Under Control


They tell me that 1993 the theme for Manufacturing System is reenginnering, archived mostly by means of better used of information technology. During the year, many business publishers issued book titles, and innumerable consultants gave seminars, to teach managers and executives the theoretical lingo linked to this, by now, slightly soiled buzzword. But don't get me wrong. Just because there's a buzzword involved doesn't necessarily mean there's no substance behind it.

The old ways (Pre-reengineering) were based on economic assumptions that no longer hold true. Cutthroat competition in high-tech and all other industries has left profit margins razor thin. The ability to move assembly work offshore means that to justify manufacturing in the U.S., productivity must be maximized.

Want some examples of the old ways? Grow the empire, dump the problem, keep your head down, keep the boss happy, and "today is the same as yesterday." Under the old rules, customers never repaired their own equipment. Local warehouses were the means to access the marketplace. Manufacturing planning was done to satisfy stocking needs and was not the means to monitor and service the order stream. In short, a legacy of paper and lack of empowerment.

But it's the revolution in communications, fostered by the computer-as-commodity, that makes new productivity gains possible. It's the explosion in software applications that makes it possible to question the old way of doing things.

The computer industry act as a catalyst, making reenginnering possible. At the same time, it has lately been a prime target for reengineering efforts, due to the competitive nature of the business. Stanford, Conn.-based Cartner Group. a market research firm, recently released its market and financial analysis of the largest 100 world-wide revenue producers in the U.S. computer hardware, software and service industries.

According to the report, the good news is the rebound in revenue growth to 7 percent for U.S. technology vendors from 1991 to 1992. the bad news stems from drastic reductions in gross profit margins for computer hardware, especially large systems. The "Yardstick" forecasts revenue growth in 1993 at "only slightly better overall," despite continuing cost-cutting measures, especially in selling, general and administrative costs, and in manufacturing budgets.

PC vendors fared better in 1992, due to their ability to reduce costs faster. The Gartner report also indicates migration to client/server architecture is accelerating, with gains attributed to PC price elasticity and performance improvements. But while PC supplier revenue grew a little more than 13 percent, their products were more than 5 percent less profitable than the year before - at almost 33 percent of revenue - due to price wars and cost cutting.

Stop for a minute and check out the trend lines highlighted by the report. Continued growing demand for information technology, but as the same time, technology breakthroughs and increasing competition make turning a buck tougher than ever. Growing popularity of client/server, the computing paradigm that best suites reengineering. And some beneficial effects of reengineering seen in the reduced price of PCs, caused as much by streamlining of manufacturing and distribution, as by technology gains.

Reengineering should allow us to serve the customer, create value, own the problem, think team, listen to the user and constantly learn. The rule is "pick it up only once." The benefits to be had though reengineering are actually much greater than you might reasonably expect. From my own experience in reengineering process used in software development, I can say that they are of an order of magnitude.

The rush to reengineering is not without its problems. Change is always messy, takes longer than anticipated, and may have unintended consequences. It's very important to remember too, that once something has been downsized - all too frequently a key component in reengineering efforts - you've lost capabilities that are very difficult to regain, should the need arise.

As appeared in Manufacturing Systems Magazine September 1993 Page 8

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