Key Success Factors for Implementation of Advanced. Manufacturing Technologies (AMTs)-Case Study Conducted on Selected Pharmaceutical Companies in

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1 Key Success Factors for Implementation of Advanced Manufacturing Technologies (AMTs)-Case Study Conducted on Selected Pharmaceutical Companies in Bangladesh Bikash Barua and M.M. Obaidul Islam Office of Research and Publications (ORP) American International University-Bangladesh (AIUB) Working Paper No. AIUB-BUS-ECON Citation Bikash Barua and M.M. Obaidul Islam (2008). Key Success Factors for Implementation of Advanced Manufacturing Technologies (AMTs)-Case Study Conducted on Selected Pharmaceutical Companies in Bangladesh. AIUB Bus Econ Working Paper Series, No , April 2008 Copyright 2008 American International University-Bangladesh (AIUB) 1

2 Key Success Factors for Implementation of Advanced Manufacturing Technologies (AMTs)-Case Study Conducted on Selected Pharmaceutical Companies in Bangladesh Bikash Barua and M.M. Obaidul Islam Faculty of Business Administration, American International University-Bangladesh Abstract This paper analyzes the key factors that affect implementation of Advanced Manufacturing Technologies (AMTs) in some selected pharmaceutical companies in Bangladesh. In this regard, we go through literature review to identify success factors for implementation and based on the literature review a framework is established to examine the key success factors. We conduct a questionnaire survey to collect necessary primary information. The information is then analyzed using statistical methods namely one way analysis of variance and multiple pairwise comparisons. From the result of the analysis we draw a conclusion and provided some suggestions in context. From the research, it is found that employee motivation, degree of availability of training program, employee relation and cooperation, existence of an employee education & training program prior to implementation, safety of performing job, need for team members to be familiar with the new technology, degree of management commitment and support, degree of financial support, and availability of skill is the key factors that affect successful implementation of AMTs. Keywords: Advanced manufacturing technology, pharmaceutical industry, implementation, key success factors, human factor, strategic factor, technological factor. 1. Introduction Advanced manufacturing Technology (AMT) involves the innovative integration of new technology, production processes and management techniques with the workforce, organization, and culture of the enterprise to form a total system of enhanced production. Indeed, the advanced manufacturing movement, in tandem with the information technology revolution, is transcending the traditional parameters of mass production, giving rise to a new era in manufacturing in which manufacturers are increasing the speed and flexibility of production while improving product quality and customization (Mohanty, 1999). The benefits of AMT use are far ranging from increasing productivity, to improving flexibility, to producing higher quality products, to reducing production costs (Beaumont and Schroder, 1997; Rischel and Burns, 1997; Small, 1998). In view of great opportunity of the future Pharmaceutical market, we try to looks into finding key factors that lead to the successful integration of the advanced manufacturing technologies in the industry. First of all we go through the literature review concerning the implementation issues and identification of key implementation factors. Then we establish a framework to analyze the key success factors. Based on the framework, we have collected relevant primary information through questionnaire survey. After then, we perform Statistical analysis (ANOVA) to identify the success factors. We then provide some useful suggestions for the industry. At the end, we provide conclusion about success factors based on the result of the analysis of the data. 2

3 2. Literature Review Badiru (1990) reports guidelines for developing and implementing strategic plans for AMT. He also discusses he concept of strategic and operational planning. Babbar and Rai (1999) have reported that the problem lies not in the level of technology, but rather in its implementation. They also state that, instead of rushing to invest in AMT, a manufacturing company must reassess its direction, strengths and weaknesses, and then develop a strategy for successful implementation. Afzulparkar at al. (1993) have identified some of the issues and problems arising from implementing a cellular manufacturing project and discuss the following issues, namely scope of CM projects, simulation modeling, cell design, cell operational logistics, and labour issues in CM. Voss (1986) reports that implementation is a vital issue which must be considered prior to any major introduction of AMT, and that strategic considerations have a major influence on the success of post-installation implementation. Sambasivarao and Deshmukh (1994) have discussed various strategic issues, such as finance position, technology position, market position, product conception and resources, and developed a four-stage framework for implementing FMSs. Boer et al. (1990) state that the advantages of FMS may be achieved, although economic, technical and organizational problems and prerequisites may prevent or delay the full benefits. Park et al. (1990) stated that implementation of automation technologies entails a large initial investment under a long-term, uncertain environment. They also observed that the decisions to implement AMT must be determined by expectations concerning factors of demand such as the breadth of the variety of products, the quantity of demand, and also the quality of products. Mohanty (1993) indicate that successful selection and implementation of AMT requires a thorough understanding of various issues. Researchers have identified and classified these attributes. For example, Tayyari and Kroll (1990) have divided AMT issues into two categories, namely direct cost benefits, and intangible (hidden) benefits. Mohanty (1993) has classified implementation issues into six categories: direct cost factors, preproduction cost factors, human issues, social issues, strategic issues, and technological issues. He argued that implementation issues are classified primarily on the basis of accountability for analyzing AMT benefits. Economic factors or tangible factors are quantifiable using cost-borne figures. These factors are again classified into three categories, namely pre-production cost factors, direct production cost factors and indirect production cost figures. Implementation issues have long-term implications for the organization as a whole and so it is necessary to consider the effects of AMT on the organization. Efstathiades, Tassou, and Antoniou (2002) have justified the implementation issues from technical, business, and manufacturing success. However, Zhao and Henry ( 1997) reveal that project team integrity, strategic planning and project championship, and technical knowledge are significant. Laosirihongthing, Paul, and Speece (2001) in their research found that organizational characteristics, principal ownership, size of company and labour union membership have significant impact on successful implementation of AMTs. Buruncuk and Zarife (2001) in their work of implementing information system found that environmental factors, organization s internal condition, project team structure, appropriate technology and methodology, and after 3

4 project support are critical for IT implementation success. They also concluded that success do not come from sophisticated and high-end IT implementation; instead they are result of the skilled management and proper implementation of Information Technologies both tangible and intangible assets. 3. Establishment of Framework to Identify Success Factors Based on the issues discussed above we have identified number of dimensions to analyze the key success factors. In this paper, success factors of AMT implementation we have considered in context of internal condition of the organization. In the organizational level, we used issues that are provided by Sambasivarao and Deshmukh (1994) as the main determinants of AMT implementation success. These are human factors, strategic factors, and technological factors. Along the human dimension factors we have considered are degree of turnover of team members, experience level of worker, active participation from the in-house engineers in system design, education level of workers, need for team formation, organization and composition of the team, need for team members to be familiar with the new technology, safety of performing job, existence of an employee education & training program prior to implementation, employee relation & cooperation, degree of availability of education and training program, and employee motivation Within the technological category factors we have identified are degree to which the organization obtained experience with a pilot project prior to implementation, configuration of hardware, configuration of software, compatibility of the technology with existing system, understanding the potential contribution of AMT to current operations and what new technologies can achieve, convenience in using the technology, degree of availability of skill. Need for external consultants, need to revise policies and procedures, need to reorganize organizational structure, nature of the relationship between technology supplier and the user firm, degree of top down-planning and bottom-up implementation, existence of a project leader, position of the project leader in the organization, degree of willingness of top management to take sort-term risks for long-term improvements, degree of financial support, degree of management commitment and support we have considered as the factors in the strategic category. 4. Research Methodology After developing the framework we have collected data from primary source through questionnaire survey on the pharmaceutical companies around Dhaka city listed in Bangladesh Aushadh Shilpa Samity and the Stock exchange of Bangladesh. The content of the questionnaire focuses on the manufacturer s view on the importance of the factor variables. The importance of these factor variables are weighed on a scale of 1-7, representing absolutely unimportant, fairly unimportant, relatively unimportant, important, relatively important, fairly important, absolutely important. The questions in the questionnaire are wide ranging and it was distributed to the executives and experienced employees as engineers, marketing, finance, management/human resources management, manufacturing. In total 32 questionnaires we have issued out of which 26 were answered and recovered representing recovery rate of 81 percent. The average years of experience of the interviewees have more than 6 years in the 4

5 pharmaceutical industry. The distribution of the respondents according to their functional area is 34% human resources and management, 25% finance, 18% manufacturing, 13% engineering, and 10 % marketing. In this paper we have used statistical methods such as descriptive statistics and analysis of variances. Descriptive statistics is conducted on the analysis of each factor variable. Average and standard deviation for each factor variable are calculated to understand the importance level of each factor variable. One way ANOVA is conducted on each of the factor variables in each dimension so that it can be figured out whether there is any significant difference among factor variables in each dimension. When a significant difference is found in the ANOVA result in a certain dimension, we have then conducted multiple pairwise comparison using tukey s method (Weiss, 1999) against each factor variable in that dimension so as to further analyze the importance level of each factor variable. 5. Analysis of Data and Result 5.1 Analysis on the importance of key factors To understand the importance of factors in implementing AMTs we have performed one way ANOVA to test whether there is any significant differences exist among the factor variables in each dimension. The result of the ANOVA is presented in Table 1. From Table 1, we have found that at 0.05 level of significance the P value for factor variables in each dimension is very low indicating a significant difference among the factor variables along each dimension. It is also known from the table that among three dimensions human factor is found to be the highest in importance average. Table 1: ANOVA results on the importance average of factor variables in each dimension Dimension Human Factor Strategic Factor Technological Factor No. of Variables Mean Standard Deviation F value P value Analysis of key factors-multiple pairwise comparisons As significant differences exist in all factor variables in each dimension, we have then performed multiple pairwise comparisons using tukey s method (Weiss, 1999) to try to find out the sources of the differences. The following are the results of comparisons Human Factors Table A1 shows the result of twelve factor variables along human dimension. From the table, it is found that employee motivation, degree of availability of training program, employee relation and cooperation, existence of an employee education & training program prior to implementation, safety of performing job, and need for team members to be familiar with the new technology are found to be most important while degree of turnover of team members, experience level of workers, active participation from the in-house engineers, and education level of workers are found to be least important. After multiple pairwise comparison is made, it is shown that at the 5

6 0.05 level of significance the importance average of employee motivation, degree of availability of training program, employee relation and cooperation, existence of an employee education & training program prior to implementation, safety of performing job, and need for team members to be familiar with the new technology is higher than the degree of turnover of the team members. There is no significant difference among the rest of the factor variables Technological Factors Importance average of technological factors is presented in Table A2 which indicates that degree of availability of skill, convenience in using the technology, and understanding the potential contribution of AMT to current operations and what new technologies can achieve are the most important factor in importance average while degree to which the organization obtained experience with a pilot project prior to implementation, and configuration of hardware. Multiple pairwise comparisons reveal that degree of availability of skill is significantly more important than degree to which the organization obtained experience with a pilot project prior to implementation, and configuration of hardware. Rest of the other variables does not demonstrates any significant difference in importance average Strategic Factors Table A3 presents the result of importance average of strategic factors. From the table, it is found that degree of management commitment and support, and degree of financial support is found to be most important factors in importance average in this dimension. Need for external consultants, need to revise policies and procedures, and need to reorganize organizational structure are least important in average. After multiple pairwise comparisons, it is found that degree of management commitment and support is significantly more important than need for external consultants, need to revise policies and procedures, and need to reorganize organizational structure. Degree of financial support is significantly more important than need for external consultants. Remaining of the factor variables is not significantly different in importance average. 6. Recommendations: In light of the research result and current situation of the pharmaceutical industry, some suggestions are provided below, 1. Pharmaceutical companies should arrange training and education program for the employees and should allocate certain percentage of budget in this regard. Moreover, the companies should establish linkages with training and educational institutes more and more so that the national innovation chain will be stronger. In this regard, government of Bangladesh should take some initiatives to establish this kind of organizations that can facilitate the required education and training. 2. Apart from education and training, pharmaceutical companies should emphasize on technology management aspects so that the required expertise will be developed. And educational institutes should also include subjects in the curriculum related to this area. 3. Companies should establish a culture based on teamwork and empowerment so that employee motivation and cooperation will be promoted that will ensure top management s commitment and support. In this regard, companies should strive for total quality management system. Moreover, attractive compensation packages need to be provided to the employees. 4. The industry should attract more foreign investment and establish joint ventures to raise the needed financing. 6

7 5. The pharmaceutical industry should establish linkage with original equipment manufacturers to get the needed technology. So, the backward linkage companies of original equipment manufacturer, especially for some stand alone systems, needed to be established. These companies should exercise reverse engineering to develop capability to generate the required equipment that will suit to our pharmaceutical companies. The government of Bangladesh should lower the tax and duties on imported machineries to promote this kind of activities. 6. The pharmaceutical companies should move toward E-business relying more on information technology. Companies should utilize the information technology especially in supply chain activites. 7. Conclusion: Based on the results, we have drawn conclusion regarding important factors for successful implementation of advanced manufacturing technologies in pharmaceutical industry along different dimensions which is presented below. Among the human factors, employee motivation, degree of availability of training program, employee relation and cooperation, existence of an employee education & training program prior to implementation, safety of performing job, and need for team members to be familiar with the new technology have some impact on importance in implementing advanced manufacturing technologies. While degree of turnover of the team members is the least important factor. Degree of management commitment and support, and degree of financial support seem to be the most important factor for successful implementation of advanced manufacturing technologies in strategic dimension. Need for external consultants, need to revise policies and procedures, and need to reorganize organizational structure seem to be least important factor along this dimension. From technological point of view availability of skill is the most important factor that have influence on successful implementation of advanced manufacturing technologies in the industry. Understanding the potential contribution of AMT to current operations and what new technologies can achieve, and convenience in using the technology is less important. Degree to which the organization obtained experience with a pilot project prior to implementation and configuration of hardware are least important factor to be considered. References: Afzulpurkar, S., Huq, F., and Kurpad, M (1993)., An alternative framework for design and implementation of cellular manufacturing, International Journal of Operations and Production Management, 13 (9), pp Babbar, S. and Rai, A. (1990), Computer integrated flexible manufacturing: an implementation framework, International Journal of Operations and Production Management, 10 (1), pp Badiru, A.B. (1990), Strategic planning for automated manufacturing: some factors and dimensions, in Parsaei, H., Ward, T., and Karwoski, W., (Eds), Justification Methods for Integrated Manufacturing Systems, Elsvier, Newyork, NY, pp Beaumont, N.B. and R.M. Schroder. (1997). Technology, Manufacturing Performance and Business Performance amongst Australian Manufacturers, Technovation 17 (6), pp Boer, H., Hill, M., and Krabbendam (1990), K., FMS implementation management: promise and performance, International Journal of Operations and Production Management, 10 (1), pp

8 Efstathiades, A., Tassou, S., and Antoniou (2002), A., Strategic planning, transfer and implementation of Advanced Manufacturing Technologies (AMT). Development of an integrated process plan, Technovation 22, pp Gülçin Buruncuk and Zarife Gonca Gülser (2001), Factors Affecting Implementation of Information Systems Success and Failure, Bo_aziçi University Department of Management Information Systems Bebek 34342, Istanbul/Turkey. Laosirihongthing, T., Paul, H., and Speece (2001), M.W., Evaluation of new manufacturing technology implementation:an empirical study in the Thai automotive industry, Technovation, Article in Press. Mohanty, R.P. and Venkatraman, S (1999)., Planning for CIMS: a case study, Journal of Applied Manufacturing Systems, 4 (1), pp Mohanty, R.P. (1993), Analysis of justification problems in CIMS: review and projections, International Journal of Production Planning and Control, 4 (3), pp Neil A. Weiss (1999), Introductory Statistics, 5 th edition, Addison Wesley Longman, Inc., pp Park, Y.H., Park, E.H., and Ntuen, C.A. (1990), An economic model for cellular manufacturing systems, in Parsaei, H., Ward, T., and Karwoski, W., (Eds), Justification Methods for Integrated Manufacturing Systems, Elsvier, Newyork, NY, pp Rischel, T.D. and O.M. Burns. (1997). The Impact of Technology on Small Manufacturing Firms, Journal of Small Business Management 35, pp Sambasivarao, K.V. and Deshmukh, S.G. (1994), Strategic framework for implementing the flexible manufacturing systems in India, International Journal of Operations and Production Management, 14 (4), pp Small, M.H. (1998). Objectives for Adopting Advanced Manufacturing Systems: Promise and Performance, Industrial Management and Data Systems 98, pp Tayyari, F. and Kroll, D.E. (1990), Total cost analysis of modern automated systems, in Parsaei, H., Ward, T., and Karwoski, W., (Eds), Justification Methods for Integrated Manufacturing Systems, Elsvier, Newyork, NY, pp Voss, C.A. (1986), Implementing manufacturing technology: am manufacturing strategy approach, International Journal of Operations and Production Management, 6 (5), pp Zhao H. and Henry C. Co., (1997), Adoption and implementation of advanced manufacturing technology in Singapore, International Journal of Production Economics 48, pp

9 Appendix Table A1: Multiple pairwise comparison result of human factors Factor H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 Average H * * * * * * H H H H H H H H H H H Note: * means that at the 0.05 level of significance importance average of column variables is significantly higher than that of row variables. Legend: H1. Degree of turnover of team members H2. Experience level of worker H3. Active participation from the in-house engineers in system design H4. Education level of worker H5. Need for team formation H6. Organization and composition of the team H7. Need for team members to be familiar with the new technology H8. Safety of performing job H9. Existence of an employee education & training program prior to implementation H10.Employee relation & cooperation H11. Degree of availability of education and training program H12. Employee motivation Table A2: Multiple pairwise comparison result of technological factors Factor T1 T2 T3 T4 T5 T6 T7 Average T * T * T T T T T Note: * means that at the 0.05 level of significance importance average of column variables is significantly higher than that of row variables. Legend: T1. Degree to which the organization obtained experience with a pilot project prior to implementation T2. Configuration of hardware T3. Configuration of software 9

10 T4. Compatibility of the technology with existing system T5. Understanding the potential contribution of AMT to current operations and what new technologies can achieve T6. Convenience in using the technology T7. Degree of availability of skill Table A3: Multiple pairwise comparison result of strategic factors Factor S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 Average S * * S * S * S S S S S S S Note: * means that at the 0.05 level of significance importance average of column variables is significantly higher than that of row variables. Legend: S1. Need for external consultants S2. Need to revise policies and procedures S3. Need to reorganize organizational structure S4. Nature of the relationship between technology supplier and the user firm S5. Degree of top down-planning and bottom-up implementation S6. Existence of a project leader S7. Position of the project leader in the organization S8. Degree of willingness of top management to take sort-term risks for long-term improvements S9. Degree of financial support S10. Degree of management commitment and support 10

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