Introduction of Advanced Manufacturing Technology:

a literature review
Kennedy D Gunawardana
Department of Accounting
University of Sri Jayewardenepura, Nugegoda.

Abstract
This paper presents an overview and guidance for manufacturing companies which are
preparing to invest in Advanced Manufacturing Technology (AMT). The purpose of this
paper is to introduce AMT to Local context and explain the reasons why the company may
encounter problems with adopting AMT. In addition to that, the author suggests many
avenues to look at AMT applications and the many suggestions offered by the relevant
literature for improving the performance of using AMT investment. Further, the research
work here aims to assist managers to understand the benefits, types and investment of
AMT and identify the problems in the local context. The author of this paper believes that
proper understanding of AMT will encourage more firms to invest in AMT and to realize the
benefits to make more contributions to society by improving world standard quality of
product.

1. Introduction
The market place of the twenty-first century is evolving into one of merging
national markets, fragmented consumer markets, and rapidly changing product
technologies. These changes are driving firms to compete, simultaneously, along
several different dimensions: design, manufacturing, distribution, communication,
sales and others. Although manufacturing has not been utilized as a competitive
weapon historically, the market place of the twenty first century will demand that
manufacturing assume a crucial role in the new competitive arena.
Progress in human society has been accomplished by the creation of new
technologies. The last few years have witnessed unparalleled changes
throughout the world. Rapid changes in the markets demand drastically
shortened product life cycles and high-quality products at competitive prices.
Customers now prefer a large variety of products. This phenomenon has inspired
manufacturing firms to look for progressive computerized automation in various
processes. Thus mass production is being replaced by low-volume, high-variety
production. Manufacturing firms have recognized the importance of flexibility in
the manufacturing system to meet the challenges posed by the pluralistic market.
The concept of flexibility in manufacturing systems has attained significant
importance in meeting the challenges for a variety of products of shorter leadtimes, together with higher productivity and quality. The flexibility is the
underlying concept behind the transition from traditional methods of production to
the more automated and integrated methods. They stress that firms
implementing automation projects should prioritize their needs for different
flexibilities for long-range strategic perspectives.
Intensifying global competition and rapid advancement of manufacturing
technology are two realties in todays business environment. These have
combined to shift the business strategic priorities toward quality, cost
effectiveness and responsiveness to marketplace changes.

2006 Sabaragamuwa University Journal, vol 6, no.1, pp 116-134 116

The quest for lower operating costs and improved manufacturing efficiency has
forced a large number of manufacturing firms to embark on AMTs projects of
various types. Dramatic developments in AMT at various organizational levels
can be attributed to numerous benefits that improve the competitive position of
the adopting companies. AMT impact not just manufacturing, but the whole
business operations, giving new challenges to a firms ability to mange both
manufacturing and information technologies.
AMT can also provide distinctive competitive advantages in cost and process
leadership. Events of the last decade, such as the US productivity problems,
Japanese manufacturing success stories and the competitive global economy,
have moved manufacturing strategy and process technology issues from the
bottom to the top of the firms priority list. The issues surrounding manufacturing
technologies and their implementations have assumed greater importance in the
manufacturing strategy debate. Practitioners and researchers have developed
strong interest in how AMT can be used as a competitive tool in the global
economy. A growing number of organizations are now adopting AMT to cope
with recent phenomena in todays competitive environment such as fragmented
mass markets, shorter product life cycle and increased demand for
customization. Although AMT can help manufacturers compete under these
challenging circumstances, they often serve as a double-edged sword, imposing
organizational challenges while providing distinct competitive advantage when
successfully implemented.
International business strategies frequently demand the transfer of manufacturing
processes. Manufacturing process is defined as any repetitive system for
producing a product, including the people, equipment, material inputs,
procedures and software in that system. An issue of importance in this strategic
decision is whether the process should be transferred without modification or
adopted in some way for transfer.
Owing to the intense global competition in manufacturing, manufacturers need to
increase their level of competitiveness in the global market. Some manufacturing
companies, therefore, are forced to undergo a period of transformation in order to
compete more effectively. Under these circumstances, AMT is considered as a
means of improving competitiveness.
The term AMT refers to computer-aided technologies in design, manufacturing,
transportation and testing, etc. In general, AMT can be categorized into two
principle ways:
The classical continuum of basic manufacturing processes which extends
from make-to-order manufacturing to continuous manufacturing ; and the
level of integration of the overall manufacturing system.
AMT provides an organization with an opportunity to successfully combat
market place dynamics and create for itself a competitive advantage.
Manufacturers and academics believe that AMTs can reduce operating
cots, provide high levels of output by removing inconsistent human input,
improve manufacturing flexibility and lead time to market.
The literature on Advanced Manufacturing Technologies can be divided in to
different fields but all fields are interrelated and those fields are as follows:
117

Kennedy D Gunawardana

(i) Adoption of Advanced manufacturing technologies

(ii) Investment of AMT
(iii) Selecting and Assessment of AMT
(iv) Planning and Implementation of AMTs
(v) Historical development of AMT
(vi) Definitions and Group of AMTs
(vii) Benefits and Disadvantages of AMT
2. Definitions of AMT
Numerous definitions of AMT exist. For example, Baldwin (1995) defines AMT as
a group of integrated hardware-based and software-based technologies, which if
properly implemented, monitored, and evaluated, will lead to improving the
efficiency and effectiveness of the firm in manufacturing a product or providing a
service. This work, however, provides a more global definition that combines the
work of Zhao, and Zammuto and OConnor (1995). AMT, defined broadly, is a
total socio-technical system where the adopted methodology defines the
incorporated level of technology. AMT employs a family of manufacturing (CAM),
flexible manufacturing systems (FMS), manufacturing resource planning (MRP
II), automated material handling systems, robotics, computer-numerically
controlled (CNC) machines, computer-integrated manufacturing (CIM) systems,
optimized production technology (OPT), and just-in-time (JIT). Although AMT
places great emphasis on the use of technological innovation, managements
role is significant since AMT systems require continual review and readjustment.
Advanced Manufacturing technology (AMT) represents a wide variety of mainly
computer-based systems, which provide adopting firms with the potential to
improve manufacturing operations greatly. It is generally expected that the
resultant improvement in operational performance will enhance the firms ability
to reap the underlying marketing, strategic and business benefits for which the
systems were adopted. Another definition is AMT refers to a family of
technologies that include computer-aided design (CAD) and engineering
systems, materials resource planning systems, automated materials handling
systems, robotics, computer controlled machines, flexible manufacturing
systems, electronic data interchange and computer-integrated manufacturing
systems.
AMT represents a wide variety of modern computer-based systems devoted to
the improvement of manufacturing operations and thereby enhancement of firm
competitiveness.
Global competition continues to drive the adoption of advanced manufacturing
technology (AMT) to date, the literature AMT on the introduction of AMT new
technology is based primarily on case studies and expert opinions.
AMT has been described as programmable machinery or a system of
programmed machines that can produce a variety of products or parts with
virtually no time lost for changes. The process of introducing AMT is generally
evolutionary but in some settings the pace is quickening. As innovations spill
over into practical application there is a simultaneous change in the mix and
range of elements generally labeled as AMT. The machines, computer control
and linkages, as well as the human operator involvement, appear to be on a
windy route from islands of technology towards some far wider degree of
computer integration, referred to as computer integrated manufacturing (CIM).
Introduction of Advanced Manufacturing Technology

118

AMT represents a wide variety of modern computer-based or numerical controlbased systems devoted to the improvement of manufacturing operations. AMT is
broadly defined as an automated production system of people, machines and
tools for the planning and control of the production process, including the
procurement of raw materials, parts and components and the shipment and
service of finished products. The properties of AMT overcome the limitations of
conventional technology in enabling small firms to develop economies of scope
based on low volume and low cost production. Specifically, AMT facilitates
customization and reduces lead times through the productions of variety,
frequent design changeovers, and rapid processing of design, assembly,
materials handling and market information.
In general, AMT typically involves (a) a computer-aided design system (CAD)
that develops designs, displays them and stores them for future reference: (b) a
computer-aided manufacturing system (CAM) that translates CAD information for
production and further controls machine tools, material flow, and testing; (c) an
automotive storage and retrieval system for delivery or pack up of parts between
machines and storage: and (d) a supervisory computer that integrates all of the
above (CIM).
AMTs refer to a family of technologies that include computer-aided design (CAD)
and engineering systems, materials resource planning systems, automated
materials handling systems, robotics, computer-controlled machines, flexible
manufacturing systems, electronic data interchange and computer-integrated
manufacturing systems.
2.1 Group of AMT
Advanced manufacturing Technologies involve the application of computers to
various facets of the production process. The 22 manufacturing technologies are
grouped into six functional categories, each capturing a different aspect of the
process-fabrication and assembly, automated materials handling systems,
design and engineering, inspection and communications, manufacturing
information systems, or integration and control.
Table 1 presents the
technologies and groups used in Canadian Manufacturing Survey (1995).
There are 26 AMTs listed in Baldwins (1995) survey. The list is obtained from
Statistics Canada in 1995. The 26 technologies belong to six functional
technology groups-design and engineering; processing, fabrication, and
assembly, automated material handling, inspection, network communications,
and integration and control.
Advanced manufacturing technologies (AMTs) involve new manufacturing
techniques and machines combined with the application of information
technology, microelectronics and new organizational practices within the
manufacturing process.
These hardware technologies have found wide
acceptance in discrete manufacturing and in resource and processing sectors.
Computer numeric controls have been applied to systems for machining, forming,
cutting and molding. The accuracy, speed and control of robots have improved
significantly and, as a result, they are used extensively in welding, painting,
material handling and an enormous number of unique assembly applications.
Vision systems provide, in real time, monitoring for precision machining and highspeed printing and remote handling of mining equipment used thousands of
119

Kennedy D Gunawardana

Metrecs underground. Computer-aided design (CAD) and rapid prototyping have

substantially shortened the development time for new products. Computerintegrated manufacturing (CIM) is applied in machine shops for tool building, the
production of engines and body assemblies for passenger cars, the manufacture
of airplane landing gear and the production of hypodermic needles for the
medical devices sector.
Complementary to the hardware technologies of AMTs is a wide range of soft
manufacturing process technologies. Just-in-time (JIT) manufacturing, total
quality management (TQM) and supply chain management are but a few of the
many soft AMTs adopted by manufacturers and processors globally.
The nature of competition in manufacturing has changed. High-quality and highly
customized goods are demanded. There is a premium for being the first to
market with a product. This has created a demand for hard and soft
technologies that help shorten design and production cycles. Freer trade has
increased the breadth of geographical competition, making it easy for foreign
manufacturers to enter the Sri Lankan market and for Sri Lankan firms to enter
foreign markets. The source of this competition varies, some of it from low-wage
areas and some of it from very technologically sophisticated countries.
Manufacturing practices and processes have come under increased pressure
from global competition. Demands for improved customer service, breadth of
product line, improved quality, quick response and a much shortened time-tomarket for new product introduction cannot be ignored by firms. In the face of
these intense pressures, Sri Lankan and other manufacturers around the world
are moving away from mass production manufacturing processes. They are
turning to greater flexibility and speed in manufacturing practices. These
practices have become the foundation for Best in Class manufacturers and
processors.
Manufacturing has been influenced by trade liberalization, global competition,
market fragmentation, technological innovation and the demands of more
sophisticated consumers. In response to these pressures, manufacturers are
incorporating more flexibility and technology in their production practices. These
features have become a trademark of world-class corporations. AMTs are a key
enabler for firms attempting to meet world-class performance targets.

Introduction of Advanced Manufacturing Technology

120

Table 1. Type of Advanced Manufacturing Technologies

Functional Group

Technology

Processing, Fabrication
and Assembly

Flexible
manufacturing
cells
or
systems
(FMC/FMS)
Programmable logic control machines or processes
(CNC and NC)
Lasers used in materials processing
Robots with sensing capabilities
Robots without sensing capabilities
Rapid Prototyping systems
High speed machining
Near net shape technologies

Automated
Handling

Material

Part identification for manufacturing automation

(bar coding)
Automated storage and Retrieval system (AS/RS)
Automated Guided Vehicle Systems (AGVS)

Design and Engineering

Computer-aided
design
and
engineering
(CAD/CAE)
Computer-Aided Design/Manufacturing CAD/CAM
Modeling or simulation Technologies
Electronic exchange of CAD files
Digital representation of CAD output

Inspection
Communications

Automated Vision-based systems used for

inspection/testing of inputs/or final products
Other automated sensor-based systems used for
inspection/testing of inputs

and

Manufacturing
Information Systems

Manufacturing Resource Planning (MRP)

Manufacturing Resource Planning (MRP11)

Integration and Control

Supervisory Control & Data Acquisition (SCADA)

Artificial Intelligence/Expert Systems (AI)
Computer Integrated Manufacturing (CIM)

121

Kennedy D Gunawardana

The functional groups and their constituent technologies, along with a brief
description of each, are provided in Table 1. AMT is a generic term for a group of
manufacturing technologies, which combine both scope and scale capabilities in
a manufacturing environment. Manufacturing strategy has become more
sophisticated. As a result, AMT can play a crucial role in making it possible for
firms to compete on traditionally contradictory competitive priorities
simultaneously.
Baldwin (1995) suggests two subgroups of technologies within AMT: the
traditional hardware technology consisting of systems, devices and stations
(SDS): and a second group of technologies, often in software form, which
perform integrative and managerial functions-integrative and managerial systems
(IMS).
Typical examples of systems, devices, and stations (SDS) include automated
identification station, automated inspection stations, automated material handling
devices, computer aided design workstations, computerized numerical control
machine tools, numerical control machine tools, programmable production
controllers, robots, shop-floor control systems.
Examples of integrated and managerial systems (IMS) include computer aided
manufacturing, computer-aided engineering, statistical process control,
production planning/inventory management software, engineering data
management, computer aided process planning, local area networks, group
technology.
Both SDS and IMS technologies can be used individually or in combination with
other technologies to achieve desired economies of scale and scope. When
taken together SDC and IMS constitute AMT.
AMT represents a wide variety of mainly computer-based systems that provide
adopting firms with the potential to improve manufacturing operations greatly. It is
generally expected that the resultant improvement in operational performance
will enhance the firms ability to reap the underlying marketing, strategic and
business benefits for which the systems were adopted. Some of the benefits
attributed to these technologies are improving market share, gaining earlier
entrance to market share, responding more quickly to changing customer needs
and the quality to offer products with improved quality and reliability.
These technologies have been classified as stand-alone systems, intermediate
systems and integrated systems. Technologies such as computer aided design
(CAD) and computer numerical control machines (CNC) are typically categorized
as standalone systems. Automated material handling systems (AMHS) and
automated inspection and testing systems (AITS) are classified as intermediated
systems. Integrated technologies can be categorized as either integrated process
technologies (e.g. computer manufacturing systems (CIM) and flexible
manufacturing systems (FMS) or integrated information/logistic technologies (e.g.
just-in-time production (JIT) and manufacturing resources planning (MRPII). The
general trend in the AMT research literature has been to examine technology
adoption and any resultant change in firm performance on the basis of the
implementation of individual technologies or in terms of implementation of
specific technology classifications such as those presented above.

Introduction of Advanced Manufacturing Technology

122

AMTs refer to a family of technologies that include computer-aided design (CAD)

and engineering systems, materials resource planning systems, automated
materials handling systems, robotics, computer controlled machines, flexible
manufacturing systems, electronic data interchange and computer-integrated
manufacturing systems (Zammuto and OConnor, 1992). Numerous studies have
emphasized the potential strategic benefits of flexibility, responsiveness,
improved quality and improved productivity through purposeful investment in
AMTs. Such benefits are increasingly important in the current global
manufacturing environment, which has been described as hyper competitive,
high-velocity and characterized by fragmenting markets, shorter product life
cycles, and increasing consumer demand for customization (Zammuto and
OConnor, 1992). Thus, AMTs have, and will continue to have, a key strategic
role in improving competitiveness by utilizing the manufacturing function more
effectively in overall business strategy.
AMT includes a group of integrated hardware-based and software-based
technologies which, when properly implemented, monitored and evaluated, can
improve the operating efficiency and effectiveness of the adopting firms. They
encompass a broad range of computer-based technological innovations, which
include numerical control (NC) machine tools, cellular manufacturing, machining
(CAD/CAM) systems, and automated storage and retrieval systems (AS/RS).
These islands of automation are integrated manufacturing (CIM). AMT has the
potential to improve operating performance dramatically and create vital business
opportunities for companies, which are capable of successfully implementing and
managing them.
AMT can also provide distinctive competitive advantages in cost and process
leadership. Events of the last decade, such as the US productivity problems,
Japanese manufacturing success stories and the competitive global economy,
have moved manufacturing strategy and process technology issues from the
bottom to the top of the firms priority list.
The AMTs are broadly classified into seven sub-groups. The classification
scheme adopted here is similar to the US Department of Commerce Survey of
Manufacturing Technology. The findings of some researchers show that the
technologies are cross categorized as stand-alone systems and integrated
systems. This classification scheme links technologies that have similar benefits
and costs. The 14 technologies are classified into three main groups, and seven
sub-groups are further divided as shown in Table 2.
Table 2. Classification of AMT
Stand-alone systems
1. Design and engineering technologies
Computer-aided design (CAD)
Computer-aided process planning (CAPP)
2. Fabricating/machine and assembly technologies
NC/CNC or DNC machines
Materials working laser (MWL)
Pick-and place robots
Other robots
Intermediate systems
123

Kennedy D Gunawardana

3.

Automated material handling technologies

Automatic storage and retrieval systems (AS/RS)
Automated material handling systems (AMHS)
4. Automated inspection and testing systems
Automated Inspection and testing equipment (AITE)
Integrated systems
5. Flexible manufacturing technologies
Flexible manufacturing cells/systems (FMC/FMS)
6. Computer-integrated manufacturing systems
Computer-integrated manufacturing (CIM)
7. Logistic related systems
Just-in-time (JIT)
Material requirements planning
Manufacturing resources planning (MRPII)
Companies must ascertain which technologies can fulfill their objectives and
identify the selected technologies belonging to a system, since it will affect the
following justification methods chosen. For stand-alone systems where the
purpose is the straightforward replacement of old equipment, even if some
economic benefits not usually considered are obtained, the standard economic
justification approaches can be used.
There is another grouping method based on the amount or type of investment.
Nature of the AMT investment can be divided into three-section computer
hardware, computer software and plant and equipment.
(1) AMT related hard ware:
LAN (local area networks)
Micros (PC Computers)
Graphics hardware:
Mainframe
Online process instrumentation
Shop floor data capture
WAN (wide area networks)
(2) AMT related Software:
CAD/CAM
Data base management systems
MRPII (Manufacturing Resource planning I and II)
(3) QC software
MRP
Expert systems
OPT
MAP
(4) AMT related plant and equipment:
CNC M/Cs
Automatic testing equipment
Computer-controlled testing equipment
Flexible manufacturing cells
Automatic assembly
Flexible assembly systems
Robots
Laser cutting
Automated warehousing/order picking
AGVs
Laser measuring
Introduction of Advanced Manufacturing Technology

124

Generic Advanced Manufacturing Technologies and Practices is another AMT

grouping. Generic AMT represent the different generations and different
capabilities that crosscut most industries.
(1) Multi-axes machining center
(2) High speed machining center
(3) Cellular manufacturing or group layout
(4) Computerized production planning system
(5) Product modeling and simulation
(6) Electronic exchange of product design and process data
(7) Automated parts identification devices
(8) Rapid set tooling and fixturing
(9) Rapid prototyping
(10) Computerized process planning system
(11) Product data management system
(12) Process simulation
(13) Knowledge-based systems
(14) On-line intelligent process control
Advanced manufacturing technologies refer to a family of technologies used in all
facets of manufacture including design, control, fabrication and assembly. AMTs
have taken on many forms of acronyms, including computer-aided design (CAD),
computer aided engineering (CAE), manufacturing resource planning (MRPII),
automated materials handling system, electronic data interchange (EDI),
computer integrated manufacturing (CIM) systems and flexible manufacturing cell
(FMC).
2.2 Empirical Evidence of Productivity increases of the firm
Sufficient evidence exists that computer aided technologies can increase
productivity as well as quality and production flexibility. In a study of 14
organizations that have deployed computer-aided manufacturing technologies,
Voss found that 12 had experienced increases in productivity. Increased product
quality, reduced lead-times, and greater flexibility occurred in 8 of them. On the
other hand, a pioneer study by Jaikumar (1986) found that deployment of
computer-aided technologies in some firms only boosted machine up time and
productivity or lead-times. Jaikumar concluded that these organizations did not
realize increase in quality and flexibility because they superimposed the new
technologies on existing structured organizations. Gaining the inherent flexibility
and quality advantages of computer-aided technologies requires a more
integrated and flexible work organization with decentralized control structures.
Computer-aided technologies are similar to earlier conventional nonprogrammable fixed-cycle technologies because of their ability to increase
machine up time and produce high volume products. Scale economies needed to
be competitive in mass markets can thus be reaped with computer-aided
technologies. Nonetheless, these new technologies differ from conventional
machines because they have the capacity to produce a wide array of low volume,
high quality, customized parts or products needed for a highly segregated market
(Zammuto and OConnor, 1992).

125

Kennedy D Gunawardana

The issues surrounding manufacturing technologies and their implementations

have assumed greater importance in the manufacturing strategy debate.
Practitioners and researchers have developed strong interest in how AMT can be
used as a competitive tool in global economy. A growing number of organizations
are now adopting AMT to cope with recent phenomena in todays competitive
environment such as fragmented mass markets, shorter product life cycle and
increased demand for customization. AMT can help serve as a double-edged
sword, imposing organizational challenges while providing distinct competitive
advantage when successfully implemented.
2.3 History of AMT
Historically, manufacturing organizations made improvements in their
productions processes primarily through investments in physical capital. Advices
in mechanization, for example, enabled manufacturing firms to enhance
efficiency in production while actually lowering the required skills and capabilities
of employees. As a result, many firms actually took the tactic of deskilling their
workforces to reduce labor expenses, thereby diminishing the necessary level of
investments in human capital with the hope of increasing profits.
In contrast to this perspective, advocates of the cotemporary manufacturing
paradigm argue for a dramatically different orientation toward employees. These
post-industrial theorists propose that compared to the deskilling tactics of
traditional manufacturing, more advanced systems require a set of
complementary practices for upskilling the workforce. Indeed, some studies have
suggested that modern manufacturing systems demand more enhanced
technical, conceptual, analytic and problem solving skills than typically were
required in traditional manufacturing environments.
In the manufacturing sector, the new technological advances have revolved
around machine tools and equipment. Advances in automation of machine tools
began about 30 years ago with the first generation of programmable machine
tools-the numerical controlled machine tools (NC). The NC did not become
widely used until the 1970s. The second generation, computerized numerical
control machine (CNC), was introduced in the late 1970s. These new machine
tools have the capacity to produce the high volume standardized parts and
products necessary for competitive success in undifferentiated markets.
The first AMT technologies were introduced in the 1950s, but it was not until the
1970s that the adoption of AMTs took off and the 1980s that their use became
widespread. Today, nearly all currently produced manufacturing equipment
incorporates some electronics element and thus fits the definitions for AMTs.
There are three types of manufacturing systems: crafts shops; dedicated
manufacturing systems (DMS); and advanced manufacturing technology based
systems (AMT). Their research is based on Teece conceptualization of longlinked versus intensive technologies. Using their classification scheme, DMS are
considered long-linked industrial systems employing hard automation whereas
AMT are post-industrial enterprises employing flexible resources.
There are many distinctions between craft shops and DMS. While craft shops
employ skilled artisans who use various hand tools, DMS deploy special-purpose
machinery operated by unskilled manual laborers. In a craft shop, workers are
organized into task-oriented work groups. Work is functionally specialized and
Introduction of Advanced Manufacturing Technology

126

used usually a single task is assigned to a worker in a DMS. In a craft shop,

performance measures are based on customs and other craftsmen evaluate the
work. DMS are controlled through a hierarchical structure. In addition to the
above characteristics, DMS are product-oriented, concerned with efficiency and
productivity. An information system controls task execution and co-ordinates
sequential activities within a DMS.
2.4 Adoption of AMT
The study of the adoption and dissemination of technologies is one of the key
components of innovation and technological development. Indeed, it is through
the adoption of newer, more advanced technologies that industries can increase
their production capabilities, improve their productivity, and expand their lines of
new products and services. Adoption of new technologies is a key element to a
firms success. Therefore, this report outlines the extent to which establishments
in the Canadian manufacturing sector use advanced technologies. It investigates
the extent to which advanced technology is used - both at the individual
technology level and at the functional technology group level, where functional
group refers to collections of technologies that serve a common purpose. Not all
firms adopt advanced technologies because of the costs associated with their
adoption. Adoption occurs when the benefits from adopting the new technology
outweigh the costs.
Michael Proter (1986) argues that there are two roads to competitive advantage:
lower cost or product differentiation. Developing countries are able to again a
foothold in international markets for their industries by translating their relatively
cheap labor costs into lower-cost goods. For industrialized countries such as the
US, where the cost of labor is relatively high, the introduction of such cost
competition has undercut many traditional industries, and forced many firms to
slash costs in order to remain competitive. In the long run, such strategies cannot
pay off for industrialized countries. The competitive advantage of low cost
production will always lie with less developed countries.
According to Porter (1986), the road to competitive advantage for industrialized
countries that wishes to keep wages relatively high must be product
differentiation. Firms must become able to produce goods that cannot easily be
transferred to lower cost locations, allowing them to maintain reasonable
operating margins while paying higher wages.
Global competition continues to drive the adoption of AMT. To date, the literature
AMT on the introduction of AMT new technology is based primarily on case
studies and expert opinions.
Global and domestic firms have different objectives for adopting AMT as a
means to effectively compete in their respective markets. Whatever the
objectives may be, the adoption of any new technology involves uncertainty
about achieving the objectives.
In addition to the inherent human resistance to change and innovation, at least
two other types of uncertainty are present when adopting manufacturing
innovations: technological uncertainty (whether the adoption of the technology
will be profitable): and strategic uncertainty (how the decisions of competing firms
will be adversely impact a decision to adopt a new technology). Generally, the
127

Kennedy D Gunawardana

effects of technological uncertainty can be reduced by research and testing. In

contrast, strategic uncertainty is more difficult and problematic to evaluate,
frequently relying on speculative efforts to anticipate the decisions of rival firms.
Adopting AMT involves both types of uncertainty.
Baldwin (1995) suggests that firms, which export a large portion of their
production, adopt a greater variety of AMT than domestic competitors. He cites
the reorientation to exporting by the Japanese as their motivation to adopt AMT.
If this is the case, US exporting firms would be expected to adopt a greater
variety of AMT than non-exporting firms.
The adoption of AMT involves major investment and a high degree of uncertainty
and, hence, warrants considerable attention within manufacturing firms at the
strategic level. As a result, issues involving selection and justification procedures
assume greater importance. Baldwin further states that companies can attain
significant competitive advantages through AMT such as flexible manufacturing
systems (FMSs), computer-aided design and robotic systems. He also observes
that many companies are reluctant to install these technologies because:
(1) Those which have frequently do not reap the advantages these technologies
can offer.
(2) There are difficulties in implementing the expensive, complex systems.
(3) There are insufficient internal skills.
(4) There is a multiplicity of implementation paths.
(5) AMT involves incremental skill building
(6) AMT requires different support infrastructure
Implementing AMT is one of the lengthiest, expensive and complex tasks a firm
can undertake.
An issue of importance in this strategic decision is whether the process should
be transferred without modification or adapted in some way for transfer, cloning a
manufacturing process can maintain commonality throughout a global network of
operations, and avoid re-engineering costs. Cloning, however, requires
robustness to the recipients local conditions and may not allow the exploitation
of benefits from local factors of production. The alternative is to adapt some
aspect or aspects of the manufacturing process, through adoption; the transferor
(the home) can take advantage of local characteristics and can facilitate the
transfer process. Manufacturing process which receives significant inputs from
the local economy, such as skilled labor, repairmen, reliable power, spare parts,
industrial materials processed according to exacting specifications and so on, are
less appropriate to the less-developed areas than those which do not have such
requirements. Vernon concluded that firms would either vertically integrate to
overcome such supply problems, or choose products which were more
transferable, such as those which did not require the local conditions mentioned
above. Taking a largely economic perspective, he identified the variables
affecting technology choice for transfer as: market size and growth, labor and
capital costs, range of technology available and prospect of technology
obsolescence. In these examples, the author has listed both host-dependent and
host-independent issues. To attempt a comprehensive assessment of the factors
coming to bear during the transfer it is necessary to differentiate between those
characteristics of the process that pertain to fit with host conditions (such as labor
costs and market) and those that affect the activity of transferring the process
(such as dependence on difficult-to-transfer knowledge).

Introduction of Advanced Manufacturing Technology

128

Literature on technology appropriateness typically suggests factors influencing

adaptation to improve fit with host characteristics and socio-economic objectives.
Pakes (1984), for example, focuses on labor substitution, identifying appropriate
technology as that which maximizes output and employment simultaneously.
This approach to appropriateness is too narrow to be of much value to transfer
practitioners assessing a manufacturing process or choosing a location. A wide
view of appropriateness should draw in all the factors that have some impact on
the operation of a manufacturing process in its new location.
Implicitly so far, adoption and adaptation of manufacturing philosophies by less
developed countries (LDCs) provides useful material for the search for factors
adaptation. The simplicity of Japanese techniques and their low capital
investment requirement makes them ideal for LDCs, requiring only training.
However, they do mention caveats, for example: workers in LDCs often lack
inherent housekeeping tendencies, capability in tool making and quality
measurement, and individuals for troubleshooting. More adaptation influencing
factors are suggested by authors in LDCs, namely, employee and supplier
participation (cultural and infrastructure), educational level, labor costs,
unionization, and firms size.
Factual evidence of the factors affecting manufacturing process adaptation is
uncommon, but a number of empirical studies have identified a lack of host
managerial know-how, lack of infrastructure, poor IPR protection, governmental
requirements and commercial habits as barriers to transfer. Different
manufacturing processes will be affected by these factors to a greater or lesser
extent. The sensitivity of a process to any of these factors gives an indication of
its robustness. If a process was not, for example, climate specific, then it could
be considered robust to climate. In this case it would be appropriate, regardless
of differences between the home and host climates. The more general case
would be where although the process was affected by climate, the home and
host climates were sufficiently similar so that the manufacturing process was
appropriate for that host.
Adoption of new technologies is a key element to a firms success. Therefore,
most of the researchers outline the extent to which establishments in the
Canadian manufacturing sector use advanced technologies. It investigates the
extent to which advanced technology is being used-both at the individual
technology level and at the functional technology group level, where functional
group refers to collections of technologies that serve a common purpose. Not all
firms adopt AMT because of the costs associated with their adoption. Adoption
occurs when the benefits from adopting the new technology outweighs the costs.
Adoption rates, alone, are insufficient for attempting to understand the complex
nature of technological change. Thus, some surveys investigate the benefits and
effects that manufacturing establishments receive as the results of adopting
AMT.
Moreover, some manufacturers hold the view that the adoption of AMT involves a
high level of investment, and its payback period is usually longer than that
traditionally required by business enterprises.
The top five obstacles to more rapid adoption of AMT, as stated by these
executives, are:
129

Kennedy D Gunawardana

(1). Lack of necessary funding

(2). Lack of in-house technical expertise
(3). Failure of top management to grasp the benefits of AMT
(4). Inadequate planning or lack of vision
(5). Inadequate cost-justification methods
2.5 Benefits of Advanced Manufacturing Technology
The literature identifies a variety of technical and strategic factors that include
AMT adoption: reduced product development time, labor costs savings, material
costs savings, a need to remain competitive, tax incentives, financing availability,
a need for product change flexibility, environmental, safety or health concerns,
increased profitability or plant performance and customer requirements. These
factors have a broad, strategic impact on the firm and affect virtually every major
element of a firms operating environment.
AMT represents a wide variety of modern computer-based systems devoted to
the improvement of manufacturing operations and thereby enhancement of the
firm competitiveness. AMT, in its varying forms, has been credited with the
potential to bestow, among other things, earlier entrance to market, faster
responses to changing customer needs, and higher quality products with
improved consistency and reliability, However, results of several empirical
studies indicate that, while most firms achieve some benefits, many of them are
not fully exploiting their AMTs touted capabilities.
Since the technical capabilities of AMT are well proven, failure to achieve the
potential benefits has been attributed to infrastructure problems such as
inadequate organizational planning and preparation for the adoption of the AMT
or defines a life-cycle implementation process which consists of the following
three phases: pre-installation (planning and justification), installation and
commissioning (monitoring and evaluation). Implementation is typically viewed as
a combination of the actions in the installation and commissioning and postcommissioning phases.
2.6 Disadvantages of AMT
Companies have identified some of the issues and problems arising from
implementing an AMT project and discuss the following issues, namely scope of
AMT projects, simulation modeling, cell design, cell operational logistics, and
labor issues in AMT.
Traditionally there has been little awareness of the need to link technology issues
with human resource management issues. Technologies have been deployed to
improve firm performance independent of programs and practices that involve
workers in decision-making. Firms implement new technologies to improve their
competitiveness. Reductions in labor costs are made possible by new automated
machines and equipment which take over decisions about production and
perform at accelerated rates operations formerly performed by humans. Faster
performing technologies permit increased production using the same fewer, or
less skilled employees.
The impediments that were investigated by Baldwin can be divided into five
groups. The first includes a set of general cost-related problems associated with
AMT adoption, including the cost of capital, the cost of technology acquisition,
Introduction of Advanced Manufacturing Technology

130

the cost of related equipment acquisition, the cost of related software

development, and increased maintenance expenses.
Four other areas were also identified-impediments that arise from government
policy (Institutional-related problems), from labor market imperfections, from
internal organization problems and from imperfections in the market for
information. Each of these also increases the costs of adopting AMT-but the
causes are somewhat more narrowly focused than the general cost-related items
that are included in the first category.
Labor-related problems include difficulties that arise because new technologies
and innovation generally need higher skill levels. In the face of these needs, a
firm may encounter impediments to adoption if there is a shortage of skills
available on the market, or if it faces training difficulties in overcoming
deficiencies, or if its labor contracts act to constrain its ability to substitute labor
across tasks.
Organizational problems are those associated with difficulties in implementing
the types of internal change in a firm that are required for the adoption of AMTs.
The first of these is the difficulty in introducing important changes to the
organization. For example, the introduction of computer-aided design may
require new structure that link engineering development with the production
department so that the advantages of concurrent engineering practices can be
fully exploited. Other organizational problems stem from a poor attitude of senior
management towards new technologies, or worker resistance.
Institution-related problems are those associated with tax regimes (both the R&D
tax credit and capital cost allowances) and with government regulations and
standards. Information-related problems arise if markets for knowledge are
imperfect.
They include lack of scientific and technical information, technological services,
and technical supports from vendors. Table 3 reports the percentage of plant
managers who reported that these problems impeded the adoption of AMT
according to the Baldwin (1995) survey.
Table 3 - Problems Impeded the Adoption of AMT
Types of Impediment
Cost-related
Institution-related
Labor-related
Organization-related
Information-related
2.7

Percentage
79.1
15.5
37.2
34.1
24.9

Role of AMT in Sri Lanka

Almost all developing countries that were British colonies for a considerable
length of time inherited the British Education system. During the early years of
the colonial period, British investors set up most of the sizable businesses in
these countries. The managerial personnel, including Production Managers, for
these enterprise were generally brought from the UK. Singapore and Sri Lanka
were British colonies for nearly one hundred and fifty years. Both of these
131

Kennedy D Gunawardana

countries inherited their education system and practice almost entirely from the
British systems.
During the colonial period, business activity in Sri Lanka was directed towards
the plantation sector introduced to the economy by the British. In order to
facilitate the investment of British capital, plantation joint stock companies were
introduced in the middle of the nineteenth century. The Sri Lankan government
has found that companies gain and sustain international competitive advantage
through improvement, innovation and upgrading. Research in the early 1990s
showed that many Sri Lankan companies were failing to compete effectively.
Productivity in Sri Lankan firms had been relatively low by other countries
standards.
Various attributes are addressed and used by researchers for procedures
involving adoption, classification, selection, and justification of AMT. In this
review, a comprehensive list of studies have been identified and classified under
many categories. The literature also observes common difficulties in
implementing AMT such as lack of technical skills, managerial problems, lack of
confidence to implement automated systems, lack of clear-cut policy direction
towards automation, resistance to adapt automation and systematic evaluation
methods. Economic issues alone are inadequate to justify new manufacturing
systems because traditional evaluation methods are inadequate for the purpose.
Non economic benefits could not be included in the justification procedure, which
offer a large number of intangible benefits. The problem lies not in the level of
technology, but rather with its implementation. It is important to note that, instead
of rushing to invest in AMT, a manufacturing company must reassess its
direction, strengths and weaknesses, and develop a strategy for successful
implementation accordingly. The entire literature review and classification
scheme suggested have brought several elements to the fore. These can be
summarized as follows:

AMT adoption factors and adaptation and implementation

problem by focusing on issues of specific interest.

AMT involves a set of quantifiable and non-quantifiable

attributes.

AMT definition has changed from time to time. It starts from

broad definition and ends up with a much computer related
field.

AMT includes many issues, especially human issue and

mechanical issues.

Advantages and disadvantages related to AMT studies are

common in the literature.
3.Conclusion
The properties inherent in Advanced Manufacturing Technology (AMT) create
new opportunities for firms, and in particular small firms in the local context. The
capability of this technology to modify production specifications quickly and
accurately means that firms can customize their products and attain economics
of scope based on low volume and low cost production. While traditionally
technology has been perceived merely as a tool in implementing business
strategy, AMT has the potential to directly affect the firms strategy choices. To
date, however, AMT literature suggests that adoption of AMT offers firms the
potential to pursue new innovative strategies.

Introduction of Advanced Manufacturing Technology

132

References
Armstrong, J. A. 1993. University-Research--New Goals, New Practices. Issues
in Science and Technology. Vol.9 (2) : 50-53.
Attaran, M. 1986. Flexible manufacturing systems: Implementing an automated
factory. Information systems management. Vol. 9. No. 2 : 44-7.
Association of American Universities. 1986. Trends in Technology Transfer at
Universities: Report of the Clearinghouse on University-Industry Relations,
(Washington, DC).
Atkinson, R 1991. Innovation Policy Making in a Federalist System: Lessons from
the States for US Federal Innovation Policy Making. Research Policy Vol. 20(6)
:559.
Audretsch, D.B. and M. Vivarelli. 1996. Firms size and R&D spillovers: Evidence
from Italy. Small Business Economics, Vol. 8(3) : 249-258.
Backer, T. E 1995. Assessing and Enhancing Readiness for Change Implications for Technology Transfer. NIDA Research Monograph, Vol. (1) : 21.
Backer, T. E. & S. L. David 1995. Synthesis of Behavioral Science Learnings
About Technology Transfer. NIDA Research Monongraph, : 262.
Badiru, A.B., Foote, B.L and Chetupuzha, J., 1991: A multiattribute spreadsheet
model for manaufacturing technology justfication. Computer and Industrial
Engineering, Vol.21 No,1-4 : 29-33.
Bagur, J., and Guissinger, A. 1987. Technology transfer legislation: An overview.
Vol.12 :51-63.
Baldwin, J., and D. Sabourin .1999. Innovative Activity in Canadian Food
Processing
Establishments: The Importance of Engineering Practices, Analytical Studies
Research Paper, Ottawa: Statistics Canada.
Baldwin, J., D. Sabourin and M. Rafiquzzaman. 1996. Benefits and Problems
Associated with Technology Adoption in Canadian Manufacturing, Catalogue 88514, Ottawa: Statistics Canada.
Baldwin, J., D. Sabourin and D. West .1999. Advanced Technology in the
Canadian
Food Processing Industry, Catalogue 88-518, Ottawa: Statistics Canada.
Balachandra, R. 1996. International technology transfer in small business: A new
paradigm. International Journal of Technology Management, Vol.12 (5-6) : 625638.
Conn-Farkas, I.1988. Human aspects of information management for technology
transfer. Information Management Review. Vol.( 4) : 47-56.
Conner, K and Prahalad, C. 1996. A Resource-based Theory of the Firm;
Knowledge versus Opportunism. Organization Science, Vol.7 : 477-501.
Conflicts Of Interest In University Technology Transfer. 1991. Chemtech, Vol.
72-3.
Conner, K. R. & Prahalad C. K. 1996. A Resource-Based Theory of the Firm:
Knowledge versus Opportunism. Organization Science, Vol. 7, 1: 477-501.
JAIKUMAR, R. 1986. Post-Industrial Manufacturing, Harvard Business Review,
Nov.- Dec., 66-76.
Packes, A and Schankerman, M. 1984. The rate of Obsolescence of patents,
research gestation lags, and the private rate of return to research resources in
R&D, Patents and Productivity, 73-88.
Porter, Michael E. 1985. Competitive Advantage: Creating and Sustaining
Superior Performance, New York: The Free Press.
133

Kennedy D Gunawardana

Samli, A. 1985. Technology transfer: the general model, Technology transfer,

Quorum Books, Westport, CT: 3-15.
Sanchez, R. & J. T. Mahoney. 1996. Modularity, Flexibility, and Knowledge
Management in Product and Organization Design. Strategic Management
Journal, Vol. 17, Special Issue Winter: 63-76.
Sanders, J D. 1994. Transfer or ?. Journal of Technology Transfer, 19(2): 3.
Sanzmenendez, L. 1995. Policy Choices, Institutional Constraints And Policy
Learning - The Spanish Science And Technology Policy
In The Eighties.
International Journal of Technology Management, 10(4-6): 622-641.
Sapienza, A.M. 1989. Technology transfer: An assessment of the major
institutional vehicles for diffusion of U.S. biotechnology. Technovation. 9(6).
Scarso E., and E. Bolisani 1996. Technology transfer to supplier-dominated
sectors: Lessons from the diffusion of CAD in the fashion industry. International
Journal of Technology Management, 12(4): 421-437.
Schmanner, R.W 1985. Making Business location decisions, Prentice-Hall :
Englewood Cliffs, NJ.
Statistics Canada. 1988. Survey of Manufacturing Technology 1987. Final report.
Ottawa.
Statistics Canada.1991. Survey of Manufacturing Technology 1989, Indicators of
Science and Technology, Catalogue 88-002, Vol. 1, No. 4. Ottawa.
Yong, S. and R. Gaertner 1994. Technology Transfer From University To
Industry: A Large-Scale Experiment With Technology Development And
Commercialization(presented at the Symposium On Technology Transfer And
Public Policy). Policy Studies Journal, 22(2): 384-99.
Yoshikawa, A. 1988. Technology transfer and national science policy:
biotechnology policy in Japan. International Journal of Technology Management,
3 (6): 735.
Yoshikawa, A. 1990. Japanese Biotechnology - Government, Corporations, and
Technology Transfer. Journal of Technology Transfer, 15, (1 & 2): 53.
Yoxen, E. J. 1984. Scepticism about the Centrality of Technology Transfer.
Social Studies of Science,14(2).
Yu H. Y. and K. S. Yeh. 1996. Technology transfer in Taiwan's information
industry: The lessons. Research Technology Management, 39(5): 26-30.
Yuan, J. D. 1996. United States technology transfer policy toward China: PostCold War objectives and strategies. International Journal, 51(2): 314-338.
Zander, U. & Kogut, B. 1995. Knowledge and the Speed of the Transfer and
Imitation of Organizational Capabilities: An Empirical Test, Organization Science,
6: 76-92.
Zammuto,R.F and OConnor, E. 1995. Gaining advanced manufacturing
technologies benefits: the role of organization design culture, Academy of
management review, Vol.17 No.4,192:701-28.
Zaheer, S. 1995. Overcoming the liability of foreignness.
Academy of
Management Journal, 38(2): 341-363.

Introduction of Advanced Manufacturing Technology

134