In this successor to "Reinventing the Factory", Roy Harmon expands on the revolutionary concept of "factories-within-a-factory" with examples and practical, proven techniques drawn from more than 2000 focused factories on six continents. Challenging such current fads as statistical quality control and outdated versions of computer integrated manufacturing as hopelessly complex, Harmon presents new ideas and case examples of methods to guarantee the success of improved operations and continuous future development.
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Roy L. Harmon, co-author of Reinventing The Factory founded Andersen Consulting's factory productivity practice and provides advice to its clients throughout the world.Excerpt. © Reprinted by permission. All rights reserved.:
Management Perspective: Strategy, Quality, and Productivity
The imminent dawning of the twenty-first century should serve to remind chief executive officers, their boards, and their fellow officers that they owe the stockholders, employees, and suppliers a road map for continuous improvement that will last well into the world of the future. The road map will be crucial to ensuring their future livelihood. In fact, the very viability of many businesses may be threatened should such plans be lacking. "Business as usual" is an operating philosophy that competitors are sure to reject. Bold, innovative changes were the precursors of past successes and will continue to be the hallmark of future giants of industry. Fortunately, the world of manufacturing is brimming with opportunities for improvement. The challenge is to find and develop executives who note a company's imperfections -- in business operations, labor relations, supplier relationships, and product value and quality -- and refuse to accept them as necessary evils. Recognizing the imperfections is the first step toward inventing strategies and tactics for eliminating them. The executive's responsibility does not stop with the limning of a future vision. It must extend into everyday planning and execution of the myriad tactics that, taken in concert, will propel the company into the ranks of the superior manufacturers of the world.
It would be easy to become complacent with the giant strides some of our factories and offices have already taken. The author, with experience in Japan and other countries, has participated in projects that have yielded even better results than those of Japanese companies. However, these improvements have not yet advanced the state of our operations to the exciting, achievable level of the global, systemwide economic benefits that lie ahead. For example, not one business executive would deny the enormous benefits that could be derived through radical reductions of the billions of dollars in the pipelines of production and distribution. However, these inventories (in the United States) have not dropped appreciably in any recent year, as shown in Exhibit 1-1. During these years, many businesses targeted, but failed to achieve, this very important business objective. Further, the strategies the largest companies pursued most aggressively had little to do with improving their operations. Too many paid insufficient attention to nuts-and-bolts issues like reducing inventories. Instead, many of the biggest businesses have pursued mergers, acquisitions, and divestitures as their route to success in the twentieth century -- a road that turned out to be rocky for most. Those executives preoccupied with games designed to drain surplus resources from acquisitions or artificial gains from unrealistic increases in stock value have only diverted resources and executive attention away from vitally needed improvements in operations. The usual results have been to sap the vitality of the factories that have been traded from company to company like poker chips. By contrast, exceptional, successful companies have always focused most of their managerial talents and energies on their core business operations. The tide of success for the long term will continue to run with those executives dedicated to the operation, not exploitation, of their businesses. Chief executive officers, therefore, must lead the charge to radically rationalized operations. To do so will require separating facts and myths.
EXECUTIVE OVERVIEW: KICKING THE SACRED COWS
A plethora of myths have arisen to explain why Japanese companies have been so competitive. In reality, they have no shortcuts to success, no single tricky gimmick to transform the rubble from a world war into a mighty industrial machine. Superior status was won and will continue to be won only by hard work and slogging, step-by-step progress spanning several decades of continuous improvement. The popular myths, each evolving from the compulsion to find an easy way to success, have caused many companies to detour from the path of hard, dedicated work. Sadly, their alternative paths have delayed achievement of the potential improvements. Several such myths -- even today -- are considered to be the sacred cows of "World Class Manufacturing." The author takes great glee in occasionally giving these sacred cows a not-so-subtle kick.
Manufacturers worldwide have listened to a confusing array of reasons for the emergence of Japan as an industrial superpower Initially, far too much emphasis was placed on "cultural" issues. Researchers such as Dore devoted entire books to analyzing the cultural differences between Western and Japanese factories. And while these cultural issues are not completely unimportant, the first order of priority should be to focus on the easiest, fastest opportunities for improvement. Dore failed to note critically important hardware (tooling and equipment) differences such as fast setup (changeover) and poka-yoke (fail-safe) production methods. These low cost methods can be rapidly implemented, whereas changing cultural factors may require years. Eventually, however, initial studies led to a consensus that statistical quality control and quality control circles must have been the twin panaceas for solving deficiencies in productivity and quality. Unfortunately, these perceptions are passé. Statistical quality control advocates usually focus on the importance of maintaining various quality charts. Where applied with vigor, charts are found in profusion all over the factory. Shingo, the famous Japanese consultant, once told the president of an American company: "But these charts are like government statistics that tell you how many people died of cancer...posting them is no more than displaying post mortem certificates." He then proceeded, without charts and in a few minutes, to design a solution to one of the company's most persistent quality problems. As previously mentioned, state-of-the-art industry leaders have moved far beyond the perceived need for statistically sampling either products or processes to identify and solve problems. Today's best manufacturers design and produce perfect quality products and components, thus obviating the need for applying statistical techniques to the ongoing production process.
Another false and dangerous perception has been that management's highest priority should be increased spending on new state-of-the-art technology, commonly thought of as factory automation. For example, all but a few manufacturing executives in the world have seen a picture or film of a robot body-welding line like the one in Exhibit 1-2. Before people begin ooh-ing and ah-ing over such examples of advanced, state-of-the-art automation, they should note that process simplification could have reduced the line length, and thus the size of the factory, by as much as 50 percent. They see robots standing shoulder-to-shoulder, as densely as possible, working at top speed. What they fail to see as readily is that the factory designers fell into a common trap. Having been accustomed to human welders, they designed the line as though the robots had the same needs as humans. They do not! Robots do not need to stand on the floor. They are perfectly capable of "standing" on the ceiling and in holes, perhaps doubling the density of work on the line and cutting not only the length of the line, but also the part of the building occupied by the line, the time to weld a body, and the number of units in work-in-process inventory. In addition, the smaller physical area of each robot's work assignment should have reduced the size, complexity, and cost of the robots themselves. Programming each of the robots should also have been much simpler, since its part of the process should have been approximately one-half as complex.
While it is true that many factories have been penny wise and dollar foolish when it comes to upgrading processes through purchases of new equipment, far too little attention has been paid to the multiplicity of opportunities to achieve the "biggest bang for the buck" -- that is, making low cost improvements to existing machines and equipment. Such low cost improvements have been proved capable of significantly increasing productivity and production capacity while conserving capital for the invention and acquisition of entirely new processes. The alternative to low cost modifications of present machines and tooling -- massive investment in a few technologically advanced machines or processes -- can yield results for only a small percentage of a factory's operations since few companies could afford to replace all existing equipment in less than twenty years at best.
Another persistent myth concerning Japanese success is that the Japanese have been willing to produce new products, at a loss, for a long time, in anticipation of long-term profitability. Critics of Western manufacturers have been beating them about the head and shoulders for placing short-term profitability ahead of investments that will first begin to produce profits in future years. Of course, although true in many instances, the whole notion that investments in improvements must always be huge and must always detract from short-term profitability is nonsense. Every improvement project can be planned in such a way as to begin paying for itself in the short term. To achieve this requires only that executive management make it a condition for designing and implementing improvements.
The most astute observers of Japanese methods have seen that factory equipment can be used indefinitely, if it is continuously improved by modification, is well maintained, and is periodically rebuilt when cumulative wear has caused general deterioration in its performance. Less experienced persons have seen the most modern of factories, with completely new equipment, and have failed to realize that they have obviously been put into operation to produce new product lines or to meet increases in sales volume that exceeded the company's older existing plants' capacities. Every major Japanese company has several factories, all of which vary in construction date and equipment age. In the past, the average age of equipment in the Japanese plant was much less than in the factories of Western counterparts. This was mistakenly attributed to higher levels of spending for new technology rather than the real reason, which is new and increased demand.
Yet another erroneous perception of some Western industrialists has to do with the myth of equipment flexibility. Product changes are the bane of every manufacturer. When the product is changed, or if there is a change in the mix of products sold, the process must also be changed, and/or its capacity must be revised. The myth of flexibility is that a machine or a number of machines can be designed and manufactured in a way that provides the flexibility to produce any product or product mix. In reality, flexible machine centers and flexible machine systems are rarely flexible since they are usually most economically and physically appropriate for a specific size range, set of shape characteristics, and necessary machining operations. Further, the presumed flexibility of the machine or system is almost always provided by a design based on using a single cutting tool at any one time. Contrasted to the conventional transfer line or multiple-spindle machines, the flexible machine or system is distressingly slow.
The equipment used by most factories, if adapted to a product and continuously modified to achieve perfect quality and superior productivity, will determine the cost of production, and hence the competitiveness of the company. Therefore, the development of a long-range plan for the purchase of new equipment and for upgrading existing equipment should be the core of every company's strategy for achieving superior manufacturing.
MANUFACTURING NETWORK: THE GLOBAL SUCCESS STRATEGY
The famous kanban system is widely understood to be a vehicle for triggering shipments from vendor to customer. However, most researchers have failed to see and understand the requirement systems that work in harmony with kanban to broadcast the latest requirements to the network of suppliers at all levels of the manufacturing chain. Kanban (including electronically transmitted kanban) is an invaluable tool for triggering shipments between factories. However, each factory in the network needs a requirement schedule with which to schedule the capacity necessary to support the latest tempo of production.
The manuscript of the author's last book contained a statement that seemed too radical to the editor. The statement was that we should be able to reduce the cost of virtually any product by as much as 50 percent by implementing all of the improvements that are waiting to be designed. At the time, the author deleted the reference rather than delay the publication by taking the time to explain why this should be possible. The largest roadblock to achieving such an ambitious goal would naturally be that purchases are 50 to 60 percent of the cost of most companies' products. Thus, if in-house costs were slashed by 50 percent, over 75 percent of the original cost would be untouched. This being the case, no single company would be able to cut its product costs in half. Thus it is obvious that improvement efforts must encompass vendor operations as well as the operations of other company factories that are part of the manufacturing network. The "pipeline" of supply, from the lowest level in the supply chain to end customer, is the arena in which the most work remains to be done; it is also the area that holds the greatest potential for improving the cost of manufactured products. Initial pipeline projects have clearly demonstrated the impressive magnitude of improvements just waiting to happen in every corner of the world. For example, Nabisco's operations in Venezuela reduced the time and inventory in the pipeline by 30 percent in the first year of the project. The factory's contribution to this improvement sprang mainly from drastically slashing the time required to change production on cracker and cookie lines from one product to another. Samples of Nabisco's low cost line modifications are included in Chapter 8.
Superior performance of all factories in the pipeline makes vastly improved systems a paramount priority. The lightning response time of the pipeline cries out for corresponding lightning-fast transmission of the latest requirements through all levels in the network of vendor and company factories. Such systems, for many companies, will do even more to reduce pipeline inventories and slash lead times than will factory improvements. Nor do such systems need to be complex and costly. As discussed later, a short-term, manual transcription of requirements from computer output into vendor schedules permitted Harley-Davidson to get revised schedules to their first-tier suppliers in a few hours. Although better, faster schedule communication will provide immediate and substantial benefits, it will take considerably more time and numerous operating improvements to achieve anywhere close to the 50 percent cost reduction. In fact, the author believes that the effort will take most companies at least five to ten years. Therefore, because it will take so long to accomplish, will have such tremendous payback, and will require the cooperation and participation of so many company and vendor factories, developing and maintaining a strategic plan for its eventual achievement is of utmost importance. So much so that no company should be without such a plan toda
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