesecountries. Thus, even the domestic "rms are constrained to compete with the world-class players byvirtue of their entry to the domestic market because of liberalisation of Indian economy. Therefore,as is clear from Fig. 1, Indian manufacturers need to acquire world class status irrespective ofwhether they are a domestic player or an exporter. Needless to mention, achieving world-classstatus is a great opportunity for those who can make it and for others, is a serious threat. Though tosome extent Indian industry has realised this and risen to the challenges, its battle for survival andgrowth has just begun. The success of Indian manufacturing in meeting this challenge will dependon its readiness to move itself from a protected domestic to a world class global manufacturing statusquickly and con"dently.

In order to monitor and facilitate this transition, it is important to develop an understanding ofthe existing scenario of Indian manufacturing, and to assess the direction in which it is heading. Inorder to accomplish this we have chosen to assess the world class manufacturing readiness of Indianindustry in terms of three attributes: the manufacturing intent, manufacturing practices, and thesupporting IT infrastructure. The reason for choosing these three attributes is based on the simplelogic that readiness depends on what the "rms want to do * their &intent', what they are doing* &practices' and what they are capable of doing* &infrastructure'. Thus, this study of the Indianmanufacturing industry takes a techno-strategic perspective rather than an economic one.

The paper is organised as follows. The next two sections describe the problems in the manufac-turing industry and manufacturing challenges. This is followed by a description of motivation forthis research, the research methodology, and the pro"le of responding companies. Next the resultsof the survey conducted as part of this research are described in terms of (i) manufacturingobjectives and strategy, (ii) usage of management tools and technologies, (iii) manufacturingmanagement practices, and (iv) IT infrastructure and practices. The next section describes theanalysis of the survey "ndings. This analysis is carried on in subsequent sections on manufacturing

30 K. B. C. Saxena, B. S. Sahay / International Journal of Information Management 20 (2000) 29}57

Fig. 1. World-class manufacturing.

strategic intent, strategic use of IT in Indian manufacturing, and breadth and integration of ITinfrastructure. The next section proposes a framework linking manufacturing strategy, world-classstatus and IT use followed by the conclusion.

2. Problems in the manufacturing industry

Today the manufacturing industry still strives for stability of its production system as a majororganisational goal (Sahay, Saxena & Kumar, 1997). Therefore, in most organisations managementof change is not yet considered a permanent objective.

Information processing is still very much fragmented even in computerised applications (Sahayet al., 1997). This is due to past bottom-up generation of computer applications, to the use ofmulti-vendor hardware and software platforms and to the functional boundaries in the companiesas well. Therefore, the decision-making process in the companies is still based on traditionalinformation processing}information gathering with &paper and pencil' and from inconsistentsources. This process is at the least very time consuming and may yield only insu$cient or evenunreliable information.

In addition, the companies are not organised for fast decision-making processes (Sahay et al.,1997). Departments are still managed according to their own sub-goals rather than to realenterprise goals. The responsibilities are still structured in one-dimension hierarchies that mixresponsibilities for enterprise assets with those for enterprise operations. Matrix organisation is stillmore or less a theoretical concept.

3. Manufacturing challenge in the 21st century

3.1. Time-based competition

In the new manufacturing environment, time is the primary competitive motive of business in the1990s. This does not mean, however, that other motives such as cost, quality and service can be

K. B. C. Saxena, B. S. Sahay / International Journal of Information Management 20 (2000) 29}57 31

Fig. 2. Changing business goals in changing environment.

Table 1Flexible manufacturing parameters for meeting business objectives

Business objectives Flexibility

Product innovation Product technologyProduct diversity Product mixCustomer requirement DesignMarket share VolumeMeeting delivery dates Routing, sequencing

ignored. In fact, these are pre-requisites to sustain competitiveness. But the winning factor isprovided by time and enhancement to the basic products (Stalk & Hout, 1990). In the manufactur-ing environment, time-based competition becomes the highest priority to gain responsiveness and#exibility (Fig. 2) (Meyer, 1990).

Responsiveness and #exibility have several important dimensions (Table 1). One is product-mix,the need to support maximum variety in end products with minimal disruption to the manufactur-ing operations. Others relate to upgrading of plant and equipment in order to be able to producequickly. The driving force behind this priority setting is the need and the wish to respond tovirtually any customer request just-in-time. Flexibility, on the other hand, is the response ofa system to environmental uncertainties (&the unknown customer'). Thus, in the next millennium,an information culture will be needed to manage uncertainties; this culture will no longer be pushedforward by technology but will be controlled by information feedback. This leads us to the secondchallenge industries are facing today: how to manage knowledge.

3.2. Managing knowledge

In the next millennium, the productivity and, even more important, the e!ectiveness of managersand white-collar workers will become critical to long-term survival. The e!ectiveness of these


experts depends on their smooth integration into the organisation. Therefore, in the era ofadvanced specialisation, integration of dispersed knowledge will become progressively moredi$cult to accomplish and more costly to achieve.

4. Motivation for this research

India ranks 45 out of 53 countries in global competitiveness, according to the 1997 GlobalCompetitiveness Report as summarised in Business Today (August 7}21, 1997). Is India on theright track to becoming a world-class manufacturer? Addressing this basic question is at theheart of this research. According to Gunn (1987), there are three pillars to support world-class manufacturing: computer-integrated manufacturing (CIM), total quality control (TQC), andjust-in-time (JIT) production methods. This research focuses on CIM, as covering all the threeaspects would have made it unwieldy and too broad to be meaningful. The objectives of theresearch are:

f To explore the current status of IT applications and management practices in Indian manufac-turing.

f To examine discrepancies with world-class practices in these areas, and the nature and extent ofinteractions between them.

f To identify strategically important areas in manufacturing management which need to beimproved by exploiting IT.

5. Research methodology

A comprehensive questionnaire was designed for identifying the contingency task structure,manufacturers' expectation from IT-based systems, the extent of usage, problems encountered andways of organising systems deployment e!orts. The survey questionnaire was designed keeping inview the available previous survey questionnaires and in consultation with practicing managers(Chung Walter, Tam Migar, Saxena & Yung, 1993; Sahay, Prem Vrat & Jain, 1996). The surveyquestionnaire was validated with a sample survey. In addition to the questionnaire survey,personal visits to companies were made to get "rst-hand information. Survey data was analysed toget a snapshot view of IT.

Out of 982 questionnaires mailed to Chief Executives/Managing Directors, 83 responses werereceived in-time out of which 78 were found usable. The remaining "ve responses were incompleteand therefore not considered. 21 responses were received much later (after the dead-line set forreturning the questionnaire), and were therefore not considered. This gives us a response rate of8%, which is considered adequate for this type of survey in India. The responding companies hada total turnover of Rs.905.51 billions in the "nancial year 1995}1996. The questionnaires weremainly "lled out by Vice-Presidents and General Managers/Deputy General Managers (70.5%).However, it is interesting to note that about 9% of Chief Executive O$cers (CEOs) also "lled in thequestionnaires. This "nding seems to be in contrast to the popular belief that top managementfocuses mainly on strategic business issues rather than manufacturing.


Table 2Regional distribution of respondents

Region States included % Response

East West Bengal, Bihar, Orissa 12North Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, 32South Tamil Nadu, Karnataka, Kerala, Andhra Pradesh 27West Maharashtra, Gujarat, Rajasthan, Madhya Pradesh, Goa 29

6. Pro5le of responding companies

The distribution of responding companies in terms of region, industry and size shows that a widespectrum of industrial activity was covered (Table 2). The respondents can, therefore, be viewed asa representative sample of the Indian manufacturing industry. In terms of regional distribution, therespondents were evenly divided among the four regions, except the East (12%). This might bebecause the eastern region has fewer states, and relatively less industry concentration.

The responses were markedly better from public limited companies which constituted nearlythree-fourths (77%) of the total sample, followed by private limited (13%) and public sector (10%)organisations. Of the 90% responses from private and public limited companies, 17% responseswere received from multi-national companies (MNCs). The responding companies were distributedover a large number of industries including steel, engineering, automobile, petroleum, electronics,fertilisers, cement, chemicals, telecommunications, textiles, consumers, agro-industry, pharmaceut-icals and others. Engineering and automobiles were the biggest segment (24.3 and 23.1%),respectively.

7. Manufacturing objectives and strategy

Manufacturing strategy is concerned with setting broad policies and plans for using theproduction resources of the "rm to best support the "rm's long-term business strategy (Skinner,1985). Respondents were asked to rate the strategic objectives of manufacturing listed in thequestionnaire on a 5-point scale, with a score of 1 indicating `not importanta and a score of5 indicating `very importanta. Quality, delivery, inventory reduction and capacity utilisationwere identi"ed as the important objectives by the participants. Manufacturing lead-timereduction and linking manufacturing and corporate strategy were considered slightly less impor-tant (Fig. 3).

Volume, mix and design #exibility (necessary for faster product development) should be con-sidered important objectives in a competitive environment. Instead #exibility was consideredrelatively less important by the participants. In contrast, according to the International Manufactur-ing Futures Survey (Miller, DeMeyer & Nakane, 1992), linking manufacturing strategy to businessstrategy was the top priority in Western countries, while faster product development was toppriority in Japan in the early 1990s.


Fig. 3. Manufacturing objectives in Indian industry (Mean scores on a 5-point scale).

Again, the high rating given to capacity utilisation should be a cause of worry to Indianmanagers with a global mindset. Under the concept of world-class manufacturing, capacityutilisation is viewed as a function of the current demand for the company's products, and not asa strategic objective.

8. Usage of management tools and technologies

A number of manufacturing management tools such as CIM, CAD, CAM, benchmarking, etc. isbeing used internationally. Respondents were asked to rate these tools on a 5-point scale in termsof their perceived usability, according to the following scores:

Score Signi"cance1 Not aware of this2 Not being considered3 Being considered4 In use for up to 1 year5 In use for more than 1 year

The one tool which makes it well past the threshold mean score of 3 is total quality management(TQM) closely followed by total productive maintenance (TPM) (Fig. 4). Interestingly, Indian


Fig. 4. Usage of management tools and technologies.

managers seem to be very hesitant to admit that they are not aware of these tools. Very fewmanagers ticked 1 against any tool!

9. Manufacturing management practices

The set of manufacturing management tasks listed in the Fig. 5 was evaluated with respect to:

f importance to top management in the short termf importance to top management in the long termf perceived usefulness of computers for the task

5-point scales were used for rating importance and usefulness. A score of 1 indicated `notimportanta or `not usefula, while a score of 5 indicated `very importanta or `very usefula. Theresults should be interesting for IT managers who want to prioritise their spending due to resourceconstraints. An interesting "nding is that the following tasks have scores of more than 4 on all threecriteria:

f working capital managementf quality assurancef production planningf materials planningf purchasingf productionf "nished goods distribution.


Fig. 5. Importance of management tasks and the perceived usefulness of IT for them.

Product design is one task in which strategic use of IT has made a major impact globally (e.g. inthe case of Boeing). In India, this task is not viewed as important because very few companies haveindigenous product development capabilities (Fig. 6). Less than 25% of their product range isdesigned in-house, according to 51% of respondents. Only 8% companies go in for in-house designfrom 51 to 75% of their product range. More than one-fourth of respondents stated that no e!ort ismade for the interaction of their design department with production engineering. This might


Fig. 6. Percentage of product range designed in-house.

Fig. 7. Factors creating problems for production planning.

indicate poor practice of design for manufacturability (i.e. designing products that can be manufac-tured more easily).

Indian production planners seem to bear the brunt of the dictum that a forecast is always wrong!The consensus seems to be that varying sales forecasts `frequentlya make it di$cult to makefeasible plans (Fig. 7). Some respondents say that this happens `very oftena, and there are also caseswhere it happens `almost alwaysa. The problems of forecasting are probably compounded by thelonger manufacturing cycle times, which make it necessary to forecast for longer time horizons. Theother factors that are commonly perceived as causes for concern for production planners* invalidstandards (e.g. BOMs) and inventory data * are not viewed as serious problems.

The biggest obstacles in achieving production targets are lack of timely supplies of materialsfrom vendors and absenteeism (Fig. 8). The other factors* equipment breakdowns and power cuts* are lesser problems. Power cuts are external variables, which can only be controlled throughcaptive power generation facilities. The problems with supplies re#ect on Indian industry'sweakness in purchasing management. Less than half of the responding companies (about 40%)


Fig. 8. Factors preventing achievement of production plans.

2The horizontal axes in Figs. 10}19 and 21}25 show the number of responding companies.

have automated shop scheduling and loading systems. Such systems, whether in-house or pur-chased, can greatly increase productivity and e!ectiveness on the shop #oor.

Fig. 9 shows the number of companies that use various planning mechanisms. Many companiesreported that they use material requirements planning (MRP) in conjunction with shortage lists.This implies that the use of MRP has not been completely e!ective because MRP use should ideallyeliminate the need for shortage lists. We also found that many managers call their materialplanning process MRP even if it is not the standard MRP procedure. In summary, MRP is themost common planning mechanism but shortage lists continue to be used, while pull systems are atan early stage of use.

The inventory "gures shown in Figs. 10}122 are representative averages for the respondents.High capital costs not withstanding, Indian industry continues to operate in high-inventory mode.Though more than 15 companies have achieved more than 100 "nished goods inventory turns peryear, many of these companies are dedicated ancillary units or companies that produce heavyequipment to order. Most of the respondents carry more than 3 days of "nished goods inventory,more than 1 week of WIP inventory and more than 2 weeks of raw material inventory. Manyrespondents did not have "gures available on their WIP inventory. The pipeline (Fig. 13) inventorylevel varies across industries and respondents. It also depends on the size of the market serviced.

Most of the respondents (83%) stated that their sta! helps vendors to improve their processes.Similarly, formal vendor rating systems are used by four-"fths of the respondents whereas onlyone-"fth replied in a$rmative that components/materials supplied directly to the shop #oorwithout any incoming inspection. However, it is interesting to note that 69% of the companies havebreak-downs of their vendor's cost for important items.

However, having cost data implies a level of trust, and is a requisite for joint cost-reductione!orts, the bene"ts of which are shared by the company with the vendor.


Fig. 9. Basic production and materials planning mechanism used.

Fig. 10. Raw material inventory held.

Fig. 11. WIP inventory held.


Fig. 12. Finished goods inventory held.

Fig. 13. Average pipeline inventory in the "nished goods distribution system.

The ultimate goal of vendor development is realised when the vendor reaches a stage of zerodefects in quality and delivery. This enables the vendor to ship materials or components directly tothe buyer's shop #oor, cutting out a lot of waste from the system. This stage has been reached byless than one-fourth of the responding companies. Though product quality improvement is statedto be the top most strategic objective in manufacturing (Fig. 3) and TQM is the most widely usedmanagement tool (Fig. 4), it is ironic to see that the results of the quality movement are onlybeginning to show on the shop #oor.

About 50% of the responding companies state that they have defect rates, before rework, of up to1%. A major chunk of the responding companies have stated defect rates of 1}3%, which is farfrom global standards of parts per million (PPM), which would imply defect rates on the order of0.0001%. Companies have also reported defect rates of more than 5%. The redeeming factor here isthat the pro"le of defect rates would probably have been much worse had a similar survey beencarried out "ve years ago. Also on the positive side, 10 companies have reported defect rates of lessthan 0.1% (Fig. 14).


Fig. 14. Average percent defect rate (before rework).

Fig. 15. Average downtime percentage.

The use of TPM (Fig. 4) has not resulted in world-class maintenance practices. Perhaps, as in thecase of quality, the need for signi"cant improvement in this area has been felt only in the last "veyears. Only 1

3of the respondents have reported downtime percentages of less than 2%. Unlike zero

defects, which many experts agree is a long-term goal, near-zero downtime should de"nitely beachievable (Fig. 15).


Fig. 16. Setup/changeover time.

The disquieting "nding here is that none of the respondents have switched to predominantlycellular layouts, which are generally considered one of the foundations for world-class manufactur-ing in the discrete manufacturing sector. The remaining types of layouts were in keeping with theconventional trends. Generally speaking, product layouts are used when the scale of productionfavours dedicated production facilities, process layouts in the case of batch production and "xedposition layouts are used in heavy industries where the `joba does not move and equipment ismoved around it.

Setup/changeover time is the key to `leana production in any plant that processes multiplematerials on the same equipment. Large setup times (Fig. 16) force longer production runs andresult in larger inventories, longer cycle times and slower response to the market. This was therealisation that led to the development of the Single Minute Exchange of Dies (SMED) concept byShigeo Shingo in the 1950s in Japan. SMED refers to setup times in `singlea minutes, i.e. less than10 min. The concept is not restricted to press shops. Only two responding companies have reachedthis stage, while 11 companies are close to it. They make up about 15% of our sample.

10. Information technology infrastructure and practices

IT applications have by now entered almost all the companies but mostly in an uncoordinatedway without long-term integration plans or automation strategies. Individual departments intro-duced computers and purchased or developed software to support their own department opera-tions. This fragmented approach divided a company into small and almost autonomous enter-prises, each with the goal to deploy the computer to make their department and its associatedactivities work more e$ciently. Thus, many departments acquired computers, developed andinstalled computerised systems, the net result of which was that the enterprise consisted of many


Fig. 17. Department-wise extent of computerisation.

`islands of automationa. It soon became clear that smooth transfer of information betweenenterprise activities and even within departments was a burden, if at all possible. Consequently, the"rst move towards integration was made to study integration possibilities between the functionsthrough networking and data sharing.

Fig. 17 shows the number of companies which had (a) computerised and (b) networked thedepartments listed. Ironically, in India's manufacturing industry, the departments that are com-puterised to the greatest extent are "nance and accounts, stores, and purchasing/vendor develop-ment. This re#ects a `transaction processinga mentality. Design/engineering, production planningand control (PPC), production, quality assurance and quality control (QA/QC), are in the secondtier while marketing, distribution, human resource management (HRM) and projects bring up therear. Interestingly, this pattern has no correlation with the perceived importance of and usefulnessof computers in managerial tasks. Also evident from Fig. 17 is the fact that many investments havebeen made in IT without reaping any bene"ts through networking.

Figs. 18 and 19 show the number of companies that used certain categories of softwareapplications. O$ce automation software, which is used for information management in o$ces,


Fig. 18. Extent of use of o$ce automation software.

Fig. 19. Extent of use of manufacturing software.

dominates manufacturing software. In the o$ce automation area, presentation packages were theleast used, with 67% companies using them. In the case of manufacturing software, the applicationswith the largest base were materials accounting and computer-aided design and drafting. Boththese applications are used by approximately 58 and 59%, respectively. MRP II and enterpriseresource planning (ERP) are used by 20% of the companies. The manufacturing application withthe smallest base is simulation, which is widely used internationally.


Fig. 20. Status of use of groupware and intranets.

MRP II produces feasible production plans to help stabilise and control manufacturingsystems. ERP is concerned with making sure that a "rm's manufacturing decisions are notmade without taking into account their impact on the supply chain, both upstream anddownstream. Taken further, production decisions are a!ected by and a!ect all of the othermajor areas in the business, including engineering, accounting, and marketing to makebetter decisions. There is a need to take into account all of these important interactions withinthe business. ERP software is the medium for accomplishing this integration of decision-making processes. Since nearly every department in a company could be computerised, the ERPsoftware can link and coordinate all of these computerised functions, to make them `talka to eachother.

Groupware refers to software designed to help business teams work together across locations.It coordinates schedules, messages and work#ow among group members and usually includesmodules for group analysis and decision-making, as well as group document preparation.Similarly, an intranet is an internet-based network for use within an organisation. Fig. 20deals with managerial opinion on two related trends that are making waves globally today.Groupware and intranets help companies to combine the uses of databases and electronic messages(E-mail). What results is `the death of distancea as far as information sharing isconcerned. Information may be simultaneously made available to managers located on di!erentcontinents. Interestingly, a small number (less than 10 in each case) of responding companieshave already used intranets and/or groupware. Intranets have a slight edge here. A largenumber of companies (about 25) are considering both these applications. An equally largenumber have not considered them yet. Interest in these developments seems to be at a thresholdlevel.

Figs. 21}24 provide interesting insights into the nature and causes of implementation of ERPsoftware in Indian manufacturing industry. Interest in ERP has crossed the threshold level, withabout 25% of responding companies stating that they are evaluating the available ERP packages,and about 20% stating that the selection process has been completed or that implementation is inprogress. 13% of the responding companies have considered and rejected ERP. About 31% of the


Fig. 21. Present status of ERP.

Fig. 22. Selection factors for ERP.

Fig. 23. Perceived bene"ts of ERP.


Fig. 24. Problems encountered in ERP implementation.

respondents have not considered it yet or are not aware of it. From those responding companiesthat have gained some exposure to ERP, the following trends emerge:

f the deciding factor for selection of a package is its functionality. The recommendation of parentcompanies is the deciding factor in some cases.

f The bad news for those who position ERP software as a template for reengineering is that themajor bene"t from ERP is perceived to be `integration of di!erent departments and easy accessto dataa. `Fundamental improvements through reengineering and streamlining the processes ofmanufacturinga is a distant second.

f `Lack of "t of existing processes with features provided by the packagea and `Lack ofavailability of personnel for implementation and use of the packagea are the biggest problems forthose going in for ERP implementation.

Fig. 25 shows the extent of use of electronic interchange of data across departments withincompanies. As shown in the "gure, the use of electronic links is gaining ground, with more than halfof the responding companies reporting its use between stores and purchase. Electronic linksbetween stores and PPC and production and PPC are also quite widely used. Such electronic linkscould be made possible due to increasing inter-departmental connectivity and use of perhapsERP-type or groupware-type software packages.

11. Analysis of 5ndings of survey

The previous section gives a summary of the survey. The "gures given there present snapshotsof an industry in a stage of transition, operating in one of the big emerging markets of theworld* India. In addition, these "ndings also raise some important research issues that have beenaddressed brie#y in the sub-sections that follow. These issues are:


Fig. 25. Departments between which data transfer is fully electronic.

f the stated manufacturing objectives of Indian organisations vis-a-vis international trendsf breadth of IT infrastructure with respect to depth of IT use in manufacturingf the e!ectiveness of use of IT in integrating the components of manufacturing systemsf breadth versus extent of integration of IT infrastructure.

12. The manufacturing strategic intent

In order to compare the manufacturing objectives of the participant organisations with those ofworld-class manufacturers, we propose a two-way classi"cation called the manufacturing strategicintent (MANSI) grid. This compares the manufacturing objectives on two dimensions* to be anagile manufacturer, or to be a conventional manufacturer (stressing capacity utilisation). Thisclassi"cation has two inherent assumptions:

1. The stated objectives of the respondents are actually the strategic objectives of the respondingcompanies; and

2. The practices of the responding companies re#ect their stated objectives.

Maskell (1994) de"nes agile manufacturing as `a series of techniques that have been used by goodcompanies to bring about unprecedented improvements in quality, productivity and customerservice. These techniques are not new, many have been available for several decades, and othershave been developed gradually over the last 30 years by innovative companies like Toyota.a Heidenti"es quality, just-in-time (JIT) manufacturing, people and #exibility as the bases of agilemanufacturing.

Conventional mass producers are driven by internal objectives that are centred on ezciency. Theprime example of an e$ciency-oriented measure is capacity utilisation. Agile manufacturers, on the


Fig. 26. MANSI classi"cation of the responding companies.

other hand, are driven by multiple objectives (e.g. faster new product development, #exibility ofvolume and mix, quality, on-time delivery and lead time reduction, etc.) which focus on e!ec-tiveness in meeting the needs of the external customer.

The objective of agile manufacturing is to produce to demand and avoid speculative production.This brings manufacturing closer to the market. As Taiichi Ohno (1992) has written, what isimportant is that the operable rate of equipment* the percentage of time for which the equipmentis ready for operation when required* should be 100%. The operating rate* the percentage ofavailable time for which the equipment was actually operated* should be determined by demand.

Manufacturers will have to achieve world-class manufacturing status to compete e!ectively inthe global market. Therefore, world-class manufacturers emphasise agile objectives and de-emphasise capacity utilisation. This classi"cation places a manufacturer into one of the followingfour types (Fig. 26):

(i) World-class players: Companies that have the potential to be world-class. These are thosewhich rated agile objectives above 3 and capacity utilisation below or equal to 3 on the5-point scale.

(ii) Transitional players: Companies that rated both agile objectives and capacity utilisation above3. These are companies that can make the transition to world-class players.

(iii) License-regime survivors: Companies which rated agile objectives below or equal to 3, andcapacity utilisation above 3. These companies continue to operate with objectives that wouldhave led to success before the liberalisation of the economy.

(iv) Inertia players: Companies that rated both objectives below 3 are surviving on inertia. Thereasons for their survival could include a monopolistic or oligopolistic market.

As we would expect in any emerging market, the largest chunk of the responding companies is inthe transitional players' quadrant. This signi"es an industry in transition.

Having the right objectives may not always lead to superior performance. However, operatingwithout these objectives is virtually guaranteed to lead to competitive disadvantage! The com-panies that are in the MANSI world-class players' quadrant have, therefore, achieved a necessary,but not a su$cient condition.


13. Strategic use of IT in Indian manufacturing

The needs and skills required to manage today's businesses in a global environment are fardi!erent than they were just a decade ago. Clearly, we need a new way of looking at manufacturing,for the way we have considered it in the past is no longer su$cient. With the rapid changes in ITand manufacturing technology, "rms are therefore getting increasingly interested in managing thestrategy-technology connection to develop new ways of achieving competitive advantage (Apple-gate, McFarlan & Mckenney, 1996). Firms are attempting to link manufacturing strategy withbusiness strategy (Skinner, 1985; Wheelright, 1981; Luftman, 1996), to examine the strategic impactof rapidly changing manufacturing and information technology (Jelinek & Goldhar, 1983; Kan-trow, 1980), and to "nd new ways of viewing manufacturing as a competitive weapon (Skinner,1985; Hayes & Wheelright, 1984; Jelinek & Goldhar, 1984). Information technology is a keyingredient in this emerging trend of getting competitive advantage through manufacturing.

Today's emphasis on competing through manufacturing may stimulate "rms to reassess theiralignment of IT strategy with business strategy. New ideas concerning how IT can change the way"rms compete, are being explored (Applegate et al., 1996; Callon, 1996; Jelassi, 1994). However,computer integrated manufacturing (CIM), which blends recent developments in manufacturingand IT to achieve competitive advantage, can provide full strategic bene"ts only if there existsa broadened partnership of top management as well as engineering, marketing, manufacturing andIT executives who share a common vision of how CIM makes possible new approaches todesigning business systems. But, as is evident from the analysis given above, most companies havefocused on &stand-alone' applications of CIM component technologies, such as computer numer-ical control (CNC) machines, computerised bill-of-materials, and turnkey CAD systems thatimprove engineering design productivity.

Obviously, it will be somewhat premature to discuss strategic use of IT (i.e. CIM) in sucha &stand-alone' applications environment. Hence, what has been done here is to develop a taxon-omy of IT applications role, and use it to de"ne the breadth and depth of IT infrastructure.

Scheer (1994) had proposed an &Architecture of Integrated Information Systems' (ARIS). ARIS isused here as a conceptual framework for visualising the roles which IT applications can play inrunning a business, as opposed to the functions performed by them. As shown in the Fig. 27, theserange from operative systems which essentially record quantities to long-term decision supportsystems. The higher the level of IT applications in the ARIS classi"cation, the more is the likelihoodof using IT strategically. The shaded portion of the diagram represents the thrust areas for ITuse for most Indian manufacturers (the bases for this conclusion are the "ndings in Figs. 17}19).Unfortunately, this usage pro"le precludes the use of IT for sophisticated tasks such as planningand decision support. The emphasis on accounting systems indicates a `data-processingamentality. Even the data processing capabilities are not fully harnessed because of lack ofintegration.

The important implication for managers, however, is that a company-wide, integrated IT infra-structure should be viewed only as a prerequisite towards the ultimate stage of using informationleading to decision support for strategic planning. For example, IT-generated inputs could be usedto speed up the accounts receivable process instead of just tracking sales and performing creditchecks. This would be a transition to a controlling role. At a higher level, analysis might reveal thatthe bene"ts from this step could be used to reduce prices. This would be a strategic role.


Fig. 27. Usage of IT in Indian manufacturing architecture of information systems.

14. Classi5cation by breadth of IT infrastructure and depth of manufacturing applications

In recent years Indian manufacturing industry is increasingly feeling the need to harness IT tomanage information #ows for more responsive manufacturing. The predominance of MaterialsAccounting and Computer Aided Design and Drafting has begun to give way to other applications.In order to assess the perception of this need and its impact on emerging IT infrastructure inmanufacturing, we propose a conceptual framework exploring IT utilisation across two dimen-sions of its breadth and depth. The breadth dimension of prevailing IT infrastructure in a companyis assessed by the number of departments that have been computerised, and companies with morethan "ve computerised departments out of a total of 11 were classi"ed as those with a high breadth.The depth of IT use in manufacturing can be measured by the number of layers computerised in theARIS architecture. However, as shown in Fig. 27, it is limited to the bottom-most two layers onlyfor all the participating companies. Hence, the ARIS architecture has not been used as the basis forde"ning the depth. Instead, depth of IT utilisation is measured by the number of categories of ITapplications in manufacturing existing in an organisation out of the 10 applications mentioned inthe questionnaire (Fig. 19). The depth is considered high if more than three applications out of the10 existed in the organisation.


Fig. 28. Classi"cation in terms of breadth of IT infrastructure and depth in manufacturing applications.

The resulting classi"cations are (Fig. 28):

(i) Resource optimising: These companies have used their extensive IT infrastructure to the hilt byusing a number of manufacturing applications.

(ii) Islands of automation: This has long been the bane of manufacturing companies. The depth ofIT use in manufacturing is not leveraged adequately due to the less developed infrastructure(low breadth) in these companies.

(iii) Resource accounting: These companies are stuck in the 1960's, with neither adequate breadthof IT nor depth of manufacturing applications. Computer applications would probably belimited to payroll and similar other areas.

(iv) Ozce automation: These companies have invested in a broad IT infrastructure, but have notcapitalised on it to use IT as a manufacturing management aid. Applications used wouldtypically include o$ce automation suites and e-mail.

A large number of the responding companies fall in the o$ce automation quadrant. This can beimputed to the fact that the need for sophisticated use of IT in manufacturing has been felt onlyrecently by industry at large. The e!ective use of applications such as computer-aided processplanning, simulation, shop #oor control, etc. will enable the shift to the resource optimisationquadrant.

15. Classi5cation by breadth and integration of IT infrastructure

CIM seeks to integrate `stand-alonea design and engineering, manufacturing and businessdecision support systems into the manufacturing of the future. Thus, integration of IT infrastructureis yet another dimension of move toward CIM, which facilitates strategic use of IT and has notbeen addressed so far in the analysis.

The extent of integration in a company's IT infrastructure is therefore a key indicator of thepotential for strategic use of IT in the company. We have awarded two points to each company foreach data transfer (out of a list of seven provided in the questionnaire) which is fully automated and


Fig. 29. Classi"cation in terms of breadth and integration of IT infrastructure.

one point for each department which is networked. Companies with a score higher than 10 wereclassi"ed as highly integrated companies. The basis for measuring the breadth of IT infrastructurewas the number of departments in which computers are used, as in the previous section.

The categories into which we classi"ed the responding companies are (Fig. 29):

(i) Holistic approach: These companies have attained a high degree of integration and possessa high breadth IT infrastructure.

(ii) Slice approach: Companies which have computerised only a few departments but gone in forextensive integration.

(iii) Piecemeal approach: Companies that have low breadth and low integration. They may not beable to extract productivity gains from IT.

(iv) Scattered approach: Companies that have high breadth but have not leveraged it to attainhgih integration.

We have a large number of companies in the scattered approach quadrant. This is probably dueto the propensity of management to invest in `computersa without realising the role of integrationin using IT strategically. However, the recent interest in ERP software shows that companies arebecoming increasingly aware of this need.

16. Manufacturing strategy, world-class status and IT use

The common thread that runs through the individual analyses is that a few select companies arealready on their way to attaining world-class status in terms of these frameworks. However, most ofthe responding companies have a lot of groundwork to do in terms of:

f setting world-class manufacturing objectives, especially by de-emphasising capacity utilisationand emphasising `agile objectivesa;

f using integrated IT infrastructure to help in operationalising these objectives;f extending the `manufacturing deptha of their available IT infrastructure to harness their

manufacturing resources towards these objectives; and


Fig. 30. A conceptual framework for evaluation of IT infrastructure in manufacturing.

f using IT to eliminate information delays that cause waste in the processes of manufacturing andlogistics.

Fig. 30 is our proposed conceptual framework for evaluating IT initiatives from a businessperspective. The breadth of IT infrastructure refers to the portfolio of functions (or departments) inwhich IT is used. The level refers to the level of Scheer's hierarchy (see Fig. 27) upto which IT usehas been extended. Execution and accounting signify the lowest level, control signi"es a mediumlevel and planning and analysis signify the highest level. Integration refers to the extent to whichdata transfers are achieved electronically through networking.

Our research "ndings show that many IT initiatives have followed paths parallel to the paths A,B or C (Fig. 30), i.e. they have ignored one dimension out of the three. This results in fragmented ortechnically oriented information management systems that do not enable the organisation todeliver superior value to its customers. Path D is the path along which organisations striving forworld-class performance must align their IT initiatives. That is, simultaneous improvements on thethree fronts of breadth, integration and level of IT use are the keys to building information systemswhich will support agile manufacturing.

This would require a change in the mind-set of management to consider information as a strategicresource and information management as an organisational issue rather than a technologicalone! If information is to be used strategically in manufacturing, the use of IT in manufacturingshould be driven by an IT strategy which is in alignment with the manufacturing strategy.Of course, to derive competitive advantage from manufacturing, the manufacturing strategyshould itself be derived from the business strategy of the "rm. There has been a lot of researchin terms of aligning IT strategy with business strategy as well as aligning manufacturing strategywith the business strategy. However, the issue of aligning IT strategy with the manufacturingstrategy has been addressed to a lesser extent in the literature. Therefore, we propose belowa framework for alignment of business, manufacturing and IT strategy (Fig. 31). Given the need foralignment of business, manufacturing, and strategies, the key question is how a company shouldaccomplish it?


Fig. 31. Aligning business, manufacturing and IT strategies.

17. Conclusion

This paper has explored Indian manufacturing "rms for the level of their preparedness forworld-class status using their strategic intent, manufacturing practices and IT infrastructure asa basis. The research "ndings, which are based on a national-level representative survey, aresomewhat alarming. It shows that only a few select companies are already on their way to attainworld-class manufacturer status, whereas the majority either lack the world-class vision, or havepoor manufacturing practices or poor IT infrastructure. Given the economic agenda of the Indiangovernment, the manufacturing sector really needs help to overcome this lacunae in the near futureor else our economic progress may be in jeopardy.

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Dr. K. B. C Saxena is NALCO Professor of Strategic Information Management and Chairman, InformationTechnology Management Area at the Management Development Institute, Gurgaon, India. Prior to this, he held facultypositions at the Indian Institute of Management, Bangalore; Erasmus University, Rotterdam; and Hong Kong Polytech-nic University, Hong Kong. Dr. Saxena has more than 25 years of academic and diversi"ed industrial experience insystems development and management of information services and technology. His research and consulting interests arein business process reengineering, information systems/technology planning and management support systems. He hasconducted as well as managed research in these areas with funding support from the Netherlands and Hong Konggovernments and the Commonwealth Foundation, UK.

Dr. B. S. Sahay is Professor of Operations Management and Chairman (Graduate Programmes) at the ManagementDevelopment Institute, Gurgaon, India. Dr. Sahay has over 16 years of experience in teaching, management consultancy,training and industries. He has participated in Management Consultancy and Project Management programmesorganised by Asian Productivity Organisation/Japan Productivity Centre, Tokyo and German Foundation of Interna-tional Development, Berlin. He has worked both in India and abroad on various assignments for engineering,manufacturing, chemical, process, jobbing, electronic and service industries. His teaching, research and consultinginterests include production and operations management, project management, productivity management, industrialengineering, system dynamics and policy modelling.


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