PRODUCTION AND OPERATIONS MANAGEMENT

OBJECTIVES
Introduction to Production Function and Operations Management Mass Production Approach Toyota Production System (TPS)
Approach Supply Chain Management

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

HENRY FORD
Introduced Moving Assembly Line: Dramatically Reduced Manufacturing Costs While Delivering Consistent, Low-Priced Product
Factory based on Chicago Meat Cutting Plants

FORD MODEL T
First Produced: October 1908

By 1927, 15,000,000 Produced Any Color so long as its 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 Ts 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

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 Fords 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 wont Eat his Supper, Hes so done out. Cant it be Remedied? That $5-aday 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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TOYOTAS ORIGINS
Toyoda Automated Loom Works
1902 Modification: Loom Stopped Automatically if Thread Broke or Spool Empty - Signal for Attention Result: No Waste from Defective Work and Lower Production Costs
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TOYOTAS ORIGINS
During WWII, Toyoda became Toyota and manufactured Motorcycles and Delivery Trucks

After WWII, Japanese Industry needed to re-build

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TOYOTAS ORIGINS

1956 Taiichi Ohno went to US to study Fords Manufacturing Facilities Found Mass Production Principles not Applicable: Scale of Japanese Markets Desire for Product Variety Unable to Afford Resources and Inventories
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TOYOTAS ORIGINS
Before returning to Japan, Ohno went to an American Grocery Store
Discovered Production and Operation Methods that Were Linked to Customer Actions: Inventories Replenished by Sales (PULL Strategy) Delivered Product Variety and Scale Minimized Waste

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TOYOTAS 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.

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TOYOTA PRODUCTION SYSTEM

KANBAN - Downstream
Demand drives Upstream Activity (Pull Strategy) Orders flow Up System, not from Top-down Only what is Needed is Ordered and Produced

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TOYOTA PRODUCTION SYSTEM ANDON Work Stops when Problem

Encountered Counter-measures taken to Cure Cause, Not re-work Defective Result. Authority delegated to Production Team Production and Problem-solving Functions combined. No Special Trouble-shooting Teams
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TOYOTA PRODUCTION SYSTEM Result of TPS is Just-in-Time Inventory System Comes from Systems Operation, Not a Requirement of It: Element of Waste Management Philosophy JIT relies on Supplier Relationships that Integrate Inventory Arrivals and Production Needs JIT depends on Mutual Commitment of Toyota Loyalty and Supplier Performance

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TOYOTA PRODUCTION SYSTEM

Why Hasnt TPS Been Universally Adopted?

Equipment Transition Costs:

Short Turnover Times (High Variety) combined with High Quality Different Management Paradigm: Empower Assembly Line Workers to Stop Production and Order Processcorrecting Counter-measures
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Worlds Second Largest

Manufacturer of Automobiles About 240,000 Employees Produces a Vehicle about every Six Seconds Consistently Profitable GM: $1.1 Billion Quarter Loss

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SUPPLY CHAIN MANAGEMENT

A supply chain is a system through which organizations deliver their products and services to their customers."
(Poirier and Reiter, 1996)

"A supply chain is an integrated process wherein raw materials are manufactured into final products, then delivered to customers (via distribution, retail, or both)."
(Benita, 1999)
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SUPPLY CHAIN MANAGEMENT

Supplier
Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier

Supplier Supplier

Supplier

Customer Supplier Supplier Supplier Customer Supplier Supplier Corporation Customer

Supplier
Supplier Supplier Supplier

Supplier Supplier

Supply Chain

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SUPPLY CHAIN MANAGEMENT

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