Production Development: Design and Operation of Production Systems

Production Development

Monica Bellgran • Kristina Säfsten

Production Development Design and Operation of Production Systems

123

Monica Bellgran, Dr. Haldex AB Biblioteksgatan 11 SE-103 88 Stockholm Sweden [email protected]

Kristina Säfsten, Dr. Jönköping University School of Engineering SE-551 11 Jönköping Sweden [email protected]

ISBN 978-1-84882-494-2 e-ISBN 978-1-84882-495-9 DOI 10.1007/978-1-84882-495-9 Springer London Dordrecht Heidelberg New York British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Control Number: 2009939259 © Springer-Verlag London Limited 2010 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms of licences issued by the Copyright Licensing Agency. Enquiries concerning reproduction outside those terms should be sent to the publishers. The original edition of this book was published in Swedish by Studentlitteratur as Produktionsutveckling – Utveckling och drift av produktionssystem. © Studentlitteratur, Lund, 2005 The use of registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant laws and regulations and therefore free for general use. The publisher makes no representation, express or implied, with regard to the accuracy of the information contained in this book and cannot accept any legal responsibility or liability for any errors or omissions that may be made. Cover design: eStudioCalamar, Figueres/Berlin Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

Acknowledgements

We are grateful to the following for permission to reproduce copyright material: Fig. 1.1, line drawing in Sect. 1.2.4, line drawing in Sect. 1.3.1, Fig. 5.13, Fig. 5.14, Fig. 5.15, Fig. 8.2, Fig. 8.12, Fig. 8.18, Fig. 10.7, and Fig. 12.1 are reprinted by permission from the originator Mario Celegin; Fig. 1.2 from Crossfunctional co-operation and networking in industrial settings, Royal Institute of Technology, Stockholm, Copyright © 2002 (Gabrielsson 2002) is reprinted by permission from the originator Åsa Gabrielsson; Fig. 2.2 from Theory of Technical Systems, Springer-Verlag, Berlin, Copyright © 1988 (Hubka and Eder 1988), is reprinted by permission from Springer-Verlag GmbH, Heidelberg; Fig. 2.3 from Robotics and Computer Integrated Manufacturing Vol. 3, No. 2, Decision support in design and optimization of flexible automated manufacturing and assembly, Copyright © 1987 (Seliger et al. 1987) is reprinted by permission from Elsevier; Fig. 2.7 from Från Taylor till Toyota, Studentlitteratur, Lund, Copyright © 2000 (Sandkull and Johansson 2000) is reprinted by permission from Studentlitteratur AB; Fig. 2.8 from Performance Assessment of Assembly Systems, Royal Institute of Technology, Stockholm, Copyright © 2000 is reprinted by permission from the originator Magnus Wiktorsson (Wiktorsson 2000); Fig. 3.1 and Table 10.1 from Restoring our Competitive Edge: Competing Through Manufacturing, John Wiley & Sons, Inc. New York, Copyright © 1984 (Hayes and Wheelwright 1984) are reprinted by permission from John Wiley & Sons; Table 3.2 from Restoring Manufacturing in the Corporate Strategy, John Wiley & Sons, Inc., New York, Copyright © 1978 (Skinner 1978) is reprinted by permission from John Wiley & Sons, Inc.; Table 3.4 from Manufacturing Strategy: linking competitive priorities, decision categories and manufacturing networks, Production Economic Research in Linköping, Dissertation, Linköping, Copyright © 2002 (Rudberg 2002) is reprinted with permission from the originator Martin Rudberg; Table 3.5 from Produktionslogistik, Studentlitteratur, Lund, Copyright © 2003 (Mattsson and Jonsson 2003) is reprinted by permission from Studentlitteratur AB; Fig. 3.9 and Fig. 3.12 from Manufacturing Strategy: Text and Cases, 2nd edition, Palgrave, Hampshire, Copyright © 1985 (Hill 2000) are reprinted by permission from v

vi

Acknowledgements

Palgrave Macmillan Publishers Ltd.; Fig. 3.11 and Fig. 8.8 from Operations Management, 3rd ed. Prentice Hall, Pearson Education, Inc., Upper Saddle River, NJ., Copyright © 2001 (Slack et al. 2001), are reprinted by permission from Pearson Education, Inc.; Table 3.6 from Produktionsekomi, Studentlitteratur, Lund, Copyright © 2000 (Olhager 2000) is reprinted by permission from Studentlitteratur AB; Fig. 4.3 from Det nya bilarbetet, Konkurrensen mellan olika produktionskoncept i svensk bilindustri 1970–1990, Copyright © 1990 (Berggren 1990) is reprinted by permission from the originator Christian Berggren; Fig. 5.1 and Fig. 9.4 from Pilot Production and Manufacturing Start-up in the Automotive Industry: Principles for Improved Performance, Doctoral Thesis, Chalmers University of Technology, Gothenburg, Copyright © 1999 (Almgren 1999) are reprinted by permission from the originator Henrik Almgren; Fig. 5.2 and Fig. 5.12 from Från system till process – kriterier för processbestämning vid verksamhetsanalys, Linköping Studies in Information Science, Dissertation No. 5, Linköping, Copyright © 2001 (Lind 2001) are reprinted by permission from the originator Mikael Lind; Fig. 5.3 from Product Design: Fundamentals and Methods, John Wiley & Sons Ltd., Chichester, England, Copyright © 1995 (Roozenburg and Eekels 1995) is reprinted by permission from Wiley-Blackwell, Oxford; Fig. 5.5 from Manufacturing Systems Design and Analysis: Context and Techniques, Chapman & Hall, London Copyright © 1994 (Wu 1994) is reprinted with kind permission of Springer Science and Business Media; Fig. 5.6, Table 5.1 and Fig. 9.10 from Nyanskaffning av produktionssystem – mer än bara inköp, IVF-Rapport 99827, Göteborg, Copyright © 1999 (Johansson and Nord 1999) are reprinted by permission from the CEO Mats Lundin; Fig. 5.8 from Handbok för utformning av alternativa monteringssystem till konventionell linemontering, Chalmers University of Technology, Gothenburg, Copyright © 1981 (Engström and Karlsson 1981) is reprinted with permission from the originator Tomas Engström; Table 5.5 from Product Design and Development, 2nd ed, McGraw-Hill Higher Education, USA, Copyright © 2000 (Ulrich and Eppinger 2000) is reprinted by permission from McGraw-Hill; Fig. 5.10 from Model-based Approaches to Managing Concurrent Engineering, Journal of Engineering Design, Vol. 2, No. 4, Copyright © 1991 (Eppinger 1991) is reprinted by permission from Taylor & Francis Ltd. (http://www.informaworld.com); Fig. 5.18 and Table 5.6 from Inter-Project Learning: A Quality Perspective, Linköping Studies in Science and Technology, Thesis No. 839, Linköping, Copyright © 2000 (Antoni 2000) is reprinted by permission from the originator Marc Antoni; Fig. 5.19 from Lärande mellan projekt, In: Berggren C, Lindkvist L (eds.) Projekt, Organisation för målorientering och lärande, Copyright © 2000 Studentlitteratur, Lund, (Tell and Söderlund, 2001) is reprinted by permission from Studentlitteratur AB; Fig. 6.2 from International Journal of Production Economics, Vol. 41, pp. 335–341, Manufacturing Strategy and Capital Budgeting Process, Copyright © 1995 (Pirttilä and Sandström 1995) is reprinted by permission from Elsevier; Table 6.5 from Strategi för produktion och produktutveckling: integration och flexibilitet, Publica, Stockholm, Copyright © 1993 (Lindberg et al. 1993) is reprinted by permission from the editor Per Lindberg; Fig. 7.2, Fig. 7.3, Fig. 7.4 and Fig. 7.5 from Learning to see, Copyright

Acknowledgements

vii

© 1999–2008 Lean Enterprise Institute, Inc. All rights reserved, (Rother and Shook 2002) are reprinted by permission from Lean Enterprise Institute; Fig. 7.8 from Production System Evaluation: A Theoretical Analysis. Linköping Studies in Science and Technology, Thesis No. 638, Linköping university, Linköping, Copyright © 1997 (Öhrström 1997) is reprinted by permission from the originator Pernilla Öhrström; Fig. 8.4 from Industriell ekonomi, Studentlitteratur, Lund Copyright © 1997 (Aniander et al. 1997) is reprinted by permission from Studentlitteratur AB; Fig. 3.7 from Materialadministration och logistik: grunder och möjligheter, Liber Ekonomi, Malmö, Copyright © 1995 (Storhagen 1995) is reprinted by permission from Liber Ekonomi; Fig. 8.9, Fig. 8.10, Fig. 8.11, Fig. 8.13 and Fig. 9.9 from Produktionsekomi, Studentlitteratur, Lund, Copyright © 2000 (Olhager 2000) are reprinted by permission from Studentlitteratur AB; Fig. 8.14 from Integrerad organisationslära, Studentlitteratur, Lund, Copyright © 1995 (Bruzelius and Skärvad 1995) are reprinted by permission from Studentlitteratur AB; Table 8.7 from Control Engineering Practice, Vol. 7, pp. 173–182, Are operators and pilots in control of complex systems? Copyright © 1999 (Mårtensson 1999) is reprinted with permission from the originator Lena Mårtensson; Fig. 9.2 from Product Introduction within Extended Enterprises – Descriptions and Conditions. Linköping Studies in Science and Technology, Licentiate Thesis no. 978, Linköping university, Linköping, Copyright © 2005 (Johansen 2005) is reprinted with permission from the originator Kerstin Johansen; Fig. 9.5, Fig. 9.6 and Fig. 9.7 from Product Development Performance. Harvard Business School Press, Boston, Massachusetts, Copyright © 1991 (Clark and Fujimoto 1991) are reprinted by permission from Harvard Business School Publishing Corporation; Table 9.2 and Table 9.3 from Projektering och idrifttagning av nya produktionssystem – en analysmodell för utvärdering av styrkor och svagheter i det egna företaget, IVF-rapport 96040, Göteborg, Copyright © 1996 (Johansson and Rydebrink 1996) are reprinted by permission from the CEO Mats Lundin; Table 10.4, Table 10.5 and Table 11.1 from TPM-Vägen till ständiga förbättringar, Studentlitteratur, Lund, Copyright © 2000 (Ljungberg 2000) are reprinted by permission from Studentlitteratur AB; Fig. 10.4 and Fig. 10.5 from Process Efficiency and Capability Flexibility, Developing a Support Tool for Capacity Decisions in Manual Assembly Systems, Linköping Studies in Science and Technology, Dissertation No. 617, Linköping university, Linköping, Copyright © 2000 (Petersson 2000) is reprinted by permission from the originator Per Petersson; Fig. 11.1 from Quality from customer needs to customer satisfaction, Studentlitteratur, Lund (Bergman och Klefsjö 2003) is reprinted by permission from Studentlitteratur AB; Fig. 11.2 from Production Disturbance Handling in Swedish Manufacturing Industry: a Survey Study (Ylipää et al. 2004) is reprinted by permission from the originator Torbjörn Ylipää; Fig. 11.3 and Fig. 11.4 from Effektivare tillverkning! Handbok för att systematiskt arbeta bort produktionsstörningar, IVF-skrift 04805, Göteborg (TIME-handbook 2004) are reprinted by permission from the CEO Mats Lundin; Press cutting from SME Manufacturing Engineering Viewpoints section, Vol. 130, No. 2, Lean: Not Just a Better Toolbox (Flinchbaugh 2003) is reprinted by permission from the originator Jamie Flinchbaugh.

Contents

1

Production Development over Time...................................................... 1 1.1 Production Development in Focus................................................. 1 1.1.1 Time to Emphasise the Importance of Production ........... 1 1.1.2 Part of the Product Realisation Process............................ 5 1.1.3 Structured Way of Working ............................................. 6 1.1.4 Road Map of the Book ..................................................... 7 1.2 Industrial Revolutions ................................................................... 9 1.2.1 The Historical Perspective ............................................... 9 1.2.2 The First Industrial Revolution ........................................ 10 1.2.3 The Second Industrial Revolution.................................... 11 1.2.4 Black Ford Model T and Fordism.................................... 12 1.2.5 Annual Model Change and Sloanism............................... 17 1.3 Organisational Fundamentals ........................................................ 18 1.3.1 Scientific Management .................................................... 19 1.3.2 Organisational Theory of Importance for Industrial Production .................................................. 22 1.3.3 Socio-Technical Organisational Theory........................... 25 1.4 Toyota Production System............................................................. 26 1.4.1 The Founder of Toyota .................................................... 26 1.4.2 Inspiration from USA....................................................... 27 1.4.3 Towards Lean Production ................................................ 29 1.4.4 The Toyota Way .............................................................. 30 1.5 Industrialisation in Sweden ........................................................... 31 1.5.1 Development Towards Mass Production ......................... 31 1.5.2 Alternative Production Concept....................................... 32 1.6 Production Development: A Summary.......................................... 34 1.6.1 External Influences .......................................................... 34 1.6.2 Actual Options ................................................................. 35 1.6.3 Strategies and Fundamental Attitudes.............................. 36

ix

x

Contents

2

Production System .................................................................................. 2.1 A Systems Perspective................................................................... 2.1.1 Characteristics of a System .............................................. 2.1.2 Production: A Transformation System............................. 2.1.3 Classification of Systems ................................................. 2.1.4 Open System .................................................................... 2.2 What Is a Production System?....................................................... 2.2.1 Terminology..................................................................... 2.2.2 The Structure of the Production System .......................... 2.2.3 Life-Cycle Perspective.....................................................

37 37 38 39 40 42 43 43 45 46

3

From Business Plans to Production....................................................... 3.1 Strategies to Reach Targets ........................................................... 3.1.1 Manufacturing Strategy.................................................... 3.1.2 Competitive Factors ......................................................... 3.1.3 Decision Categories ......................................................... 3.1.4 Formulating and Implementing Manufacturing Strategies ................................................. 3.2 The Production System’s Contribution to Competitiveness .......... 3.3 Production System and Manufacturing Strategy in Balance ......... 3.3.1 Product Profiling.............................................................. 3.4 New Production System at Lesjöfors AB ......................................

49 49 53 54 55

4

Production System Development........................................................... 4.1 New or Changed Production Systems ........................................... 4.2 Industrial Development of Production Systems ............................ 4.2.1 Typical Development Situations ...................................... 4.2.2 Industrial Practice ............................................................ 4.2.3 Structured Ways of Working ........................................... 4.3 Evaluation: Part of Development................................................... 4.3.1 Evaluation of Existing Production Systems ..................... 4.3.2 Evaluation of System Alternatives................................... 4.3.3 Evaluation of Equipment- or System Suppliers ............... 4.3.4 Evaluation After Change.................................................. 4.3.5 Factors Affecting Evaluation of Production Systems ...... 4.4 “It Is in the Walls” ......................................................................... 4.5 Production System Designers........................................................ 4.6 New Assembly Plant in Uddevalla ................................................

77 77 82 82 83 86 88 89 91 95 96 98 100 102 105

5

Production System Development in Theory ......................................... 5.1 Fundamental Concepts and the Knowledge Area.......................... 5.1.1 Design and Development ................................................. 5.1.2 Evaluation and Follow-Up ............................................... 5.1.3 Process .............................................................................

109 109 111 112 114

63 65 67 68 71

Contents

5.2

The Development Process ............................................................. 5.2.1 Design: Problem-Solving and Decision ........................... 5.2.2 Activities in the Development Process............................. 5.2.3 Industrial versus Academic Perspectives ......................... 5.2.4 Different Approaches to the Design Process.................... The Evaluation Process ................................................................. Production Development: Part of Product Realisation .................. 5.4.1 Parallel Development Processes ...................................... 5.4.2 Design Activity Dependency ........................................... Learning and Production System Development ............................ 5.5.1 Comprehensive View and Process Perspective................ 5.5.2 Development of Production Systems as Process and Project ...................................................... 5.5.3 Learning During System Development............................

115 116 118 121 123 126 130 130 134 135 136

Planning and Preparation for Efficient Development ......................... 6.1 A Framework Supporting Development of the Production System............................................................... 6.2 Contextual Aspects........................................................................ 6.2.1 Perspectives and Attitudes ............................................... 6.2.2 Company Preconditions ................................................... 6.2.3 Investment Considerations ............................................... 6.3 Management and Control .............................................................. 6.3.1 Resource Allocation to Production Engineering and Production Development........................................... 6.3.2 Time Perspective.............................................................. 6.3.3 Work Team Composition................................................. 6.3.4 Creativity and Analytical Ability ..................................... 6.4 A Structured Way of Working.......................................................

145

5.3 5.4 5.5

6

xi

137 140

145 148 149 152 153 156 157 159 160 163 165

7

Preparatory Design of Production Systems.......................................... 7.1 Background Study ......................................................................... 7.1.1 The Importance of Solid Preparatory Work ..................... 7.1.2 Starting Point for System Design..................................... 7.1.3 Evaluation of Existing Production Systems ..................... 7.2 Pre-Study ....................................................................................... 7.2.1 Pre-Study Content: Strategic and Pushing ....................... 7.2.2 To Handle Uncertainties .................................................. 7.2.3 Strategy for Future Production Systems........................... 7.3 Resulting Requirement Specification ............................................

171 171 172 173 174 179 179 181 182 185

8

Design and Evaluation of Production Systems..................................... 8.1 Design Specification...................................................................... 8.1.1 Handling Complexity....................................................... 8.1.2 Modelling.........................................................................

191 191 192 194

xii

Contents

8.2

Developing Conceptual Production Systems................................. 8.2.1 Flows and Flow Principles ............................................... 8.2.2 Flowcharts........................................................................ 8.2.3 Production Planning......................................................... 8.2.4 Choice of Process and Layout.......................................... 8.2.5 Level of Technology and Automation ............................. 8.2.6 Work Organisation and Work Environment .................... Evaluation of Solution Alternatives............................................... 8.3.1 Conditions for Evaluation During the Development Process ................................................. 8.3.2 Methods for Evaluation.................................................... Detailed Design of the Chosen Alternative ................................... 8.4.1 Detailed Layout................................................................ 8.4.2 Planning the Layout ......................................................... 8.4.3 Work Studies.................................................................... 8.4.4 Detailed Design of Work and Work Place ....................... Systems Solution ...........................................................................

195 195 197 200 202 209 211 214

9

From System Solution to Production System in Operation ................ 9.1 Implement Production Systems ..................................................... 9.1.1 Terminology..................................................................... 9.1.2 Different Start-Up Situations ........................................... 9.2 Building Production Systems ........................................................ 9.3 Planning and Preparing Production Start-Up................................. 9.3.1 Start-Up Model ................................................................ 9.3.2 Organisation and Management ........................................ 9.4 Carry-Out Production Start-Up ..................................................... 9.4.1 Efficient Start-Up of Production Systems ........................ 9.4.2 Problems During Production Start-Up ............................. 9.5 Evaluate the Result ........................................................................ 9.5.1 Evaluation of Production System After Start-Up............. 9.5.2 Prerequisites for Evaluation After Start-Up ..................... 9.5.3 Analysis of the Development Process..............................

231 231 233 235 237 239 239 242 244 244 246 248 248 249 250

10

Production System Performance ........................................................... 10.1 World-Class Manufacturing .......................................................... 10.1.1 Successful Production Systems........................................ 10.2 What Should Be Measured? .......................................................... 10.2.1 Productivity and Efficiency.............................................. 10.2.2 Overall Equipment Effectiveness..................................... 10.2.3 Manual Assembly Efficiency........................................... 10.2.4 Measures Associated with Competitive Factors .............. 10.3 Measures and Methods for Follow-Up in Practice ........................

255 255 258 259 260 263 265 266 268

8.3

8.4

8.5

217 218 220 222 225 227 227 230

Contents

10.4

11

12

xiii

Continuous Follow-Up of Performance......................................... 271 10.4.1 Different Measurement Systems ...................................... 271 10.4.2 Use of Measurement Systems .......................................... 274

The Art of Avoiding Production Disturbances..................................... 11.1 Related Concepts ........................................................................... 11.1.1 Dependability................................................................... 11.1.2 Production Disturbances .................................................. 11.2 Production Efficiency .................................................................... 11.2.1 Reduced Disturbances Increases Production Efficiency ...................................................... 11.3 Comparison Between Improvement Models ................................. 11.4 To Handle Uncertainty .................................................................. 11.5 Eliminating Disturbances During Development............................ 11.5.1 Approach.......................................................................... 11.5.2 Competence Development and Knowledge Transfer....... 11.5.3 Strategic Concerns ........................................................... 11.5.4 Development Process....................................................... 11.5.5 Participants....................................................................... 11.5.6 Means of Assistance......................................................... 11.5.7 Cooperation with Suppliers.............................................. 11.5.8 Systematic Way of Working: Basis for Robust Production Systems .............................. Production Development in the Future................................................. 12.1 Trends and Visions ........................................................................ 12.1.1 Assembly: The Mirror of Change .................................... 12.1.2 Trends Within Two Sectors ............................................. 12.2 What is Required from Future Production Systems?..................... 12.2.1 Key Areas and Success Factors........................................ 12.2.2 Lean Production as an Objective...................................... 12.2.3 Right Automation............................................................. 12.3 Future Production from an International Perspective .................... 12.3.1 Production in Europe ....................................................... 12.3.2 Production in USA ........................................................... 12.3.3 China: The Factory of the World?.................................... 12.4 Make or Buy? ................................................................................ 12.4.1 Basis of Decisions and Carrying Through ....................... 12.4.2 Consequences of Outsourcing and Relocation................. 12.5 Production in Focus....................................................................... 12.5.1 Snap Shots........................................................................ 12.6 Go for Survival: Create Competitive Advantages .........................

277 277 277 280 282 283 285 287 288 289 290 292 295 298 299 300 301 303 303 303 305 307 307 308 310 311 311 313 314 315 317 319 320 320 321

References......................................................................................................... 325 Index ................................................................................................................. 335

Chapter 1

Production Development over Time

Abstract In today’s competitive situation, it is necessary to understand how production systems should be designed and put into operation in order to support competitive industrial production. Our aim is to increase knowledge of production development and thereby contribute to the ability of Sweden and other Western countries to compete internationally with its production capacity. First we describe the driving forces behind this book. Furthermore, production development in general is discussed, and how the area relates to the overall product realisation process. A large part of the Chapter is devoted to the historical perspective. Here, the development of production systems over time is presented. The different production systems of Ford and Toyota are particularly focused upon as are a number of aspects influencing production system development.

1.1 Production Development in Focus There are a vast number of books concerning production available in the market. Is that not enough? The reply to that question is both yes and no! There are many good books that treat production questions from different perspectives. Several of these books inspired us in our work, which also is made clear from the references we use. However, we think that it is necessary to highlight the production questions again and to present it from a different perspective. In order to give you the reader a better understanding of this book’s content and message we will initially describe the main driving forces behind the writing of this book.

1.1.1 Time to Emphasise the Importance of Production “Production development” is a comprehensive concept. It is about the creation of effective production processes and about the development of production ability. M. Bellgran, K. Säftsen, Production Development, © Springer 2010

1

2

1 Production Development over Time

Fig. 1.1 The largest potential to achieve successful production systems is during the development phase. Management and control of existing systems provides less potential. (Illustration: Mario Celegin)

Production development refers to production systems in operation, where the question is how to improve already existing systems, and to the development of new production systems: “As industrial competition increases it becomes more apparent that improved levels of output, efficiency, and quality can only be achieved by designing better production systems rather than by merely exercising greater control over existing ones.” (Bennett 1986, p. 2)

The largest potential to achieve “successful” production systems is during the development of new systems and therefore we consider that this area deserves extra attention (Fig. 1.1). In this book, production development refers to development and operation of production systems. The focus is mainly on questions related to development of new production systems or major changes to existing ones. Of course several of the issues are equally relevant in connection with minor changes as well. During development a holistic perspective is important, involving technology as well as humans. To use the term production development instead of the more traditional term production engineering is a way of emphasising the need for a long-term perspective on production system development. Therefore, one of the issues raised in the book is the resources devoted to production engineering in general and to production development specifically. With global competition in mind, the focus on the area of production is a more important issue than ever for every manufacturing company in Sweden and the rest of the Western world. We consider that production development is a natural part of the product realisation process. Here product realisation refers to the process from product planning to completed product. Too often product realisation is considered to be on

1.1 Production Development in Focus

3

equality with product development while production is mentioned incidentally as something that merely has to be handled and certainly not as a competitive means. Furthermore, we consider that the work with development of production systems needs improvement. One way to do this is through tools and methods supporting a structured way of working during system development. In most companies product development is a subject that must be continuously improved particularly in relation to way of working, organisation, and tools and methods used. Large resources are put into the refinement of the product-development process. It can easily be concluded that equal concentration on the area of production development implies a large potential for improvement. Production in this book refers to the process of producing products and services with support from different production factors such as labour, machinery, and raw material. The focus is on industrial production which implies emphasis on production within the manufacturing industry. A lot of the literature within the area focuses on the automotive industry. In this book we take a broader perspective and also include other lines of business within the manufacturing industry. The conditions for industrial production continuously change. Being an actor on a global market provides several opportunities while at the same time the prerequisites change and the requirements increase. The customers expect more than low prices; high-quality products should be delivered on time at the right price. Today it is not enough to develop one successful product. In a world where the demand for new products seems to be endless a long-term ability to develop new products is required. Furthermore, knowledge concerning realisation of these products in the best way is required. Industrial production has lately received a great amount of media attention. Unfortunately most of the attention has been associated with outsourcing issues, the transfer of production to low-wage countries such as China, Poland, or Malaysia. The trend of moving production abroad continues, but has lately been more and more questioned. A growing insight into the significance of production for the individual company and for the country in general moves these questions higher up the agenda. It is not necessarily an advantage to outsource production to suppliers. This insight has arisen during a period of increased outsourcing closer and closer to companies’ core activities and thereby core competences. The question that has been posed is what will happen when parts of the core competence are missing. If we do not have the ability to produce products, how long will it be before we also lose our ability to develop competitive products? The connection between product development, industrialisation, and production are strong, but if one link is weakened there is a risk that all links are negatively affected. Already today we can see that several of the countries, designated as low-wage countries, can be characterised as huge factories without competence for development within product- and production development. On the contrary, in China alone 1 million engineers graduate annually (SvD 040220), which is of advantage to Chinese industry and improves their competitiveness both within production and product development. Therefore, it is necessary that we immediately abandon prejudices, if any, concerning the unique ability of Sweden, and other Western

4

1 Production Development over Time

countries, to develop products compared to the ability level among the low-wage countries. To believe that for example Sweden only should develop products whereas production is carried out in low-wage countries may be shown to be a devastating assumption in the near future. One of the main causes of the problem described above is that companies and nations do not necessarily share the same interests (Sigurdson 2004). Many companies regard more or less the whole world as a potential factory. Companies’ aims are maximising profits which can be achieved with production located at different places. It is necessary that the prerequisites for national production and the ability to produce are good enough so that Sweden, and other Western countries, are attractive alternatives. Otherwise the risk is that we end up with “bazaar-economies” meaning that we only sell things developed and produced elsewhere (IVA 2004). In 2004 the project Production for competitiveness1 was initiated in Sweden. The objective was that Sweden should become world-leading as a producing country: “The growth and welfare of Sweden are today directly dependent on industrial success. The purpose of the project is to highlight the importance of and improve the prerequisites of internationally competitive production. The vision is to increase the Swedish ability to compete through focus on production.” (www.iva.se/produktion, translated from Swedish)

This national gathering/venture, where the majority of organisations interested in production participated, indicated the importance of production for individual companies, line of businesses, and for Sweden in general. The manufacturing industry in Sweden represents half of the Swedish export and employs a large number of people, and contributes to even more indirect openings via suppliers, the official sector, and the service sector. If the outsourcing of industrial production abroad continues the scenario is even worse than it was decades ago when the textile and clothing industry and the shipbuilding industry moved out of Sweden. Similar activities have also been performed in for example the UK, and USA (Manufacturing 2020 Foresight 2000; Gregory et al. 2003; US Department of Commerce 2004) By giving resources and priority to production development, concentrating on development of supportive tools and methods, developing knowledge within production and strengthening the competence, both in industry and academia, production will continue to be a key factor for Swedish (and other similar nations) industry. And that was the starting point for this book on production development.

1

Organisations such as the Royal Swedish Academy of Engineering Sciences, The Association of Swedish Engineering Industries (Teknikföretagen), Metall, VINNOVA, Swedish Foundation for Strategic Research, Knowledge Foundation (KK-Stiftelsen), and Samhall supported the project. Many representatives of industry participated in the project, and also representatives from universities.

1.1 Production Development in Focus

5

1.1.2 Part of the Product Realisation Process Product realisation concerns development and production of products, attractive to the customers. Product realisation comprise all activities necessary to develop solutions satisfying an identified customer need, and all those activities required to realise these solutions in terms of physical products with associated services (Säfsten and Johansson 2005). Sometimes product realisation is used synonymously with product development. Product realisation is here considered to be a broader concept where product development and production development are integrated processes dependent on each other for the achievement of efficient development and realisation, see Fig. 1.2. Functions such as production engineering, quality, engineering material, process development, and IT support are required to support the product realisation process (Gabrielsson 2002). Product realisation is part of the innovation process, which in turn is part of the product life-cycle, see Fig. 1.3. The innovation process comprises all activities necessary to make a new product available for use in the market, from basic and applied research and development to product planning and design, process planning and production, to distribution and sales, and use and service (Roozenburg and Eekels 1995). The innovation process is part of the product life-cycle, involving end-of-life treatment of wornout products. The activities shown in Fig. 1.3 are illustrated as a sequential flow. However, in order to achieve efficient product realisation, it is essential to emphasise the necessity for integrated development of product and production process which also is stressed in Chap. 5. The process of developing production systems has not been, and is not, focused in the same way as the process of developing products, neither in academia nor in industry. Even if it is well known that financial and personnel resources in the early stages of development yield good return on investment in terms of less dis-

PRODUCT REALISATION PROCESS INPUT

Product development Production development

Identification and formulation of customer needs

OUTPUT Realisation of customer needs

Support functions

Customer

Other supportive functions

Consultants

Supplier Feedback

Fig. 1.2 The product realisation process (modified from Gabrielsson 2002)

6

1 Production Development over Time Product realisation

Product development

Goals and strategies

Research and development

Product planning

Production development

Design

Process planning

Production assembly

Distribution sales

Use

Re-use

Innovation Product life cycle

Fig. 1.3 The product realisation process: part of the innovation process and the product lifecycle (Säfsten and Johansson 2005)

turbances and better final performance, the incentives are still not strong enough to motivate increased costs for development of production systems. A lack of interest in development of production systems, compared to the attention paid to development of products, can partly be explained by the limited pressure from external customers and the limited interest in business-to-business products.

1.1.3 Structured Way of Working We have carried out a number of studies in manufacturing companies in Sweden since the beginning of 1990. The focus has been on design and evaluation of production systems, and especially assembly systems, in middle-sized and large companies. Our experiences are unambiguous: the procedure when developing production systems is not in focus, even though a positive change can be discerned lately. The development process is seldom regarded as a means to achieve the ultimate production system. Structured and systematic ways of working in production system development are missing, as a consequence of the lack of interest in the development process. There are arguments supporting as well as rejecting structured ways of working. When development of production systems is concerned high time-pressure and low priority are often used as arguments against structured ways of working. Our standpoint is rather the opposite; when a clear structure or plan is followed, less time needs to be spent on planning what to do and in what order. To know what and when to do things considerably simplifies something that is carried out under high time-pressure. Another argument is the fear of a lack of flexibility of a plan or a structured way of working. In this case the comparison with product development is interesting. It is very common today, that companies follow a structured product development process describing all activities to be carried out when developing products (Beskow 2000). A structured product development process is described as advantageous from several perspectives. Ulrich and Eppinger (2003) point out that the product development process makes the decision process explicit so every-

1.1 Production Development in Focus

7

one can understand the decision rationale. Furthermore, the structure acts as a checklist and thereby ensures that important issues are not forgotten. Another advantage is that structured methods are largely self-documenting; during the actual product development process a team creates records of for example the decision-making which thereby is made available for future reference and newcomers. There are several advantages of a changed approach towards production development, not least when it comes to the way of developing production systems. Several experiences from the closely related area of product development can be applied. Furthermore, production development should be regarded as an integrated part of the product realisation process, together with product development.

1.1.4 Road Map of the Book The book is divided into 12 chapters. The foundation for the framework and the structured way of working, presented in Chap. 6, is provided in the first five chapters, Chaps. 1–5. The content of the structured way of working with production system development is described in detail in Chaps. 6–10. Chapter 11 focuses on disturbance handling and in the concluding Chap. 12 we look ahead, towards production development in the future. The content of the book has a distinct theoretical starting-point but with clear connections to practical application. Sometimes we enter more deeply into theory. This is done in boxes called FURTHER STUDIES. Theory is translated into practical application in a number of examples in the book, and sometimes in separate so-called INDUSTRIAL EXAMPLES. Both Further Studies and Industrial Examples should be regarded as complementary to the text in each chapter; the boxes provide a possibility of increased understanding. As always it is up to the reader to turn theory into practice, based on previous knowledge and the specific situation referred to. Below the content of each chapter is described more in detail. The remaining part of Chap. 1 is devoted to production system development over time, both in terms of preferred production principles, and how work with production development traditionally has been carried out. Knowledge about the historical development and the prevailing circumstances under different time periods makes it easier to identify the decisions leading to a specific production system. This knowledge can facilitate the development of new production systems and changes to existing production systems. In a production system raw material is transformed into a product. As a starting-point in the book a holistic perspective of the production system is applied. This means that both humans and technology are included; a systems perspective is applied to the production system. In Chap. 2 the implications from the chosen perspective are discussed, and the production system is described in detail. Furthermore, the life-cycle of the production system is described. In this book mainly two phases of the life-cycle are treated, development and operation, see Fig. 1.4.

8 Fig. 1.4 Development and operation of production systems

1 Production Development over Time

PRODUCTION SYSTEM Develop system

Operate system

Development includes design and industrialisation of production systems. The subsequent operation of the production system is dealt with in terms of performance evaluation and disturbance handling. Even if the focus is on development of new systems, several issues are of course common to the task of changing an existing production system. Congruence between the company’s overall strategies and production is required if production should support the competitiveness of a company. Manufacturing strategies can be a link between the production system and business strategies, and a guiding-star for the production system designers. Chapter 3 is devoted to the content and process of manufacturing strategies. The use of manufacturing strategies during development of production systems is exemplified, theoretically as well as practically. By way of conclusion a case is presented where the manufacturing strategy was a very important starting-point when building a new industrial plant. Chapter 4 provides experiences from production development in industry, mainly based on a number of studies carried out of different change situations in manufacturing industries. The reasons behind the changes are described, as are the actual changes. The described studies involve in total about 30 manufacturing companies in different lines of business, all the way from white goods to furniture. The size of the companies varies, from less than a hundred employees to thousands. The practical perspective provided in Chap. 4 is contrasted with a theoretical perspective on the development process in Chap. 5. Systematic and structured ways of working with product development are shortly described with the purpose to gain experience from a more mature area. Furthermore, Chap. 5 elaborates on long-term development ability. To achieve this, learning is necessary and different prerequisites for learning in the context of production system development are discussed. Practice and theory from Chaps. 4 and 5 provide the foundation for Chap. 6 where a framework and a structured way of working with development of production systems are presented, especially focused on design and industrialisation. The content of the structured way of working is subsequently detailed in Chaps. 6–9. Preparatory and specifying design activities are described in Chaps. 7 and 8. The industrialisation of the resulting production system design is described in Chap. 9. When a new, or changed, production system, finally is in operation the question is how good it is. Chapter 10 deals with performance measurement in production systems. Different measures are discussed, as are different practical methods for measuring performance. When a production system operates and produces products different disturbances can be a problem. Chapter 11 deals with disturbance handling and especially elimination of potential disturbances during the development phase.

1.2 Industrial Revolutions

9

The book is concluded with issues concerning production development in the future, what is the prevailing practice, and what trends within production development can come to the fore. One of the posed questions concerns the existing, and the required, prerequisites for Sweden and similar nations to be competitive manufacturing countries in the future.

1.2 Industrial Revolutions 1.2.1 The Historical Perspective During industrial development one of the main themes has been how to achieve best performance in production. Since the industrial revolution during the 19th and 20th century a number of different production methods have dominated, during different periods. On an overall level the dominating philosophies can be grouped as craftsmanship, mass production, and lean production. These philosophies prescribe among other things the type of technology to use, work organisation, production solutions, how to handle different product variants, and quality aspects. A production system is always a result of chosen solutions. Chosen solutions are more or less based on conscious decisions. Made decisions are affected by the current historical and organisational situations. Another way to describe a situation is to use the word context, which we use from here on. Decisions made are also affected by the offered possibilities in terms of various technical, work organisational, and economical solutions. The company’s strategies are important, as are influences from history and trends in the present, when a production system is changed or developed. A classification can be made concerning how production systems of today have developed over time (Groover 2001). 1. Discoveries and inventions of material and processes to produce products; and 2. Development of systems for production, i.e. different ways of organising equipment and people in a way that production can be efficiently carried out. Material and processes to develop products have a very long history. Processes such as casting, grinding, and forging can be dated back 6000 years or more. The early production of for example weapons and implements was accomplished by craftsmanship. Domestic systems (or putting-out systems) are described where a tradesman was coordinating and buying labour from free craftsmen, working within their own premises and controlling their own tools and equipment. The first attempts towards factory systems are described from ancient Rome. The Romans had what might be called factories to produce weapons, ceramic, glass ware, and other products, even though the used procedures were based on craftsmanship (Groover 2001). It was not until the 19th century that real development towards the production systems of today started, when what we

10

1 Production Development over Time

Domestic system for manufacturing

A moveable assembly line starts in Ford’s Highland Park plant

Factory system for manufacturing

1760

1830

The first industrial revolution 1. Steam engine 2. Machine tools 3. Spinning Jenny 4. Factory system

1870

1913

The second industrial revolution

The Western world realised the Japanese capabilities Time 1973

1988

The concept lean production is coined

1. Mass production 2. Assembly lines 3. Scientific management 4. Electrification of factories

Fig. 1.5 Important activities during the development of today’s production system

can call factory systems were developed, see Fig. 1.5. This development is often referred to as the industrial revolution. Since then, development leaps of comparable importance have only been taken a couple of times. Several historical events and discoveries have, however, had a significant impact on the development of today’s modern production system. Starting with the first industrial revolution in the 18th century, a tremendous technical development occurred during the 19th and 20th century. The level of mechanisation and automation in machines, equipment, and tools increased. With machines producing identical components, the prerequisites for mass production in the 20th century was created during the 19th century. This also caused incitement for further technical development, towards more and more advanced equipment. With an increased level of mechanisation and automation in the companies’ machines, costs increased. Thereby utilisation of capacity also became an important factor to work with. The consequences from that were, among other things, a need to develop new methods for planning of production, material supply, and information.

1.2.2 The First Industrial Revolution It was mainly during the period 1760–1830 important changes took place that came to affect the development of systems to produce products. Inventions such as the steam engine, the use of machine tools, and the development within the textile industry were important. This happened in parallel with the development of the so-called fabrication system where factory workers were organised based on new principles for division of labour. Thereby this period marks the transition from an economy based on agriculture, to an economy based on industrial activities (Groover 2001). Initially, several of the changes took place in the textile industry. The driving forces for these changes are to be found in the technology as well in changes of economical and social nature.

1.2 Industrial Revolutions

11

A significant discovery was the principle of division of labour, explained in financial terms by Adam Smith (Groover 2001). Several of the major changes carried out during the 19th and 20th century were based on the principle of division of labour. In the so-called domestic system different activities in the production process were coordinated by a tradesman. The tradesman bought the raw material and delivered it to the craftsman carrying out the first operation in the production process. Thereafter this craftsman handed over the processed raw material to the next representative in the production process, and this went on until the product was completed. The completed product was handed over to the tradesman, selling it to a customer. The tradesman had none, or very little, control over the activities carried out by the craftsmen. At this point of time the boundaries between different occupational groups were clear. All activities could be carried out by a well-defined group of craftsmen, who belonged to a strong guild (Berner 1999). Craftsmen owned and sold labour, their tools, and their knowledge. Furthermore, the craftsman could organise the work by himself. It was not unusual that the craftsman also was farmer (Sundin 1991). Gradually a need to coordinate, and also to control, the various operations emerged, and entire production process became centralised and located in factory areas. The transition from the domestic system to the factory system took place without any major technological changes. It was mainly a question of where the operations were carried out and who owned the tools and controlled the activities.

1.2.3 The Second Industrial Revolution It is necessary to also mention the second industrial revolution. This time no transition from one dominating industry to another was the case, but an extension of the already initiated activities. Concurrently with an expansion in the number of produced consumer products the need for more effective fabrication systems increased. The technical background to the development of the assembly system was the introduction of standardised and interchangeable parts. While England was leading the industrial revolution, the concept of interchangeable parts was introduced in America. Most often Eli Whitney (1765–1825) is given credit for this concept. In 1797 Whitney negotiated with the American government, and received a contract for the production of 10,000 muskets. Whitney believed he could produce parts accurately enough to permit parts assembly without fitting of each weapon. In this way the time required for production could be considerable reduced. After several years of development in his factory in Connecticut he travelled to Washington to demonstrate the principle of interchangeable parts. Before government officials he laid out components for ten muskets. Thereafter he randomly picked components and assembled the ten muskets. No extra fitting or filing was required, and all of the muskets worked perfectly (Groover 2001).

12

1 Production Development over Time

The principle of interchangeable parts revolutionised the methods for manufacturing and constituted a prerequisite for mass production of assembled products. Development of specialised production equipment made it possible to produce identical components for the assembly of complete muskets. Through the achievement of interchangeable parts new opportunities for production of similar products in larger volumes arose. Later on the manufacturing technique spread from the weapons industry to Singer, the company manufacturing sewing machines. Despite Singer’s prosperity, both concerning production and sales, they didn’t succeed in fully achieving mass production without the use of adjusters (Hounshell 1984). These adjusters, or filers, were actually assemblers who used the file to fit parts together (Sandkull and Johansson 2000). Later Ford succeeded in achieving mass production of cars without the use of filers. Ford’s production system from the early 20th century is often associated with the introduction of the assembly line in the manufacturing industry. The first moveable assembly line in Ford’s Highland Park factory was put into operation in 1913, but the technology had been developed long before that within the meatpacking industry (Hounshell 1984). These, at that time, very modern production lines could be traced back to Chicago, Illinois, and Cincinnati, Ohio, already in the 1830s. The development within the meat-packing industry was observed by the industrialist Ford who brought the principles to his production plant in Michigan (Groover 2001).

1.2.4 Black Ford Model T and Fordism The most well-known production system is, without doubt, the production system where Henry Ford started his mass production of cars at the beginning of the 20th century (the following description is mainly based on Hounshell 1984; Andersson et al. 1992; Lacey 1989). The historian Siegried Giedion is mentioned as the historian that perhaps better than others succeeded in placing both the person Ford and the company Ford into an adequate technological development context. From the perspective of Giedion, Ford was active at the end of a long historical process, after the development of interchangeable parts and the ideas about continuous flow, effective movement, and disassembly. However, the importance of the changes carried out in Ford’s factory during 1913 and 1914 and its dispersion to the rest of the Western world should not be underestimated. The effect from the dispersion dealt with two areas; the actual procedure of mass producing the Model T, and the rapid technology diffusion concerning how it was produced. This came to deeply affect production during the entire 20th century. The concept Fordism, coined to identify Ford’s production system and its associated personnel politics, in several ways changed the world.

1.2 Industrial Revolutions

13

Henry Ford (1863–1947) established the Ford Motor Company in 1903, which was his third attempt to manufacture cars. It was clear to Ford, with experience from manufacturing and selling a number of mid-price cars, that the most urgent need in America at that point in time was a low-price car, built from the best material with a modern engine – “a car for the broad masse of people”. The Model T became the car combining these requirements (see Fig. 1.6). The production of the Model T started in 1908 and continued until 1927. In total 15 million cars and trucks were manufactured. With financial stability and no prejudices regarding how to produce cars, Henry Ford allowed extensive experimentation in the factory. Ford had employed 10–20 young and talented mechanics that not yet had developed established ways of doing things. Encouraged by Ford this group carried out experiments in production, tested ideas, and developed new ways of measuring, design of fixtures, tools manufacturing, industrial layout, quality control, and material handling. If the factory would have been rooted within a production tradition, Ford might not have succeeded with what he had intended to achieve. Instead Ford’s production engineers picked the best parts from several different production traditions, and overcame their limitations by adding their own technical solutions. FURTHER STUDIES: HENRY FORD (1863–1947) Henry Ford was born 1863 in Michigan, USA. At this point of time Ford’s family, who emigrated from Ireland 30 years earlier, were one of the more important families in the neighbourhood of Dearborn. Already as a little boy Henry Ford showed an unusual mechanical sleight of hand and several stories described how he invented various gadgets, repaired clocks, manufactured his own tools, investigated machines, and in other ways demonstrated his skills. When he was 16 years old Henry started to work as an apprentice in a machine workshop in Detroit. When he was 19 he went back to work on his father’s farm. Here he learned how a steam engine works and he travelled between the farmers with a moveable steam engine. Between the age of 20 and 30, Henry Ford worked as a strolling mechanic, studied machine drawing, bookkeeping, and business activity, ran his own farm and at the same time started a partnership firm focusing on wood. He had a reputation for being a good problem solver, and he successfully managed problems where others had failed, and was contracted to execute various tasks and to carry out repairs. This was how he came into contact with the internalcombustion engine, Otto, and immediately saw a possibility to create a self-sustaining vehicle. Having a fixed purpose he started to work as a mechanical engineer to learn more about, among other things, electricity. Already in 1891 cars were manufactured on a commercial basis in for example France. The words automobile, chauffeur, and garage show that France had an early lead within the automotive industry. In 1895 Ford had started to build something that looked like a car, based on what others had done before. His car strategy involved easiness, rapidity, reliability – and a low price. The first car was ready in 1896 (Quadricycle). It looked like two bicycles placed beside each other with the machinery between them, hidden in a wooden case where you could sit. Already in 1898 the next car was ready. One year later Henry Ford became technical manager in the recently formed company Detroit Automobile Company. In 1903 Ford started his own company: Ford Motor Company which went bankrupt, partly due to the major difference between mass production and prototype production. During the beginning of the 20th century there were hundreds of car manufacturers producing a few vehicles for a small

14

1 Production Development over Time

and exclusive market. The major challenge was to freeze the design and mass produce details to be able to complete a larger number of cars. In 1908 the Model T was launched. The Model T was successfully produced for a period of 20 years. The concept was a front-assembled water-cooled internal-combustion engine and rear-wheel drive. The separate techniques were not new, but to put them together in this way was new. In 1910 Ford had 10% of the total market and continued to work with improved production engineering, standardisation, specialisation, division of labour, and flow-oriented production layout with the purpose of massproducing cars. The history of the professional and the private Henry Ford is extensive, but it provides a picture of a true entrepreneur who had a fixed purpose and with enormous strength created a real car dynasty. Source: Lacey (1989)

In 1904, Ford Motor Company built a factory on Piquette Avenue in Detroit. At this point in time the company purchased most of the required components. Therefore, the factory was designed for car assembly rather than for parts manufacturing in large series. Approximately 15 assembly groups worked at different work stations to assemble complete cars. By the end of 1905 Ford Manufacturing Company was formed, in cooperation with James Couzens, among other things to get better control over Ford Motor Company and to be able to manufacture components for the most recently introduced car model, the model N. Instead of doing that in the existing factory, a factory on Bellevue Avenue in Detroit was rented and equipped. When purchasing machine tools, Henry Ford came across a tools salesman named Walter E. Flanders. Flanders was considered to be a technical genius, with a great deal of experience from several other large companies. Flanders assisted in developing the approach for engine manufacturing at the Ford Bellevue factory, and also suggested to Ford he employ the young Max F. Wollering to be responsible for the factory. Wollering proved to be the most competent manufacturing mechanic so far employed by Ford, and only a couple of months later, by the end of 1906, Ford had persuaded Wollering to take the position of overall production manager for both of Ford’s companies. Wollering was conversant with the idea of using interchangeable parts, the manufacture of exactly equal components. Ford adopted the concept of interchangeable parts and translated it into engines, wheels, axles, etc. It was used for marketing even before it was realised within the factory. After that, Flanders and Wollering were given unrestricted authority by Ford to fulfil what he had promised. Wollering set his mechanics the task of designing and building fixtures, jigs, and other equipment required for the manufacturing of all components at the Bellevue factory. The Department Heads of the different manufacturing units were supervised in how to think. Flanders on his side made changes in the production layout. The functional layout of the organisation of the machines was replaced by a sequential order, i.e. a flow-oriented production layout. Flanders and Wollering also showed the production mechanics that by using special machines, productivity improvements could be made. Other changes introduced were guidelines implying long-term material purchasing and requirements on the suppliers stock-keeping. Flanders decided that

1.2 Industrial Revolutions

15

only ten days stock should be available in the factories. Flanders increased awareness of the car manufacturing business as a fusion of three branches of art; to purchase material, to produce, and to sell. This awareness enabled the company to successfully mass produce cars. Both Flanders and Wollering left their positions within the company after a couple of years. They had probably been employed long enough to introduce a new way of thinking among the young production engineers at Ford, but not long enough to indoctrinate them with the best way”. Ford’s engineers probably completed and surpassed the fundamental principles taught by Flanders. Henry Ford succeeded in attracting well-educated engineers, who enjoyed working, to the company. These engineers constituted the core of Ford’s successful production group. Peter E. Martin and Charles Sorensen were two of them. Martin later became managing director for Ford Motor Company and Sorensen was behind Ford’s production facilities in Europe. Gradually also other talented engineers were tempted to work at Ford’s company. They played an important role in the development of mass production of the Model T in the newly built factory in Highland Park, which formally started on New Year’s Day 1910. It is interesting to note how important each individual and their specific competence were for production development at Ford. Recruiting the right people at the right time, together with synergy effects and the new thinking resulting from their cooperation were important prerequisites for the direction the production took at Ford. However, the production volume did not increase as fast as expected in 1909– 1910 (the volume was 10–20,000 cars per year). In 1911 the volume increased to 53,000 cars per year, and in 1913 yet another large volume increase occurred to 189,000 cars. This figure was doubled two years later, and the year thereafter, 1916, the annual production volumes were a gigantic 585,000 cars. During this time the price went down from $850 to $360 per car. One of the architects behind the plant in Highland Park was Albert Kahn. Principally, the structure was a four-storied building and a one-storied building, serving as a machine workshop. To allow daylight into the factories, both houses had enormous windows, both on the walls and in the ceiling. Therefore the factory was called the Crystal Palace factory, named after the World Exhibition Crystal Palace in 1853 in New York. The first assembly line was installed in the factory in April 1913. Besides the assembly lines, Ford’s production system also contained gigantic conveyors. Here raw material, semi-manufactured articles, and completed products were transported, and at the same time the conveyors served as a storage space and thereby more floor surface was available. The several kilometre-long conveyors connected the railway, parts manufacturing shops, and the assembly shops with each other. Conveyors and assembly lines set the expected work pace and indirectly managed the initiation of the single operations. The need for personnel, raw material, and components were established with good precision months in advance when the production quantities were decided (Andersson et al. 1992).

16

1 Production Development over Time

Table 1.1 Henry Ford’s elements of mass production Element

Description

Power

Power was generated in local power plants, and distributed throughout the factory by electric motors, driving units of line shafting and belting.

Accuracy

Every critical part of the Model T was manufactured in standard fixtures and tested by standard gauges during and after the operation sequence. The engine was not started until the car was ready to leave the factory, and no road-tests were carried out. Ford’s leading production engineers maintained that if parts were made correctly and assembled correctly, the final product would be correct. Quality was in other words at the forefront in Ford’s manufacturing plant almost a century ago.

Economy

Machine tools were closed group. The economy of space prevented work from accumulating in the aisles and a smooth flow of work was achieved.

System

System thinking was shown in various ways. For example, by how material was purchased, distributed, and how the final stock was handled, but also by how the machine tools were placed according to the direction of the flow.

Continuity

A system for work-scheduling was developed, providing knowledge about possible and average output from the machine tools. This made it possible to follow-up production in the different departments. Through such systematisation it was possible to maintain continuity in the input and output of materials at a calculated rate.

Speed

The principle of speed was apparent everywhere in the factory. Not at least in the tool department, providing the fundaments for the interchangeable part – and thereby the entire production process. Accuracy was highly prioritised in the list of fixture and machine tool design requirements. Fixtures and gauges were designed in a way to allow use by unskilled machine tenders.

Ford’s own development of special machinery and the purchased mechanical equipment involved a rapid increase of the production capacity of components with high precision. Since only one car model was produced in the factory, special- or single-purpose tools were used to a large extent. Ford and his production engineers were continually interested in experimentation and testing of new production methods. Mechanical equipment and production processes were constantly evaluated and changed. Installation of the assembly line and use of the line principle also in areas other than assembly was the final piece of the jig-saw making mass production possible. The line principle provided a way to speed up slow-working workers and slow down the fast ones. The assembly line provided regularity in the factory, which was significant in several ways. The way Ford’s engineers had concentrated on power, accuracy, economy, system, continuity, and speed, Henry Ford’s elements of mass production, impressed the entire world2, see Table 1.1. The very picture provided describes a large and competent manufacturing company with a well trimmed and effective production system, controlling more 2

As described by Fred Colvin in a number of articles in the American Machinist 1913 (Hounshell 1984).

1.2 Industrial Revolutions

17

or less the entire value chain, from raw material production to final assembly. Innovations and new thinking, and above all the continuous work with production development, entailed a continuous improvement of processes and methods, resulting in major improvements in productivity in the factory. Ford had achieved an economical revolution. He showed that maximal profit could be achieved with maximised production volume and at the same time minimised costs. However, the revolution was short-lived. Ford’s production system was adapted for the large volume product – the Model T. With the prevailing situation during the first 25 years of the 20th century in America as a starting point, Ford had developed a very successful concept making it possible for millions of Americans to get their first car at a low cost, with all that this implies in terms of increased freedom. During the mid 1920s, when the market eventually became weaker and the customers started to request new, varying car models with improved performance, comfort, and speed, Ford lacked readiness to handle this. General Motors annually developed new models during the 1920s, but it was not until the 1930s that it was possible to talk about annual models from Ford. In 1926 the crisis became acute at Ford, and they were forced to close down factories due to the significantly decreased demand for the Model T and instead concentrated on Model A, a model that was intended to better fit the demand. However, this concept was not possible to develop technically to the same extent. As one example, the competitors had developed a new technique for sheet metal pressing, making it possible to design new bodies for their cars. Therefore, Ford no longer had the same performance advantage as previously with the robust and reliable Model T, which was superior to the competitor’s vehicles. A new way of consuming products, where new items were abandoned for even newer ones, had evolved. This new era required flexible mass production, which created entirely new rules for the car manufacturers3.

1.2.5 Annual Model Change and Sloanism The subsequent text about Ford and General Motors is mainly based on Hounshell (1984). With flexibility as a new criterion for mass production entirely new prerequisites for production development arose. The years between 1925 and 1932 can be characterised as a time of transfer between mass production of similar products to a strategy involving annual model change. General Motor’s Chevrolet challenged Ford within the low-price segment. Engineering changes were carried out annually. In 1929 a major changeover from four- to a six-cylinder engine was carried out, which increased the yearly volume to 1.5 million cars from 280,000 cars in 1924. The changeover to the new six-cylinder engine only took three 3 Mass production of cars had to, according to Alfred P Sloan Jr., by necessity apply the same principles as the dressmakers in Paris (Hounshell 1984).

18

1 Production Development over Time

weeks which was an impressive record. Preparations for the changeover were ongoing for a couple of years, with a final phase including a pilot plant for producing the engine. Two-hundred engines had already been produced before the equipment moved and this was doubled in the new production system. This is to be compared with Ford where, under chaotic circumstances, the replacement of the Model T with the Model A caused a six-month shutdown. Ford’s changeover not only involved a change in technical solution, but also a mental changeover. The employees were used to the Model T after nearly 20 years of production of that single car model. A key person responsible for the success at General Motors was William Knudsen. William Knudsen later became managing director for the entire General Motors in 1937. He also had a critical role in the increased knowledge and know-how concerning mass production that the employees at General Motors adopted. Knudsen was recruited from Ford where he had an important role during the development of the production organisation. Relevant to note is that, despite apprehensions by many, Knudsen did not bring any experts in mass production from Ford to General Motors. Instead of building an imitation of Ford in General Motors, Knudsen chooses to build an organisation that was able to adapt to changes and expansion. He also abandoned special purpose machine tools in favour of standard equipment, placed in sequential lines. This provided adaptability to changes, totally different from the abilities in Ford’s inflexible production system. General Motors also had local and independent management in the different factories for manufacturing and assembly around the USA. The development within General Motors created a principle of flexible mass production. Product and production development were mainly controlled by market demands, unlike the development at Ford controlled by production technology. These new market requirements where similar to those of today, whereas the market situation prevailing for Ford was totally different. Strategies and principles controlling Ford’s production system – possibly influenced by Scientific Management – are still of great importance for industrial production since the assembly line and the division of labour became generally accepted concepts. There is an obvious division of labour between workers and management in Ford’s factory. Still Hounshell (1984) questions whether Scientific Management (Taylorism) actually contributed to the development of the new assembly system in Highland Park. Hounshell (1984) refers to Henry Ford who considered that the Ford Motor Company had neither relied on Taylorism nor any other system. The company should have been Taylorised even without the principles advocated by Taylor.

1.3 Organisational Fundamentals When more and more work was carried out in factories, arranged in factory systems, the requirements on work organisation increased. This need didn’t exist

1.3 Organisational Fundamentals

19

during the pre-industrial period since the tradesmen in the early domestic systems who bought labour were only interested in quality and delivery, not in how the work was carried out (Andersson et al. 1992). During industrialisation, one of the questions occupying both practitioners as well as researchers was how to organise the work to facilitate as good results as possible. Scientific Management (Taylor), the administrative school (Fayol), the bureaucratic school (Weber), and the Human Relations Movement (Mayo) usually count as being parts of classical organisational theory. Common for these schools are that they developed during the early phases of the industrialisation which is at the end of the 19th and the beginning of the 20th century (Bruzelius and Skärvad 1995). Below the fundamental principles of these schools are presented.

1.3.1 Scientific Management An idea that has, and has had, a major impact on industrial development is Scientific Management. The person associated with this idea is mainly Fredrick Winslow Taylor. The fundamentals and the principles of Scientific Management are presented in the publication The Principles of Scientific Management (Taylor 1911). The description below is mainly based on this publication. A fundamental principle of Scientific Management is maximum prosperity for the employer and for each employee. Long-term prosperity for the employer cannot exist if not accompanied by prosperity for the employee. The employer wants low labour costs and the employee high wages, and Taylor claimed that this was possible to achieve through scientific management. To make this possible the productivity needed to be maximal. However, it was here the problems began, as Taylor had noted that maximal efforts at work were not desirable among the workers. The ambition was rather to go to work and do as little as possible, a phenomenon that Taylor called soldiering. The task was to handle the soldiering and find a way to strengthen the relation between the employer and the employees so both parts could do their best to achieve the common prosperity advocated by Taylor. Taylor himself summarises his theory with the words: “it is no single element, but rather this whole combination, that constitutes Scientific Management”. The parts he referred to were: • • • • •

science, not rule of thumb; harmony, not discord; cooperation, not individualism; maximum output, in place of restricted output; and the development of each man to his greatest efficiency and prosperity.

20

1 Production Development over Time

FURTHER STUDIES: FREDERICK WINSLOW TAYLOR (1856–1915) Taylor grew up in a respected and wealthy lawyer’s home. It is described that he already as a youngster was obsessed by calculations and measurements in order to find better ways of doing things. Fredrick Winslow Taylor left his law studies at Harvard and started to work as an apprentice in a mechanical workshop and at the same time he studied engineering. At the age of 25 he received his engineering degree from Stevens Institute of Technology in New Jersey. In 1878 he started to work for Midvale Steel Company, owned by friends of his father, and managed by his brother-in-law. Soon he got a position as a group leader. A lot of the texts that are written about Taylor bear witness to a man with high ambitions to find the best, and most effective, solutions to various problems. The way he used to find the solutions was mainly through assiduous experimentation. He carried out more than 40,000 experiments to determine the optimal cutting data, which contributed to the development of the theory of chip formation. As a side effect of these experiments he also discovered the superior cutting properties of high-speed steel. He showed both in practice and in theory how cutting volume and tool deterioration varied with for example cutting speed, tool material, and machining material. As a result from these findings it was possible to increase the machining quantities five times per time unit. This work was distinguished all over the world and Taylor received a golden medal at the World Exhibition in Paris in 1900. However, there was some resistance among practitioners to use his results, many preferred to use their own methods, based on experience. As a consequence progress within the companies stagnated. Taylor continued his work concentrating on questions concerning work organisation. This is also the work that he is most well known for in the general public. Taylor discovered early that the workers were soldiering; they didn’t perform as well as they could. The culture among the workers was not to work as hard as possible, since hard work was not considered to pay off. Norms were established on the shop-floor, indicating how much to achieve in a day. When Taylor became group leader he had enough knowledge by himself to determine both how the work should be carried out, and how much time it should take. With stubbornness similar to when he carried out his experiments with cutting data he continued his work on determining how different tasks should be carried out in the most effective way. Taylor is the man who gave time and motion studies a face; he has been called the father of work studies. Taylor maintained that the workers needed motivation to carry out their tasks. One way to achieve this was to let the wages reflect their performance. It was also through compensation he was able to involve the workers in his studies. Taylor was however exposed to sharp criticism. He was called before the Senate since his methods was considered to violate human rights. However, the advantages were obvious and little sympathy was given to the potential disadvantages of the system. Sources: Sundin (1991); Andersson et al. (1992); Taylor (1911)

In Midvale Steel Company a lot of work was governed by piecework. In practice this often implied, here as in several other places, that the work accomplished was determined by the workers who had agreed on how much to produce a day, normally about 1/3 of what was possible. Quite soon after Taylor became responsible for one of the lathes it was clear that his work performance was higher than the others working with the lathes. Therefore, he was soon appointed group leader, which according to himself did not make him very popular in the workshop (Taylor 1911). Especially not since he made it clear that his ambition was to make sure that as much as possible was produced.

1.3 Organisational Fundamentals

21

One important step towards a good relation between the employer and the employees was an agreement concerning what a decent day’s work included. Taylor received permission from Mr. Sellers, managing director of Midvale Steel Company, to carry out scientific studies to establish how much time actually was required to carry out various tasks. A group of men who were considered to be physically powerful and good steady workers were selected for this purpose. During the experiments their wages were doubled, and at the same time they were told that if they were suspected of soldiering they would be discharged. Taylor wanted to determine what fraction of a horse-power a man was able to exert. The studies did not result in any law of value. No connection was found between the energy which a man had exerted during his work and how tiring the work was. In some kinds of jobs a man was tired out when doing maybe one-eighth of a horsepower, and in other jobs he was not tired to any greater extent by doing half a horse-power of work. Later the problem was handed over to a mathematician who soon determined the law governing the tiring effect of heavy work. By choosing the appropriate load, work could be carried out all day long. This was illustrated when handling of pig-iron was to be made more efficient and Scientific Management was introduced at Bethlehem Steel Company. With support from his calculations Taylor found that it was possible to handle 47 tons of pig-iron a day, instead of the 12½ tons handled before the handling was rendered more effective. The first thing that was done was to select the best man for the task. Among the 75 pigiron handlers, a man called Schmidt was selected. Schmidt was requested to do exactly as he was told, that is to carry and rest when he was told to. By the end of the day, at 4.30 pm, he had handled 47½ tons of pig-iron, which was his task. This amount was assumed to be appropriate, since Schmidt maintained this speed and load for the coming three years that Taylor was still at Bethlehem Steel. Gradually also other pig-iron handlers were trained to use this speed and load. In a similar way the work with shovelling was also made more effective. Through experiments, the appropriate load was determined to approximately 10 kilos (21.5 pounds). By selecting first-class men and observing when they shovelled, shovels appropriate for different material and loads were produced. Small shovels were needed to shovel iron ore, and large shovels for ash. At Bethlehem Steel Company eight to ten different shovels had to be available, with different sizes for different tasks. According to Taylor (1911) similar work was carried out by Frank B. Gilbreth. With support from time-studies he determined how bricklayers should work. According to his studies the number of motions made by the bricklayers could be reduced from 18 to 5. This could be done through elimination of unnecessary movements, installation of an adjustable scaffold, and by using the right way of working. Among others Mr. and Mrs. Gilbreth continued to work with Taylor’s ideas even after his death. The work with Scientific Management was also kept alive through the rationalisation movement (Bruzelius and Skärvad 1995).

22

1 Production Development over Time

Later the principles were criticised from different directions, among other things for the inhuman perspective. Hounshell (1984) criticised Scientific Management for the risk of ending up with suboptimisation4. The reason, according to Hounshell (1984), is the actual starting point that there is one best way of carrying out a certain operation, instead of investigating alternative, and maybe more effective, ways of carrying out that operation. In the example above, the handling of pig-iron could have been mechanised instead of making the manual handling more effective. This was also one of the main differences between Fordism and Taylorism according to Hounshell (1984). When production systems were made more effective under the supervision of Henry Ford they dealt with elimination of work tasks through mechanisation and thereby changing the role for the operators. Time- and motionstudies were used in Ford’s production system, but here the starting point was to plan the work for the machines since they determined the speed.

1.3.2 Organisational Theory of Importance for Industrial Production Taylorism can be classified as a normative organisational theory; the main idea is that there is one best way of organising industrial production and administration. Henri Fayol (1841–1925) is considered to be the foremost representative for this normative organisation theory (Helgesson and Johansson 1990). Fayol considered that the actions required to run an industrial company can be divided into six groups or functions: technical, commercial, financial, security, accounting, and administration. Further he said that the technical function often had a dominating position concealing other functions, at least equally important for a company’s progress and success. Therefore, Fayol treated the first five functions relatively briefly and concentrated on the administrative function. This was divided into five elements: planning, organisation, commanding, coordinating, and controlling, which in turn was divided into a further more detailed level. Fayol argued that a staff organisation should be a complement to the functional organisation, which was in line with his ideas about a united command and the number of subordinates for each manager (control range). Furthermore, he formulated a number of rules for a good manager (a good command) (Helgesson and Johansson 1990). Line and staff organisation is considered to satisfy Fayol’s requirements on unit command, where the line managers have the right to give orders, and the staff is an investigating and consultative organ without the right to give orders (Andersson et al. 1992). The German sociologist Max Weber (1864–1920) was a spokesman for bureaucracy (the bureaucratic school/theory), a complement to the classical organisational theory. Weber said that the industrial development made companies 4 Suboptimisation means that you try to reach the best possible result within parts of an entire business (Svenska Akademins Ordlista 1995).

1.3 Organisational Fundamentals

23

more and more complex. Therefore, he considered that a hierarchical organisation with strict division of responsibility, formalised rules, and formal authority, was required. The conclusion was that it is an exercise of power, and the only possible authority is the bureaucratic where the exercise of power agrees with accepted rules. Other authorities were the traditional authority concerning old habits and the charismatic authority based on the personality of the person exercising the power (Andersson et al. 1992). Industrial production at the beginning of the 20th century was mainly organised according to the same principles that Ford used, which were in line with Taylor’s normative principles known as Scientific Management. The normative organisational theory with Taylor and Fayol at its head declared how to organise a company. The well-known Hawthorne Experiments were carried out at the beginning of the development of the Human Relation Movements during the early 1930s, with Elton Mayo as a key figure. FURTHER STUDIES: THE HAWTHORNE STUDIES The Hawthorne experiments were conducted in the factories of the Western Electric Company in the USA between the years 1927 and 1932, during a transfer period towards more flexible mass production. A group of researchers, working within the so-called human factor tradition were assigned to study the company and their growing problem with working conditions. In the well-known experiments, with the purpose to investigate among other things the effect of various levels of lighting on work performance, gave the result that the productivity increased no matter what level of lighting was used. The work performance improved, both in the test group and in the control groups, even though no changes at all were made in the lighting for the control groups. The Harvard professor Elton Mayo was associated with the project and contributed to the development of the Human Relation Movement as one result of the studies. The experiments showed that it was not possible to find any trivial causal relations between working conditions, well being, and performance. Furthermore, it was discovered that work is a group activity with specific habits, and the employer bears a relation to the entire group, not to the single individual. The human need for acknowledgement and confidence, and the feeling of being connected to a group was considered as more important for work performance than the material conditions on the work place. The results from the studies gave rise to what today is referred to as the Hawthorne effect, meaning that effects can appear due to reasons you did not think of. It was not the actual conditions that gave rise to the improved productivity in the Hawthorne studies, but the fact that both the test group and the control group were noticed leading to increased satisfaction in the groups. Sources: Sandkull and Johansson (2000); Helgesson and Johansson (1990); Andersson et al., (1992)

The Human Relation Movement brought the normative organisation theory yet another step forward, according to Helgesson and Johansson (1990). Here, the importance of the group for the individual at the work place and the individual need for acknowledgement were put into focus. The Human Relation Movement meant that the ambition to increase productivity presupposed that human

24

1 Production Development over Time

feelings, attitudes, and reactions, were considered. The approach advocated by the movement has proven to be useful for handling humans within given organisational structures, and among other things resulted in instruments for that (Andersson et al. 1992). The Movement primarily is about organisational configuration. Helgesson and Johansson (1990) state that there was a particularly good breeding ground for these new thoughts in Sweden since there was an old industrial tradition in line with the Movement’s ideal. The Human Relation Movement to a high degree stimulated the development of personnel administrative and industrial psychological questions. Within companies, personnel departments were formed, with the mission to secure the well-being of employees. There are yet other organisational theories that have exerted influence on industrial organisation (Gorpe 1984). During the 1950s Frederick Herzberg identified, based on humans as individuals in work, two groups of factors: • hygiene factors: must be in place, otherwise people become dissatisfied; and • motivation factors: helps to increase satisfaction and affects motivation. Douglas McGregor’s way of considering people at work was described in two theories: • humans are by nature lazy and not interested in work (theory-X), and • to work is a human activity (theory-Y). Theory-X was considered to be the starting point for the majority of the industrial work places, not least because they were designed according to the principles prescribed by Scientific Management (Gorpe 1984). Psychologist Abraham H. Maslow’s well-known model for hierarchy of needs, comprising five levels, is sometimes used to illustrate the human needs related to work, and to understand the mechanism behind changed needs (Gorpe 1984). Maslow placed the needs in a five level hierarchy: • • • • •

physiological needs; safety needs; love and belongingness needs; self-esteem needs; and the need for self-actualisation.

Maslow’s theories have a strong foothold in organisational theory, but were not primarily developed bearing the working life in mind. Despite the fact that the theory is very well known, the scientific support is quite weak. The reason is that theories of this type are difficult to test (Abrahamsson and Aarum Andersen 2000). Finally, Herbert A. Simon can be mentioned, who introduced rational decision making (the decision school) into organisational theory. The starting point for this school is that decision making is the core of all administration, and the school developed to be a leading one during the 1960s (Bruzelius and Skärvad 1995). The decision school developed in parallel with the socio-technical school during the 1950s and 1960s.

1.3 Organisational Fundamentals

25

1.3.3 Socio-Technical Organisational Theory The socio-technical organisational theory was developed at Tavistock Institute of Human Relations in London during the 1950s. It was based on studies of the English coal industry and an Indian textile company. Fred Emery and Eric Trist are mentioned as important for the development of the socio-technical theory (Sandkull and Johansson 2000). The fundamental idea was that the workers psychological needs in a work situation had to be considered from a holistic perspective. The socio-technical organisational theory, the socio-technique, has had a great impact on industrial activities, not least in Sweden. The strong focus on the technical parts of production systems after the war conveyed an organisational problem for several companies (Abrahamsson and Aarum Andersen 2000). Research focusing on these problems resulted in new ways of organising production. The socio-technical organisational theory focused on the group level, with emphasis on the social rather than the technical system. The fundamental question is how to find a suitable adaptation between the social and the technical system in working life. The aim is to find an organisational form adapted to new technology and at the same time satisfying the psychological needs of the workers in a better way (Abrahamsson and Aarum Andersen 2000). The socio-technique can be seen as a reaction against for example Taylor’s ideas about division of labour and Ford’s assembly line. The socio-technical school was inspired by the Human Relation Movement, and had great influence on the area of work organisation, not least during the 1960s and 1970s. The socio-technical perspective on work organisation mainly implies that a work group cannot be regarded as either a technical or a social system. The work group has to be regarded as a comprehensive socio-technical system. When designing work organisation it is therefore essential to consider technical requirements, restrictions, prerequisites, and possibilities, and social and psychological requirements, needs, and conditions (Bruzelius and Skärvad 1995). The socio-technique was practically applied by organisation into production work groups. The group-based work organisation developed further towards an increased decentralisation, reduced division of labour, and reduced dependence on the need for a predetermined work rate. Through parallel flows and a number of buffers, the work situation became less controlled for the operators. Work rotation, work enlargement, and work enrichment described with other terms how the work content was broadened. The concept of autonomous groups also developed as a result of the industrial direction introduced by the sociotechnique. The term, autonomous groups, later became relatively controversial and in several companies other terms, such as objective governed groups or similar were used instead. The socio-technical perspective constituted the principal starting point for the design of Volvo’s assembly shops in Kalmar, and later on in Uddevalla. Since the car industry always has been associated with assembly lines this rendered large international attention (Bruzelius and Skärvad 1995).

26

1 Production Development over Time

1.4 Toyota Production System If Ford’s production system involved a paradigm shift at the beginning of the 20th century, Toyota’s production system represented the next paradigm shift during the second half of the century. The section below aims at describing the different parts constituting Toyota’s production system. The description is mainly based on Liker (2004), Shingo (1994), Ohno (1988), Womack et al. (1990), and Womack and Jones (1996).

1.4.1 The Founder of Toyota The success story of Toyota starts, in the same way as for Ford, with a technical and innovative engineer, Sakichi Toyoda. By the end of the 19th century Toyoda started to invent equipment to facilitate his mothers, grandmothers, and other women’s hard work with spinning and weaving. He invented a manual loom, which he further developed to power-looms. This was done during the period when inventors had to do everything by themselves and therefore Toyoda also had to solve the problem of power supply by himself. Later he invented an automatic loom and in 1926 he founded the company Toyoda Automatic Loom Works, which is the parent-company of the Toyota Group and still a central player in Toyota’s conglomerate. Among Toyoda’s inventions there was a particular mechanism for automatic stoppage if a broken thread was detected. This was called Jidoka (autonomation, mechanisms for detection of production abnormalities) and became one of the pillars of the Toyota Production System. Another important contribution was his approach that work should be based on continuous improvements. Toyoda was strongly inspired by a book5 written by Samuel Smiles. The book focused on, via descriptions of industrial success stories and different inventors, problem solving, how to develop oneself, how to achieve success through hard work and discipline, and how to attract attention. It was largely concerned with fundamental values and came to play an important role in the development of the Toyota Production System. In 1929 Toyoda sent his son Kiichiro to England to negotiate patent rights for spin- and weaving equipment. Sakichi Toyoda wanted to give his son an opportunity to contribute to the world in the same way as Toyoda himself had done. However, not by continuing to work with yesterday’s technology but with what Sakichi understood should be the technology of tomorrow. Encouraged by his father, Kiichiro started Toyota Motor Corporation in 1930. Kiichiro studied for an engineering degree and started to build his company based on his father’s philosophy and management strategies, but with the addition of his own ideas. One of these 5

The book was published in 1856 and is still available, also translated into Swedish, e.g. Smiles, S. (1998) Människans egen kraft: rätta vägen till rikedom och framgång, City University Press, Stockholm. Subject field is character building (formation of character).

1.4 Toyota Production System

27

ideas was Just-in-time (JIT), inspired by the American supermarket system where products were replaced on the shelves as soon as a customer bought them. Just-in-time, or the pulling principle, is about not producing any part until there is a need, that is when produced parts are consumed. As an illustrating metaphor the procedure of filling up the car can be used. A car has a signal indicating when it starts to run out of petrol, and when this signal activates you go to a petrol station and fill up. To fill up before that, when the tank is still full or half full, is a waste of resources comparable with producing products when the product is not needed. Just-in-time is a principle that makes it possible, through the use of various techniques and tools, to produce and deliver products in small quantities and with short lead time to satisfy the customers’ specific need. The Second World War and the following huge inflation left Toyota facing bankruptcy in 1948. To avoid this, voluntarily wage reductions were made. Kiirchi Toyoda had a policy of not firing personnel and therefore 1,600 employees were asked to voluntarily leave – which rendered strong intense protests. Despite the fact that there were several external reasons for the failure at Toyota, Kiirchi Toyoda himself took responsibility and resigned. This was a huge personal sacrifice, but it contributed to a turn-over of opinion and it also came to have considerable influence on the company. To set a good example or as they said, get your hands dirty, to adapt an innovative spirit, and to understand the value of the company’s contribution to society, were fundamental values for Toyota at this point of time and still are.

1.4.2 Inspiration from USA Eiji Toyoda, who also was a mechanical engineer, continued to work in the spirit of his cousin and eventually became managing director. After a 12-week long study tour among American factories, Eiji Toyoda gave his factory manager, Taiichi Ohno, a commission to improve Toyota’s production system until it reached the same productivity as Ford’s. This was a tough mission with respect to the different states and starting points for the companies at this point in time. The financial situation at Toyota was bad, the Japanese maker was small, and the customers demanded various types of products. With these prerequisites it was more or less impossible to apply Ford’s principles of mass production and economies of scale. However, the study tour in the USA had not impressed Eiji Toyoda. What he saw was that the production systems in American car factories more or less were the same as they were during the 1930s. Toyoda observed high inventory levels and lots of products waiting for the next operation. This was a consequence from large overproduction and an uneven flow. It could take weeks to discover defect products, since these were hidden in the production system due to the large series produced. In Toyota it was not possible to waste resources. There were no large areas available for inventories and workshops, and furthermore there was no demand for large volumes of a single type of car in Japan.

28

1 Production Development over Time

One principle that was considered as worth adapting from Ford’s production system was the continuous flow made possible through the assembly line (conveyor belt). On the basis of continuous flow, Toyota created a one-piece flow with a unique flexibility in order to satisfy the customers’ demand. By touring the factories, Taiichi Ohno applied and further developed all the different principles and philosophies practised by Toyota over the years. The result was a tremendously successful production system; the Toyota Production System. FURTHER STUDIES: TAIICHI OHNO (1912–1990) As a factory manager at Toyota, in the late 1940s, Taiichi Ohno received the commission to achieve a company that could compete with Ford’s car production, but based on the philosophy and company culture prevailing at Toyota. Ohno became a key figure in the development of the Toyota Production System, and worked for efficient production until his death. Ohno himself described the Toyota Production System in a book published in 1988 (Ohno 1988). A well-known story is when Taiichi Ohno in 1984 visited a Japanese company. After a rapid walk through the factory he asked the group manager to fetch the local manager. When the local manager turned up Ohno asked if he was responsible for the factory, which was confirmed. “The operation here is a shame. You are completely incompetent”. Straight off he asked the group manager to fire the local manager. However, the group manager stated that the local manager was neither more nor less responsible for the company’s condition then the rest of the employees in the group. The factory was managed in the same way as it always had been. The group manager suggested that Ohno, as an alternative to firing all employees, would become their sensei and tell them how to do things (a sensei is a senior teacher or mentor, working in practice with problems in production). As a result from this study tour, the 72year-old Ohno resigned from Toyota and started as a sensei (he was still chairman of the board within two Toyota companies). A long and successful cooperation between Ohno, the group manager, and the local manager thereby started. One of Ohno’s favourite sayings was that “common sense is always wrong”. He thought that his mission in life was to question common sense. Among other things he tried to find a way to change the opinion that production in batches is more efficient than production piece-by-piece. Naturally, his opinion was not completely uncontroversial, and together with his temper this caused some collisions with his colleagues and workers. Yet it is necessary to add that through this perspective a very successful manufacturing company was achieved. Source: Womack and Jones (1996)

Toyota also adapted quality thinking from the American pioneer within quality engineering, Edwards Deming (other key figures within the quality area who became important for the Toyota Production System were for example Joseph Juran and Kaoru Ishikawa). The approach that the company should not only meet the customers’ needs, but also surpass their expectations, was among others adopted. Customers in this context included also the internal customers, i.e. subsequent processes in the value chain. Deming encouraged the Japanese to adopt a more systematic approach towards problem solving. Later this approach became known as the Deming-cycle or the plan-do-check-act-cycle (PDCA-cycle) which is a pillar of continuous improvement (kaizen). Toyota created a new paradigm for production. During the 1960s Toyota extended their production system to also include key suppliers, which made the

1.4 Toyota Production System

29

entire supply chain practising the same principles. Toyota Production System became known for the surrounding world in connection with the oil crisis in 1973, which forced Western manufacturers to reconsider their production systems.

1.4.3 Towards Lean Production The origin of lean production can be found within Toyota’s Production System. The term lean production was coined in 1988 by Krafcik (Krafcik 1988). It became known world-wide through a study of car producers around the world, carried out in the late 1980s. The results from this study were presented in the book The Machine that Changed the World written by Womack, Jones and Roos (1990). Womack and Jones later further developed the description of the ideas behind lean production in the book Lean Thinking (Womack and Jones 1996) where experiences from approximately 50 companies practising lean production are described. These two books were important for the spread of Toyota’s Production System. Lean production, or recourse efficient/economising production, is according to APICS6, a philosophy emphasising the ambition to eliminate everything that does not add value to the value chain. Lean production applies and develops the pioneering ideas from Toyota’s Production System about reduction of waste and added value. Waste (muda in Japanese) in production is according to Ohno (1988) overproduction, waiting, transportation, over processing, inventory, motion, and defects. Everything that does not contribute to a products refinement and increase its value is waste and should be eliminated. Liker (2004) adds another dimension of waste – unused creativity among the employees. Lean production requires groups of versatile staff at all levels in an organisation. Therefore, the task is to question the appropriateness of the applied activities through value analysis and other methods (Shingo 1994). It’s about elimination of transports through a better layout and rationalisation of the remaining transports. It is also about achieving one piece flow through production levelling, synchronisation, and improved layouts which reduce the waste through overproduction. Achieving short throughput time and set-up time also reduces various types of waste (Shingo 1994). The application of lean production in the Western world has in several cases involved an isolated usage of one or several techniques from Toyota’s Production System without an understanding of the totality. This has not always been as successful as expected. The plants started in the Western world by Japanese car manufacturers during the 1980s however showed that it was possible to achieve lean production also outside the cultural institutions of Japan (Womack and Jones 1996). These plants, also called Greenfield plants, have been established with entirely new conditions, new employees, new tools, etc. It is also possible to point at adaptations of Toyota’s Production System to specific companies. For example, both Scania and General Motors have developed their own variants, Scania’s Pro6

American Production and Inventory Control Society

30

1 Production Development over Time

duction System (SPS) (Scania 2004) and General Motor’s production system (GPS) (Ny Teknik Wednesday 2 June, 2004).

1.4.4 The Toyota Way Toyota’s Production System should be kept separate from the way of thinking, the Toyota way (Liker 2004). The reason is that both the production system and the way of thinking need to be emphasised. Toyota’s Production System can be regarded as the most systematic and most complete example of what to achieve with Toyotas way of thinking. The Toyota way is not a tool box but rather a sophisticated system for production where all parts contribute to the totality (Liker 2004). The Toyota way is summarised in 14 principles by Liker (2004). Liker (2004) identified 14 principles, organised in four basic categories: Philosophy, Process, People and partners, and Problem solving, illustrated in a “4P model” formed as a pyramid. Philosophy is the base which the other three categories with their comprising principles rest upon. Problem solving represents the top of the pyramid, involving continuous improvement and learning. In brief, the four categories and the 14 principles comprise the message depicted in Table 1.2. The summation above provides a picture of the values that constitute the foundation of Toyota’s Production System and how the principles and the philosophy are applied in practical industrial reality. The principles together create a totality which has made Toyota an enormously successful and profitable company. INDUSTRIAL EXAMPLE: TOYOTA, A PROFITABLE COMPANY “With a profit of 1.16 billion yen, 1.16 thousand milliards, Toyota has accounted for the largest profit in the history of Japan. This corresponds to twice the profit in GM and Ford together … Among the reasons usually mentioned to explain their good profitability is their flexible production system and demand large enough to avoid large discounts as used by some of their competitors. Toyota’s value on the stock market is higher than General Motors, Ford and Daimler Chrysler together”. Source: Ny Teknik, Wednesday 12 May, 2004

Today, Toyota’s production system and lean production are often considered as synonymous with world-class production. Within the automotive industry there is a general agreement that some variant of lean production is the right way to go when it comes to the company’s overall manufacturing strategy (Mercer 1998). This is also evident in the large amount of new books describing this. From being described as “lean and mean” during the 1990s, it seems like the ideas have been accepted on a large scale. Applications have often been made in terms of using different principles or methods, rather than radical or thorough changes based on something like the Toyota way. However, the interest in the Toyota way, the fundamental principles of Toyota’s Production System, has gradually increased.

1.5 Industrialisation in Sweden

31

Table 1.2 Philosophy, Process, People and partners, and Problem solving according to the Toyota Way of thinking Category

Content of Toyota way principles

Philosophy

Base management decisions on a long-term philosophy

Process

Create continuous process flow, pull-system, level out workload, build culture for quality right the first time, base kaizen and employee empowerment on standardised tasks, use visual control, use only reliable and thoroughly tested technology

People and partners

Grow leaders, develop exceptional people and teams, respect network of partners and suppliers by challenging them

Problem solving

Go and see for yourself, make decisions slowly but implement rapidly, become a learning organisation

1.5 Industrialisation in Sweden In 1807 the first steam engine for industrial use was introduced in Sweden at Bergsunds Mekaniska Verkstad (Bergsunds Engineering Workshop). During the 1830s and 1840s a number of manufacturing industries were started in Sweden by immigrating Englishmen and Scotsmen which contributed to the important technology transfer from England. Technology transfer and transfer of ideas on how to organise and manage production have always exerted great influence on Swedish manufacturing industry (Lindberg et al. 1993).

1.5.1 Development Towards Mass Production After the early introduction of the ideas advocated by Taylor it took quite a long time before Scientific Management was applied at any larger scale in Swedish industry. Within all business in Sweden the number of employees increased during the 1940s. Production in Sweden was not directly affected by the Second World War and there was a great demand for industrial goods after the war. However, the development of new modern German industry after the Second World War gave Swedish manufacturing industry serious competition. This caused a strong pressure for rationalisation within the companies (Sandkull and Johansson 2000), and the 1950s and 1960s were the days of glory for rationalisation activities. Work studies played a central role, especially in the manufacturing industry. The Human Relation Movement did not result in any practical consequence until the 1940s and 1950s in Sweden, when personnel departments were established in the companies. By their introduction a more human perspective was developed, compared to the technical and production-oriented management resulting from the adoption of Taylorism (Sandkull and Johansson 2000). Further on, it is observed that with new staff policy and growth of personal administrative and industry

32

1 Production Development over Time

psychological questions, new issues were brought up on the agenda. Several of the lines of thoughts raised by the Human Relation Movement are considered to have been institutionalised within the personnel departments in our companies. Rather likely this development also constituted a prerequisite for the impact from the socio-technical school in the 1960s in Sweden, and came to influence the creation of production organisations based on teams. The prerequisites for mass production were not present in Sweden before the Second World War. It was not until after the war that the industries started to seriously adopt Taylor’s ideas about work studies and rationalisation, and for several manufacturing companies the assembly line became an ideal. Many attended education in production engineering with a focus on work studies during the 1950s and 1960s, with a peak in 1967 with 29,000 participants (Sandkull and Johansson 2000). The interest in production engineering and the significance of production in Sweden were obvious during this period. Work studies and other methods made it possible to rationalise production, which resulted in less complex production systems and reduced the need for production skill. The rationalisation movement resulted in, among other things, the various measurement systems that were introduced. Methods-Time-Measurement (MTM) was introduced at a large scale and the number of white collars working with work studies, methods engineering, and production planning grew quickly (Sandkull and Johansson 2000). As one consequence, among others, the skill associated with rationalisation and development towards mass production was transferred from manufacturing to functions such as maintenance, repair, and tool manufacturing. Thereby, the manufacturing departments lost many competent and skilled people. For mass production within technically oriented production systems personnel with limited skill were recruited instead. With an increased division of labour the need for staff functions arose, carrying out some of the work tasks previously handled by the skilled manufacturing personnel. The amount of indirect work thereby increased significantly and more and more people came to work with tasks outside of actual production.

1.5.2 Alternative Production Concept In parallel with the development in Japan, which among other things resulted in the Toyota Production System, development of a Swedish production concept was ongoing, with influences from the Human Relations Movement and the sociotechnical theory. In Volvo’s car plants, in Kalmar and Uddevalla, a new work organisational concept was created with longer cycle times and increased work content. Volvo’s Kalmar plant was the first assembly shop not using the traditional assembly line. Instead the cars were built in a serial flow with small buffers between each team (Ellegård et al. 1992). The plant in Kalmar was described as a new way of thinking concerning assembly. The concept was further developed in the Uddevalla plant, where Volvo moved even further away from the assembly line. The first assembly plant in

1.5 Industrialisation in Sweden

33

Uddevalla opened in May 1988 and the last in October the same year. Here, an entirely new production concept for car assembly was created, based on stationary assembly with teams qualified to build a complete car. The new production concept, sometimes called reflective production, was among other things characterised by the following principles (Ellegård et al. 1992): • overall learning of natural totalities in work; • parallel organic flows which makes building of entire products possible in selfgoverning teams; • the technical system is adapted to the human; • work content defines time required, knowledge defines work content; • division of labour is designed within the team; • long cycles are made possible; • changes are natural parts of the work; and • planning with long time-horizon. Reflective production is considered to have several similarities with lean production, but the production concepts are differentiated from each other on a couple of critical points. One difference is the use of assembly lines and the other is the extensive division of labour in lean production (Ellegård et al. 1992). The counterpart to Volvo’s Uddevalla plant was available in Saab’s Malmö plant, even if Saab did not develop a new production concept. Saab’s Malmö plant was for different reasons closed down at the beginning of the 1990s, shortly after start-up. During the same period also Volvo’s Uddevalla plant was closed down due to the company’s production capacity in proportion to the reduced market demand (Sandkull and Johansson 2000). The plant in Uddevalla was reopened in 1996 as a joint venture between Volvo and Tom Walkinshaw Racing (Engström et al.1998). The prerequisites constituting the industrial reality in Sweden in the 1980s were crucial. In order to understand the evolvement of reflective production the context is essential. During the 1980s there was an increasing lack of labour within Swedish manufacturing companies and the requirements on the places of work, the work environment, and the work tasks thereby increased. It was necessary with industrial new thinking to attract labour for production. Efforts to create what they called “the good work” were made. You can only speculate on whether the Swedish production concept, reflective production, actually was better than the traditional assembly line or not. Reflective production systems were not operated long enough to be stable. Ideas involving such radical changes of production require a comprehensive view to make sure that all parts are synchronised. For a new production concept to concur with existing ones it is also required that the management is enthusiastic and that the people realising the changes are active. The attitudes among the involved people towards the development work as well as the production system in itself are crucial for the outcome. During the deep recession in the 1990s the situation changed. Required capacity decreased, the need for recruiting reduced, and unemployment became reality. In

34

1 Production Development over Time

other words, the climate changed for innovations and development of existing and new production systems in Sweden. Furthermore, the climate was characterised by tough requirements on profitability. Specialised flexibility was predicted to replace the production systems inspired by Ford, but that has not happened (Sandkull and Johansson 2000). Instead production systems have been modified to facilitate higher flexibility. Companies in Sweden have got on fairly well when it comes to allowing employees to take more responsibility for parts of the production.

1.6 Production Development: A Summary To summarise Chap. 1, it can be concluded that there are several factors affecting the production system, see Fig. 1.6. These factors can be summarised in three different categories: • external influences; • strategies and fundamental attitudes among the individuals involved in the development of production systems; and • actual options during development of the production system. Management strategies

Technology Work environment and organisation

Actual options

Planning and control

PRODUCTION SYSTEM

Strategies and fundamental attitudes

Company culture

External influences

History

Trends

Globalisation

Production philosophies

Company structures

Fig. 1.6 Factors affecting the development of production systems (based on Bellgran 1998)

1.6.1 External Influences The external influences affecting the production system design are among other things history, trends, globalisation, and company structures. Production development history, nationally as well as internationally, has an important role. Previous achievements and successful production systems can be models for production systems to be, if gained experiences and knowledge is made available to others. A short historical description was given concerning production development in general and production systems in particular in Chap. 1. The ideas advocated by Taylor and Ford had a very dominant influence on subsequent production systems, all

1.6 Production Development: A Summary

35

around the world. The extent different production concepts are spread around the world depends among other things on the openness of the creators. It also depends on to what extent the different ideas have been studied by researchers and others. As one example Ford can be mentioned. As a consequence of his openness concerning the production system, his production technology spread quickly within the American manufacturing industry (Hounshell 1984). Ford’s ideas were spread by, for example, articles in different journals. Later, production concepts such as the Toyota Production System and lean production are other examples of ideas which strongly affected the development of new systems. Actually, it is even relevant to talk about a paradigm shift concerning the attitude towards production and its possibilities of being a decisive, competitive means for a manufacturing company. With Sweden as an example, it is also possible to give national examples of important factors affecting the development of production systems. One such factor is the socio-technical idea which above all affected the design of assembly systems, away from the traditional assembly lines to solutions implying increased work content for the assemblers. Different trends are reflected in the production systems developed, as in the current forms of industrial collaboration. However, the importance of the experiences and the history within a company should by no means be underestimated when the influence on new systems is concerned. Globalisation is a strong force affecting the design of today’s production systems. A consequence of the ever-increasing competition facing the manufacturing companies in terms of new global actors, new and more specific customer needs, short lead-times, and low production costs, is increased specialisation and in several cases outsourcing of noncore activities. The rise of new company structures implies that we can observe an increased change concerning the companies’ owner conditions, for example local ownership decreases for several production units. The number of international owners has also increased for Swedish companies; dramatically from 1990 onwards. Ownership affects the geographical location of development units for production engineering and production development, and also other research and development units. Location of research and development units belongs to the external influences. This affects existing and new production systems, since physical proximity to research and development provides good opportunities for testing new technology on site.

1.6.2 Actual Options When developing production systems the available and actual options concerning technology, planning and control, and work environment and organisation are decisive for the chosen solutions. The chosen solution is often a mixture of existing solutions and solutions developed specifically for the new production system. Planning and control is concerned with methods and tools, materials control and materials handling, and various options concerning plant layout. Existing technology, machines and equipment, availability and level of automation, are other

36

1 Production Development over Time

decisive factors. Unfortunately, it is too easy to forget the actual options concerning work environment and organisation. This area is for some reasons easy to neglect when developing production systems, even if examples of the opposite also can be given. Work environment and organisation have also been driving new ideas within the production area.

1.6.3 Strategies and Fundamental Attitudes Strategies and fundamental attitudes among involved people are decisive for the development of production systems and the final result. Strategies in a company concern the business strategy and its translation into manufacturing strategy. Strategies provide boundaries for a new production system. The applied production philosophy is partly a consequence of the chosen manufacturing strategy. Company culture concerns visible as well as invisible knowledge and experiences from the company’s own activities, and often constitutes a not deliberate control of the way of working and the choice of solutions for the new production system. Finally, people are the corner stone of the company with all its functions, not least because of the production system and its development. The fundamental attitudes among people are reflected in behaviour and decisions at all levels and in all situations. How external influences and actual options are considered when developing production systems depends on the fundamental attitudes among those involved. The development of production systems during the 20th century until today consists of a combination of different solutions and alternatives. Development is guided by the available and actual options and general opinions at the time for development. Today, the accumulated options, especially at a detailed level, are enormous compared to the situation almost a hundred years ago when Ford developed his assembly line. The possibility to find the right solution for every specific situation is therefore larger, and simultaneously the complexity increases. The requirements on the basis for decisions are high, as are the requirements on a wellplanned development process, in order to make use of the existing possibilities of achieving efficient production systems.

Chapter 2

Production System

Abstract This chapter aims at answering the question of what a production system actually is, what the characteristics of a system are, and why a systems perspective is useful when dealing with development and operation of production systems. Furthermore, different ways of classifying production systems are presented based on characteristics given by the systems perspective. The terminology related to production systems is presented, and different hierarchical levels and parts of the production system are described. As a conclusion the relevance of a life-cycle perspective on production systems is elaborated upon.

2.1 A Systems Perspective During the 1990s it was generally observed that a holistic perspective on production systems was required (e.g. Rampersad 1994; Wu 1994; Bellgran 1998). Today, the need for a holistic perspective, or to regard the production system in totality, is generally accepted. A holistic perspective on production systems implies that systems should be designed with the technical and physical parts, the humans in the system, and the way to organise the work, taken into consideration (Bennett 1986). One way to facilitate the use of a holistic perspective is to apply a systems perspective, based on system theory, to production systems. The importance of totality is emphasised when a system theoretical perspective is applied to the production system. With support from a system theoretical perspective all parts are taken into consideration and the interplay between the different parts of the production system is emphasised. A system theoretical perspective is also called a systems perspective (Lind 2001). A similar term is systems thinking, referring to how we regard the world around us, if we use the system concept to understand the complexity of reality (Checkland 1998). The notion system has become more and more common to describe activities and phenomena in different situations (Lind 2001). Therefore, the notion system M. Bellgran, K. Säftsen, Production Development, © Springer 2010

37

38

2 Production System

often appears in combination with other words, as in our case production system, manufacturing system, and assembly system. Systems exist everywhere and despite differences all systems share some common fundamental structures. As a consequence the system theoretical perspective has developed as a way of explaining systems in a scientific way (Wu 1994): “… manufacturing industries are now leaving one technological age which is characterised by machines, and are in transition to the age of systems.” (Wu 1994, p. 27)

One explanation of the statement above is that a systems perspective is useful for increasing the understanding of a complex production system. To successfully develop and operate production systems good understanding of the components of a production system and how these components interact is essential.

2.1.1 Characteristics of a System Systems theory is based on the relations and interplay between different components in a system. The fundamentals of general system theory can be found in biology where von Bertalanffy had already described the meaning of a system in 1920 (von Bertalanffy 1972). However, the system concept is, according to von Bertalanffy (1972), as old as western philosophy; Aristotle said that the totality is more than the sum of the parts. A fundamental starting point of systems theory is the idea of synergy; meaning that totality is different from and hopefully larger than the separate parts, which can be exemplified as (Checkland 1998): “The taste of water, for example, is the quality of the substance water, not of hydrogen and oxygen which is combined to achieve water.” (Checkland 1998, p. 3)

A system is an organised collection of personnel, machines, and methods required to accomplish a set of specific actions (CIRP 1990). Churchman (1968) includes the accomplishment of a set of goals in his definition, as does Wu (1994). A system can thereby be defined as a collection of different components, such as for example people and machines, which are interrelated in an organised way and work together towards a purposeful goal. The system boundaries can be drawn at different levels, and everything outside the system boundaries can be considered the external environment (Wu 1994). A characteristic of a systems environment is that the environment influences the goals for a system but the system cannot influence the environment (Churchman 1968). On the basis of how the environment affects the system, the environment can be divided into different parts. The active (close) environment directly affects the system, whereas the passive (remote) environment has little or no effect on the system (Hubka and Eder 1988). Within system theory emphasis is placed on what are inside the systems boundaries.

2.1 A Systems Perspective

39

Commonly a system is divided into subsystems, which provides a general view of a complex system. With a systems perspective the relations between the different subsystems are emphasised, and also between different hierarchical levels (Lind 2001).

2.1.2 Production: A Transformation System The function of a production system can be described as a transformation of input to output, see Fig. 2.1. This description is according to the black-box principle (Wu 1994). The transformation constitutes a black box which we cannot see the contents of. The transformation can for example consist of machining or assembly. The major elements of a transformation system are a process, an operand and the operators (Hubka and Eder 1988), see Fig. 2.2. The arrangements and relationships of the elements form the structure of the system. A transformation system usually has a defined goal; to perform a transformation on an applied operand, from an existing state to a desired state. Driving and guiding the process is the task for the operators, consisting of the human system, the technical system and the active environment. The function describes the purpose of a system, what it does or is intended to do. With the terminology from systems theory we can refer to the technical system and the human system as the executing system, and the information system and the management and goal system as the active environment. The relation between these subsystems together contributes to the transformation of input to output. One example of a transformation system is a production system. Fig. 2.1 Transformation of input to output

Input

TRANSFORMATION

Executing system Active environment

Human system

Technical system

Information system

Transformation process

M - Material E - Energy I - Information

Management and goal system Feedback

M,E,I

Operand in initial state

Passive environment

Operand in desired state

Transformation system

Fig. 2.2 A simplified model of the transformation system (Hubka and Eder 1988)

Output

40

2 Production System

The transformation can be regarded as a change process. To meet the requirements of the change, the operand gets added values. These values can be different qualities which makes the operand fulfil the requirements after the transformation. For example, there is a demand for pressed sheet instead of raw steel. In this case the steel (the operand) should be given these qualities, the added values, through the transformation process. The transformation affects the operand through changing its structure, location (for example through transportation) or time dimension (for example through stock-keeping). The structure of the system is described by the different elements, which are parts of the system, and the relations between these elements. The function describes the purpose of a system, what it does or is intended to do (Hubka and Eder 1988). When the transformation system is a production system the function is for example to transform raw material into components or complete products. Transformation of raw material into components or products can be achieved in five fundamentally different ways (Mattsson and Jonsson 2003), see Table 2.1. The transformations described above can also be combined. A production system often uses several different value-adding processes to transform raw material into the demanded form and if necessary complete products. The result (output) from a production system can therefore be input to another production system. As one example, in the USA about 20% of the steel production and about 60% of the rubber production went straight into the automotive industry during the 1990s (Wu 1994). Table 2.1 Five fundamentally different transformations Transformation

Description

Separating

Essentially one item that is the source of several items from the production system, e.g. production of petrol and paraffin oil from crude oil.

Putting together

Several items as input and one item as output, e.g. production of machines.

Detaching

Change of form of an item through removal of material, e.g. production from shaft turning.

Forming

Change of form of an item through reshape, e.g. rolling of ingot into steel profiles.

Quality adaptation Change of qualities of an item without changing its form, e.g. surface treatment.

2.1.3 Classification of Systems Depending on the purpose of a description of a system, different classifications can be used. Here we present some classifications relevant for a production system. Systems can be described from functional, structural, and hierarchical perspectives (Seliger et al. 1987), see Fig. 2.3.

2.1 A Systems Perspective

41

The functional perspective (Fig. 2.3a) describes the system as a black box transforming input to output. The structural perspective (Fig. 2.3b) is a way of describing the system in terms of its different elements and the relations between these elements. The system can also be regarded from a hierarchical perspective (Fig. 2.3c) which implies that one system can be a sub system within a larger system. With the hierarchical perspective the relation or position of a system is described in relation to other systems, as for example sub systems or super systems. Other examples of classifications relevant to the production system are (Wu 1994): • physical and conceptual systems; • continuous and discrete systems; and • stochastic and deterministic systems. Systems can be divided into real systems or models of systems (Arbnor and Bjerke 1994), which can also be referred to as physical and conceptual systems (Wu 1994). Physical systems consist of real objects such as machines and equipment whereas conceptual systems can consist of diagrams, charts, verbal descriptions, etc. The production system can be both physical and conceptual, depending on which phase of the system’s life-cycle is considered. A conceptual system can be found during the production system design phase and a physical system after the implementation phase. Continuous and discrete systems belong to a category of dynamic systems, which are defined based on how the system variables change over time. System input status system output

(a)

element relations system

(b) super system

system subsystem

(c)

Fig. 2.3 System from a functional perspective (a), a structural perspective (b), and a hierarchical perspective (c) (Seliger et al. 1987)

42

2 Production System

variables in a continuous system change continuously over time, whereas system variables in discrete systems change step-by-step. How variables change over time is for example of interest when simulating production systems. In a discrete system separate activities can be discerned, which for example is in congruence with the flow of material in production systems (Wu 1994). Going through further classifications, relevant for production systems, systems can either be deterministic or stochastic (Wu 1994). Deterministic systems have a cause-and-effect relationship between input and output, for a given input the system always responds with the same output. Stochastic systems are characterised by random properties; the input, process and output can only be statistically analysed (Wu 1994). However, the possibility to discuss deterministic and stochastic systems depends on whether the system can be classified as open or closed.

2.1.4 Open System An open system depends, unlike a closed system, on its environment. In an open system, the relation to the system’s environment is studied, which is not the case in a closed system. A production system is an open system that depends on and is affected by its environment. Open systems maintain a dynamic relation with the environment, which is essential for production systems. Production systems have to be adaptable to changes in the environment and the competitive market. An open system is among other things characterised by the following attributes (O´Sullivan 1994): • an open system is goal seeking and hierarchical where different subsystems have various degrees of importance in the goal fulfilment; • an open system is an inseparable entity, it is holistic; and • open systems are characterised by equifinality; goals can be reached in a number of different ways. Equifinality needs explanation. It was mentioned above that in closed, deterministic systems it was possible to predict the output based on the given input. Cause-and-effect relationships prevail in closed systems, which is not the case in Multifinality

Equifinality Productivity

Automation Improved work environment indicator

effect

Way of working Design approach

When evaluation is carried out

Owners influence indicator

effect

Fig. 2.4 Different types of finality relations: multifinality and equifinality

2.2 What Is a Production System?

43

open systems. In open systems there are several factors that might affect the output. To describe this, the term finality can be used (Arbnor and Bjerke 1997). Another term for finality is indicator-effect relations, see the example in Fig. 2.4. One indicator can give several effects (multifinality), and several indicators can reach one and the same effect (equifinality). The development of the theory of open systems has, among other things, contributed to the development of the socio-technical school. However, the inputoutput nature of the traditional system theory cannot fully describe the sociotechnical parts (Hubka and Eder 1988; Karlsson 1979). The system theory treating human beings in an organisation as components does not suit the socio-technical system, according to Karlsson (1979). Two different tracks have developed within systems theory; a classical system theory and a so-called soft system theory. The latter is closer to the socio-technical school, and thereby provides better possibilities to describe socio-technical systems (Checkland 1998).

2.2 What Is a Production System? The previous chapter was devoted to definitions and descriptions of systems in general. Since the focus in this book is on production systems it is appropriate to also explain the meaning of production. Moreover, a more thorough analysis and description of production systems is needed, which is provided here through descriptions of the components of the production system, its relations and hierarchical nature. The process of creating goods and/or services through a combination of material, work, and capital is called production. Production can be anything from production of consumer goods, service production in a consultancy company, music or energy production. There is a clear connection between production of goods and services. Consumption constitutes the superior driving force for all production. Produced goods must in some way be distributed for consumption. Production of goods is therefore often of no interest, if not combined with production of services, as for example within the area of logistics (Mattsson and Jonsson 2003). However, the specific type of production referred to in this book is industrial production. Our limitation is production of goods, where the transformation of raw material into products is carried out in a production system.

2.2.1 Terminology Production system is often used as synonymous with manufacturing system and assembly system. Other notions used to describe different types and sizes of production systems are line, factory, plant and workshop. The differences in notions

44

2 Production System

indicates that there actually are differences in what parts or to what extent a production system is referred to, but also that there are differences in how the different notions should be defined. The first issue to analyse is whether any of the systems is superior to the other, to look at the systems from a hierarchical perspective. To elucidate how the different notions are used throughout this book a brief survey is required. In the further studies we start with the notions manufacturing and production. FURTHER STUDIES: MANUFACTURING VERSUS PRODUCTION The English notion manufacturing stems from the Latin manu factum, made by hand, and is explained as the making of articles or material by physical labour or mechanical power. The notion production stems from the Latin pro ducere, lead forward, and produce is explained as to bring into existence. CIRP1, which is an international research association within production engineering, gives the following definitions of manufacturing and production: Manufacturing is: “… a series of interrelated activities and operations involving the design, materials selection, planning, production, quality assurance, management and marketing of the products of the manufacturing industries”. Manufacturing production, which most often is shortened to production: “… the act or process (or the connected series of acts or processes) of actually physically making a product from its material constituents, as distinct from designing the product, planning and controlling its production, assuring its quality”. As we can see manufacturing can be regarded as superior production (based on the definition of manufacturing production). In other words, according to the above given definitions manufacturing could be regarded as all activities within a company from design, material supply, planning and production, to quality assurance, distribution, management and marketing. In this case, production embraces the actual production process, the physical making of a product. Sources: Hounshell (1984); CIRP (1990)

We consider the notion manufacturing as superior production. By way of introduction it was mentioned that production is the process of creating goods and/or services and we gave music and energy production as examples. This is also reflected in the definition provided by CIRP: “… the result or output of industrial work in different fields of activity, e.g. agriculture production, oil production, energy production, manufacturing production.” (CIRP 1990, p. 736)

In that sense production, as a line of business or branch of industry, is superior manufacturing. The observant reader might have noticed that the definition of manufacturing system, concerning the content, is similar to the definition of product realisation introduced in Chap. 1. A distinction that can be made is that product realisation refers to the process describing the design and realisation of a product, whereas manufacturing system refers to the actual system where the product is designed and 1

CIRP = International Institution for Production Engineering Research, see http://www.cirp.net/

2.2 What Is a Production System?

45 Manufacturing system Parts production system Production system Assembly system

Fig. 2.5 A hierarchical perspective on production system

realised. Thus, the difference is between process and system. The product realisation refers to the process, whereas manufacturing system refers to the system. By way of introduction it was also mentioned that the chosen terminology also depends on what part of the production system is concerned. The next issue to elaborate is accordingly the different subsystems possible within a production system. A production system can for example embrace both the parts production and assembly, which means that the production system is superior to these subsystems. A hierarchical perspective of a production system is illustrated in Fig. 2.5. The notion line is often used to denominate an assembly system. A workshop can refer to a subsystem of the manufacturing system, as for example the parts production system, or to a whole plant. Plant is often used synonymously with manufacturing system. Production engineering and production development are two additional concepts which need clarification. Production engineering is here concerned with different manufacturing processes and rationalisation of existing production (Andersson et al. 1992). Production development concerns development and operation of production systems with a more long-term perspective. The discussion concerning definitions might appear to be unnecessarily complicated, but aims at illustrating the need for a common terminology. No matter what definition you decide to use, most important is that the chosen definition is jointly defined among those working together within or around the production system.

2.2.2 The Structure of the Production System A production system comprises a number of elements between which there are reciprocal relations. Commonly mentioned elements are premises, humans, machines, and equipment (Löfgren 1983). Software and procedures might be added to the listed system elements according to Chapanis (1996). A structural perspective of the production system can be used to describe the different system elements and their relations, see Fig. 2.6. Yet another dimension can be added to the description of a production system, the decision-making process. The decision-making process for a production system adds capital management (owners), business management and production management to the description of a production system (Sandkull and Johansson 2000), see Fig. 2.7.

46 Conveyor

2 Production System Humans Robot relations Production system

Computers

Fig. 2.6 Example of elements in a production system (a structural perspective)

Fig. 2.7 Model of a production system including the decision-making process (Sandkull and Johansson 2000)

Capital management

Business management

Production management

Equipment

Material

Products

Labour

At the same time as each system component is an important resource, they are also potential sources of variation and disturbances which might be difficult to predict.

2.2.3 Life-Cycle Perspective The main activities within a production system are often described based on the products life-cycle (Technical Foresight 2003): • the market activity places demands on the product delivered from the production system. It provides boundaries for how the system should perform when it comes to quality and productivity, and also provides prerequisites in terms of time for development, product qualities and cost; • the engineering activity controls the product development, which is a prerequisite for the production system; • the production activity creates the product in the production system;

2.2 What Is a Production System?

47

• the distribution activity makes sure that the product is delivered under the right conditions to the customer; • the service activity aims at removing and preventing defects which might appear in the product; and • the recycling activity aims at saving resources and handles worn-out material. The production system can also be regarded from its own life-cycle, from initial planning of the system design to phase-out. Increased environmental requirements, both from consumers and from legislation, place higher demands on re-use, not only of the produced products, but also of the production system. Therefore, it is relevant to plan for several product generations as well as system generations when designing production systems. The altered environmental requirements have contributed to a shift from a sequential to a parallel nature of the production system life-cycle, see Fig. 2.8. New production systems are designed and realised in parallel with old systems still in operation, which provides good opportunities to make use of previous experiences. The nature of the production system varies during the different lifecycle phases, as do the requirements placed on the abilities of the system. Therefore, it is essential to be aware of the production systems current position in the life-cycle to know what requirements are reasonable. Questions concerning manufacturing efficiency are also of interest when the life-cycle of a production system is considered. Manufacturing efficiency is commonly measured during the operation phase. If manufacturing efficiency is measured already from the start of the planning and design phase there would be obvious incentives to improve efficiency also during the initial development phases. All of a sudden it would be very attractive to improve the design process and to plan for efficient realisation and start-up. With this approach, manufacturing efficiency measured during the whole life-cycle of a production system, all phases could contribute to the achievement of total efficiency.

Operation, refinement

Operation

Planning

Start-up Realisation Design

Termination Re-use

Fig. 2.8 The life-cycle of a production system (Wiktorsson 2000)

Chapter 3

From Business Plans to Production

Abstract This chapter deals with the important linkage between business ideas and production. Emphasis is on the role of the production system and its contribution to company outcome. Manufacturing strategies are presented as a means to communicate the linkage between business plans and production. Process and content of manufacturing strategies are described, as well as how successful implementation can contribute to company competitiveness. Tools are presented as a means to investigate congruence between production system and the overarching manufacturing strategies. Finally, a success story of how a company developed a new production system based on a well-formulated manufacturing strategy is described.

3.1 Strategies to Reach Targets The main objective of most companies is of course to make money. Profitability is also a prerequisite for long lasting business. Thus, for a manufacturing company, it is about making products that attract potential customers, which consequently are possible to sell at a suitable price and give a certain profit. The interest in production and its influence on companies’ financial outcomes has been significant during the last century. Toyota in Japan is a company emphasising the importance of production. The company has, especially for the past 20 years, been a leading actor with its sustainable work for efficient leadership in production (see e.g. Womack et al. 1990; Monden 1998). It is, however, not easy for production to maintain its position in manufacturing companies. Production has, for a long period of time, been considered as a function that only has to do as it is told by the company. One question is how this can be, even though manufacturing companies often have between 60 and 70% of its capital tied up in production-related investments (Hill 2000). In many countries top management often lack experience and knowledge in

M. Bellgran, K. Säftsen, Production Development, © Springer 2010

49

50

3 From Business Plans to Production

production. As a contrast, Hill (2000) points out that in order to manage a company in Japan a prerequisite is to have good experience in production. A consequence of lack of production experience is that the management does not recognise production’s strategic potential. Production operations are on the contrary focused on short-term productivity and efficiency targets, thus leading to a reactive position in the company. The role of production managers has in many cases been focused on meeting short-term targets which leads to good competence in short-term activities such as planning, maintaining efficiency, and human resource issues. Ever since the beginning of the 1990s, company demands have changed considerably having consequences also on production. Manufacturing today involves handling great complexity caused by the high degree of customised products. Products are manufactured in many variants, in varying volumes, product lifecycles are shortened, and at the same time both national and international competition is increasing. It is not enough just to control and adjust the production system. According to Hill (2000), there is a need for production managers with broad experience involving business knowledge as well as the ability to communicate production’s role in the company. It is necessary to show the consequences of different management decisions on production in order to select the best choice and to make well-founded decisions. It is necessary to consider production from a strategic and long-term perspective. The awareness among executives about production’s strategic force has also increased during the past decade. The production manager of Scania stated in 2004 that “Production is our core competence” and the final assembly line in Södertälje was described as the heart of Scania (Hultén 2004). Production and strategy has, however, traditionally been considered as incompatible. From a historic point of view, production has been regarded as a shortterm perspective, whilst strategy on the contrary is associated with a long-term perspective. Strategy is a plan that describes the path to follow in a certain situation, or is a pattern of decisions that together leads the activities in a specific direction. Hayes and Wheelwright (1984) point out that the following characteristics are valid in business situations1: • time perspective is often long, both in terms of time for carrying through decisions as well as the time before we can see the results of the realisation; • effect, when it can be observed, is significant; • a concentrated effort is often needed in order to carry out the chosen activities; • most strategies demand a series of supportive decisions over time, which follows a consistent pattern; and • a strategy must be convincing so that all levels of an organisation act in a supportive manner to the strategy.

1

The word strategy was already used in 450 B.C. and embraced abilities such as administration, leadership, and power. The word emanates from the Greek word stratego which alludes to the role a general plays as a leader (Quinn et al. 1988).

3.1 Strategies to Reach Targets

51

In order to turn a business idea into a product offer, a strategy for the activities is needed. Strategies exist at different levels of a company. Corporate strategy is the top level, business strategies follow, and at the functional level there are, for example, market and manufacturing strategies, see Fig. 3.1. Corporate strategy is described by Miltenburg (1995) as a long-term, general description that involves target, product/market, and how competitive advantages will be achieved. The business strategy must also clearly describe within which business areas the company aims to act. The next subordinate level is the business strategy, which is more short-term as well as more detailed than the corporate strategy. The functional strategies are to be found at the lowest level. Each function should formulate a strategy describing how they will contribute to the company’s overall targets. The functional level includes, for example, market strategy, manufacturing strategy, as well as research and development strategy. Miltenburg (1995) points out that the functional strategies need to support each other. The importance of congruence between market and manufacturing strategies is emphasised by, for example, Hill (2000). Manufacturing strategy is in focus during development and operation of the production system, even though other functional strategies are of great importance as well. The concept of manufacturing strategy was first used during the 1940s at Harvard Business School (Bennett and Forrester 1993). The great academic breakthrough for manufacturing strategies came in 1969, when Skinner (1969) described manufacturing as the missing link in corporate strategy. The essence of the article was that manufacturing often represents a considerable investment and should thereby be proven to contribute to company targets. Consequently, a linkage between the company’s overall strategies and the foundation for making production decisions is needed. Skinner is considered one of the pioneers within the area of manufacturing strategy. Other important work has been performed by, for example, Robert Hayes and Steven Wheelwright (see e.g. their work from 1979 and 1984), and Terry Hill (see Hill 2000). Corporate strategy

Business strategy A

Market strategy

Business strategy B

Manufacturing strategy

Business strategy C

R & D strategy

Fig. 3.1 Hierarchical levels of strategies (Hayes and Wheelwright 1984)

52

3 From Business Plans to Production

FURTHER STUDIES: PIONEERS IN MANUFACTURING STRATEGY Wickham Skinner is one of the leading pioneers behind the work to bring production to corporate strategy level. Skinner’s article from 1969 is probably the most cited article on manufacturing strategies. According to Skinner, manufacturing strategies are about clarifying that production can contribute to company competitiveness. Thus, production is not a millstone around the company’s neck. It is necessary that top management make decisions that are reflected in production thus creating production that acts in a supportive manner to reaching the targets. Other prominent researchers are Robert Hayes and Steven Wheelwright, who in 1979 published an article of great importance in the field. They raise the question how the capabilities of production systems are in congruence with products and volumes, the so-called productprocess matrix. The book from 1984 is also very important. The fourth pioneer is Terry Hill. Hill’s framework for formulation of manufacturing strategies is very important, as well as his distinction between order-winners and orderqualifiers. What is common for these pioneering works, and in a sense perhaps the most remarkable, is that in spite of the fact that Skinner’s article was published more than 35 years ago and Hayes and Wheelwright began their work more than 25 years ago, their contributions are still as valid. Sources: Skinner (1969); Hayes and Wheelwright (1979, 1984); Hill (2000)

It can be noted that ever since the beginning of the 20th century, countries such as Japan, Germany, and Italy have drawn competitive advantages from their production. The main reason is that they began by integrating the production perspective with overall corporate strategies, in accordance with Skinner’s ideas (Hill 2000). These ideas have gradually spread to a wide range of companies. Studies indicate that above all, major companies are aware of production’s role and thus of formulating manufacturing strategies (Winroth 2004). It should, however, be noted that the importance of communicating and expressing strategies reduces if the company is small and the managing director and production manager is the same person. Thus, a non-articulated strategy may still have an impact in smaller companies. Production may contribute to the long-term strength of a company in two ways: resource-based and market-based (Gagnon 1999). The latter means that the very production itself provides competitive advantages to the company. It may, for example, concern a unique process technology that no competitors have competence in. The market-based approach is the most common, where production provides competitive advantages through its way of supporting company operations. This support must be stronger than the support competitors receive from their own production functions. For a long period, it was sufficient for production to respond reactively to external demands. It is, however, a long-term effort to identify and strengthen the production capabilities that actually provide competitive advantages. Thus, the production manager’s role is extremely important from a manufacturing strategy perspective. By formulating and implementing manufacturing strategy, it is possible to communicate the importance of a long-term perspective on production and at the same time to strengthen production’s role in the company.

3.1 Strategies to Reach Targets

53

3.1.1 Manufacturing Strategy Today’s customers demand more than low cost. They want products at best price, with good quality, in sufficient amount, and of course on time. In order to stay competitive it is necessary to provide production systems that are capable of handling the increasing demands correctly and efficiently. The task to provide production systems that support the factors a company has selected to compete with is facilitated by means of a well-formulated and implemented manufacturing strategy: “Manufacturing strategies comprise a series of decisions concerning process and infrastructure investments, which, over time, prove the necessary support for the relevant orderwinners and qualifiers of the different market segments of a company.” (Hill 2000, p. 48)

A manufacturing strategy is a plan comprising the activities that are necessary to reach targets. It is a pattern of decisions within different areas, supporting a company’s competitive advantages. A division of manufacturing strategy into content and process is common, see Fig. 3.2. The content of manufacturing strategy is usually described in terms of competitive factors and decision categories. A company’s aims to compete in a certain market are called competitive factors. The decision categories represent the company capabilities that are used in order to reach the targets. When this is achieved, competitive advantages are reached. The content of a manufacturing strategy determines a company’s ability to qualify as a supplier on the market through developed competitive advantages, see Table 3.1. Manufacturing strategy process describes its formulation and implementation. The major part of research so far has been focused on manufacturing strategy content (Dangayach and Deshmukh 2001). In real life, it is however equally important to actually formulate and implement the manufacturing strategies. Fig. 3.2 Manufacturing strategy: content and process

Manufacturing strategy Content Competitive priorities, decision categories

Process Formulate, implement

Table 3.1 Manufacturing strategy content MANUFACTURING STRATEGY CONTENT Competitive factors

Decision categories

Cost, quality, deliverability, flexibility

Structural production process, capacity, facilities, vertical integration

Infra-structural quality, organisation, production planning and control

54

3 From Business Plans to Production

3.1.2 Competitive Factors Competitive factors (see e.g. Hayes and Wheelwright 1984), as well as orderwinners (Hill 2000), are used to describe company objectives. They may also be regarded as performance measures or a description of a company’s competitive priorities. The four most important competitive factors are considered to be cost, quality, flexibility, and deliverability; these are described below: Cost: Refers to the ability to produce and deliver to low cost, i.e. to be cost efficient. Economies of scale, cost for supply, product and process design, as well as experience are some sources of cost efficiency. Quality: Refers to the ability to meet customer needs and expectations, to make products that correspond to what the customer wants. Quality is about experience (a higher value) or meeting specifications (less defects). Producing with good quality is often synonymous with the latter. Flexibility: Refers to the ability to rapidly and efficiently adapt production to necessary changes. Within production this is often linked to an ability to manage variable volumes, i.e. volume flexibility, or many variants within a certain volume, product mix flexibility. There are also a number of other types of flexibility. Deliverability: Refers to the ability to deliver and the most important issues are reliability and speed. Reliability is the ability to deliver according to plan, an ability that is of outmost importance to companies that deliver just-in-time. Short delivery lead times can be achieved either in the production system or through delivery from stock. A company’s competitive factors may develop over time, thus improving its competitiveness. The so-called sand-cone model was developed at the beginning of the 1990s based on results from European studies on company competitiveness, see Fig. 3.3. It illustrates that competitive factors are cumulative, i.e. they build on each other thus forming a cone of sand. Several studies have shown that the fundamental property is quality, followed by deliverability and cost efficiency (Ferdows and de Meyer 1990; Berggren 1993). Once these demands are met, it is possible to compete with flexibility. Different competitive factors can be classified based on their role in a competitive situation. Are the factors crucial for the company’s possibility to win the order

Flexibility Cost efficiency Deliverability Quality

Fig. 3.3 A sand-cone model

3.1 Strategies to Reach Targets

55

or are they prerequisites for being a supplier? Order-qualifiers are the factors that need to be met if the company is to compete as a supplier (Hill 2000). An example of an order-qualifier could be quality or environmental management certification according to ISO-standard. The qualifiers only need to be maintained at the same level as the competitors. In order to win an order you need, however, you have to be better than the competitors when it comes to order-winners. Order-qualifiers and order-winners are equally important for a company that wants to reach and maintain a competitive market position. The manufacturing strategy framework, developed by Terry Hill (Hill 2000), built on order-winners and order-qualifiers, has had a certain impact. It is, however, not entirely uncontroversial. One question is if and how the difference between winners and qualifiers give indications on how the company should react (Spring and Boaden 1997). Is it most advantageous first to fulfil the qualifiers and after that turn to the winners? Hill (2000) describes furthermore that winners are weighed between 0 and 100 based on previous sales and production. This means that, even if a distinction is made between qualifiers and winners, the company has to prioritise between different winners. The question is can the company afford to neglect any winner at all? One aspect is that winners and qualifiers are product specific. It may be relevant to separate winners from qualifiers since this gives a support when prioritising between activities and when formulating the company’s manufacturing strategies. The manufacturing strategies should specify suitable competitive factors, as well as necessary decisions within areas that support these competitive factors.

3.1.3 Decision Categories Areas, within which a company needs to make decisions, are called decision areas or decision categories. The terminology is not consistent, neither in nomenclature nor in content. The source is what Skinner described as decision areas (Skinner 1969). Another often used designation is decision category (Hayes and Wheelwright 1984). Within the area of operations management the term strategic issue is also used (Slack et al. 2001). In this book from now on we are going to use the term decision category. Each category comprises a number of questions which the company has to deal with and make decisions about. The decisions must support the chosen competitive factors and are thus very important. An early list of decision categories was presented by Skinner (1969, 1978), comprising five different decision categories: facilities and equipment, production planning and control, labour, product design and development, and organisation and leadership, see Table 3.2. Each decision calls for taking a certain standpoint. Thus, a trade-off between different alternatives has to be made. The choice of relevant decision categories can be discussed. Several alternative combinations are available (see e.g. Wheelwright and Hayes 1985; Miltenburg 1995). Table 3.3 summarises the decision categories that are dealt with in this book together with relevant questions to decide upon.

56

3 From Business Plans to Production

Table 3.2 Trade-offs in production (Skinner 1969, 1978) Decision criterion

Questions to answer

Trade-offs between …

Facilities and equipment

Vertical integration Capacity Localisation Choice of equipment

Make or buy One large or several small Close to market or material Generic or dedicated

Production planning and control

Size of stock Quality control

High or low stock capacity Reliability or low cost

Labour

Specialisation

Specialised or not

Product design and development

Number of variants Technological risk

Customised or not Leader or follower

Organisation and leadership

Organisational structure Human resources management

Functional or product oriented Large or small personnel group

Often a distinction is made between structural and infrastructural decision categories (see Table 3.1). The structural decision categories are distinguished by their long impact, their resistance to change, and that they often demand major capital investments. The infrastructural decision categories are often of a more tactical nature, they are built up by an ongoing decision-making process and they mostly need only minor investments. It may, however, be quite costly to change also the infrastructural decision categories and they may by no means be neglected. In the 1960s, when Skinner emphasised the importance of production, the primary focus was on the structural decision categories. Today, some researchers claim that the infrastructural categories are even more important (Hayes and Pisano 1996). The fundamental ideas behind lean production are given as an example that more or less lacks structural elements. Just-in-time, decentralisation of responsibility, as well as cross-functional integration entirely lack structural decisions. Structural changes are described as easier to accomplish since they only demand an investment in hardware, whilst infrastructural parts are stuck in the organisation and are consequently considerably more difficult to adjust (Hayes and Pisano 1996). From a comprehensive view it is reasonable to regard structural and infrastructural decisions as equally important. The issue is to find Table 3.3 Decision categories and example of questions that need to be answered Decision category

Questions to answer (examples)

Production process

Process type, layout, technical level

Capacity

Amount, acquisition point

Facility

Localisation, focus

Vertical integration

Direction, degree, relation

Quality

Definition, role, responsibility, control

Organisation and human resources

Structure, responsibility, competence

Production planning and control

Choice of system, capacity in stock

3.1 Strategies to Reach Targets

57

the right combination of decisions. Structural changes, such as for instance decisions regarding a new factory or changes in production capacity need to be combined with infrastructural decisions on planning and organisation in order to give good return. In order to give a better understanding of the content of the different decision categories (see Table 3.2) a short description of each category will follow. Only a short introduction will be given since most categories are more thoroughly described later in the book. 3.1.3.1

Production Process (Process Type, Layout, Technical Level)

The production process handles the transformation of resources into products (Olhager 2000). Decisions regarding production process are process type, layout, and technological level. Process type concerns how processes and activities are organised, which is directly linked to production volume and number of variants. A fundamental principle for categorising production is the frequency, with which a certain product family is run in production. The categories are single unit process, intermittent process, and continuous process. Intermittent process implies that a product is run with a certain interval in production. Another division of the intermittent process can be made based on uncoupled and coupled flow of products (Hayes et al. 2004). Which process type is the most suitable for handling product volumes and number of variants is described based on the classical product-process matrix (Hayes and Wheelwright 1979; Hayes et al. 2004; Slack et al. 2001), see Fig. 3.4. The diagonal in Fig. 3.4 indicates a normal position, where there is a correspondence between production volume, number of variants, and type of process. Any deviation from the diagonal increases the risk for increased cost, either for compensation of too low flexibility or because the process does not utilise all of its costly flexibility.

low

Volume

Variants Volume

high

high

single

single

Number of variants

decoupled

decoupled coupled

coupled contin uous

continuous low Obvious congruence between process and volume/variant characteristics

Fig. 3.4 Product-process matrix showing the conformity between volume and variants of product and process type

58

3 From Business Plans to Production

The next decision concerning production process is about layout, i.e. the physical arrangement of different equipment in a workshop. Aspects influencing different decisions are production volume, number of variants, and relevant competitive factors. A division can be made based on the following basic layouts: • • • •

Fixed position; Functional layout (process oriented); Batch flow (cells); and Line-based flow (product oriented).

The third decision concerns detailed layout. One question is about the existing and desirable level of technology in the production system. The word automation is often used to describe mechanical, electronic, and computer-based systems that are used for carrying out, inspection, and controlling different operations in production (Groover 2001). A rough division can be made into manual, semiautomatic, and automatic tasks, depending on the degree of human involvement. Which level of automation is the most suitable depends of course on a number of circumstances. Levels of mechanisation and automation have increased considerably and the number of human operators directly linked to production is reduced, i.e. the indirect work increases. Direct labour cost is often less than 10% of the product cost, while the indirect work constitutes a much larger share (Sandkull and Johansson 2000).

3.1.3.2

Capacity (Amount, Acquisition Time)

Capacity is the capability level a company has to carry out a certain activity during a certain period of time (Slack et al. 2001). This must, however, be related to the product demand. Capacity is often expressed in terms of volume or number. Estimation has to be based on the capacity need, and when it is needed. The following resources can be used to adjust capacity in the short or long term: • Personnel: increase/reduce number of personnel, number of shifts, adjustment of work hours; • Technology: new or developed production equipment; and • Buy/sell capacity: let somebody else produce, produce for somebody else. There are different strategies for handling fluctuations in demand (Olhager 2000; Petersson 2000; Rudberg 2002), see Fig. 3.5. If the company doesn’t have the possibility or chooses not to end up in a situation with lack of capacity, it can be positioned ahead of demand, a so-called leading strategy (lead). The opposite, to be behind demand, is called a lagging strategy (lag). A lagging strategy always gives a higher risk for lacking capacity than having over-capacity. Such a decision is based on trying to minimise the cost for over-capacity rather than the cost for not being able to meet demand. The ideal situation is of course if the real capacity is in pace with the actual demand.

3.1 Strategies to Reach Targets

59

Leading strategy (lead) Keep up with demand

Lagging strategy (lag)

Time

Fig. 3.5 Capacity strategies in relation to demand

3.1.3.3

Facility/Factory (Location, Focus)

The facility (or factory) is the actual building where production will take place. One of many decisions that need to be taken is where to locate the facility/facilities. Questions to deal with are: • • • • • •

Should the factory be near the market? Should it be near raw material/suppliers? How to position the factory in relation to a logistics centre? Should there be one or more factories? Are there special competence needs? Legal issues?

Another aspect, directly linked to the production process, is the focus of the factory. Process or product focus is one way of describing the linkage between production system and product. Process focus indicates a more general plant, which can handle a variation of products, whilst a plant with product focus is dedicated to one or a few products in large volumes, often with a strong focus on low cost, see Fig. 3.6. Fig. 3.6 Process vs. product focus Process focus General purpose plant

3.1.3.4

Product focus Plant adapted to product

Vertical Integration (Direction, Degree, Relationship)

Vertical integration may also be expressed in terms of vertical positioning. Available production processes and other activities that are necessary in the product realisation process, depend on make or buy decisions. The extent of vertical integration depends for instance on whether the company can build their own distribution channels or sell through retailers or if the company should produce themselves or buy from suppliers. The direction of vertical integration can be described as downstream or upstream, or a combination, see Fig. 3.7.

60

3 From Business Plans to Production

Raw material producer

Material fabricator

Component producer

Upstream

Manufacturer/ assembler

Wholesaler/ distributor

Retailers

Consumers

Downstream

Fig. 3.7 The value adding chain

Vertical integration in any direction provides a better control over the product realisation process. It also gives better access to new thinking and possibilities for technology development. Subcontractors that are integrated closely to assembly are one example of upstream integration. This is common for instance in the automotive industry. It may also provide advantages of scale since the internal demand increases which enables high volume production at low cost. Hill (2000) exemplifies with the Japanese producers of semi-conductors that provide 50% of the world market through corporate networks. Downstream integration can among other things lead to improved knowledge on the real demand structure. Another aspect to consider is the form of integration. Which relation will the company have with upstream and downstream partners? It may be in the form of ownership, partnership, or other forms of collaboration. 3.1.3.5

Quality (Definition, Role, Sharing of Responsibility, Control)

Quality is a competitive factor in terms of output property, see earlier in this chapter. However, it is also a decision category regarding the necessary decisions to make in production on how to work with quality issues. Quality regarding competitive factors calls for a definition of the actual aspects of quality, which may be based on the eight dimensions of quality suggested by Garvin (1988); performance, features, reliability, conformance, durability, serviceability, aesthetics, and perceived quality. Once the definition of the quality dimensions has been made, routines for securing these dimensions have to be established. To many companies, quality in terms of conformance to requirements is an order-qualifier. There are two overarching questions to consider related to quality in production (Hill 2000). The first question is whether there should be a reactive or proactive approach towards quality work. A reactive approach focuses on discovering faults and making sure that no faulty products reach the customer. A proactive approach is preventive. The other question is about roles and sharing of responsibility. Previous experience has shown that it often is difficult to separate responsibility from realisation, i.e. the person in charge of carrying through the task also has to be responsible for achieving the right quality (Hill 2000). Many companies today put a lot of effort into securing their processes. 3.1.3.6

Organisation and Human Resources (Structure, Sharing of Responsibility, Competence)

Decisions regarding organisation and human resources are important for a company’s ability to reach targets and achieve competitive advantages. Criteria within

3.1 Strategies to Reach Targets

61

this category include questions such as structure, sharing of responsibility, competence, and award system. An organisational structure describes company structure with departments and functions. The purpose of a structure is to analyse, systematise, and allocate work tasks in a way that utilises all available resources in the best possible way for reaching targets (Bakka et al. 1993). Thus, organisational structure reflects in what way the company recognises its production and how they work with their production function. Sharing of work tasks, job sharing, can be done in several ways. Usually a distinction is made between vertical and horizontal job sharing. Vertical job sharing distinguishes between planning and problem solving tasks and executive work tasks, while horizontal job sharing aims at splitting the process into as short time units as possible (Forslin 1991). Job sharing and work organisation is often discussed, for example, related to assembly. Work organisation describes how labour and technology are organised in order to enable production. An important question is how this work can be done in the best possible way, both regarding satisfying human needs and at the same time reaching sufficient efficiency in production. Read more about work organisation in Chap. 8: “... even when technical and financial conditions are identical there are several ways of organising work, which gives different social consequences, but also different functions of the system.” (translated from Forslin 1991, p. 166)

Other important issues to deal with are competence, degree of flexibility and versatility of personnel, reward systems design, etc.

3.1.3.7

Production Planning and Control (System Choice, Stock Capacity)

Decisions regarding production planning and control are about choice of principles, both for material handling and production. When choosing materials and production planning systems the linkage to the market or what is expected of production, should be taken into consideration at different levels. Different solutions provide different ability to support the aims at different levels. The three levels; master planning, requirements planning, and detailed planning are often used (see e.g. Hill 2000). Different aspects are to be considered at these levels (Rudberg 2002), see Table 3.4. The presented attributes are examples of aspects to consider at each level. Master planning prepares and establishes plans for selling and for production operations (Mattsson and Jonsson 2003). This involves planning for coordination between planned deliveries and sufficient capacity. The customer order decoupling point (CODP) splits the flow and decides where the planning point will be. Upstream CODP production is carried out on forecast, downstream on customer order. This means that we get the following main categories of production control; Engineer To Order (ETO), Make To Order (MTO), Assembly To Order (ATO), and Make To Stock (MTS) (as described by e.g. Mattsson and Jonsson 2003; Rudberg 2002), see Fig. 3.8.

3 From Business Plans to Production Raw material

Assembly to Order Make to Order Engineer to Order

Forecast

Supply perspective

Make to Stock

Components

Semi-finished Finished products goods MTS Customer

ATO

Forecast

MTO

Forecast

Customer Customer

ETO

Customer

Demand perspective

62

Fig. 3.8 CODP divides forecast based flow and customer driven flow

Choice of CODP affects certain capabilities of the production system, see Table 3.5. Customer demands may thus be of guidance for production planning. The output from master planning is a master plan, which is input to requirements planning at the next level, see Table 3.3. The main task at this level is to see to it that material and components are available when needed (Rudberg 2002). In requirements planning a division is made between time-controlled and tactbased planning methods. If the product is not to be made with certain time regularity, each order has to be individually planned and it is relevant to talk in terms of time-controlled planning (Olhager 2000). Necessary decisions are when and where to carry out the operations as well as the order sequence when queues occur. If set-up times are short and the product has equal work content in the different production resources it is possible to use tact-based control. This means that each product is manufactured as closely as possible to the product’s cycle time (Olhager 2000). Table 3.4 A hierarchical description of a materials and production planning system (Rudberg 2002) Level

Planning horizon

Planning period

Decision criteria

Master planning