Term Paper: Knowledge Management in the Automotive Industry

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Knowledge Management in the Automotive Industry

The Current and Potential Use of Knowledge Management within the Automotive Industry

Automotive Industry Analysis

Current Use of Knowledge Management in Automotive

Potential Future

The automotive industry's use of knowledge management is progressing from creating and sustaining knowledge systems designed to support the major phases of product development, supplier management, production and service to a more strategic approach of supporting interorganizational learning strategies and knowledge transfer. The resulting impact on it-based strategies is the development of Enterprise Content Management (ECM) platforms that are specifically developed to enable greater interorganizational learning and foster the growth of learning ecosystems between auto manufacturers, their suppliers, customers, and services organizations. Global leaders in automotive manufacturing have progressed beyond the life cycle approach of knowledge management and are executing strategies for making interorganizational learning a competitive advantage, leading to the development of entire learning networks that encompass suppliers, dealers, distributors and customers. Knowledge management in the auto industry is increasingly be relied on as the foundation for the diffusion of lean production and strategic sourcing initiatives through supply networks. In addition, the greater the interorganizational knowledge sharing, transfer and management of knowledge-based processes, the greater the level of innovation being accomplished by automotive manufacturers as the multiplicative benefits of including all members of the value chain in key strategies yields greater time-to-innovation relative to competitors. In addition, auto manufacturers are relying knowledge management as the unifying aspect of their supplier, dealer, distributor and services organizations, increasingly looking to interorganizational knowledge transfer and the development of learning systems as fueling long-term competitive advantage from both a cost reduction and innovation perspective.

Introduction

For automotive manufacturers knowledge management has progressed to enabling a series of interorganizational processes that enable knowledge management to serve as the impetus of lasting competitive advantage and differentiation. Automotive manufacturers attaining best practices in both interorganizational collaboration and the creation of their own learning ecosystems, knowledge management plays a much more foundational and less of an archival or referenceable, role in their strategies. There admittedly needs to be a balance, yet top performing auto manufacturers including Toyota for example are able to use interorganizational knowledge management as the foundation for the growth and strengthening of key strategic initiatives.

The overall objective of this report is to analyze and recommend which knowledge management processes those auto manufacturers who are attaining best practices levels of performance are relying on. Critical to this analysis is examining how Japanese auto manufacturers specifically are structuring their production systems to encompass suppliers much earlier in the sourcing, quality, and procurement process than American or European auto manufacturers. The extension of knowledge management frameworks, both highly structured with taxonomies specifically aligned to quality management strategies, and loosely coupled to promote high levels of collaboration, trust and reciprocity in the sharing of knowledge are profiled in this paper. As Toyota Motor Corporation and their Toyota Production System exemplify best practices in the area of knowledge management within automotive manufacturing, their approach to using knowledge management as both a foundation for interorganizational learning and the development of learning systems globally serve as the foundation for this paper.

In completing an analysis of the knowledge management best practices in the automotive industry, several key concepts serve as the framework of this research effort. First and foremost, there is a growing recognition that the processes and approaches companies rely on for ensuring knowledge management transforms their and their supplier organizations is a lasting competitive advantage, and as a result the depth of academic research being completed in this area is expanding rapidly (Cohen & Levinthal, 1990; Teece et al., 1997; Kogut & Zander, 1992; Spender, 1996; Grant, 1996). In addition, many scholars argue that despite manufacturers producing goods and enabling the development of entire sub-industries of accompanying services, the greatest contribution of goods producers is actually knowledge generation. In fact Toyota has found that the enabling of their suppliers for on-ramping and support of Toyota Production System standards, while rigorous and requiring continual learning, transforms the cultures of suppliers to enable greater knowledge capture, sharing and retention. In short, best practices in automotive industry knowledge management arena is now exemplified by the development of networks of companies that learn from each other and from the many collaboration requirements of making their value chains work. Scholars have begun to move away from the specific firm or manufacturer as the center of analysis and expanding the focus of research to include the network of companies and their accumulated learning both from each other and from the tasks of ensuring collaboration (Powell et al., 1996; Dyer and Singh, 1996).

Taking this network concept as the foundation of comparative analysis of innovation, it becomes clear that scholars are finding that the greater the level of integration between suppliers, manufacturers, customers, and channel partners, the greater the levels of innovation present in each organizations' products, processes, and services (Levinson & Asahi, 1996; March & Simon, 1958:188; Powell et. al, 1996). The higher the level of integration and therefore the higher the level of reciprocal knowledge sharing, the greater the level of innovation as manufacturers, suppliers, channel partners and services organizations find new processes for streamlining shared transactions, and this finding is supported by the work of Mueller, (1962, 23). Marsden, P.V. (1990, 435) argues in much of his research that the strength of integrative ties, and the "well worn paths" of knowledge sharing and eventual learning have an experiential effect on the overall growth of the learning network. What is often missed in a discussion of the strategies companies use in creating a knowledge management network, and as will be seen later in the paper, a knowledge management framework, are incentives. Szulanski (1996, 27) who states that the approaches that Toyota specifically uses in the TPS system, which he considers to be a highly taxonomy-specific knowledge management system that both applies incentives and disincentives to supply chain performance, are what differentiate this system from all others. The combination of highly structured content, well-defined process workflows, and incentives for performance all contribute to the high levels of performance attained.

Von Hippel (1998) has found that the greatest innovations have come from suppliers, looking to streamline the development of new products and therefore provide greater visibility to their own supply chain dependencies, and from customers whose unmet needs form the foundation for next generation products in those organizations that are customer-oriented and customer-centric. In the case of the automotive industry specifically it is common knowledge that as much as 70% of the value of the automobile is directly attributable not to production or assembly, but to the efficiency and synchronization of the supply chain and partnerships it is comprised of. Automobile manufacturers then are increasingly becoming integrators over highly vertically-oriented manufacturers; this integrator role is further forcing automobile manufacturers to rely on knowledge management over transactional approaches to collaboration. Taking this a step further, the quality, differentiated value and long-term cost advantages of an auto manufacturer are more of a function of the effective use of knowledge management as an interorganizational foundation for learning. The greater the dispersion of suppliers, the higher percentage of the time an auto manufacturer acts as an integrator, the more critical knowledge management be used as a platform for interorganizational learning. Toyota's dominance in global production is attributable to their best practices in sharing and enabling its production plants to use productivity-enhancing knowledge through its network Nishiguchi, T. (1994; et. al) and Lieberman; (1994; et.al.).

These scholars looked to the adoption of lean manufacturing throughout American and European auto manufacturers, and concluded that on a per-plant basis there were modest improvements in performance, yet due to the lack of knowledge management being used as a foundation for greater synchronization of efforts and integration of processes, a limit of benefits accrued from lean manufacturing resulted. Tables 1 and 2 compare the transformations Toyota has been able to make towards lean manufacturing as a result of their approach to knowledge management fostering interorganizational learning networks.

Table 1: Characteristics of a Lean Production System

Lean Production Process

System change initiative

Focus

Production line (tasks, activities and cells)

Single Organization (departments, processes, suppliers and customers)

Practices

Cellular Manufacturing; Quality Circles; Supplier Relationship Management; Pull Production; Re-engineering Setups

TQM, JIT, Six Sigma, Process Re-engineering;

Measures

Takt time, on Time Delivery, First time through, Safety Performance, Production Rate

Quality, Delivery, Process Time, Cost, Flexibility, Customer Satisfaction

Performance Measurement System

Visibility - Real Time Reporting

Causal Relationships (production tasks and activities).

Use of single version of the truth and single information

Balanced set of strategic metrics (Financial and non-financial).

New methods of cost accounting (ABC, Target Costing).

-down communication

Internal vs. External Focus (Benchmarking and Self-Assessment).

Process Management and Measures (value delivery).

Source: Lieberman; (1994; et.al.).

Table 2: Comparing Lean Production and Lean Enterprise Characteristics

Lean Production Process

System Change Initiative

The Lean Enterprise

Focus

Production line (task, activities and cells)

Single Organization (departments, processes, suppliers and customers)

Extended Enterprise (value streams and all stakeholders)

Practices

Cellular… [END OF PREVIEW]

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