Digital Technology Management BSS059-6

A Critical Assessment of Artificial Intelligence

and its impact on the Manufacturing
Industry
To: The University of Bedfordshire

12-17-2019
Table of Contents
1.1 Introduction ............................................................................................................................................ 2
2.0 External Environment Scan ..................................................................................................................... 4
2.1 Environmental Scan of the Manufacturing Sector.............................................................................. 4
2.2 Organisational Scan of WesBell Electronics ........................................................................................ 6
3.0 Strategic Information System Opportunity Identification ...................................................................... 8
3.1 Linkages............................................................................................................................................... 8
3.2 Artificial Intelligence (AI) and Manufacturing ..................................................................................... 9
References .................................................................................................................................................. 12

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1.1 Introduction
The modern external and operating environment is constantly characterized by its dynamic,
turbulent and vastly competitive nature foreshadowed by uncertainty. Consequently,
organizations must be able to anticipate, recognize and quickly react to the constant changes in
order to grow, compete and prosper (Voiculet, et al., 2010). Moreover, it is essential for
organizations to appreciate the significance of crafting and effectively executing business
strategies that can better enable them to create sustainable competitive advantage (Khalique &
Jan Khan, 2014).

According to Tapera (2014), successful strategies consist of business approaches and competitive
moves that result in growth, satisfied customers, achieved targets of organizational performance
and successful competition.

Information technology plays a crucial role in contributing value to a business and supporting
organizational transformation and the linkages of Information Technology and business strategy
should be initiated at corporate level (Andriole, 2006). Chief information officers have become
fundamental team members on boards aiding in developing and delivering strategic solutions for
organizations through the alignment of business strategy with IT strategy (Ahmad, et al., 2008).

In spite of this, many organizations consider the use of information technology as the purchase of
hardware, software and networks (Freeman, 2017) and find it continuously challenging to
establish and maintain the linkages between technological resources and organizational
objectives. Consequently, this results in challenges in identifying, to what extent, the specific
resources and systems contributed to the organization’s market position; and in such cases, IT
becomes regarded as only an item of expense (Klouwenberg, et al., 1995).

The U.S. manufacturing landscape has changed radically and manufacturers now face escalating
pressure to reduce cost whilst simultaneously delivering high quality goods and services
(Discenzo, et al., 2009). Markets continue to demand the innovation of novel products and

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solutions, however, this is foreshadowed by an onslaught of even greater demands such as
responsible environmental behaviours and sustainable manufacturing.
This report will focus on the strategic management of information systems, with a focus on the
manufacturing industry, more specifically, WesBell Electronics. This will be explored through
the lens of Artificial Intelligence (AI) and its ability to empower WesBell to deliver solutions
that change the industry as well as the company’s strategic position.

Literatures written relating to strategic management and information system including

information relating to the manufacturing sector and firms were accessed using electronic
databases for both primary and secondary data collection. Scholarly articles and journals from
JSTOR, Google scholar, EBSCOhost and other such reference websites as well as the BREO
website, online materials and reference texts were similarly accessed.

This report will continue with an environmental and organizational scan, review of the
importance of missions and objectives, a critical analysis of the external environment, an
assessment of the strategic positions of both organizations and the implications of the
environmental changes to both companies moreso from a marketing perspective.

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2.0 External Environment Scan

2.1 Environmental Scan of the Manufacturing Sector

As stated by Young (2019) of The Washington Post, America’s manufacturing sector fell deeper
into contraction in August and September marked the worst month in over a decade (Institute for
Supply Managemnet, 2019).

The manufacturing sector’s cyclical nature in modern America has been discussed, deliberated
and debated since the introduction of the industrial policy of Johnson (1984). Following 12
years of continuous decline, according to Hemphill and Perry (2012), the United States
manufacturing sector grew and added jobs in 2010 and 2011. Thereafter, this prompted several
calls for a reinvigorated United States manufacturing sector, including past President Obama’s
case for global products stamped with ‘Made in America’ in December 2010 to ABC’s ‘Made in
America’ series broadcasted on ‘ABC World News with Diane Sawyer’ in February 2011
(Jacoby, 2011).

In spite of this progress, the Alliance for American Manufacturing (2010) conducted a national
survey of one thousand possible general election voters with a focus toward manufacturing and
America’s global economic standing. The respondents’ results revealed the following:
1) 40% believed that a substantial amount of manufacturing jobs was lost
2) 39% believed that too many jobs were shipped overseas
3) 85% believed that it is crucial for the United States Congress to create manufacturing jobs
4) 57% ranked the manufacturing sector as either first or second in priority as the most crucial
industry responsible for the overall strength of the economy and 40% for national security
5) Respondents also rejected the idea that other industries such as services and technology, can
replace the manufacturing sector by better that a 2:1 ratio.

Additionally, these concerns are not without factual merit as, according to the United States
Bureau of Labour Statistics (2012) over 5.5 million jobs were lost in 2010. However, by 2011
whilst real GDP increased by a paltry 1.7%, the manufacturing component of the United States

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industrial production increased at double the rate resulting in the addition of 225,000 jobs (U.S.
Department of Labour (Bureau of Labour Statistics), 2012).

Internationally, the share of global manufacturing value attributed to the United States has fallen
over time, from 30% in the 1980s to 17% - 18% in 2012 (figure 1). Furthermore, according to
United Nations (2014) estimates, United States was displaced by China as the largest
manufacturing nation in 2010. In 2013, China’s value added in manufacturing reached $2.7
trillion, compared to $2 trillion for the United States (figure 2). China’s rise relative to the United
States was due, in part, to the fact that its currency strengthened 25% against the dollar between
2003 and 2013 (United Nations, 2014).

Figure 1 Selected Countries' Share of Manufacturing Value Added

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Figure 2 Leading Countries, Value Added to Manufacturing

2.2 Organisational Scan of WesBell Electronics

WesBell Electronics is a cable and wire distributor company that offers value added services
with emphasis on the needs of Original Equipment Manufacturers, large and small industrial
manufacturing companies, maintenance and repair of organizations and electrical contractors that
need specific requirements. WesBell is ISO 9001 certified with a mission of continuous
improvement (WesBell Electronics Inc., 2019). As a result of their small size, all liabilities are
kept at less than 50% of their assets and they make it a point to stay compliant within the
industry. Their size, however, also hampers them as they encounter challenges competing with
their biggest competitors on a national level.

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Appendix 1 highlights a PESTLE analysis undertaken for the firms in the manufacturing
industry. Government tax policies are a major element that impacts all firms, to varying degrees,
depending on a range of factors. According to (Bell, 2016), President Trump initially made
mention of applying a 35% tax to products brought back into America after being produced at
low labour wages in other countries. This would not negatively impact WesBell as they do not
currently export products outside of the United States. However, WesBell can benefit from an
increase in business as their price remains stable whilst larger, global organizations are forced to
increase costs to adjust to this new tax.

Similarly, tariffs placed on goods from China as a result of the recent feud (Russ, 2019), can
negatively impact companies if parts are purchased from different parts of the world. It can also
affect manufacturing companies that depend on exports as a revenue stream. Alternatively,
government’s reluctance to do trade can aid in reducing competition in the macro environment.

Economic factors such as interest rates can directly influence WesBell’s revenues and business
growth, as well as the industry environment. Lower interest rates reduce the cost of borrowing
and can encourage WesBell to utilize debt financing for greater spending and investment
opportunities, which is especially important for small manufacturing companies like WesBell
(Pattinger, 2016).

Moreover, developing countries’ economic growth is a macro-environmental factor that can

create opportunities for many manufacturing firms to increase its revenues. WesBell would be
unable to take advantage of this opportunity until they have decided to grow internationally.
However, increased disposable incomes is certainly a factor that can promote growth for
WesBell.

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3.0 Strategic Information System Opportunity Identification

3.1 Linkages

More organizations are becoming aware of the possibilities Information Systems (IS) offers in
achieving competitive advantage. However, the strategic use of IS firstly requires a distinct
business strategy that indicates the organization’s goals as it relates to suppliers, customers,
shareholders, competitors, and authorities, linking it to the role IS plays in this (Ahmad, et al.,
2008). Once the use of Information Systems is established, in terms of infrastructure and
architecture, the organisation is better able to indicate where and how IS supports the business
and its market position. According to Klouwenberg, et al. (1995), once applied in this manner,
IS will not be seen only as an item of expense but a production factor that can be integrated in
the strategic planning of the organisation.

Managers must become cognisant of the strategic importance of technology in bringing value
and competitive advantage to their organisations (Bellaver & Lusa, 2002). According to Floyd
(1997), part of this awareness is deciding which technologies support the organisation’s strategic
objectives, identifying strengths and weaknesses, establishing technology priorities and deciding
on strategic actions.

Technological advances have the potential to significantly increase the competitive nature of the
economic business world (Henderson & Venkatraman, 1993). Computers, software and the
Internet can transform organisations from local places of business to global market competitors.
Information technology can allow for the automation of business processes, capturing industry-
related information to be manipulated to the company’s advantage, increased quality assurance,
the optimization of business process reengineering and the efficient and effective processing of
business information (Nikoloski, 2014). It also forces organisations to remain nimble through
the adaptation of their operations to newer technological advances.

Automation improvements and the deployment of information technology can have a positive
effect on an organisation’s financial goals through economies of scale gained and a reduction in

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the number of persons required to complete a task (Gerstein & Reisman, 1982). According to
Nikoloski (2014), investments in information technology can therefore help make an
organisation’s operational processes significantly more efficient and its managerial processes
much more effective. These improvements to an organisation’s business processes can allow a
firm to dramatically cut costs, improve its quality and customer service and develop innovative
products for new markets (Floyd, 1997). Furthermore, this can in turn create new business
opportunities, enable a firm to enter new markets or new market segments of existing markets.

3.2 Artificial Intelligence (AI) and Manufacturing

Artificial intelligence is still a fairly new technology with much of its success being in the form
of testbeds as opposed to full-scale projects. According to report published by Global Market
Insights, the market size for AI in the manufacturing sector surpassed 1 billion in 2018 but more
growth is anticipated of more than 40% from 2019 – 2025. Nevertheless, though whilst
‘unsupervised’ AI is in research and development phase, ‘supervised’ it is already at work in the
industry.

3.3 Recommendations

AI CAD Tools
Design engineers have specifications they have to achieve when developing new parts and
devices. To do this it is important to understand a plethora of information from materials and
processing, to the applications and needs of the end-user. With theoretical data CAD programs
have tools like finite element analysis (FEA), and the design engineer must add the data
manually or select it from a library.

One new tool in CAD technology uses AI to create a generative design. This takes the
specifications and inputs needed for a design and generates all possible materials, geometries,
and even costs. While new features are user-friendly, the technology is only as good as the user.

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Not only do you need the knowledge of what should be added to the specification and inputs, but
the user still needs to review the possibilities to select the best solution. This type of AI CAD
technology helps amplify design engineers’ abilities and saves time because the design engineer
doesn’t have to manually design multiple iterations.

Digital Twins
Moving forward, AI technology is building increasingly accurate models using these CAD and
AI tools to include theoretical and real-world data. This combination of data is building accurate
digital twins. Having a digital model lets engineers accurately predict wear, movement, and
interactions with other devices.

AI technology in digital twins give engineers the ability to see and test parts, entire machines,
production lines, and more, all digitally. With today’s ability to rent cloud computing power,
both large and small companies can afford to use AI CAD technology to find bottlenecks,
limitations, mistakes, or better features to accelerate time to market. Having a mass of data and
mapping interactions of materials, machines, and processes lets engineers see how everything is
connected and interacts. Design engineers will know how changing design specifications would
affect the product, production line, supply chain, and maintenance

Predictive Maintenance
A large concern for manufacturers in downtime. While IoT and connectivity are helping predict
and detect problems before they occur, AI technology could keep things running smoother. For
example, an engineer looking at a set of operational data of a machine think a vibration change
means the cutting tool need to be replaced or sharpened soon.

AI Changes Factories and Education

Eventually, connectivity and AI will grow where it will be possible to achieve an N-value where
a program could update or improve a design autonomously based on real-world data. Mass
adoption of AI technology can lead to mass customization and greatly increase flexibility. This

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will not only keep companies competitive but might have a ripple effect from industry to training
and education.

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