CHAPTER - 3 MANAGING TECHNOLOGY

Application of technology has significantly transformed functioning of every industry and service sector during the last two centuries. It has enabled industry to gain competitive advantage by satisfying customer needs. It has created new industries and dramatically changed the landscape in existing industries. Use of technology development and innovation can provide a firm a unique expertise that is hard to match. Competitive advantage happens by adoption of new technology and integration with existing technologies. The speed at which new technologies are developing is astounding. A few decades from now so many new technologies will emerge and make many existing technologies redundant. Therefore, managers have to be vigilant about the latest innovations for efficient production. They will also face the challenges of protecting environment for a better present and future for the society. THE MEANING AND ROLE OF TECHNOLOGY Technology may be defined in a number of ways. It is the use of science to a need. Technology is a combination of the know-how, experience, skills, tools and equipments, soft wares, procedures and processes necessary to convert inputs into outputs, i.e., products and services. Advances in technology include ideas, knowledge, experience, and their uses to create new and better ways of doing things. It is a means of using our knowledge for solving practical problems. Know-how is the knowledge and judgment of how, when, and why to employ tools, equipments and procedures in processes. Tools and equipments include various types of general-purpose and specialized machines, tools, computers, scanners, ATMs, or robots, etc. Procedures are the rules and methods for operating machines for executing the work. Technologies do not operate in a vacuum but need a very strong support networks. A support network includes the physical, informational, and organizational relationships that make a technology complete and allow it to function as desired. Before selecting a technology the manager must be aware of all the available technologies in the market. Since a host of technologies are available in the market these days the manager should choose a correct and appropriate technology as it affects not only production but other resources such as capital, human resources and information systems. TYPES OF TECHNOLOGY Some of the experts divide technology in two categories: hardware machines, tools, equipments and computers that are used to produce goods and services; software information systems that are used on hardware. However, other experts divide technology as product, process and information technology. Product Technology: Developed within the organization primarily by engineers and researchers, product technology translates ideas into new products and services. Researchers develop new knowledge and techniques of creating and performing jobs, merge them with conventional capabilities, and convert them into specific products and services to satisfy customer needs. Process Technology: The ways by which an organization conducts various activities is known as process technology. Many process technologies have been very successful and transformed

the entire industry like the use of robots in auto sector but many process technologies have miserably failed despite their huge cost. Information Technology: Information Technology implies use of computers and software to manage information. Managers use information technology to acquire, process, and transmit information with which to make more effective strategic and operational decisions for satisfying customers needs and improve all components of value chain. Information technology pervades every functional area in the work place. It has revolutionized work in all branches of offices such as the main offices, branch offices, back offices, front offices, sales offices, or functional area offices. Office technologies include various types of telecommunication systems, word processing, computer spread-sheets, computer graphics, e-mail, on-line databases, the Internet, and the intranet. In addition to offices, information technology brought unparallel transformation in products and processes. The success story of Asian paints, BHEL, BMW, Indian Oils and a host of other companies in a wide range of sectors owe their remarkable performance to the use of information technology. MANAGEMENT OF TECHNOLOGY Managing technology means managing what adds value to the product. It is the management of innovation in products, services and processes and its implementation in the company. It implies identifying technological potentials that should be pursued through R&D, choosing from both internal and external sources the technologies to implement and then following through their successful implementation as products, processes, and services. Thus, management of technology integrates R&D, engineering, and management in the processes of planning, developing and implementing new technological capabilities that can carry out corporate and operations strategies. Technology is inherently difficult to manage as it is constantly changing in unpredictable manner. The number of technologies available in the market is mind-boggling, yet managers must be aware of those technologies that can be used in their operations. Managers are expected to know how the technology works and what is behind it. The major issues relating to the management of technology are: Strategic planning of technological products How should technology be integrated in the objectives of corporate strategy How to assess technology How to reduce development time of a new product or process INFORMATION TECHNOLOGY Information technology is crucial to operations everywhere along the supply chain and to every functional area. That is why most of the firms employ some or the other form of computer-based technology. Computers are spawning a huge proportion of current technological changes and innovations, either directly or indirectly. Computer-based information technology is used to communicate with customers, employees and suppliers. For this purpose various information systems have been developed such as management information systems, decision support systems, artificial intelligence, internet and intranet, wireless communication and automatic identification systems. IT has greatly influenced how operations are managed and how offices work. Office workers can now do things that were not remotely possible a short time ago, such as accessing information simultaneously from several locations and diverse functional areas. Information technology makes cross-functional coordination easier and links a firms basic processes. In a manufacturing plant, information technologies can link people with the work centres, data-bases, and computers. Companies like Titan, Hero Honda, Amul, etc., have used softwares like SAP, Baan, and PeopleSoft for cross functional integration. This has resulted in increased efficiency and decreased cost.

COMPONENTS OF INFORMATION TECHNOLOGY Hardware include computer, gadgets connected to it and monitor. Softwares are computer programmes that make hardware work. There are a number of application softwares. Softwares are available for almost all types of operations. Softwares are necessary to many processes such as CAD/CAM, robots, etc. They also provide various executive support systems, including management information system. Databases: A data base is a collection of interrelated data for information stored on a data storage device, such as a computer hard drive, a floppy disk or tape. Master Cards and Visa Cards use data base for billions of customers around the world. Telecommunications: For communication networks we need fiber optics, telephones, modems, fax machines and their related components. It has become possible to communicate directly with people sitting at distant places at a very low cost through such networks. Not only the success of many businesses has become possible because of telecommunications but the life of a common man has also become comfortable. It has revolutionized banking systems around the world. Maruti-Suzuki has a strong telecommunication network with all its suppliers and majority of transactions are now done online. THE INTERNET AND E-COMMERCE Global access to the Internet gives companies a vast market by connecting businesses and final consumers. The Web has a huge impact on how firms interact with their suppliers, customers, employees, and investors. Electronic Commerce (e-commerce) is the application of information and communication technology anywhere along the entire supply chain of business processes. Both whole processes and sub-processes nested within them can be conducted as e-commerce. It is sharing of business information, maintaining business relationships, and conducting business transactions by means of telecommunications networks. It is, however, more than simply buying and selling goods electronically and includes the use of network communications technology to perform processes up and down the supply chain, both within and outside the organization. Ecommerce the paperless exchange of business information allows firms to improve their processes that give competitive advantage by cutting costs, improving quality, and increasing the speed of service delivery. THE INTERNET Internet is the fundamental enabling technique of e-commerce. The internet is network of networks thousands of interconnected communications networks and millions of users. It is medium of exchange of all forms of digital data, texts, graphics, audio, video programmes, faxes. It is also an infrastructure for providing various services such e-mail, EDI, file transfer protocol, World Wide Web. THE WORLDWIDE WEB One of the most popular Internet services is World Wide Web, which emerged in 1993. The World Wide Web consists of software called Web Servers running on thousands of independently owned computers and computer networks that work together as part of this Internet service. Users request information form the Web using software called Web browsers. A Web Browser such as Microsoft Internet Explorer is a software that allows users the Web. Most search engines have developed in portalsWeb sites that provide a variety of services. Yahoo and Google are examples of widely used portals. E-Business can be grouped in the following classes: 1. E-marketplace companies 2. E-service providers 3. E-retailers and wholesalers 4. E-producers

There are a large number of E-marketplace companies that provide an exchange where buyers and sellers can transact electronically. In India there are many portals in the field of property where property deals can be made. These companies maintain and update a huge data base and provide low cost but fast service. E-service providers provide fast and convenient service. Make my trip.com, Easy Cab are E-service providers in the field of tourism and travel. Many insurance companies in India also provide E-service. E-service providers also extend personal dialogue and help in case customer wishes so. The most popular type of E-business is E-retailers or wholesalers. In India the number of Eretailers and wholesalers is growing rapidly. They offer a variety of products such as artificial jewelry, electronic goods, kitchen wares, personal care products, and so on. They offer products at much lesser rate than the market price. They pass on the benefits of low inventory management cost, showroom cost and personnel cost to their customers. E-producers is the fourth category doing e-business. They receive orders through Internet and in turn procure components electronically. Dell Computers is the most popular example in this category. Many automakers receive orders from their distributors and in turn place inventory orders to suppliers. Electronic connectivity with customers and suppliers provide tremendous efficiency to these producers in terms of speed, convenience and cost. HOW E-COMMERCE AFFECTS PROCESSES E-commerce is recorded tremendous growth and altered the traditional brick and mortar business scene at breathtaking speed. E-commerce provides speed, convenience, global market without any boundary, instantaneous services, cuts costs, improves inventory management, automates fax-andphone procurement processes, and provides inexpensive sales, marketing and customer support channels. Its capacity of connecting various business partners at great speed is amazing. ECommerce is revolutionizing the entire business spectrum. BUSINESS TO CONSUMER E-COMMERCE AND BUSINESS TO BUSINESS E-COMMERCE Thousands of firms and millions of customers are now doing business through B2C and B2B. Gillette, Nokia, Maruti-Suzuki, GE are some of the firms that follow B2C and B2B and have recorded phenomenal growth in business and reduction in cots. It ensures convenience, cost reduction in terms of petrol and parking, storage space and speed, better inventory management. ENTERPRISE RESOURCE PLANNING Enterprise Resource Planning (ERP) refers to a large, integrated, computer-based information system that supports many business processes and data storage needs. An enterprise process is a companywide process that cuts across functional areas, business units, and geographic regions, and product lines. ERP encompasses all functions of the firm. Its capacity is tremendous. When an order is booked and fed in the system it automatically goes to the operations department, purchasing, accounting, finance, HR, suppliers, marketing, shipping and distribution systems and converts the order in respective units relevant to each department. It tracks the transaction from its origin at the customer until it is complete. Decisions made at one functional level will automatically be reflected at all functional levels. SAP and Oracle are the two very popular ERP soft wares. Since ERP soft wares run ERP systems in a particular way that may not match with the legacy (existing information systems). Designing an ERP system requires that a company carefully define its major processes so that appropriate decisions about the integration and coordination of legacy systems and new software modules can be made. Processes to be used by ERP applications must also be fully specified. In many cases, a companys processes must be reengineered before the company can enjoy the benefits of an integrated information system.

WHAT ERP DOES By integrating functional areas, ERP systems allow a firm to concentrate on enterprise processes rather than functional boundaries. For example, suppose that an Indian manufacturer of three-wheelers has an ERP system and than an Spanish-based sales representative wants to prepare a customer quote. When the salesperson enters information about the customers needs into a laptop computer, the ERP system automatically generates a formal contract, in Spanish, giving specifications of the required vehicles, delivery date and price. After the customer accepts it, the sales person makes an entry, whereupon ERP verifies the customers credit limit and records the order. The next application takes over to schedule shipment using the best routing. Backing up from the delivery date, it reserves the necessary materials from inventory and determines when to release production orders to its factories and purchase orders to its suppliers. Another application updates the sales and production forecasts, while still another credits the sales representatives payroll account for the appropriate commission. The accounting application calculates the actual cost of production and profitability in Indian rupees, and reflects the transaction in the accounts payable and accounts receivable ledgers. Divisional and corporate balance sheets are updated, as are cash levels. In short, the system supports all of the enterprise processes that are activated as a result of the sale. TECHNOLOGY CHOICE Before accepting any new technology it is advisable for the firm to have a technology strategy which is linked with the corporate strategy of the firm. An appropriate technology is one that fits corporate and operations strategies and gives the firm a sustainable advantage. If the corporate strategy is to manufacture low-cost products, the most suitable technology is that enables low-cost products. On the other hand if the corporate strategy is to produce differentiated products, the firm should go in for such a technology. Moreover the technology strategy should not be a one time strategy but a long term comprehensive strategy. Technology strategy deals with more than just technological choice. It also determines whether an organization should be a leader or follower in technological change. Another aspect of technology choice is the financial return on investment. Some of the techniques for financial evaluation are net present value and internal rate of return. While deciding a technology a careful funds flow analysis should be made. A technology howsoever good it may be cannot be adopted if unable to provide a pre-set minimum rate of return on investment. The choice of technology should also be viewed from its effect on employees. In the past technology selection was done first and then handed over to employees for implementation. Now the strategy has changed and a new technology is also evaluated from the point of view of its consequences on the firms human resources. There are many libraries that have introduced barcoding system on books but it could not be implemented because of non availability of trained staff. Evaluating radically new technologies should consider financial, human resource, marketing, information flow and its impact on cross functional processes. It is risky to go in for untested technologies; therefore, preference should be given to implement a proven technology. On the basis of the above discussion the following issues are relevant for a technology choice: 1. There are a large number of technologies in the market but the company should choose only the right kind of technology suitable to its products. 2. A support system comprising of relevant processes, equipments, employee training must be made available for implementing the acquired technologies. 3. Employees should be briefed about new technologies. 4. Continuous evaluation of new technologies should be carried out to judge its success and handle emerging problems. 5. Product and service qualities should be regularly monitored.

BENEFITS AND CHALLENGES OF TECHNOLOGY A new technology should create some kind of competitive advantage. Competitive advantage includes: 1. Increasing the value of the product; increased product variety: more product features 2. Improved quality: automated inspection and reduced variation in output 3. More production, new products and new market creation 4. Reducing the costs direct cost material by using exiting materials more efficiently or enabling the use of high tolerance materials and labour costs by replacing people with robots, enabling fewer employees to operate semiautomatic machines. 5. Quicker delivery times 6. Smaller inventories and use of JIT inventory management 7. Pollution control noise 8. Higher productivity, higher income of employees because of higher technical knowledge and higher standard of living 9. Creates new industries like biomedicine and wireless communications 10. Improved customer service that leads to higher customer satisfaction because of speed and flexibility and availability of new products and services 11. Better safety and protection of employees. Dangerous jobs (like painting and welding) are now performed by robots. RISKS AND CHALLENGES 1. Risk of obsolescence: more so when an untested technology is used. 2. Risk in operations: it may disrupt established operations, may demand more resources for which the firm may not be ready. 3. Organizational risks: The organization may not be ready to accept the sudden disruptions and that may result in complete abandonment of the new technology. 4. Market or environment risks: New technology oriented product may not be very welcome in the market unless fully tested. Example battery operated cars in India. A new technology may not be very environment friendly unless fully tested. 5. Higher costs: Technology induced products and services cost higher that is why many companies shift to low cost locations in other countries. 6. Return of goods or cancellation of services. The biggest problem of E-Commerce is the return of goods because many firms do not have enough infrastructure of accepting returned goods. Similarly in E-service recovering money of cancelled services is a big problem as in case of recovering ticket cost in case of cancellation of journey. But introduction of new technology can sometimes be prohibitively expensive. It may generate employee resistance, lower morale and increase turnover. Thus, operations manager must sort out the many benefits and costs of different technological choices.

EXERCISES 1. 2. 3. 4. 5. 6. What is the role of technology in operations management? What are the components of information technology? What the implications of B2C and B2B on operations management? What is ERP? Discuss various applications of ERP? What are the benefits and challenges of technology? How to make a technology choice? What are the main issues involved in technology choice? What is E-commerce? Explain its different categories.

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