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Transcript of An Introduction to Lean Production. Ideas No new idea springs full-blown from a void New ideas...
AUTOMOTIVE INDUSTRY
An Introduction to Lean Production
Ideas
No new idea springs full-blown from a void
New ideas emerge from a set of conditions in which old ideas no longer seem to work
Automotive Industry
Origins 1880 and Craft Production Transition to Mass Production 1915 Ideas of Lean Production 1950s Lean Production Systems 1960s and
70s
Car Manufacturing History 1894 England – Buying a car (Henry Ellis:
member of Parliament) No car dealership Can’t contact an Automobile Manufacturer Need to visit Paris and find a machine tool
company Panhard et Levassor (P&L) at the time
was the world’s leading car company Commission an Automobile
P & L (1890’s)
Could build several hundred automobiles per year (one of the leading manufacturers)
Was primarily a manufacturer of metal-cutting saws (rather than automobiles)
It was a classic craft production system
P&L Workforce Skilled craftspeople who carefully hand-built
cars in small numbers Understood mechanical design principles Understood thoroughly the materials which they
used They were their own bosses Often worked as independent contractors within
P&L Sometimes worked as independent machine
shop owners with whom the company contracted for specific parts
Panhard and Levassor’s responsibilities Talking to customers to determine the
vehicles exact specifications Ordering necessary parts Assembling the final product
Craft Production
In mass production, cost per unit falls as production volume increases
In craft production, if the company tries to make 200,000 identical cars each year, the cost per car will not decrease below the cost per car of making ten
Machine tools could not cut hardened steel in 1890s and they did not use a standard gauging system (can’t create identical cars)
Craft Production
Different contractors used slightly different gauges to make parts
They put the parts in the oven to harden them for heavy use
Result? Parts warped and had to be reworked
Craft Production
Parts arrived at P&L were approximations
Workers at P&L had to file them until they fit together perfectly
Part after part was filed and assembled and filed and assembled until the automobile was complete
This is called “dimensional creep” Therefore, no two cars were the same
1890 Customer focus They could not mass produce so they did
not try They tailored each product to precise
desires of individual buyers Primary Focus: Speed and customization
(special body) Why not ease of maintenance, driving
ease, or cost? Wealthy customers who employed
chauffeurs and mechanics
P&L Customer Wanted a custom body and wanted the
transmission control on the left side (more comfortable, all steering wheels in the middle)
Ellis test drove it on the streets of Paris (every car was a prototype)
After the test drive, if everything worked to satisfaction, the customer would take the car
Would take the car many times from London to Paris for adjustments at P&L
Ellis in England
Was the first person to drive a car in England
Could travel 56 miles in only 5 hours and 32 minutes (average speed of 9.84 mph)
Speed limit was 4 mph for non-horse drawn carriages
Ellis changed the law to 12 mph
Craft Production Highly skilled workforce in design, machine
operations and fitting Most workers progressed through an
apprenticeship in hope of running their own shops Organizations were extremely decentralized
(although centralized within a single city) The owner coordinated everyone involved Used general purpose machine tools Very low production volume 1000 or fewer per
year Custom made vehicles (50 or fewer were made to
the same design
By 1905
Hundreds of similar companies were producing companies in a similar way
Difficult to create a monopoly in this situation (large market and difficult to produce more than 1000 per year)
Craft Production Today
Craft Production got replaced by mass production after World War I
What is the status of Craft Production today? Aston Martin: produces 1 car per working day Remains small and exclusive, with high prices In its body shop, skilled panel beaters make
the aluminum body panels by pounding sheets of aluminum with wooden mallets
Although they have to ally themselves with technological giants (Aston Martin – Ford)
Mass Production
Henry Ford found a way to reduce costs while increasing product quality with mass production
Craft Production offered no systematic testing, low durability and low reliability
1905 Customer
Primary Focus: maintenance, driving ease, and cost
Everyone wanted a car but could not afford a chauffeur or a mechanic
Customer wanted a car that they could drive themselves and fix themselves and that they could afford
Model T (1908)
Was his twentieth design over a five-year period
Was designed for manufacture AND user friendly
No need for a chauffeur No need for a mechanic Lower costs Result? Even more demand
Key to Mass Production
What was it? It was not a moving continuous
assembly line It was the complete and consistent
interchangeability of parts and the simplicity of attaching them to each other
The latter reasons were the manufacturing innovations that made the assembly line possible
How did Ford achieve interchangeability By using the exact gauging system for
every part all the way through the manufacturing process
Result: huge payoff in the form of savings and assembly costs
No one had figured out this cause-and-effect
Ford benefited by advanced to cut pre-hardened metals, which also solved the warping problems
Ford Innovations
Innovative designs that reduced the number of parts needed
Innovating designs that made the parts easy to attach
Simplicity, Interchangeability, and ease of attachment gave Ford a tremendous competitive advantage
Ford saves money
With such innovations, how can Ford save money?
He eliminated skilled fitters (a huge number in the labor force who were paid high salaries)
Beginning of Assembly Line 1903 – Assembly stands on which a
whole car was built by one fitter 1908 – Stationary Stands: with the
introduction of the Model T, a Ford assembler’s average cycle task was 514 minutes (8.56 hours). Each worker would assemble a large part of the car before working on the next. They had to retrieve the necessary parts, bolt them in place and move to the next car.
Beginning of Assembly Line Ford made the process more efficient by
delivering parts to each worker’s station (assemblers could remain at the same spot all day)
Summer 1908 – Ford finally achieved perfect part interchangeability and decided a worker would perform a single task and move from vehicle to vehicle around the assembly hall.
The cycle time for the average Ford assembler was cut from 514 minutes to 2.3 minutes
Beginning of Assembly Line Result: increase in productivity Why? Complete familiarity with a single task All filing and adjusting of parts had been
eliminated (all parts fitted every time).
Beginning of Assembly Line NEXT STEP: 1913 Detroit Highland Park Plant:
Continuous Flow Assembly Line Cost $3,500 Reduced cycle time from 2.3 minutes to
1.19 minutes (no one walking around, less jams of faster workers overtaking slower workers)
Model T Introduced 1908 already cheaper than
competitors 1920 Production: 2 million per year Cost, 2/3 of the cost in 1908 Designed for ease of operation and
maintenance (Had toolkit and 64-page owner’s manual to solve the 140 most common problems)
Competitors were amazed as much by the design to repair-ability as by the assembly line
Highland Park
Workers = 7000 Previously were farmers or new to the
USA (spoke more than 50 languages) Many of them could barely speak
English Took division of Labor to ultimate
extreme
Laborer’s duties before/after Before: skilled fitter in 1908 Craft Production gathered all necessary parts obtained tools from the tool room repaired them if necessary performed fitting and assembly job for the
entire vehicle checked over his work sent the completed vehicle to the shipping
department
Laborer’s duties before/after After: 1920 Mass Production One task – put two nuts on two bolts Or perhaps attach one wheel to each
car Didn’t order parts Didn’t understand what the workers next
to him were doing (all male until WWII) Didn’t even speak the same language
New Positions Industrial Engineer In charge of what everyone was doing and how
it all came together Production Engineer In charge of arranging the delivery of parts to the
line Housecleaning Workers In charge cleaning work areas Skilled Repairman In charge of refurbishing the assembler’s tools Rework Men Retained the fitter’s skills
Separation of Labor
Implications? Assemblers required only a few minutes of
training Assemblers were relentlessly disciplined
(working too slow) Assemblers were just as replaceable as the
parts on the car Foreman (formerly in charge of a large area
of the plant) became a semi-skilled checker
How did they correct errors? Assemblers didn’t volunteer any
information on operating conditions This was the job of the Industrial
Engineer or the Foreman who reported suggestions that went up the chain of command for approval on corrections
Jobs born: repairman, quality inspector, housekeeper, rework specialist, industrial engineer, and foereman.
Automation
How does Automation influence this situation?
Reduced the need for assemblers Made these other jobs more prominent
Further Specialization Industrial Engineers: specialized in assembly
operations or in operations of the dedicated machines making individual parts
Manufacturing Engineers: specialized in design of assembly hardware or in designing specific machines for each special part
These workers manipulated ideas and information but rarely even entered the factory. They replaced the work of the skilled-machine-shop owners and old-fashioned factory foreman who did it all.
The mission was to design tasks, parts, tools that could be handled by unskilled workers
Career Paths before/after Before: skilled craftsman career path led to
ownership of the business After: assemblers career path didn’t lead
anywhere (maybe foreman if lucky) After: Industrial engineers and Manufacturing
engineers could climb the ladder RESULT for Assembly workers? No company loyalty RESULT for Engineers? No company loyalty (company hopping trying to
advance within their careers)
Cars become more complicated
What happens to the Engineer’s job? There are more and more subspecialties The head of engineering has less and
less to say to engineers with subspecialties
Result? Massive disfunctions
Vertical Integration Bought engines and chassis from the Dodge
brothers Took all functions in-house by 1931 Why? Ford had perfected mass production before
his suppliers had, so he thought he could save money
He could build parts with lower tolerances and tighter delivery schedules
He did not trust anyone but himself
Influence of Gasoline on World Market Model T was considered small by American
standards and oil discoveries in East Texas pushed the gasoline prices down
European countries had narrow streets, crowded cities. Model T was considered big. Also, they could not find any oil in Europe, so European countries began to heavily tax gasoline in the 1920’s to reduce Ford’s imports
Ford did not want to supply a smaller car
Model T
Ford built 2.1 million Model T chassis, a record that stood until the VW Beetle matched it
Enter Sloan and GM
Got GM in bad shape Inherited GM with 12 car companies
with lots of overlap Goal: to improve mass production and
oust Ford as industry leader and provide a system to run all companies effectively
Sloan Strategy He created decentralized divisions managed “by
the numbers” from a small corporate headquarters
Manufacturing operations in Germany, Britain and other countries became self reliable.
Sloan and senior executives oversaw each of the company’s separate profit centers
Five car divisions, and divisions making components (Delco – generators, Saginaw – steering gears, Rochester – carburetors)
They demanded detailed reports at frequent intervals on sales, market share inventories and profit and loss and reviewed capital budgets.
Sloan Strategy If the number showed that performance was
poor, he would change general manager He developed a five model product from
cheap to expensive from Chevrolet to Cadillac to accommodate potential buyers from every income level throughout their lives
Balanced conflict between need for standardization to cut manufacturing costs and model diversity for huge range of customer demand
Sloan Strategy
Standardization: many mechanical items such as pumps and generators across company’s entire range
Model diversity: altered the outside of each car every year while keeping some “hang-on” features like air conditioning, radios, automatic transmission, which all could be installed in existing body designs
Sloan ideas
His ideas were great and innovative in marketing and management
However, they did nothing to change the feeling of the workers that they were just replaceable parts on the shop floor
So in the shop floor, things went from bad to worse
Ford shop floor
Ford didn’t care that he had a huge turnover
He found himself with such high efficiency that he was able to double wages ($5 per day) and dramatically slash prices
Drove his craft-based competitors out of business
Result of Higher Wages THE GOOD:
Turnover slowed down Workers stopped daydreaming about some
day going back to the farm Avoided union problems THE BAD Slowly, the workers came to realize that this
was going to be their life’s work Employment conditions became less and
less bearable
Car Market
Turned out to be extremely cyclical Workers were considered a variable
cost Therefore, workers were turned away at
the first sign of a downturn in sales Then came the Great Depression and
Union movement was fully in place
United Auto Workers Issues of UAW: seniority and job rights Together with cyclical nature resulted in? Seniority and not competence became the
determinant on who will stay and who will go home All jobs paid roughly the same and some were
more interesting than others Seniority and not competence decided who got the
interesting jobs Result of these and other work rules: Inefficiency (as workers fought for equity and
fairness)
State of Mass Production in the 1950’s Ford factory practice Sloan marketing and management
techniques Organized labor Mass Production in its final mature form USA dominated the world market The system marched from victory to
victory Every other industry copied this model
1955
7 million cars were sold in the US Sloan retired after 34 years at GM Big Three: Ford, GM and Chrysler Big Three accounted for 95% of all sales Six models accounted for 80% of all sales Craft production was dead in the USA Downhill slide began (Glory is Fleeting) Mass production became commonplace in
other countries
Didn’t the Europeans have the same information?
Before WWI: Andre Citroen (Citroen), Louis Renault (Renault), Giovanni Agnelli (Fiat), Herbert Austin (Austin Motor Company), William Morris (MG) visited Highland Park
Henry Ford was very open in discussing his techniques with them
Information was available in his mass production facilities in Europe as well
Why didn’t the world catch up earlier? Strong attachment to craft production
traditions VW and Fiat attempted mass production
before WWII, but had to be put on hold So it was not until the 1950’s that the
world could catch up (30 years after Ford made it commonplace in the USA)
1950’s Europe
VW, Renault, and Fiat were producing numbers comparable to Detroit
Other famous craft production firms led by Daimler-Benz (Mercedes) also went with mass production
Americans were specializing in standard size cars and pickups
Europeans were specializing in compact, economy cars (VW Beetle) and the sporty fun to drive (MG).
1970’s Luxury Car America: 5,000 pound carbureted, straight-
axle, body on chassis Cadillac Europe: 3,500 pound fuel-injected,
independent suspension, unibody Mercedes America: air conditioning, power steering,
stereos, automatic transmissions, massive and smooth engines
Europe: front-wheel drive, 5-speed transmissions, high power to weight ratio engines
European conditions
Lower wages Different cars Europe racked up victory after victory
from mid 1950’s to mid 1970’s
America vs. Europe
American manufacturers could have won if the price of gas would have stayed low (as they did until 1973)
Energy prices soared making poor Americans want economical cars
Rich Americans wanted something fun to drive
Detroit’s “hang on” features (Air Conditioning and Stereos) were easily added to European cars
Problem with European manufacturers European auto plants were exact copies of the
American plants They were even less efficient and less accurate They even copied the immigration employment
of America, getting cheap labor from Turkey, Yugoslavia, Sicily, Morocco and Algeria.
Once these workers realized that this was their life’s work and not financial independence to go back home, similar problems began to arise.
How did Europe cope with the problem? Increasing wages Decreasing weekly hours of work It got so bad that European workers
found mass production to be so unrewarding that the first priority of negotiations continued to be to reduce hours spent on the plant
This would have gone one forever in the USA and Europe if it were not for JAPAN
1970’s Customer
Primary Focus: fuel efficient, maintenance free, reliable, great quality
With more complicated cars and technology, it was difficult for the owners to repair their own car
Enter Japan
Japanese were starting a new way of doing things called Lean Production
The Rise of Lean Production In 1950 there was a young engineer by
the name of Eiji Toyoda who visited Ford’s Rouge plant in Detroit for three months
His uncle Kiichiro Toyoda had visited Ford in 1929
Toyota Motor Company had been founded in 1937 (not Toyoda because it means “abundant rice fields”)
1936 contest, 2700 suggestions and Toyota won (which has no meaning)
Start of Toyota
Attempted to build passenger cars in the 1930’s
Build trucks instead with pressure from the government
Used craft methods 1949 – collapse in sales forced to
terminate a large part of the workforce Led to a huge strike and Kiichiro
resigned
Early Toyota Numbers
By 1950, the Rouge Ford facility was producing 7,000 cars per day
From 1937 to 1950 Toyota Motor Company had produced…….
2,685 cars total
Eiji Toyoda
Not an average engineer (in skill or ambition)
Studied every inch of the Rouge plant (at the time the largest and most efficient manufacturing facility in the entire world)
He wrote back “I think there are some possibilities to improve the production system”
Eiji’s Ace: Taiichi Ohno
They did not just want to copy and improve the Rouge facility they wanted to drastically change the production process. This involved some risk.
Why would they want to reengineer the production process?
Ohno concluded that mass production could never work in Japan
Born: The Toyota Production System
Toyota in Nagoya, Japan
Composed mostly of former farmers Today it is the most efficient and highest
quality producer of motor vehicles in the world
After the WWII, Toyota went into full-scale car and commercial truck manufacturing
Problems Toyota faced
Domestic market was small Domestic market demanded a wide range
of vehicles (luxury for government officials, large trucks to carry goods to the market, small trucks for farmers, small cars for Japan’s crowded cities and high energy prices)
Toyota workers did not want to be treated like variable cost or interchangeable parts
Problems Toyota faced American occupation introduced new labor laws
which strengthen the position of the workers and conditions of employment
Management could not lay off employees easily Unions positions gained strength No guest workers (temporary immigrants) Economy was struggling, so purchasing
technology from the West was impossible Outside world wanted to establish operations in
Japan and were ready to defend their markets against Japanese exports
Government Response
Prohibition on direct foreign investment in the Japanese motor industry (critical for Toyota and others in Japan)
High tariffs barriers In global competition: Low wages would
have been only a temporary advantage (since the Japanese cars would not offer anything new in production techniques and limited competition at home)
Ohno
Knew that Mass production was not the answer
Knew that Craft-production would not be correct to use in producing a mass-market product
Ohno Example Nearly all motor vehicles are produced by
welding together 300 metal parts stamped from sheet steel (same as Ford’s Model A)
Some craft-producers (Aston Martin) cut sheets of metal (usually aluminum) to a gross shape and then beat these blanks by hand on a die to their final shape
Any producer GM, Ford, Porsche that plans to produce more than a few hundred cars a year starts with a large roll of steel
Ohno Example They run this sheet through an automated
“blanking” press to produce a stack of flat blanks slightly larger than the final part they want
They then insert the blanks in massive stamping presses containing matched upper and lower dies.
When these dies are pushed together under thousands of pounds of pressure, the two-dimensional blank takes a 3-D shape of a car fender or a truck door as it moves through a series of presses
Ohno Example
The massive expensive Western press lines were designed to operate at about twelve strokes per minute, three shifts a day, to make a million or more of a given part per year.
However at this time, Toyota only produced a few thousand vehicles per year.
Dies could be changed so that the same press line could make many parts
Ohno Example Problem: slight misalignment produced wrinkled parts.
Major misalignment and the sheet metal could melt into the die (extremely expensive and time consuming)
Detroit – die changes were assigned to specialists who took a full day to do the change. A better way was to just dedicate presses to a specific part
Ohno did not have this luxury Ohno (and Shigeo Shingo) developed a die-changing
technique using rollers to move dies in and out of position and simple adjustment mechanisms
Result: can change dies every two or three hours instead two or three months
Ohno Example
Because new techniques were easy to master and production workers were idle during the die changes, Ohno hit upon the idea of letting the production workers perform the die changes as well
By 1950’s Ohno reduced the time to change dies from one day to three minutes and eliminated the need for die-change specialists
Ohno Example Result: small batches instead of enormous lots Result: reduce inventory that mass production
requires Result: huge inventory savings by reducing
carrying costs Result: making small batches caused stamping
mistakes to show up early and instantly Result: those in stamping became much more
concerned with quality Result: eliminated waste in large number of
defective parts
Ohno Example
With American manufacturers defects were discovered long after manufacture
Result: great expense in fixing Also, they needed large number of
inventories Result: high carrying costs
Ohno Example
Ohno needed both extremely skilled and highly motivated work force
If workers failed to anticipate problems before they occurred and didn’t take the initiative to devise solutions, the work of the whole factory could easily come to halt
Holding back information, knowledge and effort (typical in mass production) would lead to disaster
Toyota employees
When Kiichiro Toyoda resigned, ¼ of the workforce was dismissed, but the remaining employees received three guarantees
1.- lifetime employment 2.- pay steeply graded by seniority rather
than by specific job function 3.- pay tied to company profitability through
bonus payments This compromise still remains a formula for
labor relations in the Japanese auto industry
Toyota employees Result: Workers would suffer a large loss of earnings if
they started over at the bottom of the seniority ladder with another company
A 40 year old worker would get much more salary than a 25 year old worker doing the same job. If he left, he would start at zero seniority at another company
Result: this made the workers a fixed cost (instead of a variable cost like in American manufacturers)
Toyota employees
Agree to be flexible in work assignments Agree to promote the company interests
by initiating improvements (rather than responding to problems)
Now that the workers are a fixed cost and are in the company for a very long time it makes sense to enhance their skills and their potential to the maximum
Back at Ford Assembly line workers performed one or two tasks,
hopefully without complaints Forman made sure that line workers followed orders These orders were devised by the Industrial Engineer IE was also responsible for process improvement Special repairmen repaired tools Housekeepers cleaned the work area Special inspectors checked for quality Rework specialists fixed quality problems at the end of
the line Utility workers filled the spot of the workers who did not
show up each morning
Manager Culture at Ford Managers were graded on two criteria: Yield: the number of cars produced in
relation to the scheduled number Quality: out-the-door quality after vehicles
had defective parts repaired Managers knew that problems could be
fixed at the end of the line in the rework area
Result: DO NOT STOP THE LINE!
Move the Metal Mentality Letting cars go down with misaligned
parts was OK since it could be fixed at rework
However minutes and cars lost only could be made up with expensive overtime
Ohno’s opinion of Detroit Muda: wasted effort, materials, and time None of the specialists beyond the assembly
worker was adding value to the car The workers could do most of the functions of the
specialists, but much better because of their direct acquaintance with the conditions of the line
He could not believe that the assembly worker had the lowest status of the factory
He could not believe that the assembly worker was told that they were only needed because “automation could not yet replace them”
Ohno’s Team Experiment
Forming teams with a team leader instead of a foreman
Teams were given a piece of the line (assembly steps) and told to work together on how best to perform the necessary operations
Team leader would do assembly tasks and coordinate the team
Team leader would fill for an absent team member
Ohno’s Team Experiment
Gave the team the job of:HousekeepingMinor repairQuality checking
He asked the team to suggest ways collectively to improve the process
This continuous improvement process is called Kaizen in Japanese
Rework at Ford Mass production was passing errors to keep the line
running which caused errors to multiply endlessly Every mass producing worker could think that errors would
be caught at the end of the line and that he would be disciplined for any action that caused the line to stop
The error could be a bad part, or a good part improperly installed. This error would be compounded by assembly workers further down the line
Once the error became embedded in a complex vehicle, an enormous amount of rectification was needed to fix it
And because the problem would not be discovered until the very end of the line, a large number of similarly defective vehicles would have been built before the problem was found
Rework at Toyota Ohno place a cord above ever work station
and instructed workers to stop the whole assembly line immediately if a problem emerged that they could not fix. JIDOKA
The whole team would come over and work on the problem
Ohno instituted a problem-solving system called “the five why’s” to trace the error to its ultimate cause. Then devise a fix so that it would never occur again
Rework at Toyota
Result: The production line was stopped all the
time and workers became discouraged Result: Experience identifying and tracing
problems and fixing them so they never occur again
Result: Errors dropped dramatically
Comparison Toyota vs. Ford Today, where every worker can stop the
line, yields approach 100% (line practically never stops)
In mass producing companies where no one but the manager can stop the line the line stops all the time. 90% yield is considered good management.
Comparison at the end of the Line Toyota: the number of reworked cars
steadily dropped to almost none. Today, there is almost no rework
Mass Production: a large number of reworked cars. Today
Percent of plant devoted to rework: 20% Percent of total hours of effort devoted to
fixing mistakes: 25%
Supply Chain Management at Toyota Coordinating efforts outside Toyota Movie: Toyota Outreach Program
Finally – Changing Market Toyota was more flexible in changing
models. Toyota keeps models in production for an average of 4 years
Big Three keep models in production for an average of 10 years