This reduction in order entry and manufacturing cycle time permitted the firm to
make-to-order, reducing inventory carrying costs to only those of work-in-process
and removing the uncertainty around demand forecasts.
(c) Need for Organizational Flexibility. IT is altering the relationship among scale,
automation, and flexibility. Large-scale production is no longer essential to achieve
the benefits of automation. As a result, barriers to entry in a number of industries are
falling. After installation of a flexible manufacturing system, BMW can build cus-
tomized cars on the normal assembly line, with their own tailored gearbox, trans-
mission, interior, and custom features. The increasing flexibility in performing many
tasks combined with the falling costs of designing products (often due to the use of
CAD) has resulted in many opportunities to customize products and to serve small
market niches.
Because of differences in labor and raw material cost or local government regula-
tion, it is often advantageous for global firms to move operations from a plant in one
country to a plant in another. Having a standardized and flexible production line fa-
cilitates these shifts. When the product is the same throughout the world (e.g., Coca-
Cola) or is provided by subsidiaries through the world (e.g., real estate listings and
sales), IT can reduce greatly individual subsidiary costs and foster common levels of
quality.
(d) Quality. Led by the Japanese automakers, product and service quality has be-
come a key strategic factor for many firms. Maintaining track of faults, establishing
a quality control program, and monitoring of production can permit the identification
of a part or manufacturing process that requires redesign. This monitoring and diag-
nostic activity is heavily information intensive.
(e) Customer Focus. It is no longer enough for a firm to produce a quality product.
A customer’s needs, preferences, and desires must also be considered. This, in turn,
requires capturing large quantities of data about customers, either by direct solicita-
tion or by purchasing marketing databases. Firms that service traveling customers—
airlines, hotels, rental car and credit card companies—find it necessary to have
worldwide customer databases. So do firms that serve customers that demand inte-
grated worldwide service. The creation, maintenance, access, and distribution of
these customer databases places significant demand on a firm’s technology infra-
structure.
(f ) Custom Products and Services. Reduction in product development and manu-
facturing cycle-times (see section 28.2(b), Timeliness) along with the collection and
distribution of extensive customer information (see section 28.2(e), Customer Focus)
has permitted firms to customize their products and services.
(g) Industry Transformations. Major shifts in industry structure is one consequence
of this rapidly changing international environment. For example, in the late 1970s
McKesson, in order to compete better with drugstore chains, introduced the
ECONOMOST order entry and inventory system for their customers, mostly indi-
vidually-owned retail outlets. Cost savings from the system (in terms of lower ad-
ministrative costs and larger value per order) were passed on to the individual pro-
prietors permitting them to compete more effectively with the chains. Over time, the
28 • 8 INTERNATIONAL INFORMATION SYSTEMS