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Dynamic Situation and Social Change in Front of Present Ent

erprises

Hua Hongming

Professor of Fudan University Visiting Fellow in MEEM, City Uni

versity, Hong Kong

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Dynamic Situation and Social Change in Front of Present

Enterprises

1。 Dynamic Situation in Front of Existing Enterprises

2。 Predominant Change of Society at Present Time

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1. Dynamic Situation in Front of Existing Enterprises

1.1 General Trend of Development1.2 Evolution of business situation of enterprises1.3 Manufacturing as a Service Business1.4 The change of manufacturing technology,

Systems and Strategies1.5 Change of business condition of enterprises1.6 Change of business rules of enterprises1.7 A new Competitive Environment1.8 The new “Good Factory” criteria

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1.1 General Trend of Development“Reform the traditional enterprises with computerized

technology into modernized enterprises and establish a new management system to adapt the requirement of the modernized enterprises

• Characteristics of modernized enterprises:“high efficiency, high responsiveness to the market change, low consumption of energy and materials”.

• Characteristics of traditional enterprises: “low efficiency, low responsiveness to the market change, high consumption of energy and materials”.

The above difference between traditional and modernized enterprise is basically caused by technological base and managerial style.

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1.2. Evolution of business situation of enterprises

1. Change of competitive condition During 40s-50s of 20th century, as market of selling party,

the competitive advantage of enterprises depended on productivity.

In 60s of 20th century, goods on the market were much abundant in quantity, the competitive advantage of enterprises depended on productivity + quality.

From 70s up to now, the goods on the market are even more rich not only the quantity but also in variety. Customers’ choice depends not only on the quality of the product but also on their hobby. In such market of buying party, the competitive advantage of enterprises depended on productivity + quality + flexibility.

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(2) Flexibility required by present enterprises

Globalproductionflexibility

Processflexibility

Productflexibility

Infrastructureflexibility

Newtechnological

base

Advancedmanagement

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1.3 Manufacturing as a Service Business

In recent decades, manufacturing is increasingly impacted by CIM. CIM changes the focus of manufacturing from physical and mechanical operations on materials to knowledge work utilizing a variety of computer and communications technologies. In effect, manufacturing has become an “information intensive” activity.

Service concept of manufacturing is a customer oriented focus that shifts competitive advantage from factor costs to the firms’ ability to innovate and to identify customer needs. Computerized flexible technology makes it possible by enabling high variety of production and high ability of responsiveness of change.

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1.4 The change of manufacturing technology, Strategies and

management

(1) Change on manufacturing technology

(2) Change of competitive strategy

(3) Change of management connotation.

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(1) Change on manufacturing technology

• From single function for precise operation to multi-function for flexible operation;

Substituting from only part of manual labor to part of both mental and manual labor.

From hard and local automation to soft and general automation.

From realizing excellent physical and chemical transformation to further realizing excellent logical use of space and time.

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(2) Change of competitive strategy

From economies of scale to economies

of scope caused by the combination of

flexibility and accuracy realized by

flexible technology and the

requirement of market.

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(3)Change of management connotation

Management target from a predominant mechanical system to one predominantly based on information.

Management purpose from coordination and management of people, materials and costs to the effective management of information, change and speed.

Management mode from emphasizing on “division of labor” to emphasizing “integration” for unified management, by substituting information for tooling, inventory, space, labor, supervision, time movement, and vertical integration.

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1.5 Change of business condition of enterprises

(1) Diminishing of some traditional constraints

(2) Formation of conditions for supporting

economies of scope

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(1) Diminishing of some traditional constraints

The application of information technology and electronic sensors

and controls to all aspects of design and manufacturing means

that product variety is possible at the same operating cost as

product standardization. New technology, such as CIM,

creates the possibility of addressing market and survival risks,

without unreasonable costs per unit. Traditional constraints

and tradeoffs of innovation against productivity, capital

investment against innovation, cost against flexibility, volume

production runs against product variety no longer apply.

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(2) Formation of conditions for supporting economies of scope

The conditions that formerly supported economy-of-scale logic are gone. In their place, conditions now support and reward factories that exhibit economy-of-scope and strategies that utilize flexibility. This change can be seen on the base of following facts:

Market is changing from selling party to buying party. Technology is changing from single function, which could

only realize production for large volume of single product, to flexible and multi-function, which can realize production not only for large volume of single product, but also for small volume of various products and rather large volume of various products.

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1.6 Change of business rules of enterprises

Table 1. Old rules versus new rules of manufacturing

Old rules New rules

"Bigger is better" "Smaller may be faster, cheaper,and more strategic"

Long production runs Short runs, short cycles

Standard products Custom variants, many new products

Change is expensive Change is cheap; stability may bemost expensive of all

Resist variation Embrace change

Rigidity is the price of speed,accuracy and volume

Flexibility and quality, speed,accuracy required for survival.

Inventory buffers uncertainty indemand, smooths production

Inventory is risky and may simply maskineffciency and outdated products

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1.7 A new Competitive Environment• The markets and customers have also changed in a

significant and irreversible manner. Market changes reinforce the emphasis on variety.

• The new technology - using machine intelligence and telecommunications to control physical process and automate a major, discontinuous, structural change. It affects not only factory design, but also the organizational relationships between R&D, engineering , marketing, and manufacturing; the structure of industry segments and the basis of competition; relationships with customers and suppliers; and the ability of a firm to secure a competitive advantage in world markets.

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1.8 The new “Good Factory”criteria Minimum changeover costs and time for make-to-order

production; Maximum flexibility and quick turnaround capability

for steep new product “ramps”; Minimum downtime - maximize effective capacity; Maximum product family “range” and variety of design

that can be produced in a continuous flow; The ability to adapt to variability in materials and

process conditions; The ability to handle increasingly complex product

design and technology; The ability to integrate new process technology into the

existing system with minimum disruption and cost.

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2. Predominant Change of Society at Present Time

2.1 Technology evolution ----integration of computers and communication

2.2 The change of development mode of social economy ------from “industry economy” to knowledge economy”

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2.1 Technology evolution ----integration of computers and

communication

CentralizedProcessing

Fig 2. C&C : The Integration of computers and communications

Computer

Semi-conductortechnology

communication

technology

technology

yearsbefore 1995 1950 1960 1970 1980 1990 2000

ElectronicComputer

Single-Function

Multi--Function

DistributedProcessing

IntelligentProcessing

systematization

Tube Tr LSI VLSI

Telephone

Analogtransmission

crossbarswitching

datacommunications

digitaltransmission

digitaltransmission

network

space divisionelectronicswitching

time divisionelectronicswitching

facsimileimage

communications

integrated

communications

network

digitalization

IC

and after

integration

0f

computers

and

communications

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2.2 The change of development mode of social economy ------

from “industry economy” to knowledge economy”

(1) The development mode of “industry economy”

(2) The development mode of knowledge economy

(3) The relationship between knowledge economy and industry economy

(4) Three supporting pillars for the development of “knowledge

economy”(5) People’s qualification required for

the development of knowledge economy

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(1) The development mode of “industry economy”

The traditional industry economy is an irreversible linear development mode.A long with this mode, natural resource will gradually diminish from year toyear, up to be completely used. At the same time, the wastes are getting moreand more, pollution is getting more serious day after day. The resources andspace available to people’ s surviving are getting less and less up toultimately be insufficient for maintaining people’ s living. So that this is anunsustainable way of economic development.It is mainly depended on land, capital and labor

1) mode

2) Characteristics

natural resource

human activities:•production

•service•consumption

industrial and social

wastes

environ-mental

pollution

Fig.3. development mode of traditional industrial economy

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(2) The development mode of knowledge economy

natural

resource

human

activi ties:

production,

service,

consumption.

industrial

and social

wastes

environ-

mental

pollution

supple-

menting

natural

resource

cyclical economy

1 2 3

4

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Fig.4. development mode of knowledge economy

1) Mode

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2)Function: to solve the problems caused by the traditional mode:

Diminishing the human consumption and increasing their effective application to natural resource, and continuously develop new natural resources;

Reducing the discharge of wastes; Reducing the pollution of the wastes to environment; Turning the wastes into regenerated and re-applicable

resources to supplement the natural resources and to realize so-called cyclical economy.

Changing the mode of human activity, and leading the human activity into development direction of “low consumption of energy and materials, high efficiency and high ability of adapting the change of the world.

3) Characteristics: cyclical and sustainable, mainly depended on advanced science and technology, information devices and management methods.

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(3) The relationship between knowledge economy and

industry economy • The essential difference between them is their dependence on

different nature of S&T. • We may say, when the technology in industry economy has d

eveloped to the point in which it started to have ability to replace human mental labor, it means that human economic activity started its transformation from industry economy to knowledge economy.

• The transformation of industry economy to knowledge economy is unavoidable development trend of human society. It is an objective law. Recognizing this law, people can start their efforts from solving the five subjects mentioned above to push the development of knowledge economy and to speed up the progress of human society, depending on S&T, information and management.

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(4) Three supporting pillars for the development of “knowledge economy”

1) The first supporting pillar ——Science and technology

2) Second supporting pillar ──advanced information technology

3) Third supporting pillar

──advanced management methods

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1) The first supporting pillar ——Science and technology

I. Function of science and technologies in all fields

II. Function of new social-technical system in our time

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I. Function of science and

technologies in all fields A. The new material technology

B. Biological technology

C. Space technology

D. New energy technology

E. Technology for exploiting the resources in deep ocean

F. A few comments on the function of technology in all fields

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A. The new material technologyIt provides an important way for reasonable application of

energy, saving of raw and semi-finished materials, and reducing costs.

Now it is focused on discovering: materials with the high effectiveness for transformation of solar

energy into electricity; structured ceramics;

super-conductor materials The development trend of the new materials is : to reduce direct application of natural materials, which are

increasingly replaced by man-made materials; to have more and more metals replaced by non-metals or compounded

materials; to have more and more scientific methods used in material production.

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B. Biological technology4 pillars of biological technology: Genetic engineering, or Gene engineering, or reformation

technology of DND; Biological catalyzing engineering, or ferment engineering. It

applies some special catalyzing function of ferment in the process of chemical reaction.

Micro-biological engineering. It utilizes some functions of micro-biology, through modern engineering technologies, to produce applicable materials, or some other industrial products, such as biological insecticide, bacterium mining, re-generated energy, and so on.

Cell engineering. This is a kind of hybrid at the level of cells.

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C. Space technology

• In 4th October 1957, the former Soviet Union launched its first man-made satellite, No.1 Spunk.

• Now it is developing the technologies for utilizing space, such as space communication, satellite broadcasting, climatic and military reconnaissance.

• The direction of further development of space technology is to establish space station, static terrace, space factory, space power station, lunar base and etc, in the purpose to using the special condition and resources in the space to serve people on the earth.

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D. New energy technology

Development trend of new energy technology: to change energy from finite mineral fuel to

infinite re-generated energy and nuclear energy, and to raising utilization rate of energy resource.

to turn the “primer energy” in the nature, such as solar energy, subterranean heat, ocean energy, nuclear fusion energy, etc, into the “secondary energy”, such as electricity, optical and heat energy which can be stored and transformed for multi-purpose use.

to develop the technology which can directly use the air and water as fuel.

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E. Technology for exploiting the resources in deep ocean

Deepest point in the ocean is over 10,000 meters under the surface of water, but people only can reach the place 200 meters deep in the ocean. So now, there are many resources in the ocean which are still unknown by people and wait for people to explore and apply.

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F. A few comments on the function of technology in all fields

Above introduction shows the technologies in all fields have played very important function in solving first 4 questions, that is to diminish the human consumption and increase their effective application to natural resources, and continuously develop new natural resources; to reduce the discharge of wastes; to reduce the pollution of the wastes to environment; and to turn the wastes into regenerated and re-applicable resources.

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II. Function of new social-technical system in our time

It is social-technical system which determines the human mode of production, service and consumption, so that the fifth problem, or changing the mode of human activities, is depended on the change of social-technical system.

A. The formation of new social-technical system

B. The technological base in the new social-technical system──flexible technology

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A. The formation of new social-technical system

• The social-technical system includes two parts: leading technology and technological base. When the leading technology of the social-technical system has obviously changed, and lead the technological base to be changed too, it means an technological revolution happened. There are five definite technological revolutions in human history.

• The fifth technological revolution was happened in 70s of last century when the computer and micro-electronic had a breakthrough development and their combination has formed series of computerized technologies which are the symbols of our time.

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B. The technological base in the new social-technical system──flexible technology

The new technological base includes advanced manufacturing technology (such as: CAM, CNC, IR, CPM, CPC, CAD, CAE, CAPP, MV, AGVs, etc.) and advanced information technology (like, AI、MI, ES, etc). They have following characteristics:

General applicability. They are applicable to all kinds of industries and enterprises.

High efficiency. The application of these technologies can help enterprises to realize various kinds of flexibility. They can bring a lot of strategic benefits to enterprises, such as low consumption of energy and materials, high productivity, high quality, high ability of adapting market change, etc.

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2) Second supporting pillar ──advanced information technology

I. Application in the process of production

and service

II. Application in telecommunication

III. Application in supporting activities of

complex social groups

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I. Application in the process of production and service

• Advanced information technologies used in this aspect includes computerized data-base system, artificial intelligence and machine intelligence, and expert system, etc.

• Now China is implementing “Three Golden Engineering”(Golden bridge, Golden custom and Golden carts) for connecting different regions and departments in their economic activities. This is a typical example of such application.

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II. Application in telecommunication

Advanced information technologies in such use include telegram, telephone, telex and TV, satellite communication, laser communication, facsimile, super-conductor communication, e-mail, electronic conference, international interconnecting web, informational high-speed high way, etc.

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III. Application in supporting activities of complex social groups

If the complex social groups wanted to have effective work, they must have following two conditions: Each member of the group can obtain the information

and help from other members just at the time as he needs and without requirement of other people’s coming, so his work has no any impacts to other’s at all.

All members in the group can keep speedy, timely and precise exchange of information with each other even in their own office.

In order to meet these two requirements, it is necessary to have effective cross-time and cross-space communication tools for the innovation activities at present time.

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3) Third supporting pillar ──advanced management methods

I. Business strategy changing from “economies of scale” to “economies of scope” and “economies of integration”

II. Management concepts emphasizing on JIT

III.Management system emphasizing on integration and unification.

IV.Automation of enterprises

V. Organization structure of enterprises

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(5) People’s qualification required for the development

of knowledge economy

The development of knowledge economy has two trends on the requirement of people’s qualification:

The technicians must master certain sort of management knowledge and ability.

Managers must have certain knowledge on technology.