Competing with global sourcing in a 'knowledge economy'

Automotive news pages these days are populated with numerous stories of original equipment manufacturers (OEMs) and suppliers engaging in more global sourcing from fast-growing, low-wage economies such as India and China. The stories are similar across all manufacturing sectors: Developed, high-wage economies are finding it increasingly difficult to compete on cost.

One approach cited to counter this is to innovate and increase the rate of technology transfer. Government policy often supports this approach through the creation of a "knowledge economy" designed to promote the generation of high-value-added knowledge, technology, and associated skills.

Fast-growing economies, particularly those of India and China, may be lower on the learning curve than Western economies such as Europe's and North America's, but this will not always be the case. Indeed, both countries have open aspirations to move beyond simple, low-cost, high-volume manufacturing to embrace the full knowledge cycle: research, design, development, and manufacture. Only in this way can both India and China sustain predicted economic growth to move into the top three world economies by 2050.

The knowledge economy relies on two vital components:

1. Generation of knowledge and technologies.
2. Application or implementation.

In a manufacturing context, implementation usually takes place on the shop floor. But it is on the shop floor where innovation and technology transfer often break down, particularly in developed manufacturing economies, which suffer from cultural, behavioral, and attitudinal inertia.

Unfortunately, this often is not discussed. We hear about the generation of new ideas, new processes, and new technologies, but we rarely hear about their application. Intuitively, this might be because the manufacturing sector understands the difficult conditions on the shop floor, but fails to realize that in places like India, these difficult conditions are nonexistent.

Context and Technology

A global automotive OEM based in the Asia-Pacific region learned firsthand of this difference while implementing a knowledge management system (KMS) in its Australian and Indian stamping facilities.

The reasons for developing the system were many and varied. Previous downsizing had resulted in a loss of valuable know-how within the stamping area of the organization, which had threatened product launch deadlines and increased development cost. The OEM wanted to capture downstream manufacturing knowledge (within the tooling, stamping, and assembly areas) and feed this back to engineering, product development, and design. This would allow early rectification of potential manufacturing problems at the design/engineering stage and be valuable in fixing expensive tooling problems that recurred on a model-to-model basis.

The system also would serve as a repository for shop floor-generated improvements, maximizing the expertise that existed among manufacturing personnel who dealt with tools and processes on a daily basis.

The OEM also could use a part- and tool-specific KMS to train future generations of toolmakers and production operators. Moreover, as well as acting as a shop floor resolution instrument, the system would contain detailed part and die histories that would form the basis of a valuable design, simulation, and engineering tool for future model development.

Part of the attraction for the relatively young Indian manufacturing firm was that the KMS would assist technology transfer among the OEM's operations, improving the company's local capability and making it part of the global operation. Further, as design and development were becoming centralized in the Australian facility, the system would act as a regional knowledge base, allowing Indian manufacturing operators to communicate directly with Australian designers and engineers.

The resultant manufacturing KMS, known as Simpress, was developed and implemented in the Australian operation over a year. It's a modular system based on a central database that can record text, images, and data relating to the design and manufacture of stamped components. The system is Web-based and resides on the company intranet, making it accessible globally but with individually controlled access rights and permissions.

The company wanted to ensure knowledge capture at the source, meaning target input users would be shop floor operators, supervisors, and manufacturing middle managers. Because these target users sometimes had minimal computer literacy, the system was designed to allow entry in five simple, wizard-type steps. Minimal entry time was a critical requirement in this high-volume manufacturing context, so typical entry time was kept to five to 10 minutes.

The system itself is visual in nature and supports a hierarchy of images and accompanying text. This is different from most other systems that support the more common format of text with accompanying images. Thus, when making an entry, the user was asked to mark up a CAD image of the part and then prompted to add digital images of the subject part, tool, or assembly, which also could be marked up. All the tools needed to do this were contained within the Web browser, which helped reduce the amount of text description required.

The initial version of the system had two modules to support the launch of new-model programs within each of the manufacturing subsidiaries. Both of these modules integrated new and existing work processes, allowing users to view concerns, resolutions, and improvements associated with new parts and tooling.

The system then deployed a communication back end, sending the entry to an area controller. After assessing the entry for appropriateness and accuracy, the controller escalated the entry to upstream engineering, product development, and design areas for action and integration. Users could collaborate with multiple people from various areas to decide the best way to address a concern and incorporate its resolution into best practice.

After senior management approval, the entry was sent back to the originator with associated feedback. At all times users were kept informed of progress through an electronic notice board.

Implementation Differences

The system originally was launched in the Australian manufacturing operation. Its visual nature helped simplify its adoption. In addition, the system was integrated into the existing production system so that it became a seamless extension to users.

After the Australian launch, the interface was slightly modified and a similar implementation was undertaken on the Indian shop floor. The differences were significant, and the Indian shop had a much easier time transferring to the new system. In the Australian shop, with its traditional manufacturing context, resistance to change made the new-technology introduction highly political, bureaucratic, and overly complex. The Indian shop, a relative newcomer to Western philosophies of organization and manufacturing, seemed to adopt the system implementation more readily.

The Indian workers, used to not being allowed to talk with superiors, appreciate the communication and openness between management and the shop floor and the ability to discuss and participate regardless of title and rank. For example, Indian operators feel a sense of esteem when they are able to talk to the manufacturing vice president on the shop floor and even more so when the VP talks to them. In Western manufacturing operations, this same engagement and inclusiveness often are treated with skepticism, antipathy, and indifference.

The average age of the manufacturing work force in the Indian subsidiary is about 30 years. They all are highly educated, holding at least a bachelor's degree, and most with master's degrees. Even the operators moving parts between presses or handling the manual spot welders are educated to this level. Many operators spend 12 hours a day at work with travel and then spend another three to four hours a night studying at local colleges or universities. This commitment not only underscores the desire for personal achievement and improvement, but also the intellectual capacity of the shop floor work force.

The motivators that drive such commitment are many and varied. On a broader social scale, poverty is widespread. Many of the male shop floor operators provide not only for their own family, but also for their siblings and parents. They are pressured not only to maintain their jobs, but to develop and prosper.

Western organizational philosophies offer a structure and associated processes to achieve this. Noticeably, however, one common element of a Western manufacturing organization—a workers' union—is not present in the Indian facility. A small group of operators previously had tried to organize a union, but they suffered from a lack of colleague support.

Indians have seen what they consider destructive effects of unions in other manufacturing workplaces and, furthermore, are satisfied with management and their working conditions. Perhaps they also intuitively understand the large number of people waiting to fill their position and, as such, feel a strong sense of privilege.

More than anything, the Indian workers want to develop, improve, and succeed. They are enthusiastic to learn new things and apply them in their work. They feel a sense of pride in the organization, and they understand that their success is inextricably tied to the success of the company.

This sense of teamwork drives enthusiasm and individual contribution. The tool maintenance team aids the production team to overcome rate problems without being prompted or told to do so. Operators speak of being proud to contribute and feeling honored when they are recognized by a peer among a group of workmates. These cultural, social, and attitudinal characteristics help make technology transfer less daunting and somewhat simpler than in Western economies.

The Bottom Line

So what does this mean for the knowledge economy and government policies that aim to encourage the introduction and application of technology to fight off threats from fast-developing, low-wage economies? Current attention is focused on the generation side of the knowledge economy, but without associated swift application, these policies most likely will fail.

Those who reason that manufacturing sectors in countries such as India and China do not have the skills or experience to match their counterparts in Western countries are correct. They are, however, supporting perhaps a short-sighted argument, because such countries have the capacity to catch, match, and eventually surpass the West in many areas of manufacturing.

Finding a solution to this problem is very difficult. Western manufacturing needs to understand and acknowledge the challenges they are facing, in particular those on the shop floor and their associated management. The often prevalent "them versus us"; mentality promotes a separatist attitude that not only hampers technology transfer before it starts, but prevents the everyday activities that support world-class manufacturing—continuous improvement, for example.

A system that allows workers to capture knowledge and information during the design-manufacture process and use the feedback to resolve problems can help promote technology transfer. This approach has the potential to save money immediately, but more important is its potential to become a vehicle for change in the organization. Employees begin to feel that their knowledge is valued, and they become involved in creating a legacy for the future prosperity of the company.

Changing more than 100 years of industrial tradition and culture is an immense task. It takes time, persistence, and effort from all stakeholders: government, education, and industry. As such, we must start the journey now.

Dr. Victor Pantano is project leader—industry and Michael Cardew-Hall is professor and head of engineering with Australian National University, Department of Engineering, Canberra, ACT, 0200, Australia, 61-2-6125-0330, michael.cardew-hall@anu.edu.au.