One of the most important factors impinging on management today is the reality of globalisation. Karlsson (1992) noted that globalisation is the first and most obvious of the corporate strategies. Furthermore, he concluded that there is a shift in mode from what can be called internationalisation to globalisation.

According to Scully and Fawcett (1993), competitive survival depends on the firm’s ability to understand the changing global environment and to adopt the emerging rules of global strategy. Competitive advantage can be achieved in many ways, for instance by attacking product design, quality, price/cost, lead time, process or inventory levels. However, the common thread is often greater responsiveness to customers' needs. Customers want better quality, quicker response, greater flexibility and higher value. Quicker response time includes, time to market, supply-chain reaction time, flow time through the support offices, cycle time through the plant, delivery time to the external customer, and service recovery when things go wrong.

Six fundamental objectives for improving the performance of manufacturing systems have been identified by New (1992). These include: 1) Reduce inventory; 2) Reduce manufacturing lead times; 3) Increase rate of product innovation; 4) Reduce the overall cost; 5) Reduce the support facility; and 6) Use Parts Per Million (PPM) as the unit of measuring defects. It is clear from his work that material, and in particular Non-Conforming Material, is a key performance indicator for manufacturing. The smaller the Non-Conforming Material, the more viable the process of manufacturing. The complexity of raw materials and manufacturing processes, demanding customers and fierce competition make it essential that reduction in material waste be sought throughout every element of the plant. This in turn requires that the manufacturer know exactly what is happening to the material in the plant, and be able to rate vendors accordingly. The better the quality of information, the better the manufacturer’s ability to assess procurement processes and in turn to compete and respond faster to customers’ needs.

Material waste is unfortunately more often than not considered a part of the manufacturing processes. Non-conforming material can be found in any of the three manufacturing stages as follows:

1. Procurement Stage: Raw material or components procured from suppliers found faulty at receiving.
2. Production Stage: Work-In-Process (WIP) material or components found faulty on the production floor.
3. Dispatching Stage: Finished goods found faulty or damaged before dispatching to customers.

It has been demonstrated (Terpstra 1990) that forming strategic alliances with suppliers does actually result in a reduction in the number of non-conforming parts. The problem of how the non-conforming parts are found, and what to do with them, still needs to be addressed.

According to Skelin and Soliman (1996), to reduce material waste, the decision-maker must select the decision on the fate of material which leads to least manufacturing cost. Since manufacturing costs include not only material costs but also production costs (production time), it is essential to consider the impact of material on the production. In other words, when an item is needed for production, its absence may delay production; the decision-maker must take such impact into account.

Although it is recognised that companies must continuously strive towards total elimination of waste, in reality this is not always possible because:

1. An item is of poor quality.
2. The value of the item is so small that it would be cheaper to scrap than repair it or return it to the supplier for credit.
3. The store contains a large number of the same item in stock and hence production will not be set back as a result of scrapping the item.

Material found faulty (i.e. classified as waste) during production and dispatching usually would have accumulated a higher Value Added and hence must be seriously examined. Accordingly, all cost considerations as well as production needs and other related issues must be reviewed by the decision-maker before deciding the fate of the non-conforming material.

In a typical manufacturing organisation, the Receiving Department usually performs a number of functions including:

• Receiving and recording any quantities received;
• Detecting damaged or defective goods;
• Deciding on what to do with damaged or non-conforming material and goods;
• Preparing inspection reports, and
• Moving goods to the storage area immediately after receiving.

The typical decisions made at the Receiving Department are as follows:

1. Either Accept the item; or
2. Reject the item. In this case material is classified as non-conforming and a decision is required on its fate. This means that one of the following must happen:

1. Either Scrap the item; or
2. Return the item to the supplier; or
3. Use the item under some concession; or
4. Rework the item (repair).

At the other end of the manufacturing process, the Dispatch Department has the responsibility for sending finished goods to customers. Usually before dispatching, packaged goods are visually inspected for any damage. The outcome from this inspection is either:

1. Dispatch the goods to the customer;
2. Rework the damaged goods before dispatching them to the customer;
3. Send it as Factory Seconds to a third party to recover as much value as possible; or
4. Scrap the damaged goods because it is uneconomical to do otherwise.

During production, faulty items found on the floor face one of the following decisions, either:

1. Scrap the item;
2. Rework the item; or
3. Use the item under some concession.

The following diagram (Figure 1) illustrates these decisions within a typical manufacturing setting.

Figure 1: Illustration of the decisions on the fate of the non-conforming material in a general manufacturing setting.

Apart from cost considerations, there is a set of constraints that needs to be satisfied. These include the control of inventory build-up and the minimisation of interrupted deliveries to customers. Demand-pull signals need to be recognised and modified, if necessary, by reference to the manufacturing plan. For example a forthcoming demand trough or design change, for instance, might influence the quantities and hence material classified as scrap.

As Knowledge-Based Technology matures, globalised manufacturers can no longer afford not to make use of this technology, to reduce the time and cost of resource utilisation and control. Soliman (1997) has presented a number of factors that could influence the automation of decision making in resource utilisation in manufacturing settings.

Performing complex calculations such as Value Added, risks, production needs and the cost of non-conformance using digital computers requires the development of a set of computational algorithms. These sets of complex algorithms and mathematical models are at the heart of the Knowledge Based System. The above rules are suitable to drive the reasoning engine of a sophisticated Knowledge-Based System, to provide to the decision-maker a number of scenarios and their possible outcomes. Knowledge Engineering is a proven technology capable of performing complex operations using stored data and knowledge.

The most important functions in the automation of material management decision-making are to calculate:

1. Value Added for each part;
2. Risks Associated for each non-conforming part;
3. Economics of Rejection for each part;
4. Inspection Procedures and Sample Sizes required for each batch; and
5. Production Needs required for a given setting.

The following diagram (Figure 2) illustrates the conceptual model of the Knowledge-Based System developed.

Figure 2: Illustration of the various components of the Knowledge-Based System.

Experience has shown that managing the Supply Chain manually is expensive, as it requires time and effort to support. Considerable savings and benefits can be obtained if some of the manufacturing functions, such as Inspection and Quality Control, are computerised.

The application of Knowledge-Based Systems in production management is likely to lead to strategic advantages because:

1. The compression of time and the reduction in costs will make it possible to gain competitive advantages in price, product innovation and service.
2. Factors which play an important part in time compression include the use of strategic resources such as Knowledge-Based Systems in production management.
3. The transfer of know-how, experience/learning in production, managerial skills and invisible assets are fundamental elements for competitive advantage in production management.

Automated decisions could be an effective management-support tool and could complement the work of staff freeing them to do more challenging and higher value activities, provide just-in-time training to non-experts, and be used to create "intelligent" front-ends for existing databases. Although the databases and the Knowledge Bases must be kept up-to-date, manufacturing staff can devote more time to challenging issues, where their contribution promises to provide greater value. This application was never intended to replace the human staff, but rather seeks to increase their effectiveness and make their knowledge more accessible (Soliman, 1998). The bottom line is that managers can use this technology to leverage professional expertise, customise their services and increase their value, encouraging them to provide higher productivity. In addition, the Automated decision can provide more control assist in directing and managing the resources more efficiently (Drucker 1992). This technological evolution, which has prompted growth in the investment in Information Technology, will lead to better quality, higher productivity and profits.

Finally, it is expected that the use of Knowledge-Based Systems in production management will make major advances towards redefining it away from physically driven processes and towards an information-intensive system. The extent to which companies are cognisant of the Knowledge Based System’s multi-mission capabilities in itself does not in any way guarantee the successful implementation of a flexible strategy. Rather, strategy, organisation, design and incentives must match the new opportunities offered by Knowledge-Based System’s multidimensional and complex offerings.

1. Drucker, P. F. (1992), "Managing for the Future: The 1990s and Beyond", New York: Truman Talley Books.
2. Karlsson, C. (1992), "Knowledge and Material Flow in Future Industrial Networks", International Journal of Operations and Production Management, Vol. 12, No. 7/8, pp. 10-23.
3. New, C. (1992), "World-Class Manufacturing Versus Strategic Trade-offs", International Journal of Operations & Production Management, Vol. 12, No. 6, pp. 19-31.
4. Scully, J., and Fawcett S. E. (1993), "Comparative Logistics and Production Costs for Global Manufacturing Strategy", International Journal of Operations and Production Management, Vol. 13, No. 12, pp. 62-78.
5. Skelin, D. and Soliman, F. (1996): "Improvement of the Materials Management Chain and productivity using Knowledge Based Systems ", Proceedings of World Conference on Globalisation and Entrepreneurship, ENDEC, Singapore, December 5-7, pp. 723-732.
6. Soliman, F. (1997), "Improving Resource Utilisation Through Patient Dependency Systems", Journal of Medical Systems, Vol. 21, No 5, Oct, pp. 291-302.
7. Soliman, F. (1998), "Patient Dependency Knowledge-Based Systems", Journal of Medical Systems, Vol. 22, No 5, Oct, pp. 353 - 366.
8. Terpstra, V. (1989-1990), "Piggybacking: A Quick Road to Internationalisation", International Marketing Review, 7,4, Vol. 6-7, pp. 52-63.