ITFT--Production,operations, management

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PRODUCTION AND OPERATIONS

MANAGEMENT

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OBJECTIVES

Introduction to Production Function and Operations Management

Mass Production Approach

Toyota Production System (TPS) Approach

Supply Chain Management

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PRODUCTION versus MANUFACTURING

Production is a Broader Term that Spans both Manufacturing and Services Functions

Production is the Application of Resources, People and Machinery, to Convert Inputs into Finished Goods and Services

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MASS PRODUCTION

Mass Production: Makes Outputs available in Large Quantities at Lower Unit Costs than Individually- Crafted Items

Characteristics of Mass Production

Labor Specialization

Mechanization

Standardization

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ASSEMBLY LINES

Assembly Line first Introduced by Eli Whitney (Cotton Gin Inventor) to build Muskets for the US Government In 1799

Used Ideas of Specialized Labor and Engineering Standards (Tolerances) to produce Assemblies from Parts in Repeatable Manner

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HENRY FORD

Introduced Moving Assembly Line: Dramatically Reduced Manufacturing Costs While Delivering Consistent, Low-Priced Product

Factory based on Chicago Meat Cutting Plants

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FORD MODEL “T”

First Produced: October 1908

By 1927, 15,000,000

Produced

Any Color so long as it’s Black…

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ASSEMBLY LINE BENEFITS

Initially, took 14 hours to Assemble Model T - Mass Production reduced Time to 1 Hour and 33 Minutes

Model T’s Price dropped from $1,000 in 1908 to $360 in 1916

Result was Ford becoming Dominant Automobile Manufacturer and Assembly Line Method as Dominant Production Approach

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FORD ASSEMBLY LINES

Assembly Line pulled by Ropes Magneto Assembly

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MASS PRODUCTION

MODEL “T” – Machine that Changed the World

1914: Ford produced 308,162 cars, more than all 299 other auto manufacturers combined

1927: Automobile Produced every 24 seconds

Higher volumes → Lower cost → Lower Prices →Increased Sales → Higher Volumes

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MASS PRODUCTION

“PUSH” Strategy – Driven by Inputs and Objectives

Control of Raw Materials and Labor plus Profit Goals = Production Rate separate from Customer Demands and Preferences

Performance measured by Budget Variances and Quantitative Results (Defects or Unit Costs per Day, Week or Month), not Quality Standards

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MASS PRODUCTION

Low Product Variety; Small Orders Not Feasible

Specialized Machinery and Centralized Manufacturing

“Economies of Scale” – High-Speed Sequential Production

Development Costs Spread Over Large Volume: Low Cost per Unit Produced

Low-Skill/Low-Wage Work Force

Large Advertising and Marketing Budgets

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FORD WORKING CONDITIONS

Monotony of Assembly Line Work: 300% Turnover

$2 per Day and a 9-Hour Shift

Ford’s Response to Working Conditions Dilemma

Increase Pay to $5 per Day and Reduce Shifts from 9 Hours to 8 Hours

“The Chain System you have is a Slave Driver. My God, Mr. Ford! My Husband has come Home and Thrown Himself Down and won’t Eat his Supper, He’s so done out. Can’t it be Remedied? That $5-a-day is a Blessing; a Bigger One than you Know. But, Oh, They Earn It!”

- Wife of Ford Assembly Line Worker

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MASS PRODUCTION

Flaws of Mass Production Approach

Production Levels cannot Stop or Slow: Defects resolved outside Production (Added Costs of Rework)

Long Changeover Times limits Product Variety

Erratic Finished Products Inventory Levels Incentives and 0% Financing

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MASS PRODUCTION Market Orientation Flaw

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TOYOTA’S ORIGINS

1902 Modification: Loom Stopped Automatically if

Thread Broke or Spool Empty - Signal for

Attention

Result: No Waste from Defective Work and

Lower Production Costs

Toyoda Automated Loom Works

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TOYOTA’S ORIGINS

During WWII, Toyoda became Toyota and manufactured Motorcycles and Delivery Trucks

After WWII, Japanese Industry needed to re-build

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TOYOTA’S ORIGINS

Found Mass Production Principles not Applicable: Scale of Japanese Markets

Desire for Product Variety

Unable to Afford Resources and Inventories

1956 – Taiichi Ohno went to US

to study Ford’s Manufacturing

Facilities

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TOYOTA’S ORIGINS

Discovered Production and Operation Methods that Were Linked to Customer Actions: Inventories

Replenished by Sales (“PULL” Strategy) Delivered Product Variety and Scale Minimized Waste

Before returning to

Japan, Ohno went to an

American Grocery Store

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TOYOTA’S ORIGINS

Toyota Exports its First Car: The

Forgettable “Crown”

Under-powered and Unstable at

Freeway speeds, Production is

stopped in 1959

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TOYOTA PRODUCTION SYSTEM

In 1961, Toyota adopts “Systems Perspective” KAIZEN – Continuous Improvement Attitude

that Minimizes Waste and Emphasizes High Quality

Processes are analyzed to eliminate flaws rather than fixing defective products

WASTE – Comprehensive View that includes Time, Resources and Materials Over-Production Time Spent Waiting Unnecessary Movements of Items

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TOYOTA PRODUCTION SYSTEM

Waste is anything other than the

minimum amount of equipment,

materials, parts, space, and

workers’ time which are absolutely

essential to add value to the product.

- Shoichiro Toyoda President, Toyota Motor Co.