There are many benefits that technology can bring to an operations environment. Automated machinery, programmable equipment, and management information systems can provide speed, low unit processing costs, labor cost savings, increased accuracy and consistency, and sophisticated tracking and decision support systems to increase operations efficiency and effectiveness for both manufacturing and service environments. The main drawback in many technology decisions is the high fixed cost of purchasing and implementing the new systems. If mistakes are made in technology purchases, it can severely impact the fortunes of the company.
Managers are often biased in favor of adopting leading edge technology, especially if they see their competitors adopting it. Financial justifications for purchasing new technology are often overly optimistic in estimations of payback periods, the costs of implementation, and the actual gains in overall productivity the firm will enjoy.
The challenge for managers in technology is selecting the right technology for the right application. For example, if a manufacturing company believes that automation will increase the firm’s flexibility to adapt to a changing competitive environment, questions should be asked, such as:
- What type of flexibility does the company need to thrive?
- Does it need to quickly switch production across a wide variety of products (product mix flexibility)?
- Does it need to quickly produce new products for a rapidly changing marketplace (product development flexibility)?
- Does it need to be able to quickly ramp up production during times of high demand, and quickly scale down production when cyclical or seasonal demand hits downturns (volume flexibility)?
Deere & Co manufactures machinery for the highly cyclical agricultural and construction industries. One of the reasons for Deere’s success over the many decades is its ability to keep its technology expenditures under control so it can weather the inevitable declines in demand for its products. Deere managers use a mix of low technology/labor intensive production methods and automated/programmable technologies in its manufacturing plants. Careful technology decision making is a major reason why Deere & Co continues to thrive in spite of its highly volatile markets.