INTRODUCTION TO COLLABORATIVE MANUFACTURING

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INTRODUCTION

Manufacturing is a constantly evolving field that is strongly driven by optimization of the resources it employs. Manufacturing optimization is showing a shift from processes to businesses in a more systemic analysis of its nature and role in the whole picture. Current economic conditions throughout the world, characterized by the steady growth of local economies, have contributed a good deal to this trend.

This chapter briefly presents the economic principles that drive collaborative manufacturing and the conditions supporting what manufacturing has become nowadays. Later sections of this chapter examine the coordination feature that enables collaborative manufacturing within and between en- terprises and discuss several cases that demonstrate the ideas of collaborative manufacturing.

MANUFACTURING IN THE CONTEXT OF THE GLOBAL ECONOMY: WHY COLLABORATE?

To understand collaborative manufacturing in its actual form, we must refer to the current world economic conditions that motivate collaborative manufacturing. Many scholars recognize that we are living in the knowledge revolution. As Sahlman (1999) notes, the new economy markedly drives out inefficiency, forces intelligent business process reengineering, and gives knowledgeable customers more than they want. This new economy, based primarily on knowledge and strong entrepreneurship, is focused on productivity and is profoundly changing the role of distribution. Distribution and logistics must be more efficient, cheaper, and more responsive to the consumer. This trend of new, competitive, and open channels between businesses is geographically dispersed, involving highly technical and rational parties in allocating effort and resources to the most qualified suppliers (even if they are part of another company).

One of the key aspects leading the way in this new knowledge-based world economy is science. There is a well-documented link between science and economic growth (Adams 1990), with a very important intermediate step, technology. Science enables a country to grow stronger economically and become the ideal base for entrepreneurs to start new ventures that will ultimately raise produc- tivity to unprecedented levels. This science–growth relationship could lead to the erroneous conclu- sion that this new economy model will prevail only in these geographic areas favoring high-level academic and applied R&D and, even more, only to those institutions performing leading research. However, as Stephan (1996) points out, there is a spillover effect that transfers the knowledge gen- erated by the research, and this knowledge eventually reaches underdeveloped areas (in the form of new plants, shops, etc.). This observation is confirmed by Rodriguez-Clare (1996), who examined an early study of collaborative manufacturing, multinational companies and their link to economic de- velopment. According to the Rodriguez-Clare model, the multinational company can create a positive or negative linkage effect upon any local economy. A positive linkage effect, for example, is created by forcing local companies to attain higher standards in productivity and quality. An example is the electronics industry in Singapore (Lim and Fong 1982). A negative linkage effect is created by forcing local companies to lower their operational standards. An example is the Lockheed Aircraft plant in Marietta, Georgia (Jacobs 1985).

We are therefore facing a new world of business, business of increasing returns for knowledge- based industries (Arthur 1996). The behavior of increasing-returns products is contrary to the classical economic equilibrium, in which the larger the return of a product or service, the more companies will be encouraged to enter the business or start producing the product or service, diminishing the return. Increasing-returns products or services, on the other hand, present positive feedback behavior, creating instability in the market, business, or industry. Increasing returns put companies on the leading edge further ahead of the companies trailing behind in R&D of new products and technol- ogies. A classical example of this new type of business is the DOS operating system developed by Microsoft, which had a lock-in with the distribution of the IBM PC as the most popular computer platform. This lock-in made it possible for Microsoft to spread its costs over a large number of users to obtain unforeseen margins. The world of new business is one of pure adaptation and limits the use of traditional optimization methods, for which the rules are not even defined.

Reality presents us with a highly complex scenario: manufacturing companies unable to perform R&D seem doomed to disappear. One of the few alternatives left to manufacturing companies is to go downstream (Wise and Baumgartner 1999). This forces companies to rethink their strategy on downstream services (customer support) and view them as a profitable activity instead of a trick to generate sales. Under this new strategy, companies must look at the value chain through the cus- tomer’s eyes to detect opportunities downstream. This affects how performance is measured in the business. Product margin is becoming more restricted to the manufacturing operation, disregarding services related to the functioning and maintenance of the product throughout its life. A feature that is increasing over time in actual markets is for businesses to give products at a very low price or even for free and wait for compensation in service to the customer or during the maintenance stage of the product’s life cycle (e.g., cellphones, cable television markets in the United States). According to Wise and Baumgartner (1999), manufacturing companies follow one of four downstream business models (Table 1).

The ability to respond quickly and effectively to satisfy customers is what is making the difference among manufacturing companies nowadays. Technological advances such as Internet are facilitating ways for companies to meet their customer needs. As DeVor et al. (1997) point out, agile manufac- turing focuses on enhancing competitiveness through cooperation and use of information technology to form virtual enterprises. Virtual enterprises are constructed by partners from different companies collaborating with each other to design and manufacture high-quality, customized products (Chen et al. 1999). Agile manufacturing practices are based on five principles (Yusuf and Sarhadi 1999):

• Identifying and creating value

• Enabling the flow-of-value stream

• Allowing customers to pull value uninterrupted

• Responding to unpredictable change

• Forming tactical and virtual partnerships

SNAG-0337

Agile manufacturing can be considered as the integration of technologies, people, and business processes.

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