Industrial Operations
Midterm exam
Textbook(s) Required: Manufacturing Organization and Management– Amrine, Ritchey, Moodie, and Kmec
Prentice Hall, Sixth Edition (1993).
ISBN-10 0135548586 (hard cover) or ISBN-13 9780135548585 (paper cover).
Midterm exam from chapter 1 to 18
Unit 1 Introduction: Manufacturing in the United States
American Style of Manufacturing
The industrial revolution started in England about 1750 with the mass production of textiles and metal goods. However, industrial development in the U.S. was delayed because of our colonial status. The British prohibited the export of production equipment wishing to protect their highly profitable domestic industries. Colonies like those in North America were limited to low value-added activities such as agriculture. Raw materials; cash crops like sugar and tobacco; and food were produced in the colonies. In turn, the colonies were forced to buy British goods. Inevitably, illegal blueprints for weaving and other production equipment were smuggled to the colonies and events like the Boston Tea Party initiated the Revolutionary War and separation from the British Empire. Real economic and political separation from the British did not take place until after the War of 1812 was resolved
American-style manufacture began to develop in the urban areas of the Northeast in the years before the Civil War. (Hounshell, 1984) Several characteristics distinguished U.S. industry from its European ancestor (and later, its Asian competitors). Because many of these characteristics persist, they are worthy of our consideration.
1. In Europe, labor was plentiful; in the U.S., labor was scarce. The English passed laws to force the rural population of agricultural workers into the emerging factory towns. In the nascent industrial areas of the U.S., the frontier and the lure of free land through the Homestead Act provided a safety valve for unhappy workers. The use of technology to replace labor has always been a feature of U.S. industry. Before the Civil War, the Southern economy, based on slavery and the plantation, remained linked to the old British Mercantilist economy. The Civil War confirmed that the northern, ethnically diverse, urban economy based on the American-style factory was superior to the southern, racist, rural plantation economy dependent on the Europeans.
2. Water, clean air, land, energy, and raw materials were abundant in the U.S. First water power, then coal-fired steam engines, then petroleum and natural gas provided (until very recently) the attitude that the energy supply was inexhaustible. In Europe and Asia, the view that these materials were scarce and expensive was predominant. Similarly, industrial materials such as wood, metals, and petroleum-based synthetics have been readily available within the U.S. borders or easily purchased in poor countries. Japan developed industrially with virtually no domestic natural resources, the Europeans experienced serious industrial pollution problems as early as the 1700’s. European and Asian views of land use supported by zoning and other regulations have made space a commodity much more valuable than in the U.S.
3. U.S. industry produced high volumes almost from the beginning. The large domestic market and U.S. competitiveness in the export markets made for large lots and long runs. Conversely, European and Asian producers developed in very small, controlled (limited competition), domestic markets. Also, this meant that U.S. firms had to compete both domestically and internally almost from the beginning.
Mass Production
In the years between the Civil War and World War One (1865 -1914), the U.S. achieved global industrial dominance. This American-style manufacturing was technology-intensive, wastefully consumed natural resources, focused on high volume for domestic and foreign markets, and was accustomed to domestic and international competition. Starting in the 1880’s, “trusts” or monopolies develop in areas such as steel, and later in petroleum. The Sherman Anti-Trust law of 1890 established the basic law of competition in the U.S.: companies could not collude to fix prices. Also, the Sherman Act established the important legal precedent of government intervention, modifying the basic tenets of free-market capitalism. Government could invoke “the greater good of the people” to regulate industry.
However, according to Hounshell, and Womack et al. in the Machine That Changed the World, the production systems of this era had not yet achieved “mass” production. To paraphrase Henry Ford as reported by Hounshell: “mass production is achieved when the “fitter” (who physically modifies parts to make them fit) is replaced by the unskilled assembler.” Mass production meant a radical shift for the industrial workforce from a factory floor controlled by skilled workers (fitters) to a factory floor controlled by supervisors and engineers. In terms of quality systems, mass production emerged when forming process outputs could be consistently measured/sorted by accurate attribute gages. While this probably happened in many places, we have documented evidence that the Ford Motor Company achieved mass production of components by 1910 and of automobiles by 1914.
In mass production, engineers designed the work, supervisors oversaw its implementation, and workers did the physical work. The combined mental and physical work done by the journeyman skilled trades was replaced with a separation of work: mental work done by salaried personnel and physical work done by unskilled workers. The skilled trades were limited to building production equipment, setting it up, and fixing it.
Scientific Management
Frederick Taylor originated the term scientific management in the 1890’s. His was a systematized and highly structured method of planning and controlling work. His goal was to remove all mental work from the workers believing that decisions made by workers about their own work was “fatal to success”. Understanding Taylor requires some knowledge of his milieu, or historical context. Eastern Pennsylvania in the 1890’s was undergoing an enormous boom based on heavy manufacturing. Immigrants were streaming into the U.S. through Ellis Island. After the Civil War and the end of slavery there was a massive outmigration from the American South by African Americans fleeing Jim Crow segregation and seeking a better life in the North. Many of the recent arrivals were unskilled and illiterate but willing to work under any conditions. Unions were denied real federal protection until 1935. There was no federal health and safety or environmental legislation until the 1970’s. Unsafe working conditions were the norm, and employees had no protection against capricious actions by companies. Limited mechanization and automation meant that direct labor was the largest portion of a manufacturing company’s expense. Getting people to do manual work harder and faster was one of the only tools for improvement. Furthermore, the concept of “Social Darwinism” justified abusive actions by employers. The now-rejected concept of Social Darwinism (an idea Charles Darwin never accepted) stated that people on the bottom of the social and economic order deserved to be there because they could not “compete” in the struggle of “survival of the fittest”. Most worker resistance was overcome by increasing real wages. Ford combined mass production technologies and scientific management when the moving assembly line was introduced in 1914. The system was enormously successful: direct labor for auto assembly was reduced by 88%. (Womack et al.) However, the work was so onerous for the workers that labor turnover soared to 600% per year. (Hounshell). Ford increased wages to the now famous $5 per day to combat high levels of employee turnover. The combination of “mass” production technologies and scientific management created the model for U.S. industry that continued through most of the 20th century.
Lean Production
Mass production really did change the world (see The Machine that Changed the World on the global auto industry and lean production). The U.S. economy changed from being producer-driven to the current situation in which the economy is driven by consumers; about two-thirds of U.S. GDP is now consumer spending. Part of the reason this occurred is because the mass production system generated a lot of wealth and created a new middle class from what had been the industrial working class. Productivity gains in agriculture in the 19th century freed up agricultural labor to work in the factories. The success of mass production meant that productivity gains freed many from factory work to seek a future in the service economy. This process continues as high productivity/high value added manufacturing jobs may remain in high wage countries such as the U.S. but low productivity/low value added jobs will certainly be exported to low wage/low cost countries. The current painful (especially in Michigan) adjustment in the U.S. auto industry is a continuation of a two hundred year old process.
The transition from craft production to mass and then to lean is well documented in The Machine That Changed the World. When comparisons between mass and lean production were first made in the mid-1980s, lean production focused on the voice of the customer, produced twice as much value per worker, required half the engineering hours to produce a product, and was capable of higher quality and continuous improvement. The decline of the US vehicle producers and the success of Honda and Toyota is simply more evidence to support this continuing trend. Lean production is a global, not a Japanese system as we will see later in the course.
Outside the U.S., many countries are attempting to emulate our path; a proven strategy to becoming wealthier is to support a competitive manufacturing base. Obviously, some countries like Japan have already succeeded, but many others like China, South Korea, and Brazil are at earlier stages of development. To maintain its standard of living the U.S. must respond to these challenges by seeking good ideas whatever their source. The cost of doing business in the U.S. is high; manufacturing can only stay here if it is truly competitive. So, lean production should be seen as a key business strategy to continue our own evolution in the midst of fierce global competition.
The “bubble” economy of the 1990’s in the U.S. created many distortions in the marketplace. Many major manufacturers earned more profits by financing their products than making and selling goods. Or, the “bubble” expansion of the 1990’s created unsustainable market growth (and subsequent bust) in computers, software, and office furniture, to name a few affected sectors. The entire U.S.-owned car business has been operating at a loss for more than a decade; profits have come from finance divisions and a few products such as vans, SUVs, and trucks. The oligopoly in large vehicle production has created a situation similar to the entire auto business in the 1950’s when a few producers were able to set prices. This is ending as non-U.S. producers begin to compete in the truck, SUV and mini-van market segments. The inevitable “hangover” from the “bubble” forces us back to basics: how do we design and make goods people are willing to buy? And, how do we do this better than our competitors, domestic or foreign?
We must learn from our own past. Are essentials of the long-past “craft” production era still useful? For example, pride in one’s work and belonging to a successful group remain attractive for most people. Lean production has the potential to revive these feelings among the workforce. Which elements of “mass” production will we continue to improve? Frederick Taylor institutionalized standardization. Lean production cannot operate without standardization. However, in lean systems, improvements which may later be standardized can come from anyone with a good idea. Taylor believed that suggestions from workers were “fatal to success”. Lean systems must elicit suggestions from everyone. In the mass system, measurement of success was often tied to production rates and capacity utilization. This can lead to waste through excess inventory. We will later take a close look at Ohno’s (father of the Toyota Production System, TPS) definition of muda or waste. Lean systems’ measurements of success are tied to customer satisfaction while reducing waste including inventory. Perhaps the lean model will help us to create more meaningful measurements of success.
There is nothing particularly startling or new about lean production. It is a continuation of an evolutionary process of applying human intelligence to improvement. However, a study of how it developed and where it came from is essential to understanding how it can help us to improve.
MFG 203 Industrial Operations
Unit Two
As we learned in Unit 1, the market place for manufactured goods in the U.S. (and most other places in the world) has shifted from producer-dominated (monopolies, one producer, and oligopolies, a few usually colluding, producers) to consumer-dominated. The power to control markets and set prices, possible with monopolies and oligopolies, we might call a “push” market; the market dominated by consumer choice, we might call the “pull” marketplace. (See Push/Pull in coursepack)
Push producers can design and make goods and provide services based on their own capabilities and needs, and can set prices. In the U.S., the Sherman Anti-Trust Act was passed in1890. Simply stated, companies are not supposed to dominate markets to the extent that they can set prices and companies should not collude to dominate markets and to set prices. “Trusts” or monopolies are basically illegal. This law forced the break up of such old monopolies as Standard Oil and established regulations for public service monopolies such as interstate transport, communications, water and power supplies. Airlines, trucking, and telecommunications were exempted from this level of regulation in the 1980’s. IBM and Xerox in the past, and Microsoft in the present have dominated their respective markets. The old U.S. “Big Three” automakers had 95% of the vehicle market through the early 1970s. Anti-trust suits were not successfully prosecuted in any of these cases. The basic tenets of the Sherman Act still hold; monopolies able to set prices are not likely to succeed (at least in the U.S.). This means that “push” producers are either threatened by competition or have failed. A modern, “pull” manufacturer must start all activities with the customer in mind.
In a “push” environment, producers can add a margin (say 10%) to their costs to determine their profit. In a “pull” environment we must start with what the customer is willing to pay (the “target” cost) and subtract our costs to determine if or not we are making a profit. U.S. vehicle producers were able to make annual profits of 15% or more in the old “push” environment (see Womack, the Machine That Changed the World). The “pull” environment starting in the late 1970s (with the advent of serious Japanese penetration into the U.S. market) eroded this margin. From the mid-1980s through the 1990’s, the old U.S. Big Three made no net profit on automobiles. (see The End of Detroit by Micheline Maynard) Their profits came from trucks, mini-vans, SUVs, and loaning money. In my personal opinion, the current, catastrophic (at least for the state of Michigan) adjustment of U.S. vehicle producers marks the transition from a national market dominated by “push” producers to a global market dominated by “pull” producers. Many European vehicle producers are facing the same situation as the EU phases out guaranteed monopolies for national producers (e.g. Rover in the U.K. and Fiat in Italy). We can also see this trend in the multiplicity of producers for the U.S. marketplace: clothing, computers, home electronics, power tools, and many other market niches with many, if not dozens of competing producers. The advent of the “big-box store” corresponds to high levels of consumer choice. If there were only one real choice for that new wide-screen T.V., we would not find it so entertaining (at least for me) to wander around Best Buy, Circuit City, or even Sears (a former push producer) and gaze, mesmerized, at all our possible purchases. Consumers have many choices and producers must try to convince customers to buy their product. It is much easier to be a “push” producer (we do what we know how to do) than a “pull” producer (we must make the customer want our product and customers are unpredictable). In a recent (September 8, 2007article) in the Ann Arbor News, the new CEO of now Cerberus-owned Chrysler, Robert Nardelli, stated that the first two elements of Chrysler’s restructuring will be: “improving customer expectations and boosting quality.” No longer can we engage in “Field of Dreams” production: we make it and they will come and buy it (because they have no choices).
If we wish to succeed in Industrial Operations (and we do!), we must become “pull” producers, or “lean” producers. We must start, not with our own capabilities (what do we know how to do, the voice of the producer) but rather with the very big question: what do our customers value (the voice of the customer)? Furthermore, all of our product and process specifications (and associated costs) ought to support the proposition that we are focusing our efforts on customer value. We should be allocating resources and spending money only on what the customer will pay for. Customers are willing to pay for good products not for the waste incurred in making those products.
To start, we must determine what the customer wants/expects and how that translates into our producer specifications. One approach is to use the Quality Function Deployment method. The QFD promotes a formalized methodology to identify customer needs (and perhaps anticipate unarticulated customer needs), translate these product attributes to process attributes and parameters, and compare our product with our competitors’. Additionally, the QFD gives us objective information to help prioritize the relative importance of product and process characteristics. Not all product specifications have the same importance; some are more critical to customer satisfaction (or required to comply with government regulations). We cannot afford to inspect each product after every manufacturing process; so we must develop strategies which minimize or eliminate inspection. Customers pay for good products, not for inspection. We must design quality into the product and processes, and not assure quality by inspection alone. Minimizing inspection means we have to understand variability in the processes ( more on this later) and place product specifications in a hierarchy; only those most important to customer value (or complying with government regulation) will be tracked on an ongoing basis. For example, I do care that the on/off button on this computer works (perfectly and for a long time); I am far less interested in the surface finish on the back of the monitor. Both the switch and the surface finish are defined by design specifications; both have nominal (target) values and permissible tolerances (variation from the target). However, in manufacturing we are going to prioritize the critical switch over the relatively unimportant surface finish although all specifications on both assemblies must be met. The CPU and monitor must comply with FCC regulations on electromagnetism but color variation on the bottom of the CPU tower matters a lot less. The QFD will permit identification of what the customer wants and what processes are critical to customer satisfaction. The completed QFD can form the basis for prioritizing manufacturing specifications and “deploying” this information from design engineering to the factory floor. What we record on quality control charts (much more on this later) is generally the “special” or “critical” characteristics as defined by the customer via the QFD or other mechanism. Prioritization of specifications is a generally good manufacturing practice and required in the vehicle industry compliant to the ISO/QS/TS quality standards.
Big questions: What do customers expect? Can we surprise customers with product features which delight/excite them? Noiraki Kano is a Japanese academic responsible for the “Kano” model of customer expectations. This model has been widely applied in the U.S., especially in the auto industry. In the U.S. we tend to rely heavily on market research to tell us what customers want in a product or service. Kano believes that producers can only capture part of what customers expect because (1) many requirements are “unspoken” and not mentioned in market research. For example, what I expect in a computer is that (1) It boots ups (2) all the plugs work and I have a power cord compatible with my electrical outlet. If I am asked what I want, I might say fast, good graphics, small footprint. So market research might not reveal basic requirements. In a novel customer study done by a U.S. automatic transmission manufacturer, the company found out that their customers mostly expected that the transmission lasted 100,000 miles without repair and did not leak on the garage floor. Previous market research had revealed that customers wanted quick starts, a fancy shift lever, and smooth shift points. So basic “must-be quality” has to be assured as well as higher expectations. And, what is minimally expected changes with time. I now expect a lot of software already loaded on my new computer; I now expect internet-readiness. Only a couple of years ago, I had to purchase a separate modem, configure the machine to communicate with the modem, and load virtually all of the applications programs. Plug and play rules!
Kano also realized that merely meeting customer expectations (product “made to spec.”) could remove dissatisfaction from a customer but would not generate satisfaction/excitement. The producer must anticipate unspoken customer expectations if we wish to remain competitive and/or take business away from our competitors. The QFD (see KanoQFD article) can assist us in determining customer expectations which fall into all three of Kano’s categories.
So, this unit ought to help us use the QFD to identify and define customer expectations, prioritize product and process specifications (and deploy these to the manufacturing floor), and use the Kano model to understand customer “delight” versus basic expectations.
MFG 203 Unit 3 Introduction
This class started to further understand the context of U.S. manufacturing in 2007: i.e. U.S. manufacturing is vibrant, competitive, necessarily global, tied to our national well-being, engaged in continuous improvement, and always starts with the customer.
The basic premise is that industrial operations start with the customer. Which leads one to ask: Who are the customers, what do they value, and how can we create and maintain a production system which undertakes nothing without the customer in mind? Or, in other words, how to create a system from which the customer defines and “pulls” value. In most markets customers have many choices when it comes to performance, quality, and pricing. We, as an operation, cannot “push” a product, its features, its quality levels, or its price based on our internal needs. These are defined by the customer.
As we learned in Unit 2, Quality Function Deployment (QFD) is an important tool to help us find out what customers value and how we can align and prioritize our efforts to meet these needs. The needs may be basic/unspoken or more sophisticated and unanticipated needs/wants as defined by Kano. We use this information to design our production systems. The hierarchy or priority of specifications (required in the auto industry) informs how we deploy resources to meet customer needs. We do not just make things just “to spec” (although we have to do this too). We design systems to meet and exceed customer needs/expectations (see Taguchi in Chapter 4 and this will be pursued in much more detail later in the study of quality systems). The matrix intersections of the QFD tell us how our “specs” do or do not meet customer expectations. Also, we know from Kano/QFD that we are selling not just manufactured product but rather a “package” of products and services to our customers.
In one small way, the Pencil QFD assignment in Unit 2 was a bit unfair to those of you that have never been exposed to the concept before. Not unfair in the respect that it was not a good exercise, or a good way to introduce it to students, but because of the fact you had to do the problem on your own. In the real world, this type of analysis must be done in a team environment. In the best case scenario, an organization will perform the QFD on more than one level. On one level, the customer and suppliers should be involved to identify as many customer and technical requirements, as possible. Too many is not an issue as they will get “washed out” in when Degree of Importance numbers are assigned. On another level, the organization should conduct the study with an internal, cross functional team, to align the relationships with the company’s own strategic goals.
Unit 3 introduces reading from the textbook. This text is a sixth edition, first published in the late 1950s. It is a well-accepted and standard text on the topic of industrial operations. While it has been extensively re-written, there are still some traces of “push” system practices embedded in the text. I delayed the use of the text, until unit 3, for two reasons (1) So you would have plenty of time to find and purchase a (hopefully reasonably priced) copy and (2) to start the class with new information which sets the stage for the modern, global, competitive, customer driven world. Be cautious when you run across remnants of “producer oriented” information that still exists in the text, it is dated and runs counter to the modern “customer oriented” practices of today.
For each text reading, I will post a set of notes. The text is long and (at times unnecessarily) complex and we will not read all of it. The Notes will serve as a guide to what material I expect you to know for the exams.
MFG 203: Unit 4 Introduction
This Unit is large and complex. Any of the assigned chapters could be made into an entire course. We will briefly survey these areas rather than do an in-depth study. This section is however critical for a variety of reasons. The Manufacturing Case Study is assigned today and much of the material covered in this unit will directly apply to completing this assignment. And, manufacturing companies make money in the factory by adding value to materials and purchased parts. In other words, customers pay for what we do to incoming materials to give them what they want (or more in the Kano model).The value is added primarily in two ways: (1) thermodynamic/form and (2) knowledge.
(1) Thermodynamic/form value: For example we bring in thermoplastic resin, an injection molder, and the mold. We use heat to change the resin into a form we can sell to a customer. And, we might take the injection molded part and assemble it into another form. The final result is worth much more than the cost of the resin. We take sheet steel and form it by stamping; the stamping is worth more than the sheet steel.
(2) Knowledge value: First, we cannot add thermodynamic/form value without specific knowledge. Yes, we can follow the directions to operate the machine given the resin manufacturer’s data. But, we cannot differentiate ourselves from the competition without idiosyncratic knowledge; effective manufacturers have many process knowledge “secrets”. Also, product and process engineering are ways of adding knowledge value. For example, Toyota took over a General Motors assembly plant in the mid-1980’s (NUMMI in Fremont California) and within two years doubled the productivity with far fewer defects with almost no additional investment in equipment and using the same GM/UAW workers.
Companies/facilities that are mostly just adding thermodynamic/form value are good candidates for offshore production/outsourcing and the production of commodities. Companies/facilities which bolster thermodynamic/form value with lots of knowledge value (in product and process design) are more like to be globally competitive and maintain employment even in high wage countries.
When reading the assigned chapters, please use the Notes from the Coursepack to focus your attention. This is a lot of material but this is a survey course. If you understand the terminology in the Notes, you will be prepared for the midterm. Memorization is far less important than knowing where to look it up.
PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET AN AMAZING DISCOUNT 🙂