Lowering cost. As we have seen, information technology can alter a company’s costs in any part of the value chain.8 the technology’s historical impact on cost was confined to activities in which repetitive information processing played a large part. These limits no longer exist, however. Even activities like assembly that mainly involve physical processing now have a large information-processing component.
Canon, for example, built a low-cost copier assembly process around an automated parts-selection and materials-handling system. Assembly workers have bins containing all the parts needed for the particular copier. Canon’s success with this system derives from the software that controls parts inventory and selection. In insurance brokerage, a number of insurance companies usually participate in underwriting a contract. The costs of documenting each company’s participation are high. Now a computer model can optimize (and often reduce) the number of insurers per contract, lowering the broker’s total cost. In garment production, equipment such as automated pattern drawers, fabric cutters, and systems for delivering cloth to the final sewing station have reduced the labor time for manufacturing by up to 50%. (See the insert, “Aim: A Competitive Edge,” for further examples.)
Lowering cost. As we have seen, information technology can alter a company’s costs in any part of the value chain.8 the technology’s historical impact on cost was confined to activities in which repetitive information processing played a large part. These limits no longer exist, however. Even activities like assembly that mainly involve physical processing now have a large information-processing component.
Canon, for example, built a low-cost copier assembly process around an automated parts-selection and materials-handling system. Assembly workers have bins containing all the parts needed for the particular copier. Canon’s success with this system derives from the software that controls parts inventory and selection. In insurance brokerage, a number of insurance companies usually participate in underwriting a contract. The costs of documenting each company’s participation are high. Now a computer model can optimize (and often reduce) the number of insurers per contract, lowering the broker’s total cost. In garment production, equipment such as automated pattern drawers, fabric cutters, and systems for delivering cloth to the final sewing station have reduced the labor time for manufacturing by up to 50%. (See the insert, “Aim: A Competitive Edge,” for further examples.)
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