Economic/Financial Justification of AMT

Then, one examines their treatment regarding the AMT as a resource and some existing gaps and difficulties, specially relating to the demonstration of intangible benefits of these technologies when justifying their acquisition. Finally, it is proposed a rationale for the “measurement” of these benefits, based on the resource-based view (RBV) and its core concepts of Back to "Search By Author" competences and capabilities in the context of the Maslen-Platts “Manufacturing Vision” and The Manufacturing Strategy.

Keywords Economic/Financial Justification of AMT, Intangible Benefits, ResourceBased View, Manufacturing Vision, Manufacturing Strategy Introduction Several decades ago, the companies didn’t demonstrate much concern for their similar in Japan, France, Germany and Singapore, however today with the popularized Marshall McLuhan’s concept of the “global village”, the volatile investment expansion all around the world and the technology associated with the manufacturing, the firms realized the speed of changes was leaving behind even managerial icons.

Following the changes in the competitive environment and perceiving the direct influence of the emphasis in strategy and competitive advantage, the Operations Management environment also passes by important changes, above all in the manufacturing area of the companies.

This area now is considered as potential competitive advantage to companies and managers and attracts attention of many researchers, defining what nowadays is known as the manufacturing strategy (Skinner, 1974; Hayes & Wheelwright, 1985;

Jaikumar, 1986; Leong et al., 1990; Hayes & Pisano, 1994; Maslen & Platts, 1997;

Hayes & Upton, 1998). The manufacturing has been recognized in fact as “a highly competitive strategic weapon” (Meredith & Hill, 1987).

Just-In-Time, Theory of Constraints and Industrial Automation promote an enormous advance in the manufacturing environment. Companies have tended to reduce stocks, eliminate wastefulness, enhance quality and reduce costs, presenting an Back to "Search By Author" almost infinite number of potential stratagems for greater competitive advantage in the “battle against the competition”.

Specially, the use of the Advanced Manufacturing Technologies (AMT) has contributed to a dynamic and central quality attributed to the subject in the manufacturing strategy debate.

The main goal of the present article is to explore the environment of the AMT selection and adoption, keeping a closer look in the economic/financial justification for their acquisition. The AMT (Advanced Manufacturing Technologies) are perceived throughout the work as “equipment or displays of a numerical and computational basis (software e hardware), developed to perform or support manufacturing activities” (Gouvea da Costa, 2003), whose use is defined as motivated by the will in improving competitiveness (Small & Chen, 1995; Gouvea da Costa et al., 2000 apud Small, 1993;

Tracey et al., 1999) through the improvement of manufacturing operations (Hayes & Upton, 1998; Small, 1998 and 1999).

The result of the observation will be a proposed rationale beneath the justification process, holping to improve the strategic quality of the existing ones and the consequent efficient support to the decision-making process.

One begins by presenting the strategic arena and the landscape where the rationale has being developed - the Manufacturing Strategy. In a second step, analyses the current available models or methods for the economic/financial justification of AMT, looking for gaps and difficulties in their evaluation. The third step consists of an evaluation of the treatment of these technologies in the models of management and adoption of AMT as resources. And by getting in contact with a new model of seeing the manufacturing proposed by Maslen–Platts (1997) in their “Manufacturing Vision”, in a fourth step presents a new model of selection of AMT, developed by Gouvea da Costa (2003), bringing a new light over the AMT as available resources. Finally, this model of selection of AMT will determine the new proposed rationale beneath the economic/financial justification, using the Resource-Based View of the Firm as its viewpoint.

It will be demonstrated that the Resource-Based View presents a new way of thinking these technologies as resources and not only tools for the implementation of the Manufacturing Strategy. And being considered resources to provide a rationale that shows more clearly the benefits underneath their installation. The “measurement” of the intangible benefits under the AMT will be of great help in the justification of their acquisition, since this is the most common complaint of the theoretical scholars and practitioners that deal with the subject.

The AMT – a Strategic Pictorial Evolution The mass production technology, almost exclusively used until the fourth postwar oil crisis (1973) [1], associated with the economical progress of the period, reached various emergent markets, through scale production and costs reduction. At that time the evaluation of a technology was based, mainly, on the incurred variable costs, especially those concerning the direct labor force, versus the proceeded production volume. All the technology potential was measured according to its performance and the incurred expenses during its use.

Although, the crisis was associated with a stable and slow general growth, the production volume began to appear insufficient and even questionable, when related to the future contribution for the growth and survival of a company in its market or markets.

Some companies, realizing that a new reality was evolving, especially in the Japanese conglomerate, began to produce less volume of diversified products.

By the end of the seventies, the manufacturing of diversified items in moderate or small quantities in the Japanese automotive sector presented the automation as the way out for this new reality. The growing demand by consumers for more diversified products, associated with the automation evolution, explain the reason behind the great attention this new model was getting (Sakurai, 1997).

The Factory Automation (FA) and the Computer Integrated Manufacturing (CIM), for instance, brought into the scene great advantages for the industries. Highly adopted in Japan, Germany, United States and Great Britain, the industrial automation has performed a powerful influence in the way Operations have evolved, since its implementation and dissemination. Equally CIM, flexible system that integrates systems like marketing, engineering and manufacturing, presented challenges for managers regarding the process of management itself.

When one makes a historical revision of the manufacturing since the beginning of the Industrial Revolution until these days, it is amazing to acknowledge the achieved evolution. Technology became a constant subject in studies and researches.

However, the introduction of the Flexible Manufacturing Systems (FMS) and the Computer-Assisted Design/Computer-Assisted Manufacturing (CAD/CAM) suscitates many inquiries regarding the complex environment created for managers, supervisors and engineers.

Nowadays, the obtained benefits of the mass production of the same product with the smallest costs (Fordist model) and the manufacturing of diversified items in moderate or small quantities, with the best cost/benefit equivalence (Japanese model), although quantitatively representative, do not present a sustainable competitive advantage anymore, since their dissemination provided access to many companies and popularized its concepts enormously. The use of AMT is no longer a hermetic box, placed in the hands of the “chosen ones”. Technology is available for those who have the intention and the capital for its acquisition and development. They are found in the most diverse forms, associated with diversified benefits and outcomes (Appendix I).

The “cold” numbers of an isolated financial evaluation for the acquisition of those AMT can not reflect anymore the reality of the investment and its consequences.

Likewise, an isolated comparison of strategic goals also will not demonstrate it (Small & Chen, 1995). Unfortunately, many firms have fallen in those “pragmatic traps” and in the meantime have lost opportunities of maintaining their leadership, taking advantage of the endogenous development of internal competitive advantage, due to the use of specific technologies and the benefits associated, in a long range evaluation.

The time of disregarding any minor investment in a stand-alone technology went by and the strategic aspect is more than ever present (Small & Chen, 1997). The world today is as competitive as competent, making any improvement or mistake in the choice of an important resource as the AMT, mean the difference between the success or the failure of any corporation.

Economic/Financial Approaches and AMT Evaluation The available economic/financial justification approaches, although considered valuable tools for the selection of the AMT (Table I), also encounter an important limitation imposed by the consideration of benefits (Chan et al., 2001). According to Small & Chen (1995), for instance, 82 differentiated benefits and capabilities were revealed in their review in AMT justification literature. It is accepted by the specific AMT literature and practitioners that some of these benefits are: “improving market share; gaining earlier entrance to market; responding more quickly to changing market needs; and the ability to offer products with improved quality and reliability.” (Small, 1999). Along with obtaining competitive advantage; increased throughput; better management control, etc.