Evolution

OPERATIONS STRATEGY

THE EVOLUTION OF

MANUFACTURING

THE EVOLUTION OF

MANUFACTURING

Warwick Manufacturing Group

The Evolution of Manufacturing

1. Introduction 2

2. The stages of manufacturing 2

3. Craft production 3

4. Industrial production 3

5. Problems experienced with industrial production approach 6

5.1. Mass production’s inability to cope with product differentiation; Ford vs. GM 6

5.2. Manufacturing management’s approach and its perceived role 8

5.3. Reactive strategy to adopt the latest strategic fashion 13 5.4. Inability to cope with the growing competitive

challenge from in Japan 14

6. Mainstream concepts adopted during the industrial production stage 21

6.1. The response to increased pressure from Japan 21 6.2. Focused factories, cells and the systems approach 24 6.3. World class manufacturing 26 6.4. Lean manufacturing 32 6.5. Business process re-engineering 38

7. The future; the post-industrial stage 43

7.1. The drivers for change 43 7.2. Cooper’s theory of confrontational strategy 43 7.3. The Future of Manufacturing Improvement 45 7.4. The post-industrial organisation 47

References 49

World Class Manufacturing

Warwick Manufacturing Group 2

WORLD CLASS MANUFACTURING Karen Bradbury & David Purchase

1. Introduction The purpose of this chapter is to explain how manufacturing has evolved in 3 main stages from craft systems to industrial systems and now towards post-industrial systems. The intention is to show how external and internal factors have driven changes in the strategic role of manufacturing and how manufacturing needs to be organised to respond to these changing factors. The topic of world class manufacturing will also be covered and the proliferation of manufacturing terminology will be explained and put into context.

2. The stages of manufacturing The following section draws on two primary sources. The first source is a paper by William Doll and Mark Vonderembse1 titled “The evolution of manufacturing systems: towards the post industrial enterprise” which is included in Voss’s book “Manufacturing Strategy; process and content”. The second source is a chapter titled “The Taming of Lions: How Manufacturing Leadership evolved 1780 - 1984” contained in Skinner’s2 book on manufacturing. According to Doll and Vonderembse (p. 357) the basic assumption behind the use of the 3 stage model is that;

“.... manufacturing enterprises, driven by their environment, change in character over time and evolve in patterns roughly correlated to movements between three stages: 1. craft shops employing skilled artisans; 2. long linked industrial systems using hard automation; and 3. post-industrial enterprises characterised by flexible resources and information-intensive intellectual work.”

The transition between the craft and industrial stages provides a historical perspective and explains why many of today’s companies developed. The transition from industrial to post industrial is of particular value in explaining the problems facing most Western companies today. Doll and Vonderembse (p. 359) provide the following table to summarise the characteristics of each stage.

Craft Industrial Post-industrial Social system Value orientation Norms

Skill Workmanship

Product Efficiency / productivity

Customer Product development and throughput times

Work system Equipment resources Nature of work

Flexible hand tools Skilled manual labour

Capital intensive - special purpose Unskilled manual work / functionally specialised

Capital intensive - flexible Information intensive intellectual work



Work group

Task orientated groupings

intellectual work Functionally specialised work groups

Self-organising and self-directed work groups

Control System Performance measures Information systems Control mechanism

Customary standard Informal and based on learning from experience Craftsman

Single and task specific Formal information systems to control task and execution and co-ordinate sequential activities Hierarchical authority structure

Multiple and global Formal and informal systems for control, mutual adjustment and learning Modified market mechanisms (i.e. long-term co-operation)

Table I - Doll and Vonderembse's characteristics of manufacturing systems by stage of evolution

3. Craft production All early production was performed by skilled craftsmen. This meant that there was a great variety in the products that were available. Even the same type of product would vary with no two being the same. This was because parts were made to fit each other rather than to strict drawings or standards. Simple hand tools were used and standards of work evolved over time to form ‘custom and practice’ rules. The quality of the product was dictated by the skill of the craftsman. Motivation and control was self generated and, since one person was responsible for the product, feedback on poor quality from the customer was easy and rapid. The skills were passed on via apprenticeships with the apprentice working alongside the craftsman for a number of years. This method of learning was also at the heart of Japanese society according to Cooper3 (p. 40);

“In Confucian philosophy it is considered honourable to imitate and an honour to be imitated. In Japan’s ancient form of teaching, the sensei, or master, would teach his students by demonstration, and the students would copy the master exactly until they gained the requisite skill to become master in their own right.”

The customer benefited from being able to specify exactly what he wanted but prices were comparatively high and throughput was low. For example early motorcycle manufacturers tailored the motorcycle frame to suit the physical build of the rider. Today craft systems still exist for industries such as clothing design, furniture design, catering etc.

4. Industrial production From 1750 to 1850 new generic technology enabled the transition from simple hand tools to capital intensive machinery. Power was supplied in the form of water & steam and shafts,



gears, bearings & mechanical movements enabled this power to be harnessed. This provided the opportunity to mechanise hand performed operations. Work shifted focus from the product to the process with apprentices being trained how to use a particular machine, such as a lathe. This type of factory required a top-level technological entrepreneur to invest in the new machinery and design the factory, which was then run by foremen or overseers. The basic premise was that capital investment in machinery reduced both the volume of labour required and the skill level of this labour. Management of this lowly skilled work force was simple and undertaken not by the owners but by an agent or foreman. However, distribution of both coal and manufactured products was still difficult.

According to Skinner (p. 281) a key development late in this period was the ‘American factory system’ which concentrated on;

“ ... making interchangeable parts and products that could be readily repaired later by substituting new parts. This American factory system required fixtures and gauges and more complex measuring and inspection equipment and procedures. It also required a standard method of manufacture and, therefore, worker discipline and supervisory surveillance.”

Between 1840 and 1890 improvements in transportation meant that ‘mass markets’ could now be reached and hence factories grew in size with more fully integrated facilities transforming raw material to finished product in one factory.

Large volume, low cost production could only be achieved if a standard product range was offered. However, this meant that the products were now available to most of the population, theoretically resulting in a rise in living standards. Cooper (p. 14) identified three product related characteristics to explain how different products can compete in the same markets. These characteristics are selling price, perceived quality and perceived functionality. Perceived because there are times when historic performance on either of these characteristics can create a reputation for the product. Customer awareness of this reputation, either good or bad, takes time to spread and hence the customers’ perceptions may not match the reality.

“Quality is defined as performance to specifications and functionality is defined by the specifications of the product.” Cooper (p. 15)

These low cost products could compete along side craft products providing the craft products offered superior quality and/or functionality. Cooper (p. 24) provides the following diagram to show what he defines as the ‘survival zones’ for the craft producers of cars in comparison to the survival zone of the Ford Motor company.



PRICE

FUNCTIONABILITY QUALITY

FordCraftProducers

Figure 1 - Cooper's survival zones of the craft producers and the Ford Motor Company

Low cost production was achieved through specialisation and sub division of the manufacturing task. Frederick Taylor in seeking to find the ‘one best way’ to manufacture firmly separated work planning from work execution. These various factors created the need to actively manage and control the tasks being performed within these manufacturing enterprises. According to Skinner (p. 289);

“Swiftly in the 30 year period from 1890 to 1920 a new management function, demanded by the physical realities of growth, size, and complexity, led to the development of the production department and a production manager whose responsibility it was to tie together and co-ordinate all elements of manufacturing into a working, functioning, and economically efficient system. .... It shifted nearly all the scope and power of manufacturing management from the president-foreman team to a middle level in the organisation.”

The impact on the organisation of work within the manufacturing enterprise was dramatic with specialisation by function and most of the workforce separated from the customer. Marketing was now required to interpret the customer needs for the functional areas and create product specifications for manufacturing. “Clerks and expediters, accountants, schedulers, method and procedure planners, and purchasing departments were added and became necessary overhead.” Skinner (p. 288). The work force identified themselves with the product they made but not with the customer they served. Manufacturing focused in innovation in the tasks with the objective of improving efficiency and productivity; as opposed to enhancing the value of the product to the customer. Specialised staff, such as industrial engineers, concentrated on developing innovations which would replace labour with machines thereby reducing variability and cost, through economies of scale. The responsibility for investment in technology and equipment for manufacturing passed from the entrepreneurial owner of the company to the production manager whose primary function was to provide a good return on any investments he made.

From the 1920s to 1980s the basic approach to industrial production was refined but not fundamentally changed in the West. The work of Taylor and his followers was taken further



with the creation of predetermined standards for direct labour and the use of work or activity sampling to study the efficiency of indirect staff. Although mass production was possible for some companies batch production was often the most suitable approach for Western companies. Material requirements planning (MRP) was developed to handle the growing problems of co-ordinating material schedules in these batch manufacturing environments. Economic order quantity formula was used to solve how much to order and statistics were used to improve forecasting. The need to manufacture new products rapidly for World War II forced the development of the ‘learning curve’ concept along with project management techniques such as critical path analysis (CPA), project evaluation and review (PERT) and Line Of Balance (LOB).

Technology changes were modest with the first stages of automation appearing in the 1950s. According to Skinner (p. 294) it took 30 years for numerical control (NC) to become the dominate technology in metal working. Even today few companies have been able to fully exploit NC, CNC (computer numerical control), CIM (computer integrated manufacture) and FMS (flexible manufacturing systems) in the way originally envisaged when the technologies were introduced.

The typical industrial production systems which have developed are;

“... functionally specialised operations arranged in a fixed sequence and a hierarchical administrative structure” according to Thompson’s4 conceptualisation of long linked technologies as described by Doll and Vonderembse (p 357).

These systems are designed to measure, predict, schedule, rationalise and control products, sales rates, engineering product design, specifications and materials. However, the underlying philosophy on which these industrial production systems is based took into account the environmental and competitive factors relevant around the 1900s. This underlying philosophy has determined the way western manufacturing managers think and behave today. However, as the environment and competition has changed conflicts and problems have arisen with the industrial production approach.

5. Problems experienced with industrial production approach

5.1. Mass production’s inability to cope with product differentiation; Ford vs. GM Henry Ford’s Model T motorised assembly line is infamous as one of the first fully integrated, mass production facilities. The initial success of the Model T was due to the ability to produce a standard, comparatively low but acceptable functionality & quality product at a very cheap price, in comparison to the craft producers of cars. However the Model T was sold to a completely new segment or market (the middle classes) in comparison to the craft produced cars and hence both manufacturers survived.

Using Porter’s5 generic strategies of low cost and differentiation, shown below, Ford had created a ‘cost leadership’ strategy. However, Ford was to suffer at the hands of Alfred P. Sloan, President of General Motors.



Competitive Advantage

Lower cost

Differentiation Competitive

Broad Target

COST LEADERSHIP

DIFFERENTIATION

Scope Narrow Target

COST FOCUS

DIFFERENTIATION FOCUS

Figure 2 - Porter's generic competitive strategies

Sloan recognised that he could not compete on cost and so he ‘differentiated’ his cars by offering a higher level of functionality for a slightly higher price. Cooper (p. 23) classifies this a ‘vertical product differentiation’ or ‘a product for every purse’. Cooper (p. 25) illustrates the differences between the survival triplet of price, functionality and quality for Ford and GM using the following diagram.

PRICE

QUALITYFUNCTIONABILITY

General MotorsFord

Figure 3 - Cooper's survival zones of Ford and General Motors

The GM car could now be viewed as a status symbol. To survive Ford needed to respond by increasing the functionality of the Model T sufficiently to keep pace with GM whilst still winning orders on price. However, Ford was unable to do this and hence GM became the dominant American car manufacturer. One reason for Ford’s inability to respond may have been the company’s failure to successfully manage such a vertically integrated company from one central location. GM overcame this management problem by creating a divisional structure based on functional specialisation as illustrated below.



Design

Purchasing

Production

Assembly

Design

Purchasing

Production

Engines

Design

Purchasing

Production

Chassis

Central Coordination

Figure 4 - GM's Divisional Structure

Initially the craft producers continued without too much direct competition but as GM increased functionality their market niches or segments shrank and many found they did not have sufficient volume to generate the profits required to fund either the research & development or investment in new manufacturing facilities. This problem has continued to the current day; for example with Aston Martin & Jaguar being purchased by Ford.

5.2. Manufacturing management’s approach and its perceived role Skinner (pp. 303-304) in his own book on manufacturing provides the following table, shown overleaf, to explain how traditional western manufacturing managers think;

One of the key problems with manufacturing is that it has generally reacted to the corporate strategy as provided and Hill (pp. 27-32) gives the following reasons for this;



Our Mission From Top Mgt. Is

Therefore We Need

But We Operate In Much Uncertainty

So We Learned That Certain Practices Work Best

And We Developed Ten Good Success Rules

Meet customer needs

Low costs Equipment does not always work

Maximum scale of production

1. Meet customer schedules

Produce good return on investment

Low investment

Off-quality production

Continuous process 2. Minimise costs

High efficiency Cost change Tool for volume 3. Maximise productivity

Schedule change Freeze designs 4. Mechanise processes for volume, repetitive, mass continuous production, so as to have the fewest possible workers and least problems of co-ordination

Parts get lost or rejected

Standardise 5. Control and direct the workforce via industrial engineering supervision, and the Personnel dept.

Vendors miss deliveries

Good forecasts 6. Focus on the short term, be systematic, detailed, precise and accurate

Designs change Measure 7. Follow the accounting and financial rules handed down by mgt.

Specifications change Stabilise schedules 8. Seek maximal simplicity, stability and close managerial controls

Jobs change Schedule and control 9. Minimise risks by minimising changes

World Class Manufacturing Error! Reference source not found.


every element

Our Mission From Top Mgt. Is

Therefore We Need

But We Operate In Much Uncertainty

So We Learned That Certain Practices Work Best

And We Developed Ten Good Success Rules

Too few/many workers

Control systems 10. Manage pressures for change from engineers, salespeople and marketeers.

Workers unhappy, not competent, not committed

Mature, proven technologies

Short job cycles

Engineer processes

Simplify jobs

Delegate worker responsibility front line supervision and personnel

Close inspection of production

Ample buffer inventories

Table II - Skinner's Historical Process By Which Manufacturing Manager's Thinking Developed



1. The production manager’s view of himself - in line with Skinner’s views production managers see their role as coping with the demands placed on them and reconciling the trade-offs inherent in these demands. Not enough effort is made either to communicate these trade-offs before the strategy is finalised or to seek ways to eliminate the trade-off. The classic example is the perceived trade-off between cost and quality.

2. The company’s view of the production manager’s role - According to Skinner6 “.... to too many executives, manufacturing and the production function is a necessary nuisance - it soaks up capital in facilities and inventories, it resists changes in products and schedules, its quality is never as good as it should be and its people are unsophisticated, tedious, detail-orientated and unexciting.”

3. Production managers are too late in the corporate debate - accountants and marketers tend to dominate. Craft enterprises and the early industrial systems had top level managers or owners who knew about manufacturing and often designed the production process; ensuring that manufacturing was considered at a corporate level. In many American and UK companies today there is a lack of manufacturing experience at the top level and yet according to Hill7 (p. 15) manufacturing accounts for 70-80% of assets.

4. They ‘can’t say no’ syndrome - all too often production responds to requests from other managers without explaining the corporate implications of this request. For example in many UK companies the managing director often becomes involved in sales and it has not been uncommon for the managing director to personally take an order and then instruct production that this order must be delivered on time. Rarely do production managers refuse such a request but often the implications may be to delay orders for larger and more important customers.

5. Lack of language - production managers are often engineers or have worked their way to the top through the organisation. Lack of a business education can mean they are less able to communicate at corporate level in comparison to accountants and marketing executives.

6. Functional goals and measures - sales departments are generally measured on the monetary value of sales. However, the actual value of the order to the company depends far more on whether the order matches the sales forecast around which the manufacturing facilities have been designed. It is interesting to note that many German and Japanese companies ‘freeze’ their master production schedules for longer than UK companies and insist that within this period no changes are made. Lansing Bagnall a UK fork lift truck company was taken over in 1988 by Linde, a German company. Lansing only fixed the production schedule 5 weeks in advance and even within this period would alter the schedule in response to customer order changes. Linde fixed the production schedule 12 weeks in advance. Sales and marketing took responsibility for the finished product. If a customer had cancelled or changed the specification of a truck all changes were made off the production line and if the order was cancelled Sales and Marketing were held accountable for the finished goods stocks. Consequently it was clearly in their interests to sell the planned production mix. At Lansing production were held accountable for the



finished goods stock and modification to part built trucks often took place on the production line creating very costly disruptions.

7. Functional support for manufacturing is weak - as a result of 6. many of the support departments provide weak support for manufacturing because they are driven to achieve their own functional objectives. If design departments had been fully aware of the needs of manufacturing there would be no need for programmes to improve ‘design for manufacture’ or ‘simultaneous engineering’.

8. Tenure - the expected length of period a manager expects to stay in one position will affect the decisions he makes. In many large companies managers are often moved on a frequent basis. In 1984 within IBM it was a common joke that IBM actually stood for ‘I’ve Been Moved’. If you expect to stay in a job for only a short period you are more likely to take decisions which improve short term performance and these short term decisions often have a detrimental impact on long term effectiveness.

9. Top management’s view of strategy - most top managers concentrate on looking outwards detecting change in the external and competitive environment; not inwards.

The impact of these various factors is illustrated very clearly by Hayes and Wheelwright8 (p. 396) in their book “Restoring our competitive edge; competing through manufacturing”;

Stage 4: Externally Supportive

Pursue a manufacturing based competitive advantage Manufacturing centrally involved in business decisions L.T. programmes to acquire capabilities ahead of needs

Stage 2: Externally Neutral

Achieve parity (neutrality) with competitors Follow “industry practice” Capital investment is primary means of gaining an edge

Stage 3: Internally Supportive

Provide credible support to business strategy Screen investments for consistency L.T. manu. developments are systematically addressed

Stage 1: Internally Neutral

Minimise manufacturing’s negative potential Internal measures and controls Retain many options

Figure 5 - Hayes and Wheelwright Four Stages of Development in Manufacturing's Strategic Role

Far few companies have reached stage 4 on this model.



5.3. Reactive strategy to adopt the latest strategic fashion Another common approach is to relate strategy to the latest fashion in ‘magic solution’ which is on offer. For example the chart, created by Tom Ridgeman whilst working on the Time Compression Programme at Warwick Manufacturing Group below shows how manufacturing strategy has typically developed in the West.

CostStrategies

Quality

CustomerFocus

Technology/ Innovation

TimeCompression

High

Low

Old New

Level ofDevelopment

New CorporateStrategy =

The most for lesscost in the leasttime.

Figure 6 - Development of Manufacturing Strategies in the West

The first mass producers tended to compete primarily on cost and availability. Their products were only made available to the general population because they were affordable and demand generally exceeded supply. This situation still exists in the developing world today. In Malaysia there are long waiting times for a customer wishing to buy a Proton car. In Russia it has become cost effective to return Lada cars from Britain. Here it is also the availability of spare parts and the ease of maintenance which is contributing for the demand for the Lada as opposed to demand for more modern imported cars.

The entry of the Japanese into the car market increased production capacity and introduced the need to raise quality standards. The typical Western approach was to respond with a Total Quality Management programme. Many companies had not realised the link between organisation culture and the TQM programme and as a result many programmes failed to reach their full potential. Just In Time programmes were also copied. These were sometimes viewed as a quality improvement programme and sometimes as an inventory reduction programme. However, the interrelation between the various systems was not recognised. You can not reduce inventory without improving quality standards unless you are prepared to accept production stoppages whilst poor quality parts are replaced.

As labour costs rose in the West, and the developing nations started to enter into manufacturing, the need to reduce labour costs became apparent. The typical response, long associated with industrial production, was to seek out technology to replace manual labour.



The classic example was the GM response to attempt to automate everything but many other companies experienced problems with ‘islands of automation’ which failed to improve the overall production system. Who needs automated warehouses if you can reduce inventory to a minimum? If you reduce batch sizes the need for conveyors and mechanised lifting systems can often be eliminated. Companies fell into the classic trap of not simplifying the process before considering introducing new technology.

Although the Japanese products had been of a higher quality they were generally of a lower functionality. Particularly with respect to aesthetic design. However, the Japanese soon overcame most of their problems by conducting far more research into what level of functionality customers wanted. Their cars soon offered specifications, such as sun roofs, as a standard feature, simplifying production and giving the customer what he wanted. In the industrial production systems in the West manufacturing was very remote from the customer. Large, central functionally specialised departments were driven not by what the customer wanted but by departmental goals, with production focusing on productivity. Hence the customer focus strategies resulted in re-organising companies into units focused on the customer. However, in large companies these strategic business units (SBU) often failed to share common learning, concentrating on their own profit goals.

Finally Western manufacturers have found that although they have reorganised into customer focused groups they were still not as responsive or cost effective as overseas competitors. This has spawned the concentration on time and business process re-engineering (BPR). However, these new solutions have not always delivered the required results. Michael Hammer9 has written a follow up to “Reengineering the Corporation” entitled “The Reengineering Revolution” which seeks to confirm that BPR is not just a fad and explain some of the problems which companies have encountered implementing BPR

These examples show that too often the strategy which is formulated on these fashionable concepts often shows no real understanding of the principles referred to or their role and relevance to the organisation.

5.4. Inability to cope with the growing competitive challenge from in Japan This section was written in 1996 by Eugene Hill, a Warwick undergraduate student studying for a BEng in Manufacturing Systems Engineering, as part of his final year undergraduate project.

What has led to the success of the Japanese? In examining how the Japanese have been successful, we should be better equipped to develop successful manufacturing strategies in the future. This section will look at main stream concepts developed to overcome the problems of the industrial production era.



.

JAPAN Continuous Improvement (Kaizen)

Toyota Production System (Lean Manufacture)

Japanese ManufacturingTechniques

Kaizen

Total QualityManagement

LeanProduction

Total QualityManagement

LeanProduction

BusinessProcess ReEngineering

MRP II

MassProduction

BatchProduction

QualityControl

Productivity

MRP

QualityAssurance

BusinessProcess ReEngineering

MRP II

Theory ofconstraints

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Quality Movement

Mainstream WCMTechniques

WEST Step Change (Innovation)

Figure 7 - Development of World Class Manufacturing Techniques

The figure above shows three main features within the development of Japanese manufacturing techniques: continuous improvement, the quality movement and the Toyota production system. It also indicates how the quality movement has developed within the bounds of continuous improvement, and how lean manufacture has developed both within the quality movement and continuous improvement. This is important because none of these ideas developed without influence from the environment they were in. So attempting to implement Lean manufacture without the quality aspects or the culture of continuous improvement is likely to not meet success. Each feature will now be examined independently.

5.4.1. Culture and Continuous improvement After World War II Japan's industry was in a state of decimation. In a search for the best ways to proceed they looked to the West for answers and found new ideas which in the West had fallen mainly on deaf ears. However in Japan they struck a chord, they grasped these ideas and propelled themselves towards TQM, Lean manufacture and all the methods which lie in the bounds of these concepts e.g. Just-in-time, Kanban, Poka-Yoke10. The role of Japanese culture in the development of these concepts was significant, Clive Morton highlights four cultural characteristics portrayed by the Japanese:



1. Group Think - prepared to share ideas for the good of the group.

2. Process orientated - the realisation of the importance of the process not just the end results.

3. Distinction between step and gradual change - Gradual change has always been the norm in Japan.

4. The renewal instinct - buildings and plant with short design lives, investing in the most up to date methods and/or technology.

Continuous improvement or Kaizen is highlighted as one of the main elements of Japanese manufacturing techniques. The figure showing the development of world class manufacturing techniques shows it enveloping all other concepts and it is felt that this is a realistic representation. Kaizen, as Clive Morton pointed out, was a cultural norm for the Japanese and so flows through all other concepts which they developed.

5.4.2. The Quality Movement In the figure showing the development of world class manufacturing techniques TQM is shown as the most recent product of the quality movement. It is not one, but a set of principles developed over the span of the movement. The figure below shows some of the key elements.

TQMmanage quality in

TQCTQCOrganise quality inOrganise quality in

QABuild Quality in

Prevention not detectionSimple Tools e.g.. SPC

Quality is everybodies responsibilityoff-line Design for quality. Costs reduction

Quality is a strategic goalExtreme customer satisfaction

Demming’s 14 points for management

Figure 8 - The layers of the quality movement (adapted by E.P. Hill from various sources)



In the early fifties Edward Deming was invited to Japan, with him he took the simple tools of quality control including Pareto analysis, scatter diagrams and in particular SPC (Statistical Process Control)11. These tools were focused on the manufacturing operations themselves. The variables of specific operations in the system are monitored to observe when they are starting to go out of control. Before poor quality products are produced the operation is corrected to ensure conformance to specification. This is prevention rather than detection12.

In the late 50's Dr. J.M. Juran, another American quality guru, went to Japan to promote quality on a wider horizon. No longer should quality be purely the domain of production, but of concern to all business functions. Total quality control (TQC) was for the organisation. One fundamental element of TQC is quality in design. Dr. Taguchi clearly distinguished between on-line (SPC etc.) and off-line quality control. He firmly believed that off-line quality was in hands of the design office and that quality in service was shown by a product’s performance in use. Variations in this performance can be due to problems in manufacturing and hence the concept of designing for manufacturability was born. Taguchi is also well known for his Design of Experiments (DOE), which are used to reduce the number of experiments required to find the root cause of a quality problem where a number of possible variables are involved13.

Many quality gurus were involved in the quality movement in Japan including Deming, Juran, Crosby and Conway, yet Demings influence seems to be strongest. Deming proposed fourteen points for management, this is a comprehensive all prevailing quality concept and represents the foundations of Total quality Management14. Below the table compares approaches to quality and also gives a summary of TQM.



Quality Control Quality Assurance

Total Quality Control

Total Quality Management

Philosophy Inspecting quality in

Building quality in

Quality for the organisation

Managing quality in

Starting point Production specification, itemised costing

Adoption of procedure manual, introduction of variance analysis (e.g. SPC)

Blueprinting operation, using problem solving techniques

Understanding customers, establishing quality management structure, culture change

Benefits Few, causes more problems than it solves

Improved product quality, evidence of procedures gains market entry

Cost reduction, (waste down, inventory down) production to customer’s specification

Guaranteed quality, the ability to manage change, customer satisfaction, habitual improvement

For which companies

Those who don’t know better

Those with survival problems

Those competing on cost and quality

Those with market leader’s vision, competing on quality and looking for sustained growth and increased market share

Responsibility for quality

Quality control department (through individual inspection)

Quality assurance department (centralised staff function)

Systems operation (through design and installation of controls)

Organisation wide responsibility (through devolved strategic vision)

Goals Defect detection Production to design specification, defect prevention

Cost reduction and conformity to specification through design and installation of controls

Habitually and competitively meeting customer requirements

Table III - A comparison of approaches to quality (Manufacturing Engineer Dec. 1994)



5.4.3. The Toyota Production System The figure below illustrates the stages in the development of the Toyota production system and hence lean manufacture. Note: this does not represent the operation of lean manufacture.

Single MinuteExchange of

Dies

Toyota Production System (Lean Manufacture)

EmpoweredWorkers

QualityCircles

Education(e.g.. Five ways)

SuggestionSchemes

Eliminationof Waste

Supply Chainmanagement

RevealsWaste

Just-in-Time

CustomerFocus

Figure 9 - The development of Lean Manufacturing

Just after the second World War Eliji Toyoda, president of the Toyota Motor company spent three months observing examples of the Western mass production within the USA. He was not impressed by what he observed to be high levels of waste at every stage of production. He concluded that this was not the path for Toyota to take. Eiji Toyoda and his highly talented production engineer Taiichi Ohno pioneered the Toyota Production System, sometimes referred to as Just-in-Time Manufacturing (JIT) or as is now labelled, Lean Production15.

Ohno's first problem was with the stamping of vehicle parts and the minimum scale of production required for economic operation. Western lines were producing a million or more of given part per year on dedicated presses, in order to minimise the impact of expensive and lengthy die changes - often taking a whole day for a specialist, on unit costs. With proposed volumes in the thousands, there was no way economies of scale could be achieved, and so this was not an option.

In 1954 Ohno looked to Shigeo Shingo's ideas on setting up machines, what Shingo later developed into the concept of SMED (single minute exchange of dies). Shingo at the time was working for the Japanese Management Association but later founded the Institute for Management Improvement16. Toyota applied these simple techniques to allow the change of dies every two or three hours using rollers and simple mechanisms to minimise set up times. He then gave this task of changing dies to the production workers, and so removed the need for specialist die setters. Die changing times typically were slashed from a full day down to 3 minutes. Ohno discovered that there were other benefits of running small batches, first, they eliminate the cost of carrying large stocks of finished part inventories; and second, small batches allowed errors and problems to show up almost instantly.



Benefits

Low inventory levelsslash holding costs

Errors are spottedalmost immediately

Reducing set up timesallows small batches

Benefits of small batches

Figure 10 - Benefits of small batches

To tackle these errors or problems as they occurred the workforce were empowered, giving them the responsibility for their own problems. Ohno felt that assembly workers could probably do most of the functions of the specialists and do them much better because of their direct acquaintance with the line. The workforce were grouped into teams each with a team leader and tasks outside of their original production tasks: house keeping, minor tool repairs(preventative maintenance) and quality checks. They were also set aside time to collectively suggest ways to improve the process, and so the Quality Circle and Suggestion scheme were born.

The next move was to eliminate rework which incurs high cost; in mass auto production 25% of shop floor space is often dedicated to rework. Pull cords were placed above each work station such that should an error occur that the worker could not rectify, that person could, and had the authority to, stop entire line. The whole team would then come over to work on the problem. This need for problem solving required education and training of the production staff. One problem solving technique instituted by Ohno was the Five Why's, where production workers were taught to systematically trace the error back to its root cause. Today the line almost never stops as problems get tackled rapidly and do not occur again. Toyota also developed a method of full proofing operations using simple devices, e.g. ensuring parts were placed the correct way around before welding. Shingo was impressed by these measures and developed the idea somewhat further into what he terms "Poka-Yoke"17.

The next stage in the Toyota production system was the elimination of waste from the supply chain. Ohno observed that the situation of suppliers competing on cost blocked the flow of information between suppliers, impeding the development of their own industries. He was also concerned with the suppliers’ poor quality and high inventory levels. Where parts were delivered to a maximum acceptable level of quality there was little impetus for the supplier to improve. Poor co-ordination of the flow of parts and fluctuations in demand, led to high levels of finished component inventory being held by the supplier to ensure delivery to the customer. Toyota's aims were to encourage communications. One of the ways this was achieved was through the use of shared employees or implants. Toyota allocating resources to help suppliers to develop their quality and production Techniques to meet their demands.



They then developed the Just-in-Time system known as Kanban to control the flow of parts within the supply system, to reduce inventories and raise impetus for quality. Just-in-Time systems are very difficult to implement as they eliminate practically all inventory. If any small part of the system fails then the whole of production will grind to a halt. In Ohno's view this was precisely the power behind the idea, it removes the safety nets and focuses on problem anticipation and resolution before production stops. This is illustrated well by the “rocks of Production” covered by a sea of inventory18, see below.

poorlayout

unreliable supply

machine downtimescrap damaged

itemscomponentcomplexity

Figure 11 - The hidden rocks of inventory

It is obvious that many ideas from the quality movement are shared by Toyota and that Toyota have made significant contributions to quality concepts. The next step for the company was the concept of Customer focus, a principle which lies at the heart of TQM. Many of the principles of lean production were in place within Toyota by the early 1960's, but the majority of Japanese industry did not take note until after the oil crisis of 1973. Japan, unlike the West, took the oil crisis very seriously, which is understandable due to their lack of natural resources and dependence on oil imports.

6. Mainstream concepts adopted during the industrial production stage Parts 6.1, 6.3, 6.4 and 6.5 were again written by Eugene Hill, a Warwick undergraduate student.

6.1. The response to increased pressure from Japan In the late seventies19 particular sectors of Western industry were coming under increasing pressure from Japanese imports, in particular automotive and consumer electronics. With the Japanese gaining an increasing market share companies had to take action. Their response was to drive for improved productivity; driving down operating costs, and increasing volumes. This, and the developments in computer techniques such as MRP, were not sufficient to hold off the Japanese because cost was merely their entry ticket to Western



markets. On top of this they offered unequalled quality, a level of quality that quality assurance systems such as BS 5750 on their own could not keep pace with. This situation is shown using Cooper’s survival triplets below and is again taken from Cooper (p. 27).

AmericanMass

Producers

Japanese LeanProducers

PRICE

FUNCTIONALITY QUALITY

Figure 12 - Cooper’s Survival Zones of Mass Producers and Lean Producers

Of particular interest is Cooper’s (p. 28-29) explanation of the current position of firms such as Mercedes and BMW whose quality and functionality Cooper believes to be inferior to companies such as Toyota but who are surviving currently on customer loyalty and have a ‘region of relaxation’ .

PRICE

QUALITYFUNCTIONALITY

Regionsof Relaxation

Regionsof

Relaxation

Figure 13 - Cooper's Role of Brand Loyalty



During the eighties the flow of information on Japanese manufacturing techniques rocketed as Guru's attempted to transfer these concepts to the West. During this period many companies possessed a sense of urgency, almost "evangelism", about attempts to emulate Japanese practice.20 Although as the eighties drew to a close this enthusiasm turned to disillusionment, as the difficulty of implementing these practices became apparent. These problems were mainly attributed to cultural differences. Despite the general failure of quality circles and suggestion schemes in the West one concept seem to meet with reasonable success. The Theory of Constraints (TOC) was developed by Eli Goldratt and his ideas were presented in “The Goal”. This approach embodied much of what the Japanese had been doing including quality, but was a concept built on adapting these ideas to Western practices, in particular batch manufacture. It also introduced new ideas and provided an alternative to MRP shop floor scheduling systems called OPT (optimized production technology)21.The crux of the concept lay in the identification and management of production bottlenecks. It is these bottlenecks which govern both the throughput of the system and the inventory held within the system. This concept has a great deal to offer in terms of guidelines for manufacturing companies in particular: how it defines the difference between utilisation and activation of resources; and the new perspective brought to measures of performance and the overriding business objective: to make money.

It wasn't until the Japanese started to successfully implant their own factories into the West using their practices with Western workers that the enthusiasm was re-kindled.22 In Richard Schonberger’s words23;

"The basis of success is not culturally based, but a different set of concepts, principles, policies and techniques for managing and operating a manufacturing enterprise. All of it is easy to understand, not hard to accept (once known), eminently teachable, learnable and not so difficult to apply"

Now that the company next door was using these methods companies were able to accept that culture was perhaps not such a barrier and that culture was something which could be developed. The West soon began to realised the old concept of an "optimum level of quality", above which the cost of quality exceeds the benefits to the customer and manufacturer, is flawed. In fact better quality leads to lower costs due to reduction in inspection costs, failure costs and increased volumes due to increased market share24.

So what are the concepts which have been developed. Six mainstream concepts for manufacturing improvement have been identified; the focused factory, World Class Manufacturing WCM, Total quality Management TQM, Lean Manufacture, Business Process Re-engineering BPR and Manufacturing Resource Planning MRPII. The focused factory was developed as response to increased competition in the West and is the underlying philosophy behind the systems approach, Lucas being one the first UK companies to adopt the systems approach, and the move to cells. TQM and lean manufacture are the mainstay of Japanese manufacturing techniques and as such earn their position in this list. BPR, which hasn't as yet been touched upon, is a concept adopted by many companies today in an attempt to leap ahead of the competition or save a dying business. It is very much built the West's step change mentality and many argue its principles are in conflict with TQM. It is because of this



perspective and its popularity that it merits further analysis. MRP II is quite different in that it's focus compared to TQM or Lean manufacture is narrow. However, many western companies have adopted it in an attempt to fix their problems of competitiveness through lead times and delivery performance date conformance.

Some may argue that for manufacturing other concepts deserve to be placed on this list. For example ideas such as; Total Preventative Maintenance and Concurrent Engineering, these and others fall within the scope of TQM and Lean Manufacture and so will be dealt with at a later stage. Approaches such as Computer Integrated Manufacture (CIM) and Flexible Manufacturing Systems (FMS) have not been considered here. They are fundamentally technological solutions which replace people with automation. Most of the concepts presented here see people as an important element within the improved system or at least do not advocate their complete elimination. In these notes TQM is not discussed further because it will dealt with on Quality modules and MRP/MRPII will not be considered since it is examined on the Logistics modules.

6.2. Focused factories, cells and the systems approach This focused factory originated as a concept in 1974 with Wickham Skinner, a Professor of Business Administration at Harvard Business School, publishing his paper on the subject in the Harvard Business Review25. This initial idea is at the centre of the ‘systems approach’, covered later on the module, and is the basis for reorganising a factory into cells. In this article Skinner explains that Western companies faced with competitive threats from countries with lower labour costs concentrated on improving direct labour productivity. He contended that this was not the answer and identified four basic changes which had to be made;

1. “Seeing the problem not as ‘how can we increase productivity’, but as ‘how can we compete’?

2. Seeing the problem as encompassing the efficiency of the entire manufacturing organisation. [not just direct labour]

3. Learning to focus the plant on a limited, concise, manageable set of products, technologies, volumes and markets.

4. Learn to structure basic manufacturing policies and supporting services so that they focus on one explicit manufacturing task instead of many inconsistent, conflicting, implicit tasks.”

Traditional company rationale had been ‘economies of scale’ and lower capital investment, so they have many products for different customers all under one roof. His philosophy was that;

‘A factory that focuses on a narrow product mix for a particular market niche will outperform the conventional plant’.



Basic concepts

The factory will be manageable and controllable and there will be clear goals. Skinner developed this philosophy by studying 50 factories in 6 industries and identified the following basic concepts;

• “There are many ways to compete besides producing at low cost.” [i.e. better quality, customer service, delivery, technological innovation, rather than price.]

• “A factory cannot perform well on every yardstick”. [Manufacturing performance targets require trade-offs as they cannot all be accomplished equally. Companies need to know “What must we be especially good at?” Focus needs to come from the corporate strategy and it must consider the existing factory.]

• “Simplicity and repetition breed competence.”

So what does a focused factory look like? 5 Key Characteristics were identified:

1. Process technologies; Unproven process technologies are limited to one per factory. Proven 1 to 3 per factory.

2. Market demands; a plant can only do a superb job on 1 or 2 market demands at any one time ( quality, lead time etc.)

3. Product volumes; Produce comparable product volumes with one-offs segregated.

4. Quality levels; One set of mental assumptions which do not over-control or over-specify quality.

5. Manufacturing tasks; Limited to one or two at most. The task which the factory is focusing on must be governed by one set of internally consistent, doable, non-compromised criteria for success.

Reasons for inconsistency

A conventional factory invariably contains many inconsistent elements of manufacturing because;

• professionals in each field pursue different goals

• the manufacturing task may have subtly changed but the policies have not

• the manufacturing task was never made explicit

• the inconsistencies were never recognised

• more products were piled on to existing plants to meet a variety of markets. This resulted in product proliferation, complexity and confusion.

Guiding rules for a focused plant

Skinner recommends a four-step approach;



1. Centralise the factory’s focus on relevant competitive ability by having a brief statement of corporate objectives and strategy.

2. Translate this statement into what this means for manufacturing highlighting the key areas for focus.

3. Examine each element of the manufacturing process; how must it change to achieve focus.

4. Reorganise the elements to produce a congruent focus; create a system from the elements. This has invariable meant cells and strategic business units although Skinner’s terminology was a ‘plant within a plant’.

6.3. World class manufacturing This section is an investigation into the term World Class Manufacturing. It seeks to define the World Class Manufacturer, and discuss what makes them so. Serving the customer is then discussed as a fundamental basis of WCM, and the section proceeds to identify the principal manufacturing factors which support this goal. The concept of change is examined, looking at the breadth of change involved in becoming World Class. The cultural barriers to success are then put forward in four key areas. The section concludes with the need to employ an effective manufacturing strategy.

6.3.1. What is 'World Class Manufacturing'? The definition of WCM is fairly implicit, and there seems to be wide spread agreement amongst authors.26

"World Class Manufacturing is the ability to compete and survive on a global scale. " Clive Morton27

This status is not exclusive to the big multinational companies, small and medium sized companies can also operate and compete on the same fundamental principles of WCM, be they in international or domestic markets. The point is that they have the ability to outperform the best competitors within their chosen market. With the current industrial climate of intense global competition these competitors are outstanding, the only way to stay ahead of them is through excellence in every aspect of the business.

For a leading company to stand still for any length of time allows the competition to gain ground and potentially overtake their position. World Class status is merely an entry ticket to highly competitive markets28 a great deal of ongoing effort is required to sustain this position.

6.3.2. Pursuing excellence In the early eighties Peters and Waterman29 published their findings after an extensive period of research into what makes a company "Excellent". Based on the cream of American industry, they found that in general excellent companies were brilliant on the basics: tools and thinking, intellect and wisdom, analysis and action, the former in each case not overpowering the latter. As for the organisational structure there was no answer. The research showed that an intelligent approach to organising had to encompass, and treat as interdependent at least seven variables:



structure, strategy, people, management style, systems and procedures, guiding concepts and shared values (i.e. culture). They illustrated this concept through the use of the McKinsey 7-S framework see the figure below. Alfred Chandler, who wrote Strategy and Structure back in 1962 stated: 'structure follows strategy'. Peters and Waterman reiterated this statement: 'Get the strategic plan down on paper and the right organisational structure will pop out with ease, grace and beauty.'

Structure

Strategy Systems

SharedValues

Skills Style

Staff

Figure 14- McKinsey 7-s framework

They went on to propose eight attributes possessed by excellent and innovative companies.

1. A bias for action, for getting on with it. Even though these companies may be analytical in their approach to decision making, they are not paralysed by fact.

2. Close to the customer. Learning from the people they serve. Providing unparalleled quality, service, and reliability.

3. Autonomy and Entrepreneurship. They foster many leaders and innovators throughout the organisation.

4. Productivity through people. Treating the workers as the root source of quality and productivity initiatives.

5. Hands on commitment from top management, value driven.

6. Stick to what you are good at, never acquire a company you don’t know how to run. This complements both Skinner’s ideas on focus and the core competence and capability arguments by Prahalad & Hamel.



7. Simple and lean organisation. None of the companies studied ran formal matrix structures. They were elegantly simple and top level staff were lean.

8. Balance between freedom of action and control. Autonomy pushed down to the shop floor or product development team.

(Source Peters and Waterman, 1982)

These attributes are non manufacturing specific, and are applicable to the business process as a whole. WCM builds on these principles of excellence, approaches to manufacturing improvement focus on a number of factors, the content of which changes as the industrial environment changes in response to customer demand.

6.3.3. Serving the customer Serving the customer is the fundamental basis of WCM. The ultimate goal of a business is to make money and do this consistently; i.e. success and survival.30 To maximise the effectiveness of operations, every activity has to be focused on providing the product or service to the customer for which there is a demand. To perform any activity for which there is no direct customer demand is wasteful, i.e. a non-value adding activity.31

It has to be appreciated that customer needs are dynamic. With competition so intense, in many cases customers are spoilt for choice and can afford to be choosy. A manufacturer attempts to stay ahead by knowing what their customers needs are going to be, allowing them to ultimately satisfy this new demand. This is where getting close to the customer is very important, learning from existing customers and potential customers is an essential life line for survival.32

6.3.4. The principles of WCM There is widespread agreement on the criteria for manufacturing excellence.33 Western companies trying to achieve world class status have placed an emphasis on: Quality, customer satisfaction, flexibility, and costs.34 However Clive Morton, author of 'Becoming World Class' presented these criteria in a different manner. He proposed that a company has to satisfy three criteria before it can gain access to the highly competitive markets of WC manufacturers. These entry points are:

1. High Quality - not an end to itself, by achieving, leads to other features of WCM.

2. Cost - customers expect high quality for low cost.

3. Delivery on time - West in general operates on a buffer stock system, floating on a sea of inventory, masking the ineffectiveness and dysfunction below the surface.

All of the above are very dependant on cultural changes, without which WC methods can not truly succeed. Once this has been achieved and access to a market has been gained it is necessary to advance beyond these entry points. This process will benefit the company through increasing market share; higher profitability; achieving customer delight; so assuring the companies long term and viability35.



6.3.5. The transition to World Class The term World Class Manufacture 'captures the breadth and essence of change’36. involved in attaining this status. The western industrial world must shed its old habits and look to WCM. One company's approach to manufacturing improvement may be different to another’s, this is due to different production processes, needs of the market, product technology and management styles.37 However the criteria for excellence, as identified above, remain fundamentally the same. These must be pursued and the barriers to excellence broken down.

Alan Robinson38, put forward four requirements of WCM which he perceives as being crucial to succeeding in attaining this status. These aspects reflect Japanese principles upon which the Japanese miracle was built39.

1. An Active Process of Improvement and Simplification

The crusade for simplification: rooting out causes of error; waste removal. The path must be cleared of obstacles to achieve a process of production simplification. This leads to: fewer suppliers, reduced parts count, focused factories (narrow line of products and technologies), schedule to a rate as opposed to lots, fewer racks, more frequent deliveries, smaller plants, shorter distances, less reporting, fewer inspectors, less buffer stock, fewer job classifications.

“The basis of simplification and direct action: Do it, judge it, measure it, diagnose it, fix it, manage it.”40

2. Enlighten Attitudes Towards Employees

People issues can be the most difficult aspect of WCM to tackle, and many potential problems lie here. If performance is going to be improved it is necessary to make use of the workforce's knowledge to make products better, faster and safer41. Under WCM, shop floor operators and supervisors have responsibility for their own production scheduling, quality control, preventative maintenance and the introduction of new production methods. This requires a transfer of responsibility from middle management to the shop floor. The table below demonstrates the differences of responsibility between the traditional Western approach and WC personnel management methods.

PERSONNEL RESPONSIBILITIES UNDER WCM Traditional Responsibilities New Responsibilities Shop Floor Staff Suppliers of labour not thought Middle Management Primary decision makers

Shop Floor Staff Responsible for quality, scheduling, preventative maintenance, and attaining production targets Middle Management Expert advisors, coaches, mentors to shop floor "Champions of change"

Table IV - Maskell’s table showing changed responsibilities with WCM



Moving to this style of employee involvement or education and cross-training, increases skills and flexibility, and provides the workers with the tools for problem solving. The West attempted to get employees involved through quality circles, but these have not worked well because they were not generally accompanied by education or a change in culture42.

Once people are involved in the continuous process of improving products success brings an atmosphere of team involvement and common cause, having allowed people who previously had little opportunity to contribute to become innovative and resourceful problem solvers. They enjoy work with wider variety where their ideas are respected.43

3. Harness the Power of Continual Improvement

The term Kaizen is used in Japanese companies, and is now adopted by many Western companies seeking to be world class. It translates roughly into "continuous improvement," although the concept as a whole covers a broad spectrum of ideas encompassing the field of manufacturing improvement. In the West we possess the ability to make step changes. These are usually prompted by market forces and competition which leave the company no alternative. However, we have the ability to leap frog with innovation, developing and applying new technology, processes and systems. The table below lists the features of Kaizen and Innovation and is taken from Imai Masaaki’s book “Kaizen; The Key to Japanese Competitive Success”44.

KAIZEN INNOVATION 1. Effect Long-term and long-lasting

but undramatic Short-term but dramatic

2. Pace Small steps Big steps 3. Time frame Continuous and incremental Intermittent and non-

incremental 4. Change Gradual and constant Abrupt and volatile 5. Involvement Everybody Select few “champions” 6. Approach Collectivism, group effort,

systems approach Rugged individualism, individual ideas and efforts

7. Mode Maintenance and improvement

Scrap and re-build

8. Spark Conventional know-how and state of the art

Technological break-throughs, new innovations, new theories

9. Practical requirements

Requires little investment but great effort to maintain it

Requires large investment but little effort to maintain it

10. Effort orientation People Technology 11. Evaluation criteria

Process and effort for better results

Results for profits

12. Advantage Works well in slow-growth economy

Better suited to fast-growth economy

Table V - Masaaki's Features of Kaizen and Innovation approaches



Our main weakness is our inability to maintain an ongoing effort of improvement, the performance leap is made and then the system goes into decline until the next innovative step. The true ideal would be to marry the Japanese ability to continually improve with the West's ability to leap frog45 such that decline is avoided. The figure below shows the pattern of step and decline and also demonstrates the combination of both step and continuous change.

Innovation Alone

Dev

elop

men

t

Innovation plus Kaizen

What should be (standard)

Maintenance

Inno

vatio

n

Time

What actually is

Inno

vatio

n

Maintenance

What should be(Standard)

What actually is

Innovation

Dev

elo p

men

t

New StandardKaizen

Inno

vatio

n

New StandardKaizen

Time

Innovation, and the marriage of innovation with Kaizen Source: Imai Masaaki 1986

Figure 15 - Masaaki's Marriage of Innovation with Kaizen

The starting point for Kaizen is problem recognition. If the problem is not recognised then this leads to complacency. Kaizen emphasises problem awareness, it is a problem solving process and utilises a number of tools46.

Continuous improvement also includes the concept of the "Learning organisation”47. With the increasing emphasis on information as a resource, the adversarial relationships with customers and suppliers are out. Partnership is the name of the game, maximising the flow of information and the opportunities to improve. Richard Schonberger sums the principle of continuous improvement up in one succinct statement, which is in fact the motto of the Olympic games, but highly applicable to WCM.

"Faster Higher Stronger"'

4. Understanding the Pervasiveness of Invisible Waste and how to Eliminate it.

Waste is anything which adds cost to the product but does not add value. Once the obvious sources of waste have been eliminated, the less obvious or hidden waste's are more difficult to identify and dispense with. Quoting Dr. Shigeo Shingo:

"Unfortunately real waste lurks in forms that does not look like waste. Only through careful observation and good orientation can waste be identified. We must always keep in mind that the greatest waste is the waste we do not see.48

He also goes on to identify seven key areas of waste:



1. Waste of producing defects, cost of correcting or accepting and the risk of annoying the customer. Usually the cost of losing a customer is far greater than rectifying an error, better still make it right first time every time.

2. Waste of transportation, moving items from A to B does not add value.

3. Waste of overproduction, goods produced that are not sold, waste materials, labour, transport and storage expenditure.

4. Waste of waiting, materials for processing or machines/people waiting for materials.

5. Waste occurring in the process itself, redundant tasks which were part of the original system or process design that are no longer required.

6. Waste of movement, if a worker has to spend time moving from one work station to another then this time has been wasted. This is the domain of work study and scientific observation of work, time and motion studies. This approach can cause problems, sometimes perceived by the workers as imposed speed ups and an attempt to eliminate jobs. The key message here is 'Work smarter not harder'.

7. Waste of inventory, as a rule of thumb the cost of holding inventory is approximately twenty-five per cent of the inventories value per year. This cost is often spread around and becomes invisible. Removing it is difficult as it usually covers up many problems. Inventory is addictive, the more you have the more you need.

In conclusion, a company wishing to achieve WC status or any form of manufacturing improvement would be unwise to do so without first drumming out a business strategy. World class manufacturers invariably have a clearly defined manufacturing strategy, centred around key issues. This must be congruent with the companies overall business strategy; should be short, cover key issues and act as a guideline to all employees49.

6.4. Lean manufacturing This as a concept is probably the most comprehensive, in that it covers almost every aspect of manufacturing. Several sub-concepts will be visited under this title: total preventative maintenance (TPM), Kanban, Concurrent engineering (CE) sometimes referred to as simultaneous engineering. Lean manufacturing is often called JIT manufacturing. Although JIT is arguably the most powerful element of Lean Manufacture, it is still just that - an element, and so Lean manufacture will be used here.

6.4.1. The Goal50 The Ultimate goal of lean manufacturing is the total elimination of waste from the manufacturing system.

This system extends into the company’s suppliers and through to the customer. Waste is defined as anything which adds cost to the product but does not add value including the Shingo’s 7 areas of waste.



6.4.2. The Principles51 1. Reduce set-up times to allow smaller batches; optimum batch = 152

Shigeo Shingo's concept of SMED (single minute exchange of dies), and subsequently OTED (one touch exchange of dies) raises three key points53:

1. Differentiate between operations which are internal to set up which can only be performed when the machine is shut down, and external set-up operations which can be Performed while the machine is running.

2. Question the basis of internal set-up to convert them to external operations.

3. Streamline all aspects of the set-up operation

SMED has the potential for huge internal set-up time reduction: Mitsubishi Heavy Industries, the internal set-up time for six boring machines - which had previously taken twenty four hours was reduced to two minutes and forty seconds. (Source: Alan Robinson54 1990)

2. Employee Involvement and motivation through empowerment

TQM plays an important part in achieving motivation and empowerment. In addition, the lean environment connects workers with the consequences of their work and so it is only natural for them to want to avoid errors55. If this is not the case then at least the lack of inventory will mean that the next operation will pick up the previous workers errors rapidly, such that they may have a chance of remembering what went wrong so the problem can be eliminated at source56.

3. Adopt quality systems to eliminate errors at source optimum: zero defects.

TQM is a corner stone of Lean manufacture, and its approach to quality should be adopted. Lean manufacture also includes mistake proofing - Poka Yoke. It recognises that people are human, and on occasions inadvertently forget things resulting in an error occurring. By building in a pseudo-checklist into the operation being performed when the operator forgets something the device/system will signal the fact and thereby prevent the defect from occurring57.

4. Just-In-Time manufacturing control - Kanban systems to eliminate inventory, optimum: zero inventory.

JIT manufacturing systems are often referred to as "Pull" systems, in that demand from the next operation in the system triggers production in any one operation, i.e. the parts are pulled through the system. If there is no current demand for a part then none are made, hence locally eliminating the waste of overproduction. It is commonly perceived that JIT systems make to order, this is generally not the case, they require demand to be steady over a reasonable time horizon and products to be standardised, these products being manufacture to stock and customer demand served from this stock. This has to be the case as JIT systems become difficult to manage if production volume varies continuously. JIT can approach "make to order" by reducing lead times such that demand is either known or can be forecast very accurately. That said, Japanese companies are able to produce a tremendous variety of



products and offer customisation to order. It is the integration of other approaches which allows this to occur.

"The Toyota Production System is called JIT because it answers to the needs of a changing market place by providing goods in the amounts needed." Taiichi Ohno & Setsuo Mito58

Kanban is one method of implementing JIT within the production system. However Kanban is not JIT in itself:

"Kanban is simply a tool for driving the system. itself does not raise productivity" (Taiichi Ohno taken from Shingo’s book59)

There are two fundamental forms of Kanban: one card and two card Kanban. In the first one card is used to trigger both the production of replenishment parts and instruct transport of finished parts to the next operation. In the second the two functions are separated. It is important to note that cards do not have to be used: containers which are designed to carry a specific number of a specific parts or, areas marked out on the shop floor. The key is that the method be highly visible and unambiguous.

Two card Kanban is advantageous where supplying and consuming operations are separated by some considerable distance. Two card Kanban requires the supplier to hold finished goods stock, but allows it to plan its production. In one card Kanban the system relies on the ability to replenish items used quickly and so it is better suited to environments which demand short lead times. Many companies adapt Kanban to suit their own needs, but in general most systems rely on the output of the finished product being level, and that this demand is stable over a reasonable time horizon (one month say).

5. Total Preventative Maintenance, optimum: eliminate equipment failure60

Total preventative maintenance (TPM), also known as total productive maintenance, offers a systematic approach aiming to achieve zero losses, through zero equipment failures, and zero defects. Within a lean environment machine breakdown will bring the whole of production to a halt and is therefore unacceptable61.

Production workers assume ownership for their work area, they gain responsibility for routine maintenance of machines and equipment, including cleaning and maintaining their work area for maximum efficiency. The workers are trained to identify problems, determine solutions, and implement proved work methods through their small groups/teams. If this transfer of maintenance responsibility from specialist to production worker is fully implemented the specialist has more time for high level predictive maintenance, engineering improvements and operator training. Nakajima, author of "Introduction to TPM: Total Productive Maintenance" identifies three stages in the development of a TPM system:

1. Breakdown maintenance (equipment is only prepared when it breaks down).

2. Preventative maintenance (causes of breakdowns are known, and maintenance is performed before breakdowns occur).



3. Total productive maintenance (operators provide direct input on equipment maintenance to machine designers and product designers, and all unforeseen failures are eliminated).

The last two stages combine the principles of preventative maintenance with a total quality and continuous improvement mentality. The benefits seen when TPM is successfully implemented are:

1. Improved equipment eliminates root cause of defects.

2. Defects are prevented through planned maintenance.

3. Preventative maintenance costs are reduced as equipment operators conduct autonomous maintenance.

4. Improved equipment designs ensure that new equipment naturally produces fewer defects.

5. Simplified product designs produce with few defects.

6. Engineers, technicians, and managers are trained in maintenance and quality.

To fully implement TPM is by no means easy and requires a great deal of preparation, patience, persistence and perseverance.

6. Streamlined plant configuration62

Where volumes are insufficient or dedicated markets are unpredictably volatile to permit dedicate production lines, Group Technology (GT) or Cellular Manufacturing (CM) is an alternative to the tradition job shop layout - machines grouped on the basis of process e.g. milling, grinding, lathes etc.. Cells are formed to produce a specific part or assembly or maybe a group of similar parts or assemblies. All the necessary equipment is placed within the cell such that all required operations can be performed within that cell to produce the finished part or sub-assembly. This layout permits cell teams to be with cell leaders who are responsible for scheduling and controlling the cell.

Advantages of cells:

• Simplified production control.

• Reduced work in progress.

• Reduced transport and space requirements.

• Reduced lead times.

• Improved human relations.

• Team spirit evolves, good basis for continuous improvement.

Disadvantages of cells:

• Duplication of resources between cells.

• Lower machine utilisation.



• Cell volume and product mix flexibility may be limited, leading to unbalanced work loads between cells.

7. Supply chain management

This involves three key aspects:

1. Developing supplier relations, lower the barriers to communication, and harness the suppliers’ expertise in specific design areas.

2. Improving the supplier base and performance, selecting exclusive supplier network based on previous good service, quality of product and also location (preference for suppliers). Get involved with supplier to improve their manufacturing, information and distribution systems to meet quality, cost and lead-time requirements63; implant own staff to provide expertise and a line of communication between the organisations. Encourage suppliers to also implant staff into your organisation to further develop the understanding of both your own and the supplier’s requirements64 e.g. Bose Corporation JIT II purchasing.

3. Introducing JIT delivery, once suppliers are capable of achieving JIT delivery reliably, such that one's own manufacturing system will not be disrupted. It is important not to merely push the raw materials and components stock back onto the supplier, such that they have to carry the burden of holding the stocks. Their system must be developed to deal with the requirements of lean manufacture.

8. Customer Focus

To quote Konosuke Matsushita, founder of the consumer electronics company which bears his name.

"The customer is king, but a king that needs to be advised and supported by his subject, the manufacturer." (Financial times 6th February 1995)

The company needs customer needs to create demand for it's products by identifying latent customer needs and rapidly developing new products in response. This is where time to market is very important, and where the concept of concurrent engineering emerges.

6.4.3. Benefits Successfully implementing Lean manufacture will result in elimination of waste, reduction of costs, improved product quality, and employee Typical benefits seen:

• Cost savings: inventory, shop floor space, scrap, time.

• Revenue increase: increased market share through products and service, increased margins.

• Workforce improvement: Teamwork and job satisfaction, better skills, empowered and motivated.



6.4.4. Limitations No forward planning element - JIT systems and Kanban rely on standardisation of products such that the re-ordering is handled by triggering replenishment.

Conversion to lean may be radical in comparison to traditional approaches in the West but fundamentally lean seeks continuous improvement. Improvement within the company may be marked over time, but on it’s own it will not generate huge innovative steps.

6.4.5. Environment Many of the principles of Lean Manufacturing can be adopted by almost any manufacturing set up, although Kanban in it's purest form limited to level production65. Small companies may experience difficulty in implementing certain aspects of Lean Manufacturing due to the high initial set up costs, and lack of weight in influencing and making demands of suppliers66.

6.4.6. Implementation A survey of some two-hundred and ninety JIT manufacturers, (note JIT is used here to describe Lean manufacture), published in the Production and Inventory management journal (3rd quarter 1995)67, revealed the reasons for implementing JIT and the first steps were taken, by those companies deemed to be most successful in implementing the concept.

• Reasons for improving the internal workings of the organisation rather than externally driven forces are associated with higher levels of success in implementing JIT. This implies that firms that have a true understanding of the principles of JIT will have better success than firms that are undertaking JIT because "Everybody else is doing it".

• More of the highly successful firms tried to first obtain top management commitment to JIT than the firms with medium or low success.

• In order to have higher success with JIT, there has to be a programme to educate and train the employees prior to implementation.

• A larger proportion of firms that are highly successful in implementing JIT invested in a consultant to introduce JIT than firms that reported medium or low levels of success.

A second independent survey68 reveals that small companies find it undoubtedly harder to implement lean principles. As stated previously, they can't afford the high up front costs. With the benefits of lean manufacture being harvested over an extended period of time due to it's continuous improvement mentality, such expenditure may be difficult to justify over more radical approaches to manufacturing improvement. The majority of small companies complain about problems with: incoming parts quality, a reluctance in vendor co-operation, financial difficulties related to plant layout changes and training, gaining employee and union support.

6.4.7. Integration If lean manufacture is implemented then TQM has already been implemented as part of the course. Lean manufacture also incorporates concurrent engineering, total productive maintenance and many other concepts which may be adopted in their own right. However there are limitations



when these concepts are implemented in isolation; it is the integrative nature of Lean manufacturing which makes it such a powerful concept.

Japanese companies are able to offer a diverse range of variants and customisations within their product ranges and are able to apparently make these to order. One way of doing this is to create such large demand for each variant that volumes allow dedicated lines to be set up69. Another approach is to customise a standard product as late as possible within the production line, so producing a number of variants on the same line. To do this requires forward planning to ensure that the correct parts will be at the right work station, at the right time to be fitted to the right job. This is where Western companies have managed to successfully integrate MRP with JIT.

6.5. Business process re-engineering This is concept was conceived by Messrs. Hammer and Champy with the realisation that:

“It’s not the products but the processes which make the products that brings companies long term success.'70

Their definition of a process is ;

“a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”

They highlight that the customer is not necessarily the customer of the company, but may be internal to the organisation - the internal customer71. Business process re-engineering (BPR) aims to re-invent or radically change the company’s way of doing business72. It deals with the rapid change and growth in customer expectations and competition. It aims to increase the competitiveness of the business through radically re-designing organisation to focus on the core business processes.

But what does a company which has been re-engineered look like? John Puttick73, formerly of PA consultancy and now working for the Warwick Manufacturing Group provides the following diagram as an example. He defines the business processes as;

1. KNOWLEDGE ACQUISITION: - The acquisition, retention and exploitation of knowledge about the external and internal environments of the operations of the enterprise.

2. BUSINESS PLANNING: - The application of “the knowledge” to the financial criteria established by the stakeholders to develop a plan for the operation of the enterprise.

3. PEOPLE DEVELOPMENT: - Leadership, alignment, education & training and empowerment of the people in the enterprise.

4. PRODUCT CREATION: - Understanding the market, research & development of suitable products / services and the establishment of appropriate resources to manufacture them.

5. PRODUCT SUPPLY: - Promotion, sales, order processing, purchasing, manufacture, distribution and after sales support.



The Environment

Demographyand Lifestyles

PortfolioStrategy

ExternalThreats

Customers

External Opportunities

GlobalEconomy/

Politics

Markets, Products & Services

Competitors

Technology

Suppliers

Business Planning Knowledge AcquisitionPeople Development

Product Creation Product Supply

Factory for the Future

THE INDUSTRIAL ARENA FOR THE 90’S AND BEYOND

Figure 16 - John Puttick's vision of the re-engineered manufacturing business

6.5.1. Goal Dramatic improvement in performance, e.g. cost, quality, service, and speed, through the radical redesign of business processes.

6.5.2. Principles 1. Customer Focus:

On the needs of the customer and the processes which serve those needs.

2. Team orientation:

Both in re-engineering and in running the business. A task force is formed to start the BPR initiative. BPR works in a systematic way, first identifying the critical processes to the business, for example: responding to a customer order, designing a product or manufacturing a product. Secondly it determines the current performance and capability of those processes. Thirdly the requirements of those processes are defined, focusing on customer satisfaction. Finally the process is re-engineered to close the gap between the current and required capability, either through modification or complete re-invention74.

Benchmarking has a significant role to play here in order to find the best methods of performing certain processes such that these can form the basis of new approaches within the company. BPR also requires tools for mapping the business processes such that non-value adding activities can be identified and eliminated. Once a process is re-engineered a process



team is formed around it. This allows the integration of internal functions using a multi-disciplined team, so breaking down the traditional lines of demarcation between departments75.

3. Empowerment

People need to be given the responsibility of answering questions and solving problems, of doing the job. Information Technology (IT), also plays a part in this by allowing generalists to make decisions that would have previously required consultation with specialists, through the use of expert systems.

4. Education

Education as opposed to purely training. In a BPR environment people need to be able to question, they need to know why. Training informs people only how things are done. Although, the "how" element is also very important especially as BPR requires people to be able to undertake more than one task - multi-skilling, reversing the concept of the division of labour.

5. Information Technology

IT is seen as an enabler of BPR providing new solutions, allowing old rules to be broken which previously had not been possible, for example overcoming the trade off's between centralisation and decentralisation by allowing effective communications via telecommunication networks. However, Hammer and Champy are quick to point out that in the past companies have frequently made the mistake of merely computerising the existing process76. This is not radical and will not result in dramatic improvements, it will merely speed up information transfer or processing within the ineffective process.

6. Management Driven

BPR is a top down approach and actively discourages bottom up involvement. Supposedly the shop floor will resist any change as they do not have a wide enough vision.

6.5.3. Benefits Dramatic Improvement in Performance, typically:

• Reduced Costs

• Higher productivity

• Improved awareness and response to customer needs

• Reduced lead times

6.5.4. Limitations77 • BPR will not deliver quality by itself, although the implementation of IT systems may aid

check ups and controls which will reduce errors.

• Nor will it deliver production improvements in it's own right.



• Re-engineering means a radical break from the past, most jobs have to be re-designed or eliminated altogether78. This cutting of jobs provides very rapid cost savings but saps employee motivation and loyalty79. Clive Morton states:

'It is one thing to radically re-engineer companies: it is another to motivate and retain those staff that remain. '

• BPR is very much a radical step and is far removed from continuous improvement and it's culture.

6.5.5. Environment This concept is applicable to any company in any industry because it focuses on their customer needs and their business processes.

6.5.6. Implementation BPR is attractive to Western companies because it80;

• Does not require a major cultural shift as do TQM or lean production

• Does not challenge the status quo, wholly top down.

• Promises to assist in flattening hierarchy

• Not necessarily manufacturing related.

• Radical and Innovative

• Process focus as with TQM and Lean.

• Potential for information technology applications

Before re-engineering can commence it is important to identify and select which process to tackle, this is done on the basis of:81

1. Which is in deepest trouble

2. Which if re-engineered will have biggest impact on overall performance.

3. Which is most susceptible to change

The next step is to understand the process, what it does, how well (poorly) it performs and what critical issues govern it's performance. Over analysis of the process serves no purpose, a high level perspective provides sufficient insight for superior re-design to be achieved. Re-engineering is then a matter of brainstorming the process within the team environment of the task force.

BPR has a poor record for successful implementation with the concepts’ originators Messrs. Hammer and Champy admitting that some 50-70% of re-engineering efforts have failed. Surveys reveal that this is fundamentally due to lack of commitment from the top. Hammer and Champy state however, that many re-engineering attempts fail because the companies have not really



understood the process. Often BPR is successfully re-attempted as companies learn from their mistakes the first time round. They list a number of common mistakes:

• Trying to fix or adjust the existing process as opposed to a radical re-designing.

• Not focusing on the processes, e.g. trying to re-engineer a department which may deal with a number of process fragments.

• Going for small results. BPR must aim for dramatic improvements, quitting too early should be avoided.

• Neglecting peoples’ values and beliefs, although the existing culture must not must not be allowed to halt BPR.

• Attempt from the bottom of the organisation.

• Define constraints prior to exercise. BPR is about breaking existing rules.

• Not giving BPR top priority or spreading efforts over too many re-engineering projects.

• Attempting to keep everyone happy. Implementation must not be prevented due to resistance.

One of the big issues in implementing BPR is senior management's desire to satisfy the stock markets thirst for quick fixes, usually by sacking workers, rather than on introducing structural changes. As well as destroying morale, this approach can lead to "corporate anorexia", with firms too thin to take advantage of economic upturns. Many guru's are now looking towards softer approaches to BPR which allows a greater input from the bottom of the organisation and that promotes the human element as opposed to eliminating it.

6.5.7. Integration Conflict exists between the continuous improvement of TQM environments and the radical step change which occurs with BPR. Many companies who have previously implemented TQM are finding that it doesn't readily blend with wave after wave of restructuring, down-sizing and re-engineering. Despite the success stories of TQM, e.g. Motorola's TQM devotion is reckoned to have saved them some $6.5 billion since 1987, most managers still believe that cutting jobs cuts costs faster. This down-sizing undermines a corner stone of TQM: employee motivation, subsequently tension between radical and continuous improvement can end up sabotaging a company's total-quality programme82.

Saying that, once a company has restructured itself, it may be in a position to adopt concepts such as TQM and lean manufacturing. This will require restoring the employees' motivation, but will build on the act of BPR as opposed to allowing regression.



7. The future; the post-industrial stage

7.1. The drivers for change Some of the key rules of business are changing. Skinner provides the following examples for 1984 (p. 316)

1. “There is more competition, internationally and domestically. [Supply now exceeds demand in most Western markets but not yet in many of the domestic markets of the developing world.]

2. Product life cycles are shorter.

3. Product volumes are apt to be shorter.

4. Product variety is apt to be greater.

5. New product development cycles are shortening.

6. New product technologies are proliferating.

7. New process technologies, especially microprocessor-based, are accelerating.

8. Work culture, demographics and the sociology of work are vastly different than in 1960.

9. Government exerts more control and influence.

10. Product quality, service, delivery and reliability are generally increasing in importance.

11. The mix of costs is shifting, with overheads, material and energy costs rising and direct labour declining.”

According to Doll and Vonderembse (p. 361);

“Whereas the industrial revolution was technology driven and market enabled, the post-industrial revolution is market driven and technology enabled.”

7.2. Cooper’s theory of confrontational strategy If you read most of the literature on strategy and, a lot of the material generated by the Warwick Manufacturing Group, it all assumes that a company can create a sustainable competitive advantage. Porter’s generic strategies of low cost and differentiation indicate the dangers of being in the centre of his 4 box matrix, with no discernible strategy, but it is implied that a company can defend its position in one of the 4 boxes for a significant period of time.

Yet the Ford vs. GM story shows that the competition can effectively change the rules of the game and what was once a differentiator, such as an air bag on a car, quickly becomes an order qualifier. Prahalad and Hamel’s83 work on core competence again implies that a company can seek out and sustain a core competence. In fact their definition of core competence includes the fact that it should be difficult for a competitor to imitate.



Cooper in his book “When Lean Enterprises Collide; Competing Through Confrontation” challenges these basic assumptions. By studying how Lean enterprises compete against one another in Japan he contends that it is no longer possible for these organisations to sustain a competitive advantage. With most Japanese companies competing against 4 to 6 domestic rivals quality is now a given, or order qualifier, and orders can only be won by lowering cost or increasing functionality. The whole nature of strategy changes to provide an organisation which;

• can create temporary competitive advantages,

• can continually monitor both the competition and the customer to identify when this temporary advantage has been lost, and

• can be continuously seeking new ways to develop the product to achieve new temporary competitive advantages.

This may not appear very different at face value but it does require huge investment and dedication in market research, product research and development, flexible manufacturing facilities, robust cost management systems and education & training of the employees.

Cooper attributes the development of this confrontational style of strategy to two factors; the emergence of the lean enterprise, covered previously, and mechanisms unique to Japan for rapid technology diffusion. Lean manufacture enables small batches to be made economically and hence Lean companies can attack market niches successfully. The mechanisms for technology diffusion are shown below, Cooper (p. 38);

TechnologicalEquivalence

HorizontalIntegration

MultifunctionalTeams

MITI Committees

Industry Associations

Loyaltyto

Classmates

Imitation

Figure 17 - Cooper's mechanisms that make it impossible to sustain a technolgical advantage



Examining these in more detail;

Multi-function teams - these tend to be conservative since any new idea must be accepted by all members and hence incremental changes dominate. These incremental changes are similar to the competition because each company has the same customers, the educational background of engineers is very similar, the active use of benchmarking other’s products quickly spreads ideas and the teams have access to the same technical resources.

Horizontal integration - through the use of supplier associations, set up by companies such as Nissan, any new innovations are shared. Since suppliers have more than one customer the ideas spread quickly.

Imitation - as discussed in the craft production section it is considered honourable to copy and be copied. In the West imitating is often viewed as cheating.

The remaining three factors were very important when Japan’s manufacturing industry was developing but are less relevant now. As the Japanese companies have dominated internationally they have become less willing to share information with their competitors.

Loyalty to class mates [school and university] - was as strong as loyalty to the company.

Industry associations - the Ministry of International Trade and Industry (MITI) set some of these up to help transfer technologies but others have been established independtly such as the Japanese Productivity Center.

MITI committees - if MITI believes that the effort required to develop a technology can not be born by one company it creates a committee from the major players in the industry.

A Western approach to these competitive factors might have been for a ‘cartel’ arrangement to be formed where each company kept to it’s own market niche to avoid head on competition and ensured acceptable profits for all. This did not happen in Japan because there were already foreign competitors in the domestic market and hence a ‘cartel’ agreement would have been more difficult. It is also very important in Japanese culture to have high self-worth and this means working for the best company.

The implications for Western companies competing against Japanese lean producers is that they too will have to adopt confrontational strategies and end the search for the illusive sustainable competitive advantage.

7.3. The Future of Manufacturing Improvement In the future to be merely a Lean or Total Quality organisation will not be enough. There seem to be two main themes in manufacturing improvement for the future.

• Flexibility, within the individual organisation.

• Agility within the industry.



It is important to separate these two themes as many authors are writing about Flexibility under the title of Agility. It is true that flexibility will be a pre-requisite for Agility but agility takes a step further.

7.3.1. Flexibility in Manufacturing. Flexibility is not a new idea, a flexible company is seen as a company which possesses both the ability to respond rapidly to changing customer requirements (response), and the ability to offer a wide range of products(capability).

Flexibility costs, but in the future companies are going to have to be able to make to order small quantities of product at mass produced cost. This is "Mass Customisation": Combining the craftsman’s ability to make customised products with the economy of the assembly line84. This is particularly necessary where markets are highly volatile and product life cycles are very short. Truly flexible factories need to be capable not only of producing different versions of the same product, but also completely different products using the same processing route. This spreads the costs over a number of products, so that it is less painful to stop making one of those products if it fails85.

Toyota, who led the way towards lean manufacturing is now heading down the flexible route. It previously invested heavily in automation and the latest technology, but its more recent factory developments perceived automation in a different way. They realise that the supposed costs reductions resulting from removing people from the assembly line does not always follow. As a company reduces the number of line workers the number of maintenance staff rises rapidly, as the only ones who understand the machinery and robots, there is little room for continuous improvement. Automation also only does what it is designed to do and is thus inherently inflexible. Toyota see workers as more dextrous, flexible and inventive than automation. Automation should only be used where it aids workers rather than replacing them86.

7.3.2. Agile Manufacturing87 Agile manufacturing is similar to flexibility in terms of providing customised products, in low volume, at mass produced prices. However, the focus does not lie with any single company. Agile manufacturing focuses on the provision of a product in response to a market opportunity or customer need. The concept is born, the product designed, verified, parts manufactured, assembled, the product marketed, shipped, and the need is satisfied. Each step of this process could conceivably be undertaken by someone different88. This requires companies to know their capabilities exactly, to be aware of other companies needs, and be able to co-operate effectively. Currently talk of "Virtual Enterprises" and "Ad-hoc Coalitions" is growing rapidly89, with information technology is seen as a major factor which will allow companies to operate on this basis.

Whether this becomes a reality for all organisations is questionable. Many companies are still struggling to come to terms with the ideas behind the concepts presented here. Lean manufacturing is most certainly one path to knowing one's own capabilities and being able to control processes predictably, although it is not necessarily the only route to agile



manufacturing. Focusing on core competencies and defining the company's primary business functions has to be the first step. Some large companies, who previously have widely diversified or are highly vertically integrated are starting to address this issue, in response to their lack of competitiveness, e.g. IBM's restructuring and record losses in the early to mid 90's. Business Process Re-engineering is a radical approach to achieving this focus.

Small companies can potentially thrive in this environment, as to produce in large volumes will serve no advantage, and capabilities not possessed by the company can be supplied by another organisation. Unless the majority of small companies can catch up in terms of up to date thinking and methods, then they will not be able to seize this opportunity.

7.4. The post-industrial organisation What does a post-industrial organisation look like?

“Manufacturing is increasingly viewed as an enterprise, i.e. a complex chain or network of interdependent value-adding activities starting with the preparation of raw materials, through fabrication and assembly, to distribution and after-sale service. The successful competitors are becoming service or customer orientated and the nature of the work has become increasingly intellectual. By reducing product development / throughput time and developing networks of social systems that listen to the ‘voice of the customer’, these firms seek continuous improvement by co-ordinating a continuing stream of product and process innovation across their value chain.” Doll and Vonderembse (p. 354)

Summarising the key characteristics of these organisations;

• All employees understand the needs of their customers and how their organisation provides value to these customers.

• They are organised in work groups which are self-directed, since everyone understands the strategy & customer needs.

• They involve shop floor staff in the decision making and problem solving process.

• The learning ability of the organisation is enhanced by the communication achieved between the work groups, customers and suppliers.

• They achieve continual and rapid improvement in all performance measures; without trade-offs. These measures are global, not task specific, and describe how the whole value chain is performing.

• They can cope with increased complexity, uncertainty and change by moving towards flexible specialisation exploiting advanced manufacturing technology. This technology is designed to achieve not ‘economies of scale’ but ‘economies of scope’(Goldhar and Jelinek)90.

• There is a ‘technology-pull approach’, using available generic technology, driven by assessing customer needs and product and process design is undertaken simultaneously.



In the industrial production stage the approach was to produce a standard range of products efficiently. In the post-industrial stage the emphasis is on value to the customer and decreasing product development and throughput time. Doll and Vonderembse (p. 367) contend that the key difference is that in the industrial era managers concentrated on strategies in response to technological and economic changes but largely ignored the impact on the social, work and control systems within the manufacturing organisation. In the post industrial organisation social, work and control systems must be designed to enhance learning and encourage innovation through the supply chain.

A final thought

What is surprising is that much of the academic theory which underpins this view of the post-industrial society was written in the mid to late 80s. Much of it is consistent, and indeed, based on the characteristics of world class manufacturing and lean production. Yet how many companies, today, have successfully moved to this stage?



References 1 Doll W. J. and Vonderembse M. A. ”The evolution of manufacturing systems: towards the post industrial enterprise” a paper included in Voss C. A. “Manufacturing Strategy; process and content”, Chapman and Hill, 1992, pp. 353-370. 2 Skinner W. “Manufacturing; The formidable competitive Weapon”, John Wiley & Sons, 1985. 3 Cooper R. ``When Lean Enterprises Collide; competing through Confrontation”, Harvard Business School Press, Boston, Massachusetts, 1995. 4 Thompson J. D. “Organisations in Action”, McGraw-Hill, New York, 1967. 5 Porter Michael E. "Competitive Advantage; Creating and Sustaining Superior Performance” , MacMillan Free Press, 1985, p. 12. 6 Skinner W. “Operations Technology: Blind Spot in Strategic Management”, Harvard Business School Working Paper 83-85 (1983) p.11. 7 Hill T. “Manufacturing Strategy; the strategic management of the manufacturing function”, second edition, Macmillan Press, 1993. 8 Hayes R. H. and Wheelwright S. C. ““Restoring our competitive edge; competing through manufacturing”, John Wiley & Sons, 1984. 9 Hammer M. and Stanton S. A. “The Reengineering Revolution”, Harper Collins, 1995. 10 Morton Clive 1994, 'Becoming World Class', MacMillan, ISBN 0-333-62560-9 11 Morton C., ibid. 12 Hundy Brian 1991, 'A Brief History of Quality', Manufacturing Engineer Sept. '91. 13 Hundy B. 1991, 'A Brief History of Quality', Manufacturing Engineer Sept. '91 and EEV Ltd. 1994, 'Design of Experiments Part 1', Project Management: Engineering series. 14 Tamimi N. Gershon M. “A tool for assessing industry TQM practice versus the Demming philosophy”, Production and Inventory Management Journal, 1st Quarter 1995. 15 Morton C., op cit. and Womack J., Jones D., Roos D. 1990, 'The Machine that Changed the World', New York: Rawson Associates, ISBN 0-89256-350-8. 16 Shingo Shigeo 1990, edited by Robinson. Alan 'Modern Approaches to Manufacturing Improvement (The Shingo System) ISBN 0-915-299-64-X 17 Shingo, ibid. 18 Oliver Nick and Wilkinson Barry 1992, 'The Japanization of British Industry - new developments in the 1990's', ISBN 0-631 -1 8676-X(PB)



19 Kidd Paul T. 1994, 'Agile Manufacturing - Forging new Frontiers', Addison Wesley, ISBN 0-201-63163-6 20 Oliver & Wilkinson, op cit. 21 Eli Goldratt, Robert Fox 1986, 'The Race', North River Press, ISBN 0-88427-062-9 22 Oliver & Wilkinson, op cit. 23 Schonberger Richard 1986, 'World Class Manufacturing', ISBN 0-02-929270-0. 24 Anon, 'The strain of quality: American companies are discovering what happens when quality meets total chaos’, Economist 14th Jan '95. 25 Skinner, W. “The focused factory”, Harvard Business Review, May-June 1974, pp. 113-121. 26 Schonberger R., op cit. 27 Morton C., op cit. 28 Morton C., op cit. 29 Peters T. J. and Waterman R. H. 1982, 'In Search of Excellence’ ISBN 0-06-015044-4. 30 Goldratt E. M. & Cox J. ‘The Goal' (Revised edition), Gower Publishing, 1989. 31 Shingo, op cit. 32 Schonberger, op cit. 33 Schonberger, op cit. 34 Maskell Brian H. 1991, ‘Performance Measurement for World Class Manufacturing', ISBN 0-915299-99-2 35 Morton, op cit. 36 Schonberger, op cit. 37 Maskell, op cit. 38 Robinson Alan 1990, Foreword and Introduction to Shigeo Shingo’s “Approaches to Manufacturing Improvement” 39 Masaaki Imai 1986, 'Kaizen - The key to Japanese Competitive', ISBN 0-07-554332-X. 40 Schonberger, op cit. 41 Maskell, op cit. 42 Masaaki, op cit.



43 Maskell, op cit. 44 Masaaki, op cit. 45 Morton, op cit. 46 Masaaki, op cit. 47 Lawlor Alan 1985, 'Productivity Improvement', Gower Publishing. ISBN 0-556-02439-X 48 Shingo, op cit. 49 Maskell, op cit. 50 Womack and Shingo, op cit., and Taiichi Ohno with Setsuo Mito 1986, 'Just-in-Time for today and tomorrow’, Productivity Press. 51 Womack, Shingo and Schonberger, op cit. 52 Schonberger, op cit. 53 Shingo, op cit. 54 Robinson, op cit. 55 Anon, “The strain of quality .....” Economist 14th Jan. 95, op cit. 56 Schonberger, op cit. 57 Shingo, op cit. 58 Ohno Taiichi with Mito Setsuo 1986, 'Just-in-Time for today and tomorrow’, Productivity Press. 59 Shingo, op cit. 60 Patterson J.W., Kennedy W.J., Fredendall L.D. 1995, 'Total Productive Maintenance is not for this Company’. Production and Inventory Management journal 2nd quarter 1995. 61 Temponi Dr. C., Pandya S.Y. 1995, 'Implementation of two JIT elements in small-sized manufacturing firms'. Production and Inventory Management Journal 3rd Quarter 1995. 62 Schonberger, op cit. and Goldratt & Fox, op cit. 63 Morton C., op cit. 64 Marsh Peter 1995, Financial Times 18th September, 1995. 65 Wild R. 1995, Production and Operations Management 5th edition, Cassel. 66 Temponi, op cit.



67 Markham Dr. I.S., McCart Dr. C.D. 1995, 'The Road to Successful Implementation of Just-in-Time Systems', Production and Inventory Management Journal 3rd quarter 1995. 68 Temponi, op cit. 69 Schonberger, op cit. 70 Morton C., op cit. 71 Hammer Michael and Champy James 1994, ' Reengineering the Corporation - a manifesto for business revolution' Nicholas Brealey, ISBN 1-85788-056-0. 72 Ross Alastair 1994, 'Mapping Success', Manufacturing Engineer, Dec. 1994. 73 Puttick J. “The Product Complexity - Market Uncertainty Matrix”, The Factory of the Future Internal Paper, Warwick Manufacturing Group, 1993. 74 Ross A., ibid. 75 Baxter Andrew 1995, 'Push and Pull on the Shopfloor - A system that has reduced BAe's inventory and increased productivity. Financial Times 17th Jan. 1995. 76 Baxter A., ibid. 77 Morton C., op cit. 78 Anon, 'Re-engineering with love....' The Economist, 9th September 1995. 79 Morton C., op cit. 80 Morton C., op cit., and Ross A., op cit. 81 Hammer & Champy, op cit. 82 Anon, “The strain of quality .....” Economist 14th Jan. 95, op cit.. 83 Prahalad C.K. and Hamel G. "The core competence of the corporation", Harvard Business Review, May/June 1990. 84 Morton Oliver, 'Survey of manufacturing technology', Economist 5th March 1994. 85 Markillie Paul ,'Survey of the Car Industry' Economist 17th October 1992. 86 Anon, 'The kindergarten that will change the world...' Economist 4th March 1995. 87 Kidd, op cit. 88 Morton O., op cit. 89 Morton O., op cit. 90 Goldhar J. D. And Jelinek M. “Plan for economies of scope”, Harvard Business Review, 61 (6), pp. 141-148, 1983.

Page 1



Programme

• Early history - from craft to mass• Mass production - good and bad• Lean production - the Japanese way• Beyond lean - drivers for the future

Craft Production

• High customer choice• High production costs - price• Poor quality• Highly skilled workforce• Focus on products

Page 2



The English System

• Skills associated with a particular machine or technique

• Deeper, more specialist, skills• One worker could not make a complete article

The American System

• Skinner defines this as:

“… Making interchangeable parts and products that could be readily repaired later by substituting new parts. This Americanfactory system required fixtures and gauges and more complex measuring and inspection equipment and procedures. It also required a standard method of manufacture and, therefore, worker discipline and supervisory surveillance.”

Page 3



The American System

• Mechanisation of work• Dedicated machines• Less skilled workforce• Improved quality (repeatability)• Simpler to manage• Reduction of choice - economies of scale

Scientific Management

• Fredrick Taylor & the Gilbreths• One ‘best way’• Standard rates of output• Total management control• The worker as a machine

Page 4



Ford’s Mass Production System

High volumelow unit cost

low skilled workforce

Mechanisationconsistent parts

Flow Linessimple to manage

Taylorismstandard rate

• Market segmentation• Quality & image• Decentralised control

General Motors Refinements

Page 5



Mass Production Summarised

Advantages• Low cost• High productivity• Simpler to manage• Increased quality

Disadvantages• Inflexible• High capital risk• No customer focus• Worker dissatisfaction• Hidden cost overheads

Opportunities tostandardise

Increased scale ofproduction

Growth inmarket share

Lower & morecompetitive price

Reducemanufacturing

cost

Source P.T. Kidd 1994

Economies of Scale

Page 6



Progress in ManufacturingTiming Emphasis Driver

1950/60’s

1965

1968

1972

1975

1980

1986

1990’s

2000

Labour Cost & Output

Material Supply

Sales

Financial Control

Technology Panaceas

Japanese Solution

Total Quality

BPR & Lean

“e”

Market will take anything

Material cost is greater than labour cost

Growth has outrun market demand

Growth has outrun financial resources

Lights out factory

JIT, Cells, Kanban, etc.

Systems Approach

Low cost, Lean Organisations

Integrated virtual organisations

Range of Options

Vol

ume

of p

rodu

ct

CraftAmerican

Ford (1914)

G.M. (1920’s)

Lean

CIM

Volume Variety Mix

Adapted from ‘The Machine that Changed the World’

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Lean Manufacturing

� Focus on the customer� Empower employees� Adopt systems to achieve for zero defects� Total preventative maintenance to eliminate

equipment failure

•The total elimination of waste from the manufacturing system (quality).

Quality Strategy

• 100% inspection (+ rectification)

• In-line sampling – SPC

• Line Stop - Andon

• Total Quality

• 6 Sigma

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Lean Manufacturing

• The total elimination of waste from the manufacturing system (JIT).

� Reduce set up time aim for a batch of 1 � JIT and kanban to achieve zero inventory � Manage the supply chain� Stream line the plant configuration

Just-in-Time

• Sometimes used instead of Lean• Really - high volume assembly• Needs high commonality of parts• Started at Toyota (Taiichi Ohno & Shigeo Shingo)• Needs levelled schedules

� poor for “strangers”• Kanban requisitioning of parts• Supplier parks

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Other Areas of Improvement

• Manufacturing resource planning (MRPII)• OPT & the theory of constraints (bottlenecks)• Focused factories, cells and group technology• Business process re-engineering (BPR)• Core competencies• Single Minute Exchange of Dies (SMED)• Computer numerical control (CNC), flexible manufacturing

systems (FMS), computer integrated manufacture (CIM)

Business ProcessRe-engineering

• Conceived by Messrs. Hammer and Champy� ‘It’s not the products but the processes which make

the products that brings companies long term success.”

• BPR involves customer focus, team orientation, empowerment, education & IT and is driven by top management.

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BPR Examples of Processes

• A process is ;“a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.” Eg:

–KNOWLEDGE ACQUISITION: - The acquisition, retention and exploitation of knowledge about the external and internal environments of the operations of the enterprise.–PRODUCT CREATION: - understanding the market, research & development of suitable products / services and the establishment of appropriate resources to manufacture them.


• Benefits� Reduced costs� Higher productivity� Improved awareness and response to customer

needs� Reduced lead times

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• Limitations� The success of BPR is totally dependent on complex IT

systems� Re-engineering means most jobs have to be re-designed or

eliminated altogether. Clive Morton states: 'it is one thing to radically re-engineer companies: it is another to motivate and retain those staff that remain. '

� BPR is very much a radical step and is far removed from continuous improvement and it's culture.

Group Technology

• Cells of machines (process flow)• Based on families of parts• Each cell makes a complete product• High worker satisfaction & involvement

� Team working• High quality• Simple to manage

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Manufacturing Resource Planning

• MRP - Computer manages stock from� Bill of materials� Inventory� Lead times

• MRPII - Computer holds process details & calculates capacity required

� WIP & progress checking� Modelling of demand profiles

Optimised Production Technology

• Read ‘The Goal’ by Goldratt• Suits batch production - high variety• Schedule work to manage the bottlenecks

� Time lost at a bottleneck is lost forever� Time saved elsewhere is an illusion� Balance the flow of work

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Optimised Production Technology

•Where would you hold WIP?

•Where would you like the bottleneck to be?

•What about “wandering” bottlenecks?

OPT is actually Goldratt’s own package for scheduling, using his rules. There are many other packages working on different mathematical models but they tend to be referred to as “OPT”.

SMED

• Based on work of Shigeo Shingo at Toyota• Initially, set-up time on large presses• What parts of the set-up can be externalised?• Quick release fastenings & automatic location of

tools• Why the need to wait for quality approval?• EBQ dependent on set-up time (square root

formula)

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Low inventory levels & holding costs

Errors are spottedalmost immediately

Reducing set up timesallows small batches

Benefits of Small Batches

Benefits


• "World class manufacturing is the ability to compete and survive on a global scale. " Clive Morton¤Pursuing excellence¤Serving the customer¤High quality¤Low cost¤Delivery on time

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World Class Performance

Rework rate < 5ppm

Zero defects at customer

Inventory turns (RM & WIP) >100 per year

Value adding time > 50% of manufacturing lead time

OEE ≥ 85%

Stage 4: Externally Supportive

Pursue a manufacturing based competitive advantage Manufacturing centrally involved in business decisions L.T. programmes to acquire capabilities ahead of needs

Stage 2: Externally Neutral

Achieve parity (neutrality) with competitors Follow “industry practice” Capital investment is primary means of gaining an edge

Stage 3: Internally Supportive

Provide credible support to business strategy Screen investments for consistency L.T. manu. developments are systematically addressed

Stage 1: Internally Neutral

Minimise manufacturing’s negative potential Internal measures and controls Retain many options

Hayes and Wheelwright 4 Stages of Development

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The Four Stages

Stop holding theorganisation back

Be as good ascompetitors

Be clearly thebest in the

industry

Redefine theindustry’s

expectations

Give anoperationsadvantage

Link strategywith operations

Adopt bestpractice

Correct theworst problems

Doll & Vonderembse’s Characteristics

• All employees understand the needs of their customers

• Shop floor involved in the decision making process

• Learning ability enhanced by communication between work groups, suppliers and customers

• Continual & rapid improvement• Simultaneous product and process design

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Craft Mass/Industrial Post Industrial Worker High skill,

involvement, influence & respect

Low skill, no involvement, little influence or respect

Intellectual, problem solver, training and respect

Management Chaotic, no control, reliance on workforce

Ordered, total control, aim for predictability & stability

Coach & facilitator, cooperation with workforce, thrive on uncertainty

Customer High choice, high price, variable quality, slow delivery

Low price, improved quality and delivery, poor choice

High choice, low cost, high quality and service

Summary - From Craft to the Future

Low

High

Craft American Mass Lean CIM

Costs

QualityChoice

The Drivers of Change

Documents

Evolution