- In the past most manufacturing organizations viewed operations strictly as an internal function that had to be buffered from the external environment by other organizational functions. Orders were generated by the marketing function supplier and raw materials were obtained through the purchasing function capital for equipment purchases came from the finance function the labor force was obtained through the human re sources function and the product was delivered by the distribution function Buffering the transformation process from the external environment as traditionally desirable for several reasons.
- Interaction with environmental elements e.g customers and salespeople on the production floor could have a disturbing influence on the transformation process .
- The transformation process was often more efficient than the prose es required for obtaining inputs and distributing finished goods.
- With certain processes e.g auto assembly lines and continuous-flow processes such as petroleum refining maximum productivity was achieved only by operating at a continuous rate that assumed the market could absorb all of the product being manufactured. This meant that the production process had to shift at least some of the input and output activities to other parts of the firm.
- The managerial skills required for the successful operation of the transformation precess were often different from those required for the successful operation of boundary functions such as marketing and human resource for example.
However there were some inherent disadvantage when the transformation process was totally isolated One was that information lagged between the pro and the boundary functions which inevitably led to inflexibility Another was that for techie products particular communications between the shop floor and the could be extreme valuable in solving technical problem during production. As how Practice box Forbore Company Customer Friend Program provide a good example of how manufacturing now directly interacting with customer.
More and more firms are recognizing the competitive advantage achieved when the transformation process is not isolated as when customers are invited to view their operating facilities firsthand. For example Green Giant believes that the tours of their production facilities that they provided to Japanese distributors were a major factor in their ability to penetrate that market with their Green Giant food products Similarly National Services which offers a mail-order prescription service encourages insurance companies and HMO to visit their facilities to assure themselves of the high quality of its prescription filling process. In a like manner companies are working more closely with suppliers Firms like Toyota for example have suppliers deliver product directly to the factory floor, eliminating any need for a stockroom. Texas Instruments encourages many of its vendors to automatically replenish items on the factory floor without individual purchase orders or incoming reports every time a delivery is made. This trend toward having the transformation process work more closely with both suppliers and customers alike is often referred to as a product's value chain. We can define a value chain as consisting of all those steps that actually add value to the product without distinguishing where they are added. This concept attempts to eliminate all non value added
such a inspection and inventory and consequently results in a higher.