Getting manufacturers in step with the times

THE TROUBLE with many management theories is that they are based on limited samples: a consultant takes the handful of companies he has worked with and develops an analysis of the way the whole of industry works.

By contrast, Stephen Howard of Amtek consultancy, based in Rutland, has spent five years assembling data on almost 10,000 firms. He has his theory now, but this one is based on a vast sample. He says he was inspired by Professor Ramchandran Jaikumar of Harvard Business School, whose research into the evolution of manufacturing led him to conclude that companies could be classed according to the 'business epoch' in which they operated.

As the head of manufacturing consultancy at Courtaulds, Mr Howard analysed 437 of its companies before leaving to build up his database. And he believes history holds the key.

Manufacturing has moved through several 'epochs' over 400 years, though most companies still operate an epoch or two back from the leading edge. Worse - and this is where he says there can be a quick cure - one part of a company may be 50 years ahead of another part. By lining up the parts so they are in the same epoch, efficiencies may be released.

The epochs are defined by the way businesses operate: starting small and highly flexible, they become huge and inflexible. Then the process goes into reverse. The most advanced factories today are almost as flexible as those in the 17th and 18th centuries, when companies were craft-based and not very productive, but flexible: a worker could make a gun one day, a harness the next.

The first development from the craft epoch came with the industrial revolution. Simple machines such as drills and lathes brought a fourfold increase in productivity and a consequent reduction in prices, though the craftsman still had responsibility for quality and, to an extent, design.

The American system, most often associated with Henry Ford, increased productivity by a further three times, but at the cost of an almost total disappearance of variety. Quality and control were taken away from the shopfloor in what Mr Howard calls: 'the first separation of thinkers and doers'.

In the post-war boom the market demanded variety, but the only way of achieving this was by building ever bigger multi-line factories. The task of controlling this complexity brought the next era: Taylor Scientific Management - the world of the stopwatch, with inspectors trying constantly to correct errors.

The Taylor period, at its height in the Sixties, lives on in many companies. It sees the beginning of the quality movement (inspecting out even more defects), and of computer systems such as manufacturing resources planning, designed to bring order out of chaos.

The next stage, which most managers would still regard as state of the art, is Dynamic World, in which the company is starting to simplify itself so that it can handle change in a more controlled way. Quality is handed back down to operators, as the idea is accepted once more that people are more important than machines.

Mr Howard has identified two further stages. First is the Process Improvement era, or Numerical Control, the state reached by the best motor component manufacturers. Here, the overall level of skill is higher, making the organisation more flexible and responsive. A factory will be organised in cells, with a smaller number of highly trained operators who operate sophisticated equipment. The high level of skills means that decisions can be made closer to market - an increasingly important source of competitive advantage. And the factory will be able to produce more variants - both functions of greater flexibility.

Second is the most advanced epoch, inhabited by few companies - the Versatile Business Integration era, in which a factory that had 150 machines and 300 workers in the Dynamic World now has 30 of each. A high level of automation is matched by a high level of skills. The company has virtually the same ability as its ancestor in the craft era to change from one product to another. Its organisation is based on what Mr Howard calls 'surgeon teams' - small groups of highly skilled people who can design products or tackle problems.

One company at the VBI stage is Beretta, the Italian gunmaker. As a demonstration, it designed and made a perspex gun within seven hours of being asked to do so. Although it did it in a state of the art factory, it claimed that its 'surgeon team' structure, not automation, was the key to its efficiency.

Another VBI example is John Deere Tractors, which not only makes tractors, it makes anything similar to a tractor with minimal notice. 'We asked it for special tree-felling machines for a project in Russia,' Mr Howard said. 'They gave us a seven-week lead time.'

Mr Howard stressed that companies should not all be working frantically to get to the VBI stage. First, they should check that all their parts are operating in the same epoch.

'A company might have an IT kit that is state of the art, but if its information control is at the Taylor stage, it will not be able to make proper use of it,' he said.

He suggests concentrating effort into area that are lagging, while leaving the rest to cope on their own. It is only at this stage, he says, that ideas such as total quality management or just in time production are brought into play.

(Photograph omitted)