1. RESEARCH TITTLE

“Hybrid framework to improve Small to Medium sized Manufacturers’ flexibility to market turbulence in the Mass-Customization era”.

2. PROBLEM STATEMENT

Small to Medium sized Manufacturers (SMMs) struggle due to increasing vulnerability caused by an unpredictability of the market environment (Shah, 2005). Andrews, Mintzberg and Quinn (1992) define the environment of an organization in business as: The pattern of all external conditions and influences that affect its life and development. For Brown and Eisenhardt (1998) this kind of environment is defined as: A situation that is subject to continuous and substantial changes which are uncertain and unpredictable. Pine’s (1993) Market turbulence definition can also be brought forth; “Market turbulence is an imprecise terminology that connotes the amount of instability, uncertainty and lack of control in an organization’s marketplace. Instabilities and uncertainties refer to variations in Market trend - demand volatility and Product design (Matanda and Mavondo, 2001; Fugate et al., 2008).

Stigter (2002) made a compilation of the above theories in a tentative to understand how SMEs should locate themselves in a way that will bring success in a turbulent environment. A turbulent environment is described as difficult to understand and requires a flexible organization to adapt, respond quickly and adequately in order to remain competitive. He then concludes that a turbulent environment consists in a situation that is subject to continuous and substantial changes which are uncertain and unpredictable. Van Noort (1999) states that MC is one of the main forces influencing SMEs business environments. The lack of flexibility to Market turbulences of MTO Small and Medium Manufacturers can have detrimental effects such as delay in delivery, destabilization of the equilibrium supply chain and loss of markets to larger or more resourced manufacturers (Chang et al., 2003; Kaminsky & Kaya, 2006; Kurtz, Menezes & Rados, 2012; Lourens & Jonker, 2013; Radziwon et al., 2015; Saniuk & Waszkowski, 2016; Aboelmaged, 2017). 

As seen above, there is a need for SMMs to implement a cost effective Manufacturing framework which allow flexibility to Market turbulence, customers’ satisfaction and match Mass Production efficiency. The next section will highlight the elements of such a manufacturing framework.

3. RESEARCH AIM AND OBJECTIVES

This study aims to define a framework which will combine advantages of Make-to-Order (MTO) and Make-to-Stock (MTS) manufacturing systems coupled with manufacturing floor setup which will support the combined strategy efficiently. The manufacturing floor setup to be defined in this study will be based on the nature of workers/operators movement along the production line. An attempt to implement a new adaptive and flexible manufacturing solutions in SMMs should allow the manufacturing of a wide range of products at the same time, increase the degree of machine utilization, reduce in-process inventory (Eroglu & Hofer, 2011) as well as decrease response time (El Maraghy, 2005) in order to meet customer preferences (Aitken et al., 2002).This Hybrid framework will allow SMMs to:

• Match mass production efficiency.
• Be responsive to market turbulence.
• Provide high level customer Satisfaction.

Objectives:

1. To determine the Product Delivery Strategy (PDS) in MTO or MTS through Olhager model (2003).

2. To Re – design the Manufacturing floor

3. To develop Discrete Event Simulation (DES) models of As-Is and Proposed Manufacturing systems in Arena.

4. RESEARCH QUESTION

“How can SMMs improve their flexibility to a dynamically changing market shifting towards Mass-Customization?”

This question is broken down in three sub-questions:

1. How to classify products to determine an effective Product Delivery Strategy (PDS)?

2. How to mitigate the High cost of Mass customization?

Cost of doing business in the MC era (Noguchi & Velasco, 2005):

• High level inventory
• Longer lead time
• High manufacturing cost
• Need for substantial investment

3. How to measure the performance of As – Is and Proposed manufacturing configurations?

5. RESEARCH DESIGN

1. Research philosophy - Positivism: It derived from natural science and is characterized by the testing of hypothesis developed from existing theory (hence deductive or theory testing) through measurement of observable social realities (Saunders, Lewis and Thornhill, 2007; Easterby Smith, Thorpe and Jackson, 2008; Hatch and Cunliffe, 2006).
2. Research choice – Deduction/Hypothesis testing: It involves the development of a theory that is subjected to a rigorous test (Robson, 2002).
3. Research strategy:

• Case study research: It involves an attempt to describe relationships that exist in reality. Case studies may be positivist or interpretivist in nature, depending on the research’s philosophy, data collected and analytical techniques used (Zainal, 2007).
• Simulation: It involves copying the behavior of a system. Simulation is used in situations where it would be difficult normally to solve problems analytically and typically involves the introduction of random variables or assumptions (Merkuryev and Teilans, 2017).

4. Research approach – Mono method: it only considers one methodological approach to be inherently superior and it is simple because that superiority is said to hold across a broad spectrum of organizational research questions. A mono – method approach can either be Quantitative or Qualitative (Hinkelmann and Witschel, 2013).
5. Time horizon - Cross-sectional study design: in this setting, researchers collect information from a sample drawn from a population. It involves collecting data at one point of time. The period of data collection can vary and it depends on the study weightage (Saunders et al., 2009).

6. RESEARCH METHOD

Given the nature of this study, implicating the development of a hybrid framework for SMEs in the manufacturing sector, a quantitative paradigm approach was opted for. Figure 1 shows this study research method process flow. This research methodology is divided into three Sections. Each section intends to address a research sub – question formulated under Research Question. Section 1 will provide an answer to the first research sub-question “How to classify products to determine an effective Product Delivery Strategy (PDS)?”Section 2 will provide an answer to the second research sub – question “How to mitigate the High cost of doing business in Mass customization era?” and subsequently the last section will answer the last sub – question “How to measure the performance of As – Is and Proposed manufacturing configurations?”

Figure 1: Research method – Process flow diagram

7. IMPORTANCE AND CONTRIBUTION OF THE STUDY

7.1. Characteristics of SMEs in developing countries (Bayarçelik et al, 2014):

• Limited resources and capabilities in terms of capital investment, workforce, equipment and Technology.
• Fast learning ability

7.2. Alignment to National Strategies

In 2014 former South African President, Mr. Jacob Zuma restated the significance of Small business’ growth to the country economy through the Department of Small Business creation. This aimed at creating more jobs and stimulating the South African economy by strengthening SMEs’ positions. This is far from the first step South Africa has taken toward promoting small business development. This has been on the country’s agenda since 1994; however small businesses are still struggling despite the ongoing national effort. The only way the department may be successful in reaching the set objectives, it is by engaging in practical action to change small businesses’ environment (CPLO, 2017).

7.2.1. Current environment

Although South Africa has made considerable efforts to promote SMEs, the current environment is one in which operating a small business is complex and risky and has high failure rate. Studies have shown that five out of seven SMEs in South Africa fail within a year (Peyper and Liesl, 2013). In contrast to the United States where 70% of small businesses survive at least two years (Hirsh and Lou. 2014). However, South African SMEs are doing better than most countries’ SMEs on the continent and is on par with or better than most developing countries. Steps have been taken to reducing environmental risks for businesses. In 2013 South Africa simplified the documents and time needed to export and import commodities through advanced custom programs and in 2014 it replaced the secondary tax on businesses with dividend tax on shareholders to ease the tax payment.

Yet, doing business in South Africa remains a challenge for SMEs. In 2014, SBP (private sector development and research company) reported conducted a study on SMEs growth and competiveness through a sample of 500 SMEs in various sectors. Business owners believed that the current business environment is hostile to their operations, with 71% saying that it becomes more difficult to run a business in South Africa. They identified as main challenges to growth the nature of the turbulent market, lack of skilled labor, oppressive regulations and lack of investment (SBP, 2014).

7.2.2. The National Development Plan and Future Goals

The National Development Plan (NDP) outlines a comprehensive development strategy, in which SMEs play an important role. One of its main economic objectives is to reduce unemployment to 6% by 2030. To achieve that objective, South Africa will have to create 11 million new jobs, which would require an annual GDP growth of 5.4% (National Development Plan, 2014). However, the South African Reserve Bank only predicts an annual 3% GDP growth. With official unemployment rate at 27% and unofficial rates even higher, SMEs success is essential not only for GDP growth, but for job creation as well. For that to happen, SMEs have to perform and develop at a better rate than seen so far

7.3. Contribution

In this dynamic ever changing customer – centered market, the ability to be responsive to turbulent environment has become a critical key to doing business. The Hybrid framework designed in this study will provide the following benefits to SMMs:

• It will help SMMs react and adapt to dynamically changing market environment.
• It will enable SMMs to be more sustainable and reduce the risk level for entrepreneurs engage in the production sector.
• It will enable Manufacturers to create products quickly to the customer’s specifications more efficiently and stay competitive in the market they are established in.
• It will help SMMs create high customer satisfaction, become more efficient and increase revenue as time goes on.

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