The ECCO System

Cybernetic Principles for Effective Control in Complex Organizations 

Click here for footnotes, Ch 2.


Emerging Challenges for Modern Manufacturing Organizations


In the last twenty years, the rate of technological change has been enormous, particularly in the areas of robotics, computer science, and electronics. This technological change has permeated the manufacturing arena in consumer goods, from automobiles to home entertainment technology, and the defense industry, as well as the technology and information systems used in the manufacturing process itself. The United States easily dominated world trade in manufactured items for almost twenty-five years following World War II, lulling American industry as well as Americans into complacency. American industry suffered a rude awakening, however, in the early 1970s. Japan had been recovering from the war, methodically rebuilding their industry with assistance from American consultants and a singleminded national determination to become a leader in the world marketplace. In 1970, for the first time, Toyota became the number one selling automobile in America. Japanese stereo, television and other personal entertainment equipment dominated the consumer markets, outdistancing its American counterparts in innovative features, quality of construction, reliability, and value.

What came as an even greater shock than initial Japanese success was the difficulty American industry would have in catching up. Cranking the same U.S. industrial machine harder did not suffice to close the competition gap. At the same time, American consumers were becoming even more demanding and sophisticated. The Japanese met the challenge, most notably with automobile production: Japanese auto producers such as Toyota, Mazda and Honda proved that small cars could be designed to be safe, and that larger automobiles could be fuel efficient without sacrificing performance. Twenty years later, U.S. automakers can still not reliably match nor challenge the Japanese in the combination of quality, performance and economy. This lag in quality and productivity performance extends to other industries as well. 1,2,3

Attention has been variously focused throughout the years on the causes of the relative decline in American manufacturing prowess. There has been widespread concern beginning in the 1970s that America might have fundamental problems with being innovative enough due to lack of science education, lack of basic science research,4 and lack of co-operative research between universities and industry 5,6, and lack of various sorts of government support.7 Concern also focused on manufacturing productivity, and the failure of many American firms to adopt robotics, computer controlled manufacturing and various forms of flexible manufacturing technology and integrated information systems technology. 8,9,10

Attention was focused on the American worker, unionized or not, and on American management practices and roles 11,12,13,14,15 compared to their Japanese counterparts as well as to the more successful and innovatively managed companies in the US. In the early 1980s, quality efforts of Deming, Juran, and Crosby received an enormous amount of attention, and the strategic importance of manufacturing was increasingly recognized as critical. 16,17 In addition to recognizing its strategic importance, emphasis was placed on improving its operations with a variety of practices designed to increase quality and streamline production.

At the same time, observers realized that the Japanese were not only producing better quality items faster and cheaper than the US, but also that they knew their customers needs better. Inadequate market research was targeted, along with improving operations and communications between marketing/sales departments and engineering design.18


What are the essential problems faced by modern American industry? Concern about innovation, productivity, and better market research gave way to the realization that: "Time is the most deadly of industrial wastes. . . . The first benchmark of competition was price, it then became quality, and now it is time."19,20

"Product leadership can be built without scientific leadership if companies excel at design and the management of production", maintains Ralph Gomory of the Sloan Management Institute. The reduction of cycle time is paramount. Similarly, he maintains that "quick development beats market research every time." 21 He reports that he "once made the mistake of asking a Japanese colleague . . . whether he had researched how customers were likely to respond to a particular kind of ink jet for printers. Why, he politely retorted, should he study whether customers are likely to respond positively to this or that jet if his company can get out a wholly redesigned printer in eighteen months? Why not adapt to actual buying patterns?" 22

According to industrial consultant John Stahl:

The waves of the 1970s and 1980s were cost reduction and quality improvement successively. Everything indicates the next wave is a service wave, service meaning the entire time it takes to complete a process from conception to development to production to delivery. . . . It must find ways to concurrently and continually reduce cost even as it improves quality and service. Small, incremental improvements will not be enough; major changes need to occur. 23

Close co-ordination and flawless planning are required to achieve these three essential goals. "High quality and low cost cannot be manufactured in unless they are first designed in." 24 Design for manufacture is prerequisite for success. However, this is not enough. An estimated 80% of total lead time required in batch processes is for non-manufacturing, non-value-added processes. The sources of most of these are outside manufacturing proper, in sales, maintenance, procurement, administration and finance, and inventory and quality assurance. 25

Let us look at the various approaches to these problems which have been attempted, beginning with the foundations for Japanese success, a source of the modern manufacturing revolution. Then we will briefly consider various paths and approaches applied by US manufacturers: adopting Japanese models; adopting and adapting specific practices such as JIT and SPC and team-based processes; adopting various high technology manufacturing processes such as robotics, computer-based manufacturing and flexible manufacturing systems; and pursuing modern management philosophies and methods.

The Sources of Japanese Success

The popular story about Japanese success often begins with W. Edwards Deming and his introduction of Statistical Process Control technology into Japan after the Second World War. The truth is much more embedded in Japanese culture and practices as can be seen by their long tradition of shipbuilding, and the manufacture of devastatingly effective war planes and machinery which assailed China and Russia for years before it engaged the West.

Toyota Motor Company is also a homegrown success story. Though the owners of Toyota visited US automakers in the early 1930s, they could adapt little of the manufacturing technique to their operations. Instead, Toyota pioneered work group production, lean production techniques and other truly Japanese-born techniques now adopted by US manufacturers. Yet, that was not enough to produce dramatic world-wide success until the national post-war move to technological advancement represented by JUSE, the Japanese Union of Scientists and Engineers.

After World War Two, Japan was indeed devastated economically and its people dispirited. It retained in most of its factories strong vestiges of its feudal culture and practices which interfered with effective modern production and management. In short, they were mired in the very culture which, soon, would prove advantageous. In the meantime, they had lifetime employees who were incompetent, but had to be retained and promoted to do-nothing jobs in order to preserve "face". In keeping with this tradition, they made business decisions consensually, and parochially, in such a way that no individual could be held accountable if the idea turned out to be a bad one. The factories themselves were badly organized. Those which were equipped and organized identically to American factories fared significantly better than those organized along traditional Japanese lines, and even those produced, at best, 60% of what their American counterparts did. 26

What they retained was a desperation and force of will to once again dominate the world, this time in terms of world trade. What enabled that will to be effectively harnessed was the introduction of modern operations research techniques, delivered by American advisors. The most notable were Deming, Shewhart and Juran, who had been recently spurned by American industry. Combined with their cultural and philosophical heritage, and their traditional national will and experience, these techniques acted to crystalize Japan's industry into a formidable mechanism for the effective domination of a variety of world markets.

The contribution of Japan's culture as well as their philosophy on their success should not be underestimated. Culturally, the notion of filial piety and its reciprocal, authority-provided ensured welfare, is extremely strong. Corporations took their responsibilities seriously, providing for a core of workers paternalistic concern, supervision, and extensive benefits for employees and their families. Permanent employees are hired straight out of school, and are employed by the company for life. In return, workers gave unquestioning and selfless loyalty and commitment, providing a powerful basis for co-operative teamwork.

Japan had no core of ready-made specialists, and so trained managers by rotating them among widely different departments and functional sub-systems, familiarizing them with different functions in the context of overall company goals. These aspects of Japanese culture provided a structural groundwork or pre-disposition for a highly integrated, coordinated system with a strong cultural base. Slow promotion to management was offset by the pride of being one of the company team and respect of management and co-workers based on being a member of the team provided the incentives which worked for, not contrary to company goals. Workers, being of a different social class than managers, did not expect to attain positions higher than foreman, and cultural pride, as well as filial duty, and the deeply felt responsibility for doing good work as a member of the team in response to company expectations provided the incentive structure for workers participation. 27

A final aspect often emphasized by Japanese authors is the philosophical foundations of Japanese culture, which have a profound effect on the way science and technology is pursued, and on day-to-day problem-solving operations. According to biologist Tatsuo Motokawa, the difference between Western and Eastern science is summed up as follows:

Western science is hypothesis oriented. . . . The hypothesis should be big: the final rule should be one, and therefore the biggest and most general hypothesis is the best one. This drives the hypothesis to become abstract.

Eastern science is fact oriented. It tries to communicate with the truth, not through generality and abstraction. . . but through specificity and objectivity. . . . The tendency of Eastern science to stress specificity and particularity makes it quite objective and practical. 28

The material consequences for this approach in the factory setting are illustrated by Hajime Karatsu in the following story, underscoring the differences between the American and Japanese approaches:

At an American run plant in Singapore, I once opened up a defective semiconductor to try to find the reason for the failure. I found a damp patch on the inside that was clearly either a drop of sweat or spit from the person who had worked on the product. Because of that drop, the aluminum elements had begun to corrode. . . .

I asked the plant manager to take more protective measure with the clothing worn by the workers at his plant. He ignored my request and said that because this particular semiconductor had a protective film on its surface, exposure to moderate amounts of contaminants in the air would not affect it. Even though I protested that we had a photograph that clearly showed what the problem was, he refused to accept what I said. . . .

The American manager reasoned that because the semiconductors were coated with a protective film, contamination was eliminated as a reason for defects. . . . The average American engineer . . . has the extremely naive notion that all one must do is follow standards and blueprints to ensure that everything will be okay. 29

The Japanese have an approach which is philosophically grounded in specific and non-theory based empiricism.30 This approach gives the Japanese an acceptance of inconsistent and surprising realities, a preference for particular facts rather than large, encompassing theories or models 31 and makes Japanese manufacturing a constant struggle against the "grey areas", resisted by theory-based Americans.32


The final aspect of Japanese success is probably that they evolved their manufacturing plants in the modern environment, which they helped to create. They did not have to unlearn lessons and deconstruct understandings and organizations which had worked in the past. In the context of their philosophical underpinnings, pragmatic changes, even those we would find revolutionary, are relatively easy to make. Their "theories of the specific" enable changes, which are not allowed to impact Japanese cultural underpinnings. Neither do these changes challenge their paradigms of how the world works. Such is not the case in the West.

This flexibility of the specific within unchanging tradition enables the Japanese to continue to evolve and change management structures as needed. Where Western observers have insisted on the Japanese management techniques such as lifetime employment, Japan is slowly shrinking the size of their core permanent employee pool, and increasing the number of contract workers. It is preparing, and helping its workers prepare, for a more horizontal labor market, and judiciously replacing the traditional seniority system of compensation with some merit-based pay incentives. But it is moving cautiously, and taking care to preserve the essential integrity of its operations and policies.33

Adoption of the Japanese Model in the U.S.

Adoption of Japanese management techniques shows some promise. But how effective will it be outside of the Japanese cultural, philosophical, and historical environment? James Lincoln reports that American workers surveyed responded positively to the idea of their companies expanding benefits, providing lifetime employment, and using team processes and participatory management modeled on the Japanese experience. However, the same survey (which was given to both Japanese and American workers) showed that Japanese workers are considerably less satisfied with their jobs than American workers, particularly the young. The same Japanese workers, however are still much more loyal and committed than their more satisfied American counterparts.34

Some aspects of Japanese management we will clearly not want to import. The ability to do more, better, for instance, must be harnessed in the right direction. This "companyism", points out Kenichi Ohmae, has led a number of Japanese companies to overinvest in new technologies and overproduce, driving profits out of entire industries. It has also led to the bleeding of natural resources and raw materials, and to destructive environmental practices which are only now being recognized by Japanese electronic, fishing, and paper industries.35

Three additional Japanese "blindspots" are noted by Rehfeld, an American who worked in Japanese corporations. The first is their refusal to employ women, even highly trained University graduates, to do more than serve tea. The second is their practice of limiting the advancement of non-Japanese managers. The third is their reluctance to hire employees who previously worked for other companies into anything higher than an entry level position. When Toshiba entered the laser printer market after competitors had already produced and marketed the machines, ". . . rather than hire top engineers from those other companies, it reinvented the wheel. The product development process moved along so slowly because of the lack of expertise that the company missed an important opportunity." 36 Thus, some aspects of the cultural infrastructure, practices, and perspectives of the Japanese have their drawbacks as well as advantages. 37


The reproduction of the Japanese model outside Japan has not brought the success one might expect. Though some successes have been achieved with the total model implementation, such as the NUMMI auto plant, a joint venture between Toyota and GM, a similar implementation at the GM Van Nuys plant failed to produce significant improvement. 38,39 Implementations of Japanese-type total quality approach have occurred throughout the world. A recent survey reveals that the location of these plants doesn't matter as much as the "corporate parentage" i.e. nationality of top management. 40 Thus, it appears the infrastructure of culture and practices of the Japanese is difficult to reproduce with non-Japanese management, and may bring with it some drawbacks we do not wish to incorporate in the West.

Adoption of aspects of the techniques, management approach, and technology, on the other hand, has proved fruitful for American companies. So have some thoroughly homegrown technologies and practices. Let us examine these next.

High Technology Responses

A significant body of literature over the past twenty years has held that increasingly sophisticated manufacturing technology and information systems are critical to the evolution of world class manufacturing. But the use of computer-based technologies, robotics and integrated information and control systems has traditionally been approached in the engineering management literature as if the technology itself would save the day. In fact, a review of the experience with these technologies indicates that the infrastructure environment is critical to technological success. And either the technology creates the necessary infrastructure, often painfully and a piece at a time, or the advantages the technology cannot be realized. As Jack Meredith notes:

In the area of implementation of innovative manufacturing technology], U.S. firms are known for having extreme difficulty introducing change into the workplace. Although these technologies are largely equipment based, the organizational changes they require to make them effective competitive weapons make the hardware changes and implementation an almost trivial element of their total impact. Rather, the infrastructure of the firm is the greatest impediment to effective implementation of these technologies, and one which firms seem to have the greatest difficulty overcoming. 41

Robotics and automation

Some prominent authors, including Hall42

, envision world class manufacturing as a highly automated and roboticized operation. The factory of the future has few (if any) manufacturing employees, relying on sophisticated automation and fully computerized control and information systems for the production and tracking of goods. This vision has certain merits, appreciated by line and top managers alike. As one manager at KLM Electronics of Morgan Hill, California, a small manufacturing plant, noted: "The CNC sheet metal stamping machine is the best employee I've got. It's never late for work, doesn't screw up, call in sick or get drunk on the job. And I don't have to pay it any benefits."43

Robot manufacturers had a record year in 1989, with $513 million in new orders, a 55% increase over the previous year. Robotics manufacturers claim that robotics will be a major key to U.S. manufacturing success.44 However, while selective use of automated processes can be of enormous value in improving particular process quality and eliminating bottlenecks in manufacturing processes,45 automation in and of itself may be of limited value in reducing production costs.46 While an estimated 75% of cost reduction practices focus on reducing labor costs, the labor costs themselves account for only 5-10% of total product cost. The majority of cost involved in manufacture of products is in materials.47 For this reason, minimization of waste is critical. But direct savings as a result of elimination of labor costs may be minimal.48

Even in environments where labor is a major portion of cost, fully automated is not always the best way to go. Johnson notes: "Fully automated systems in some [warehouse] environments have definitely paid off. But the applications of these systems often restrict themselves to environments with little variability as to handling characteristics, and a company's willingness to pay the high cost of implementation and maintenance."49

Motorola Corporation discovered that automating a system to solve particular identified manufacturing problems before a complete analysis of the design and production process has been performed will only automate and preserve inherent inefficiencies. And after the analysis and simplification, automation may offer few additional benefits.50 Again, the context of an efficient, effective organizational structure is often prerequisite for the acquisition of significant benefits from robotics and CNC equipment.

J.R. Sutton of Anderson Consulting, Arthur Anderson Corporation points out that:

Choosing automation as a first step is wrought with danger and examples of failure. In fact, one company in the auto industry invested as much in automation as it would have taken to BUY the competitor that was eroding their market share. Ironically, this large investment failed to address the fundamental manufacturing problems, and they continued to lose market share. 51

Simplification in manufacturing, according to Sutton, starts with the adoption and development of Just-In-Time (JIT) or Continuous Flow Manufacturing (CFM) processes. Simplification undertaken before or without concomitant automation can yield 75-80% improvements at one-fifth the cost of the potential automation investment. 52


Computer Assisted Design

CAD has the potential to reduce lead times, allow for easier revision of designs to meet customers' emerging demands, and improve quality and accuracy. It also has the potential to bridge the gap between design engineering and manufacturing, particularly when wed as CAD/CAM, and as the core of CIM. However, the more CAD technology is exploited in integrated manufacturing management schemes, the greater the need for major organizational redesign. These changes include significant alteration in task distribution, increased skill development for workers, changes in worker/supervisor roles,53 reduction of middle management personnel, in favor of more critical interdisciplinary planning and coordination teams "integrat[ing] previously separate functions within production and between production, design/marketing, and co-ordination/planning." 54,55

Many companies adopt CAD as an isolated technology to ease the work or improve the productivity of drafters or engineering designers. After a learning curve period of a year or more, they will see some incremental changes. But there will be a ceiling on the improved productivity. 56 Thus, corporations who adopt CAD and CAD/CAM without planning and following through on considerable revamping of the organization, including structural changes, increased trust relationships with employees, substantial retraining, role redefinition, middle management and worker displacement, and major cultural changes will fail to reap its long term benefits.

While authors like Hall57 and Gunn58 extoll the virtues of impending integrated CIM which will include planning and scheduling as well as accounting, purchasing, and tracking systems along with actual CAD/CAE/CAM functions, it is widely acknowledged that true CIM is well in the future. Major technical impediments exist. Adler notes that "[t]echnological advances are a necessary but not sufficient condition for . . . realizing the associated benefits [of CAD/CAM]" 59 and that organizational issues are critical to its success. He identifies five key "levels of organizational learning": skills, procedures, structure, strategy, and culture.60

If integration of CAD/CAM require such far-reaching organizational changes, the depth of changes can only be greater when more far-removed aspects, such as accounting, purchasing, and marketing are included in the CIM or CIE package.

Computer Integrated/ Computer Aided Manufacturing

Nothing represents the vision of the totally mechanized factory of the future as much as computer integrated manufacturing. CIM is a poorly defined term at best. Hall envisions it as a massive database to integrate all the design and support functions of a manufacturing business from engineering design prints to purchasing files to cost accounting and personnel management. Other authors use CIM to refer to a CAD/CAM links which enable the engineer to design a part on a computer which automatically directs the fabrication of the part. More recently, the term CIM has been applied to the totally paperless, entirely automated control of assembly and fabrication processes of particular components, using robotics exclusively for the fabrication and assembly, and automatically generating all information and records associated with the process.

Regardless of the comprehensiveness of the definition one chooses to use in describing CIM, the first step toward CIM is Computer Aided Design, followed by integration with the manufacturing operation, CAM. Gold states succinctly the competitive potential offered by CAM: "In recent years, newly developing countries have increased their share of international markets primarily because of efficient, hardworking labor paid much lower wage rates. CAM offers the possibility of reducing and even offsetting these advantages." 61


The design of a CAM system, however, requires extensive analysis and understanding of manufacturing processes and their co-ordination, not normally possessed by conventionally equipped manufacturers. Its potential is great, but the potential for error bordering on disaster may be greater. Systems require large capital investments, benefits are often overestimated, and systems may take years to become as effective and efficient as prior manual methods of production were. For example, GM committed two billion dollars to build the new CAM-based Saturn plant, predicting it would be competitive with modern Asian auto manufacturers. The results were disappointing:]ithin less than two years of the planned completion date, it was recently reported that the Saturn plant was encountering major failures in seeking to integrate supposedly sequential operations. Even more serious, the plant is unlikely to achieve more than one-half of the planned reduction of $1500 per car, which is what was necessary to eliminate the cost disadvantage relative to the Japanese. 62


CAM systems potential to provide competitive advantage rests largely on their potential to integrate manufacturing operations, a process which is often resisted strongly by managers and operational personnel alike. The impacts of CAD transcend functional departments, often resulting in no individuals being experienced enough to perceive its true potential. Senior managers, who ought to be in a position to appreciate the integration, often do not have the perspective or expertise to understand the operational functions and value of a CAM system, and cannot mandate the necessary re-organization to take advantage of it. Because of its integrative nature, systems need to be designed top-down, and integrated into all the information handling systems of the company. Without top management strategic vision, and a supporting, co-operative corporate infrastructure, the chances of this happening are slim. Thus, in spite of the fact that CAM has been extensively discussed and analyzed in the literature for over a decade, and bits and pieces of applications can be found in industry, very few large-scale CAM and CIM systems exist.63,64


In some markets, a reduction in total labor costs is the only way to compete. Allen-Bradley realized that it couldn't match foreign competition in production of contactors used with one of their major products, a particular programmable controller for electric motors. After trying and failing to buy, license or contract their production, they put together a pilot production plant--and realized that even if they eliminated all direct labor costs, they would still not be able to compete. But further research showed that with a paperless environment and a "no inventory" production schedule, they might be competitive. It took a year for the CIM system to be developed, at a cost of $15-20 million. It integrated not only the control system for manufacturing the product but the supporting information system as well. It did not, however, make the company money. Its value was in the strategic importance of the product, and the advantage of the resultant "corporate learning."

For Allen-Bradley, the system was worth the risk. However, Allen-Bradley was a special case, according to CEO J. Tracy O'Rourke. First, he points out that the company was ready. They had already worked out their quality problems, had an extensive existing computerized factory and management information system in place, had a variety of flexible, team-oriented system of product and process design with supporting computer simulation facilities, and experienced software developers. The company was "in the business" of producing computer-controlled processors, already. They simply turned their expertise to their own process design. And a major problem was getting different divisions of the company to co-operate with one another. The product they chose to develop the system around also met several particular requirements. According to O'Rourke, "the best candidates are products that do not have to be enormously flexible, not products that have options on top of options. Then make sure you are not too far down the products' lifecycles. You have to expect the demand to be steady for a while--time enough to master the technology."65

Finally, the CIM system must be designed to be flexible, so it can be adapted to other products in the future. At this point, most systems are homegrown, and will be for an undetermined period of time. 66

CIM is in its infancy. Many pieces of CIM exist, but must be integrated manually. A number of technical and practical problems still need to be addressed, in terms of standards, interfaces, and built in flexibility of systems. In the final analysis, CIM and CAM are enormously powerful and promising technologies. But they are not ready yet for general use. And they, too, will require an enormous change in the way companies do business, inside and out.

Flexible Manufacturing Systems

Flexible Manufacturing Systems (FMS) are designed to enable efficient small lot and short run production by eliminating much of the set-up time required to switch production batch runs. This enables manufacturers to tailor their products for individual customers or markets to an unprecedented degree, without prior commitment of materials and labor. It requires enormous adaptation of the physical plant and the manner in which the process is managed. This impact is not limited to the production process, but includes procurement, order processing and engineering design, at the very least. Its success also depends heavily of employee participation, changes in roles of operational employees and managers, and requires extensive technical training. A company must be prepared for all this, plus delays in production for installation, implementation and ramp-up to full production capabilities.67

The choice to invest in an FMS impact not only manufacturing, but the entire company. Not the least of these impacts will be on overall corporate strategy, in which marketing department strategy will be a linchpin. For FMS to be a cost-effective choice, it may require a radically different marketing approach, and entry into uncharted markets to exploit the potential gains made in manufacturing flexibility. It will similarly require changes in the perspectives, and possibly training and skills, of design engineers.68

Companies such as Allen-Bradley report success in adopting FMS by integrating the technology with "human labor components" in integrated manufacturing cells. The technology fit the manufacturing problem, their existing philosophy of stockless production, as well as their experience with related technology, and was appropriately modified for maximum effectiveness. This application, however, was for a single product area, and responded to a well-understood and limited problem.69

The bottom line on FMS is similar to other innovative technologies and practices: It requires a flexible, coordinated organization to use the technology on an as-needed basis to enhance performance in the context of an overall strategic plan; or the implementation itself requires radical changes in organizational philosophy and structure, a serious departure from traditional organizational norms. Understandably, these conditions impede the widespread adoption of new manufacturing technologies. It also causes upheaval and less than optimal performance in many organizations which decide to take the plunge.

Conclusions: Technological Approaches

Although most firms adopt new manufacturing technology for economic reasons, including reduction of labor and unit production costs, Davis notes that "these technologies seldom save money; they provide new opportunities for making money."70

In many cases, new technology requires rethinking of existing company values, and often a re-evaluation their needs and goals. Adoption has often been shown to require changes in corporate infrastructure, and far-reaching internal changes in philosophy and the way of doing business. It is clear, then, that technology alone is not the solution to America's manufacturing woes. It will contribute mightily to a total solution--but that total solution will require a change in fundamental business management practices.

Integration of all parts of the organization is necessary for both the decision to purchase new technology, and because of the far reaching impact of the new technological capabilities.71 The companies who were successful had to change their way of doing business, including roles of employees, rewards, and communications. In fact, the technology, being designed to streamline the dynamics of manufacturing operations, forced major changes in organizational structure which made the structure more reflective of the operational dynamics required--lateral integration. Companies which did not shift their organizational structure to match the dynamics failed to gain significant benefits from the technology over the long term.

The biggest problems with technology implementation are found in the corporate infrastructure. Management literature in the last decade has dealt with this issue in a variety of ways, and suggests several approaches to the achievement of a corporate structure and strategy which will support rather than impede the processes and technologies to enhance American manufacturing competitiveness.

Socio-technical Practices


Just-In-Time production techniques (and those of its close relative, CFM) are a vital part of the solution to manufacturing challenges. Properly implemented, it can eliminate waste, increase manufacturing flexibility, eliminate most inventory and work-in-progress costs, increase productivity and decrease rework.72 72,73,74,75

Many companies have successfully implemented these practices with excellent results. Combined with other Total Quality Control practices, such as SPC, and where appropriate MRP II, it is a formidable and critical element of manufacturing success.76

Yet, Japanese plants, and U.S. plants owned and managed by Japanese, continue to outperform U.S. and European owned plants, regardless of the level of plant technology.77

Moreover, JIT requires major philosophical and structural changes in the corporation as a whole to exploit its potential. It means extensive and co-operative relations not only with shippers, but often with truckers to co-ordinate timely receipt of materials, as well as significant retraining and re-education of personnel associated with the production process.78

In spite of the tremendous potential of JIT, many manufacturers are not so successful. Bowman points out that "Typically, the reason [for lack of success] is the failure to understand that JIT requires fundamental changes in the philosophy of how the manufacturing company will operate."79

This will have impact at all levels of the company. The potential for additional problems in relying on JIT to solve problems for manufacturing is discussed by Klein.80

Though it is widely acknowledged that worker involvement and participative management is critical to the success of JIT and SPC, the realities on the shop floor may be different, resulting in loss of worker and team autonomy, creativity, flexibility and local control over methods. She warns that this may lead to frustration on the part of workers, increasing the potential for sabotage, and an ultimate loss in the flexibility of the system, to the detriment of the JIT effort. Clearly the way the system is implemented and the infrastructural and philosophical context of its implementation will be critical to its success.

Concurrent or Simultaneous Engineering

Concurrent Engineering has become the paradigm for modern industrial production development.81,82,83,84,85

Also known as Simultaneous Engineering, the core of this practice involves the simultaneous design of both the product and the process by which it is to be produced. Its core purpose is to ensure the design of a product which will be manufacturable in a timely and cost-effective manner, without rework or in-process design changes. Computer simulation is commonly used86

, as are various mathematical modeling techniques to translate engineering and design wisdom into financial terms.87

As this practice has evolved, more and more functional department representatives have been routinely incorporated into the process. The reason for this is that the decisions made early on in the design process affect the way the product will be produced, marketed and sold. Cadillac discovered that although according to their cost accounting system, design accounted for only 5% of the cost of production, its shadow cost (the influence it had on the total costs incurred in the production of a new product) was closer to 70%.88

And conversely, decisions about purchasing parts for assembly, accounting for processes, and modified for easier production or less expensive packaging and shipping will affect the cost of production and often the integrity and reliability of the design.

Consider the rather typical problem recounted by Nevins and Whitney in their book Concurrent Design of Products and Process. Design engineers co-operating with production engineers discover that significant time can be saved in production (a serious bottleneck can be relieved) if they insert fasteners with robotic technology instead of having workers on the line insert the fasteners by hand. They have to approach and convince the purchasing department to purchase fasteners which are chamfered so that the parts will not jam on insertion by the robot. (Human workers can insert non-chamfered parts by hand without jamming.) However, the fasteners which are chamfered are significantly more expensive than those which are not. The purchasing department has to be convinced that it will save the company more money in production than it will spend on increased cost of parts. This was a non-trivial issue which eventually required some modeling to convince the purchasing department of the wisdom of that decision.

Nevins and Whitney conclude that:

The point is that a seemingly minor decision, made to optimize a corner of a company's operations, can have a pervasive effect on how a product is made or used, with severe consequences for operating costs or the customer's perception of the company. These decisions can completely defeat the designer's intentions. Top management, engineering, purchasing, personnel, and manufacturing can each contribute to the success or failure of a product.

It should be no surprise, then, that one key conclusion reached by the Second National Symposium on Concurrent Engineering held February 7-9, 1990, in West Virginia, was that "if a company is to invest in concurrent engineering, a 'cultural' change must occur. This means the way you do business within the company, and the way you do business with the rest of the world."91

This sentiment is echoed by Ziemke and Spann: "In order for concurrent engineering to succeed, all major departments involved with getting the product to market must be continuously involved with the development of that product from the initial steps through to sales."92

So stated, this might seem a straightforward task. Yet they go on to say that "with all of the [organizational techniques and technologies developed in the United States since World War II], the more competitive foreign organizations appear to function better than our own. Now concurrent engineering is being promoted as a panacea to save America's musclebound bureaucracies from themselves."93

They proceed to list a number of barriers to crossfunctional co-operation and team focus on the truly important, rather than politically expedient, issues in the design to manufacture process. Their main issue is with organizational infrastructure: "Too many companies use the techniques [like concurrent engineering] as substitutes to avoid dealing with hard issues. The latest fad got translated into buzzwords and meaningless symbols while the real work of changing the organization went undone."94

Project management

A precursor to and close relative of the concurrent engineering approach is the practice of crossfunctional project management teams, which have had tremendous impact in improving product quality and reducing time to market.95,96,97,98

These teams come in a variety of configurations and reporting structures. The matrix management approaches were an attempt to leave intact (to some degree) the existing functional specializations and departmental reporting responsibilities while exploiting the benefits of lateral co-operation.

The versions which leave the matrix skewed toward existing reporting and control structures are the least effective. Those in which the operational level participants are most removed from the traditional reporting structure, in favor of working under an autonomous project manager or as an autonomous team, work the best.99,100,101

Better yet, suggest Bartlett and Ghoshal, don't impose a formal structure; let the teamwork become an integral part of the way the company operates.102

These most effective structures, however, require supporting organizational changes: They don't work in typical old-style bureaucratic companies.103,104

Independent "think tank" operations such as the "skunkworks" model105

, or independent corporate R&D divisions along the lines of Rosabeth Moss Kanter's "Newstreams"106

have also been extremely successful.

Other techniques

A variety of other techniques, spearheaded by the Japanese and adapted for American application, have been used in American corporations as pieces of quality efforts, with mixed and disappointing results. Quality Circles, once thought to be the cornerstone of Japanese success, have failed to provide expected improvements: In fact, they may have a dampening effect on quality efforts and participative management initiatives.107

Process Action Teams, a popular American counterpart of Quality Circles, can produce results which appear locally satisfying, but are globally damaging to Total Quality Efforts. So can seemingly neutral techniques like Statistical Process Control.108

Success in utilizing these techniques depends on already having an organizational structure and culture which supports them.109,110

Conclusions: Socio-Technical Practices

In short, though technical and sociotechnical solutions are important, they themselves require significant organizational change (or organizational independence), rather than serving as a substitute for restructuring. Various techniques and practices are often adopted by companies with predictably mixed, and often disappointing results. Even adopting formula based Total Quality strategies or Japanese management techniques is no assurance of success.111

The implications are that the old power and authority structure, the control structure, no longer works for innovative, responsive design and manufacture. But new control structures have not yet been clearly provided, though examples of successful companies using these techniques and technologies do exist. Business management literature has been investigating how to create a successful implementation of modern manufacturing technology and techniques in earnest for at least a decade. We will examine their contributions and assess to what degree this need has been met.

Organizational Management Approaches

Three major authors characterize the trend in U.S. management literature of the decade: Tom Peters (with Waterman and Austin); William Ouchi; and W. Edwards Deming. In addition, several Japanese authors (notably Karatsu112 , Ishikawa113, and Imai114) and American authors Schonberger115and Lincoln116, among others, have sought to bring management wisdom of Japan to the U.S. We have discussed the Japanese approach and its undeniable merit, as well as some undeniable drawbacks and barriers to total implementation.

Waterman and Peters117 looked for attributes of outstandingly successful U.S. manufacturing companies, and examined them for traits which set them apart from less successful counterparts. As a result of this investigation, they identified eight "attributes of excellence": a bias for action; remaining close to the customer; supportive of employee autonomy and entrepreneurship; productivity through people; hands-on value driven; "stick to the knitting" (staying close to the technology they specialize in); simple form, lean staff; simultaneous loose-tight properties. Peters and Waterman sought to move from the previous "rational/analytic" management model fostered in academic programs to an "intuitive/imaginative" emphasis, with the support of modern and more humanistic applied behavioral science. They offer a number of case studies of excellent companies demonstrating these principles, and identify three "pillars" of success: breaking old habits; stability; and entrepreneurship. In the face of the need for change, they point out that much stability comes from a strong "corporate culture".

Their contributions toward a new management theory are founded on a movement away from the Weber/Taylor rational action management toward a modern organization built and managed at the "limits of rationality". "Building on that, four elements of the new theory would include our observations on basic human needs in organizations: 1) people's need for meaning; 2) people's needs for a modicum of control; 3) people's need for positive reinforcement; and 4) the degrees to which actions and behaviors shape attitudes and beliefs, rather than vice versa." They also suggest two additional elements from past and current management theory be incorporated into the new: the critical role of corporate culture, and the notion of purposeful, but specifically unpredictable, evolution of the company.

The Peters and Waterman approach emphasizes a need for "people" values, and the need for exceptional, out of the bureaucratic limits, activities, in strong contradistinction to Weber's rule-based organization, run by financial numbers, analysis and interests above all else. They emphasize that "Core management practices in the excellent companies aren't just different. They set conventional management wisdom on its ear."

In Peters' follow-up book, co-authored by Nancy Austin, he notes in the Preface:

In Search of Excellence disgorged no magic. It simply said, Stay close to your customers; wander around. The absence of magic -- "Practice common sense"--turned out to be its biggest selling point. And its biggest source of frustration: no surefire formulas . . . no ten-step guides, how to begin, how to learn, and above all, how to teach yourself to sustain success for decades.

So Peters and Austin present a series of stories in A Passion for Excellence to serve as intuitive models and examples. Still, they offer no formal theory-based infrastructure. It does not seem to be magic which is needed here, but some structural underpinnings to replace those castigated and rejected with the admittedly dysfunctional Weber/Taylor bureaucracy.

Deming's approach121 is a curious blend of exhortation for management leadership, directions for particular practices to be undertaken or eliminated by management, (eliminate quotas, inspections, yearly performance reviews etc.) and highly specific quality control techniques, most notably Statistical Process Control. His "14 Points" and "7 Deadly Diseases" are based on his experiences of implementation of Total Quality control practices evolved in Japan, and his experiences of U.S. industry and its particular foibles. Though his wisdom has enabled many companies to improve their operations, particularly through specific operational techniques and practices, Deming also fails to provide a theoretical infrastructure description.

Ouchi's Theory Z122 is perhaps the most thoughtful and thorough book focusing on organization and management issues for the present day. He analyzes aspects of successful Japanese companies which are typically not found in "Type A", or typical American companies, but are found in extraordinarily successful U.S. companies, designated by Ouchi as "Type Z" companies, both in manufacturing and service sectors.

Ouchi's insightful discussion of the sources of failures in U.S. Weber/Taylor managed companies has been invaluable and strongly influential in changing perceptions of American managers. His comparison of Type A and Type Z values, activities and practices frame one of the clearest understandings in the literature about the deeply rooted constitutional differences between successful modern management practices and those traditionally founded in the Weber/Taylor model. Ouchi has provided a useful 13-step plan for creating the cultural and practical changes to transform a Type A company into a Type Z company, based on his consulting experiences. And he provides examples and advice on creating documents with which to focus cultural values.

He does not focus, however, on general and formal aspects of the internal control and co-ordination of these systems. In some sense, Ouchi has provided perhaps all that one should need to construct a successful Type Z company. Unfortunately, the vast majority of companies attempting a Total Quality program do not, or cannot apply it successfully. A set of formal principles may provide the conceptual basis for a new understanding of how this new organization, founded on trust and co-operation, can be controlled as circumstances and environments change.

Finally, Ouchi's 13-point plan is a long term proposition, which he estimates may take ten or twelve years to move through an organization. (Similar estimates are given by Deming and Juran for their management philosophies.) If we understood the formal principles which might underlie the successful modern organization, we might reasonable hope that this time could be shortened dramatically.

Other Management Perspectives

Many other authors have addressed all or part of the problems which face companies wishing to transform their cultures and practices to become successful "Total Quality" companies, or World Class Manufacturers. It will be worthwhile to review briefly their contributions.

Rosabeth Moss Kanter has written persuasively and elegantly about the changing roles of managers123 and management approaches to change124 and the alternative structures which corporations can adopt to meet demands for flexibility while retaining organizational structural foundations.125

Much attention has been given to the positive role of "good" corporate cultures.126,127 Strong, unified corporate cultures are associated with excellent companies, including IBM and Hewlett Packard, and are considered an important source of "high reliability".128 Culture acts as a "social control system" which can replace or obviate the need for formal rules relied on in the Weber/Taylor system.129 As such, it is one of the few aspects of modern management theory which explicitly focuses on "control".

But norms might not be shared across organizational functional boundaries or management levels, which diminishes the effectiveness of culture as a control system. While transforming such "bad" cultures into good ones gets less attention, O'Reilly proposes the means, which are reminiscent of those proposed by Ouchi, and implied by many others: With respect to core values, top management must say what it means, mean what it says, back up its words with actions, and change incentives to reward and reinforce the desired behaviors in its employees.

There is no shortage of step-by-step plans, identification of essential components, and checklists of important characteristics needed to create a Total Quality Organization130 New ways of thinking about the corporation are also cited as critical131, as are the capabilities to achieve ongoing change and development of corporate strategies.132 This body of literature, taken together, is invaluable in terms of insights generated, problems addressed (and sometimes solved) and models proposed. And the volume and breadth of the literature indicates not only the widespread sense of need for change, but the evidence that it is taking place.


The indications in favor of giving up our old ways of controlling things are indisputable. But what is the new way of controlling things? We are offered operational and functional answers rather than formally theoretical ones. Adoption of this new way of doing things is not a guarantee of success. Success will come, in one sense, as a whole, or not at all. Those companies which succeed by using a particular set of steps, or philosophy, or methods, or framework which helps them make sense of the changes, report that particular path which helped them achieve success, not the formal underpinnings themselves which support the new organizational structure. They are likely not aware of them explicitly. One needn't be aware of a structure which is working, anymore than a fish needs be aware of how it is supported by the ocean until it is pitched onto dry land. Then it need only discover the way back to the sea.

Why, then, should the absence of a theory of control for the modern, complex manufacturing environment be a concern? First, in a number of organizations, lack of control (and lack of understanding of the nature of effective control) is proving to be an impediment to TQM efforts. McDonnell-Douglas lost $300 million in the first five quarters of its TQM implementation, a period in which it was estimated they should have earned $100 million.133 One problem cited by managers implementing total quality programs were the effects of the policies "empowering" employees, which undermined the traditional lines of responsibility, accountability and incentive structures.

Second, a repeated source of failure of Total Quality efforts has been attributed to piecemeal adoption of strategies and practices. Yet many companies who are apparently successful use their own sets of strategies assembled "piecemeal", and tailored to their particular corporate needs. What is the difference, and how can faulty implementations be corrected? Currently, there are only partial answers to this question.

The U.S. military has had mixed and limited success in its implementations of TQM. One major problem is their inability and unwillingness to alter the bureaucratic structure of the military organization, which they claim they do not need to do in order to successfully implement TQM. A legitimate concern of military leaders is the issue of control. If the current structure of control, the command hierarchy, and its supporting practices are altered, what reliable control structure would take its place? This concern is shared by many manufacturing companies hovering on the brink of implementing Total Quality practices.

The next question which might legitimately be asked is: What might such a theory of control offer if one were proposed? First, it would provide a clear foundation for organizational (re-)structuring in terms of control and co-ordination, which is currently absent from the literature. This will simply fill in a gap for companies already well on the road to success.

Second, it will enhance and clarify aspects of how co-ordination and control work, and give a framework for understanding what the criteria might be for an acceptable variety of structures to meet identified needs, rather than proposing specific structures themselves. In this way, companies may more reliably tailor their solutions to their particular needs and environments. Similarly, it will enable companies not in manufacturing to improve their operations, without requiring them to "force-fit" operational solutions out of context. Service, professional, not-for-profit, multiple customer and third party payment environments, have significantly different functional attributes from manufacturing companies, though they share aspects of complexity and the need for quality improvement.

Third, and perhaps most important, is the major concern of the systems science/cybernetics approach. If aspects of an operation (a system) can be framed abstractly, then we have access to our knowledge of other systems which formally resemble them. We can use this knowledge of other systems to enhance our understanding of the system in question, and have access to solutions developed in and for formally similar systems.

Finally, if the necessary control substructure for success could be identified, companies might be able to construct and implement the systemic changes required in modern organizations much more quickly than when using solely the informal, patchwork, trial and error, or "model-imitation" approaches. While the foundations for the theoretical control structure which will be proposed here are not intended to disprove or displace existing approaches, they may conceptually unify many concepts and practices already described in the literature, and should enhance Total Quality efforts.

It is the intention of this work to explore fundamental theoretical principles of efficient and effective control of complex systems. From this, a theory of essential control infrastructure for complex systems may be developed, which will be designated as ECCO system criteria, for Effective Control of Complex Organizations. The first step of this examination must be to consider briefly the nature and function of the present, dysfunctional model of organizational control: The Weber/Taylor bureaucracy.

After exploring in what ways the Weber/Taylor structure fails to meet the requirements of the complex modern manufacturing organization, it will be appropriate to consider what formal structures have evolved and been developed to deal with highly complex systems. From this, a number of crucial principles used for control will be identified and related to their various manifestations in both management and technical operations of successful companies.

Finally, specific organizations which have been independently identified for Total Quality excellence will be examined to determine how and to what extent the principles are manifest in these organizations, and how it has affected the character of hierarchical control. In conclusion, the significance of these principles in contributing to the construction of an infrastructure description will be suggested, along with its potential role in the transformation of organizations and the diagnosis and remedy of implementation problems.


Back to Table of Contents On to next chapter Back to Home Page