of organizations have become the same task.
CHAPTER 4: THE IMPACT OF IN FORMATION TECHNOLOGY ON THE ORGANIZATION
Currently, ABZ has a very traditional organization structure; it has a headquar ters with a small staff and a number of manufacturing plants in the U.S. and abroad. The largest of these plants is responsible for most information technology in the company. The firm has generally underinvested in technology and is behind its competitors in the industry. Fortunately for ABZ, its products are of high qual ity, and the company has not needed to compete on information technology.
Suppose that management has heard about the T-Form organization and would like to adopt it. What could the company do? Table 4-6 shows how management at ABZ could use the IT design variables discussed in this chapter to restructure the company. ABZ is currently being forced into becoming a virtual supplier by its customers who are moving to just-in-time production. ABZ needs to develop the capability to "inquire against" and monitor its customers' production control and scheduling systems so that it can send products without the customer even having to order them.
Electronic linking can be used to link production planning, order entry, and marketing. The sales force does not need individual offices. Representatives can use notebook computers and can work from home to concentrate on working with customers. Control can be enhanced by developing information systems which make control information available to various levels of management.
Technological leveling is accomplished by reducing layers of management and providing communications tools such as electronic mail and groupware to man agers. ABZ has a large number of administrative support staff members and others not involved in direct production in the factories. It is this support staff that adds overhead and is an excellent candidate for leveling.
In the factory, the company has successfully moved toward production au tomation. Expanded efforts should focus on the creation of an electronic manu facturing environment. Orders arrive electronically from customers, and each order generates a bar code to describe the customer and product. When produc tion begins, a worker attaches a bar code to the physical tray that holds the prod uct through the production cycle. At each stage a worker wands the bar code at a workstation to bring up a screen with instructions on what operation to perform. At the end of production after quality testing, the only paper necessary is a label for the shipper.
Electronic mail and groupware can be used for technological matrixing. They address the informal communications vital to managing a company. ABZ can quickly form task forces and other informal groups to address problems. This ap proach is particularly valuable for communications among plants. For example, one U.S. plant sends "kits" of a product to be completed to a plant in Mexico. Var ious problems between the plants can be resolved quickly using electronic com munications rather than physically traveling between sites.
Technological matrixing also facilitates a reduction in managerial levels as it encourages employees to take the initiative in solving problems. Suppose that a customer contacts a marketing manager to ask if it would be possible to access ABZ's production-scheduling system to schedule products to be built for the customer. In a matter of minutes, the marketing manager, using e-mail and
98 PART TWO: ORGANIZATIONAL ISSUES
TABLE 4·6
AN EXAMPLE OF DESIGN FOR ABZ Conventional Class of variables design variables
Structural Definition of organizational subunits Determining purpose, output of subunits Reporting mechanisms Linking mechanisms Control mechanisms Staffing
Work processing Tasks Workflows Dependencies Output of process Buffers Formal channels Informal communications/ collaboration Interorganizational Make versus buy
relations decision
Exchange of materials Communications
mechanisms
IT design variables Applied to ABZ
Virtual components Manage virtual inventory for distributors; connect with customer production systems for JIT; use a common-order entry system for a single point of contact; contract with overnight carrier for all distribution
Use more electronic communications to flatten structure, increase span of control
Electronic linking Link production planning, order entry and marketing; notebook computers for sales force; eliminate private offices for sales force Develop systems to make control information
more widely available
Technological Reduce the number of layers in the organization leveling by substituting electronic communications and
groupware
Production Continue efforts at automation automation
Electronic workflows Move toward total electronic tracking of order; use bar codes to coordinate production with an electronic traveler
Coordinate with e-mail and groupware Virtual components
Electronic Use e-mail and groupware, especially to communications communicate among distributed plants and
headquarters
Technological Use e-mail and groupware to coordinate on matrixing production forecasts and special projects Electronic customer- Develop a home page on the Internet containing
supplier product information; as soon as feasible, use relationships it or a commercial online service to allow
customers to inquire on availability; other options would be EDI and groupware Electronic customer- Same as above
supplier relationships
Electronic linking Establish electronic mail links with customers; consider commercial services, EDI, and/or groupware
CHAPTER 4: THE IMPACT OF INFORMATION TECHNOLOGY ON THE ORGANIZATION 99
groupware, can form a task force that includes personnel from production plan ning, marketing, information systems, and other interested areas. There is no need to pass this request through layers of management in different departments. ABZ needs to connect electronically to customers to provide them with a vir tual inventory.
It
can also take advantage of more extensive electronic customer supplier relationships. For example, ABZ can put up a home page on the Web to describe its products and then allow its customers to order from the Internet.What is the result of ABZ's adoption of IT design variables? Extensive use of electronic communications and linking results in fewer management layers and flattens the structure of the organization. Fewer layers combined with the avail ability of information at all levels in the organization will push decision making down to lower levels of management. Easy electronic communications encourage employees to contact appropriate colleagues to solve a problem, rather than refer it up the hierarchy through a supervisor. Employees will be able to take on more re
sponsibility and have an IT infrastructure to support them.
Some employees, especially the sales force, at ABZ will no longer have offices. ABZ will move toward complete electronic integration with customers and suppli ers. Electronic mail for informal communications, EDI for routine transactions, and in some cases direct links into customer information systems, will increase the firm's responsiveness to customers and suppliers. Electronic workflows in produc tion will eliminate paper and, more importantly, provide better service. Production lots will not get lost if they are tracked electronically and production workers will have accurate information on what tasks to perform for each order.
1 00 PART TWO: ORGANIZATIONAL ISSUES
Just-in-time (JIT) manufacturing has become extremely popular in the U.S. given the posi tive experiences that Japan's factories have shown using this approach. Just-in-time is a part of "lean production" and is designed to keep inventory at a minimum. Because there is little inventory, the quality of parts and the dependability of the supplier are critical.
An American at Bose Corporation, Lance Dixon, came up with a modification called JIT II; he invited suppliers' sales representa tives to sit next to the factory floor and gave them free rein to move about the plant. These representatives can attend production status meetings, visit R&D labs, and access Bose's own production planning and fore casting systems on Bose computers. They can write a sales order of their own.
This new approach requires a great deal of trust between the customer and supplier. Not all attempts at establishing JIT II rela tionships have worked, but where they have, there can be many benefits. A Honeywell plant in Minnesota has 1 5 representatives from 1 0 suppliers in cubicles just off the pro duction floor. Some of these representatives
work on new product designs, but most oversee purchases. They think like Honey well employees and look for ways to cut costs. Honeywell runs the factory with inven tory levels measured in days rather than weeks; it also has reduced its purchasing agent pool by 25 percent. Some representa tives will order from a competitor if it is best for Honeywell.
In retailing, the same concept is called efficient customer response (ECR); suppliers continuously replenish inventories as the store sells items. Vendors are linked to cus tomer computers which have forecasts and point-of-sale data. The sale of goods "pulls" inventory to the shelves; vendors do not "push" their merchandise on the store. ECR has worked well for some customers and suppliers, but many firms are wary.
JIT II and ECR represent different ways of thinking; they are made possible partially be cause of information technology. However, to succeed they require management to support the concept and to create an atmosphere in which customers will trust their suppliers to act in the customer's best interests.
To accomplish this restructuring will take ABZ a long time since it has not kept up-to-date with technology. It will have to invest in a technological infra structure and people to develop the kind of IT applications described in this chapter. ABZ's product quality has helped it attain a commanding market share, and adopting a T-Form organization will help it sustain this position and meet the threats of competitors who currently obtain more from their investment in IT than ABZ.
We should add a note of caution: IT is not the solution for every problem. Com petent managers can use the IT design variables presented in this chapter to im prove the organization. They can also use them to create significant problems. For example, a colleague recently reported on a company where a manager only com municates with the staff via e-mail and rarely listens to any of them. It is likely that his strong staff will find other places to work. IT design variables are one ap proach to improving the organization; outstanding managers will use them with good taste to design efficient and effective organizations.