3. Overstated Role of Capital

8/3/2019 3. Overstated Role of Capital

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Overstated Role of Capital



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“If large amount of capital were available

at low interest rates,

what would manufacturing industry spend it for?”

Likely Candidates• Computer systems for sending shop floor data to

planners and cost accountants

• Process Automation

CNC machines Bigger, faster models of current machines

Robots

• Automated storage and retrieval systems

• Automated inspection equipment




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Feedback from World Class Manufacturers onviews

All the previous stated views are dubious investments• Computer systems for sending shop floor data to

planners and cost accountants• Charts & blackboards can make a good information

system• Process Automation

CNC machines Bigger, faster models of current machines Robots

• Not always improve the process• Automated storage and retrieval systems• Add cost, not value to the product• Automated inspection equipment• May just put off correct response




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Process Automation - Research

• Researchers selected automobile industry for their study.Why automobiles because:

It’s the worlds largest manufacturing activity

Industry has revolutionised twice in last century: 1930 –

Ford and 1970 – Toyota Assembly plants all over the world carry out the same

tasks, that are uniform and comparable

It has changed our most fundamental ideas of how we

manufacture things

“ How we make things dictate not only how we work,

but also how we think”




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Assembly Plant Characteristics - IMVP

J/J J/NA US/NA EuropeProductivity (hrs/veh) 16.8 21.2 25.1 36.2

Quality (defects / 100 veh) 60.0 65.0 82.3 95.0

Space (sq ft / veh / yr) 5.7 9.1 7.8 7.8

Repair Area (% of assly area) 4.1 4.9 12.9 14.4

Inventory (days) 0.2 1.6 2.9 2.0

Job Rotation (0=none, 4=frequent) 3.0 2.7 0.9 1.9

Suggestions (# / employee)61.6 1.4 0.4 0.4

# of Job Classes 11.9 8.7 67.1 14.8

Training of new workers (hrs) 380 370 46 173



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Questions Raised

The results were shown to management of cooperatingcompanies and questions raised were:

• Whether automation is the secret?

• Does manufacturability (ease of assembly) of the product

make the difference?

• Is product variety (models) and “under the skin” (engine /

transmission combinations) complexity the reason? Arethe more productive plants focused on single / few

standardised products?


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Automation v/s Productivity

0

10

20

30

40

50

60

70

80

0 10 20 30 40 50

Automation (% of automated assly steps)

P r o d u c t i v i t y ( h

r s

/ v e h )

J / J J / NA US / NA NIC EUROPE



Questions Answered

• Whether automation is the secret?

• Most automated plant (48% automisation) need 70%

more human effort than most productive plant (34%automisation)



Questions Answered . . contd

• Is product variety (models) and “under the skin” (engine /transmission combinations) complexity the reason? Arethe more productive plants focused on single / fewstandardised products?

• The most productive plant in the world manufacturedmaximum product variety (frequently) and alsomanufactured maximum under the skin complexity



Questions Answered . . contd

• Does manufacturability (ease of assembly) of theproduct make the difference?

• Yes, its all about producing easy to assemblecomponents, simplify designs and manufacturingmethods

“How can this be?”


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Automation Facts

• The hi-tech plants End up adding many indirect technical and service workers

Have a hard time maintaining high yield becausebreakdowns in complex machinery reduce the fraction ofthe total operating time that a plant actually produces

vehicles



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E.g. – Comparison of Chrysler and Toyotaplants

Chrysler:

• 45% automated plant

• All technologically updated systems for quality checks

• Robots

• Huge space – machines placed at a distance to eachother

Toyota:

• Equipped with 20 year-old machines• Retrofitted

• Humans

• Less space - work Stations close to each other



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Comparison of Engine Plants

Plant Details Chrysler Trenton Toyota Kamigo

# 9

Plant Size (sq. ft.) 2,200,000 310,000

Employment 2,250 180

Throughput (per day) 3,200 1,500

Inventory (days) Avg. 4 Avg. 0.25

Robots 6

The American plant is almost 7 times larger, with more than 15 times

more material and 6 times more labour per engine for a bit more than 2

times of production



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Toyota Plant Characteristics

• Toyota plant is equipped with 20 year old machineso Old proven technology

o Business is about increasing ROI (Throughput)

ROI = Profits

Investments

ROI = Revenue – Expenses

Fixed Assets + Inventories



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Toyota Plant Characteristics . . . contd

• Retrofitting:o Machines are retrofitted, they do not miss a beat

o Limit switches and electric eyes check, count & index

o If a machine make breaks down signboard lights up, so

summons help to fix the problemo Poka-yoka (fool proof) systems are adopted, lowering

accidents and loss of production

o Quality problems are nipped in the bud so there is little reworkto do and carry buffer stocks

• Preventive maintenanceo The plant runs 2 shifts and preventive maintenance goes on

between the shifts (8 – 4 – 8 – 4)

o When the machine is scheduled to run, it runs right




Toyota Plant Characteristics . . . contd

• Low Set up timeo Reduced to 4 mins from 12 mins in 1989

o No need to run large batches

o Absence of large storage areas and handling equipments.

• Workstations are close to each othero machines are jammed in small space, workers can operate

on more than one machine at a time

o Reduced flow time and flow distances

o Shorter cycle time




E. g. IBM and HP

Some companies are trying hard to make sure their useof robots cause sales to grow. IBM is one such company.IBM’s personal computers are assembled with the aid of

robots.

But the PC is a marketing phenomenon – from zero to $5billion in less than 5 years. Who can say whatcontribution the robots made?




Plant Characteristics - IBM

• A module that combine with different keyboards, displayunits and other peripherals

• Most of the assembly, testing and packing are done by

several robots• The design has no features , a smaller part count with

hardly any screws. Assembling is mostly push & snap




Plant Characteristics - HP

• Most of the component parts are bought. Number ofsuppliers are few, but with certified quality product

• Designers spent time with 6-axis IBM robot, tounderstand

What it could do, What it could lift, How far it could reachetc.

• Designers went to work designing the PC a robot canassemble

“IBM went ahead and installed robots whereas HP didn’t”




IBM / HP

HV LC – IBM LV LC – HP

Product 3178 logic unit PC touch screen

Models One Mixed

# of suppliers Small 2,000 to 200

Part count Small 20,000 to 450

WIP reduction 24 to 5 days 21 to 3 days

Space reduction Sixfold Fourfold

Labour reduction Thirteenfold Fourfold

Robots Several




Success Factor for both PC makers

IBMWith Robots, the unit cost of product turned out to be lowbecause the high investment cost are amortised over a

large sales volume.

HP

They do not install any robots. Reason – when a productis designed so that a robot can assemble it easily, it is

much easier for humans to assemble. Result – low breakeven point with a very low labour cost per unit.

“Companies that do not sell massive quantities like

IBM, cannot even think about early automation”




General Principle

• Make the most of the equipment already owned

• Eliminate unnecessary steps & processes

• Combine the operations

Can I combine the operations at one workstation?

o

This is viable only when human elements are involved. Ifthere are machine elements and machines do not allow to doso then production goes for a loss

• Reduce flow distances

• If not possible to bring workstations closer, speed up the

movement

• Do not put equipment simply to displace labouro Equipment cannot think or solve problems; humans can

o Equipment can be a problem; labour can be an opportunity




Conclusion

• Automation is worthwhile if it improves the performanceor cost of humans

• For any industry there is a minimum amount ofautomation feasible; after that it is a cost

• Standard deviation should be considered in automation,than mean

“As automation increases - productivity improves is aMYTH”

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3. Overstated Role of Capital