Pushing Production To New Heights

Sept. 21, 1998
Today's leading-edge manufacturers put the accent on time, flexibility, and delivering what the customer really wants.

As the 21st century approaches, many manufacturers find themselves in a state of transtition--at some stage of metamorphosis from the traditional mass-production model to a more flexible and customer-responsive opertations environment. However, the extent of the change--and the goals being pursued--depend on the nature of the industry, the type and mix of products produced, the competitive climate, and the perceptions of how rapidly that climate is likely to change in the future.

There never has been a single model that has neatly described every type of manufacturing operation. Tactical decisions that made sense for high-volume repetitive manufacturers, for example, weren't necessarily applicable to engineer-to-order companies or firms with a highly variable product mix. What worked for discrete manufacturers might not address issues common to process industries. But across a wide spectrum of industry -- especially in discrete-products sectors -- the emphasis today is on implementing "lean" manufacturing principles. A decade or more ago, the early adopters among operations executives called it "JIT manufacturing" or "continuous-flow production."

At the top corporate echelons, the level of interest increased in the 1990s after a study team at Massachusetts Institute of Technology (MIT), Cambridge, described the emerging competitive model as "lean manufacturing." For years senior executives had talked about creating organizations that were lean and mean, but today the term "lean" implies much more than just trimming headcount. It has become an umbrella term for a variety of initiatives based on both engineering analyses and common sense -- and aimed at eliminating wasteful, non-value-added activity from production and support processes.

In essence, the message is: Why devote manpower and other resources to things the customer would not willingly pay for? In implementing lean principles, manufacturers have:

  • Sought to squeeze time out of both production and product-development cycles -- and, more recently, out of front-office processes such as order processing and configuration.
  • Applied advanced information technologies to ensure that the right information reaches the right people at the right time -- to improve the synchronization of activities and eliminate as much guesswork as possible.
  • Realized that making the transition to the new manufacturing environment requires the commitment -- and the brainpower -- of front-line employees. Since they're on the firing line where production-related problems occur, they're often in the best position to recognize and implement solutions.
  • Begun to shift from forecast-based "push" systems -- making things they hope will sell -- to flexible demand-driven "pull" systems geared to making products for which they have customer orders in hand. Demand-based systems tend to improve cash flow by reducing the amount of unnecessary inventory in the pipeline, in addition to avoiding costs associated with obsolete inventory.
  • Learned to partner with key suppliers to shrink purchased-materials leadtimes and improve the flow of incoming parts and materials -- giving new visibility to the importance of "supply-chain management."

In the end, it is all about meeting ever-increasing customer demands and expectations -- about price, quality, delivery, and suitability. And since the marketplace today often puts a premium on satisfying individual user needs, many companies now are tinkering with, or at least contemplating, various techniques for developing "mass customization" capability. Where the traditional mass-production model -- often associated with Henry Ford's early auto-assembly lines -- emphasized cost reduction through economies of scale and "one-size-fits-all" product uniformity, many manufacturers are now striving for a competitive edge by offering the ability to configure or even custom-design products to suit buyers' unique tastes and needs.

And they are employing the latest information-technology systems, including Internet-based applications, to develop this capability at affordable prices. "Ultimately," observes Richard K. Lester, director of the Industrial Performance Center at MIT, "industry wants to produce customized products, tailored to individuals -- at a mass-production price."

On the whole, increased attention to world-class performance has delivered broad-based productivity gains. In the U.S. manufacturing sector, productivity climbed nearly 3% a year from 1990 to 1996 -- about three times the productivity growth rate of the economy as a whole, Lester points out in The Productive Edge: How U.S. Industries Are Pointing the Way to a New Era of Economic Growth (1998, W.W. Norton & Co.).

"Some people say that the reason for the productivity improvement is all the downsizing and outsourcing that has been taking place," he tells IW. "But if you look at the productivity data for the last 12 years -- from 1985 to 1997 -- you'll see that, although employment in manufacturing did decline about 4%, the productivity level improved by 44%. That means that the bulk of the gain didn't come from getting rid of people. Instead, innovation has been a big part of the productivity improvement in manufacturing."

The achievements, however, have been far from uniform. For example, IndustryWeek's 1997 Census of Manufacturers survey -- which collected data from nearly 2,800 American production facilities -- found that while 7.4% of the plants had boosted productivity by 41% or more during the previous five years, nearly 50% reported gains of less than 11% for the same period.

Nonetheless, a sizable majority of the respondents reported either "some" or "wide" adoption of such practices as quick-changeover methods and cellular manufacturing.

Clearly, the variation in improvement levels indicates that not everyone is at the same point on the learning/success curve. Still, when company executives take the time to glance backward, they're often amazed at how much their operations have changed.

Read more about operations best practices in the following articles:

One Company's View: Golf-equipment manufacturer cuts strokes off its process.

New Attitudes, New Structures: Mass-production methods undergo a transition.

Striving For Optimism: Plants adopt new systems and strategies to meet new market demands.

Supply-Chain Strategies: Let the information flow.

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