PU 306 D/YCMOU: MU-2402

World Class Manufacturing

MITCOM Syllabus World Class Manufacturing Semester 1 & 3, June 2013 Unit No. 1 Contents World Class Manufacturing(WCM) Definition Historical Perspective: Industrial Revolution Evolution of Scientific Management Globalization Examples of WCM companies Typical Characteristics of WCM Companies Performance Indicators Six Sigma Philosophy Models for manufacturing excellence Systems & Tools for WCM Improving product & process design: MRP, MRP2, ERP, Lean Manufacturing, JIT, FMS, SQC, Poka Yoke, 5-S Benchmarking: Best Practices in WCM Gaining competitive edge through WCM Eliminating Waste Human Resource Management in WCM Teamwork, Motivation, Rewards Customer focus: Building strengths through customer focused principles Misc. Topics: Costing & Valuation, Value Analysis Strategic Linkages Indian Scenario Case Studies Class Tests, Presentations, Assignments No. of Sessions of 1 Hr each 4

5 6 7 8 9 10

2 2 2 2 4 4

Educational Resources: 1 Text Books 2 Reference Books

World Class Manufacturing - Strategic Perspective - B.S. Sahay, KBC Saxena, Ashish Kumar. (Mac Milan) Making Common Sense Common Practice Models for manufacturing excellence Ron Moore (Butter worth Heinmann) World Class Manufacturing: Book1, 2, 3 YCMOU

Supplementary Reading

Prof. A. Dhingra
(306 D)-WORLD CLASS MANUFACTURING 1. Historical perspective: World class Excellent organizations American and Japanese Companies, Deming Awards , Malcom Baldrige National Quality Award Globalization Global Companies Models for manufacturing excellence Business Excellence. (6) 2. Bench marks, Bottlenecks and Best Practices: Concepts of benchmarking, bottleneck and best practices, Best performers Gaining competitive edge through world class manufacturing Value added manufacturing eliminating waste Toyota Production System example. (6) 3. System & tools for world class manufacturing: Improving Product & Process (6) Design Lean Production SQC , FMS, Rapid Prototyping , Poka Yoke , 5-S ,3 M, use of IT ,JIT, Product Mix , Optimizing , Procurement & stores practices , Total Productive maintenance , Visual Control. (6) 4. Human Resource Management in WCM: Adding value to the organization Organizational learning techniques of removing Root cause of problems People as problem solvers New organizational structures. Associates Facilitators Teamsmanship Motivation and reward in the age of continuous improvement. (6) 5. Typical characteristics of WCM companies: Performance indicators what is world class Performance Six Sigma philosophy (3) 6. Indian Scenario: Leading Indian companies towards world class manufacturing Task Ahead. (3) Books Recommended: 1. World Class Manufacturing -Strategic Perspective -B.S. Sahay, KBC Saxena, Ashish Kumar. (Mac Milan) 2. Making Common Sense Common Practice Models for manufacturing excellence Ron Moore (Butter worth Heinmann) 3. The Toyota Way -Jeffrey K.Liker (Tata McGraw Hill) 4. Operations Management for Competitive Advantage Chase 5. Making Common Sense Common Practice Moore 6. Managing Technology & Innovation for Competitive Advantage Narayanan 7. Just In Time Manufacturing M.G.Korgaonkar 8. Machine That Changed The World Womack Text Book: World Class Manufacturing, Book 1, 2, and 3 : by YCMOU Questions from previous exams: 1. 2. 3. 4. What is multicompany planning? Give three concepts in this regard. List & explain types of line configuration. Discuss on essence of high potential teams. Discuss the salient features of manufacturing control systems like MRP, MRP 2, ERP. 5. Explain the various types of assembly line configurations. 6. Define quality and state quality control tools.

7. What is traditional production cost system? How does it differ from target cost system?

8.How was labour productivity achieved in past? What are the factors responsible for todays productivity trends. Manufacturing / Production : The process by which goods and services are created. Production Management :management of organizations productive resources or production systems, which converts inputs to products and services Broader concept of production :Value addition Operation : process of changing inputs to outputs thereby adding value to some entity

WCM Definitions: The term WCM First used by Hayes & Wheelwright in 1985. A world class manufacturer is one who can compete with the best, anywhere in the world. Globally, internationally Compete on 4 priorities: cost, quality, delivery/service, flexibility, WCM are those that demonstrate best practices in industry. High standards of excellence: Best of best, best in class, manufacturer at international level. Definition of Department of trade & industry: A company is said to have WCM status if its answer to the following questions is affirmative: 1. Is the plant clean? 2. Facility reliable? 3. Documentation up to date? 4. Develop your own products and processes? 5. Workforce flexible? 6. Shortest throughput time? 7. TQM & Kaizen? 8. Training? 9. Ideas from Shop-floor? 10. Continual change? What does it mean to be a world-class competitor? It means being successful in your chosen market against any competitionregardless of size, country of origin or resources. It means matching or exceeding any competitor on quality, lead-time, flexibility, cost/price, customer service and innovation. It means picking your battlescompeting where and when you choose and on terms that you dictate. It means you are in control and your competitors struggle to emulate your success. What does it take to be world class? First and foremost, you must be in controlin control of your processes and resources, in control of your markets and customers and

in control of your information. Being in control doesnt necessarily mean you make all the decisions, but it does mean you are prepared and will not be thrown by unexpected changes in demand, technology, circumstance or competition.

It takes a lot of efforts to become WCM. There are a number of manufacturing practices a company must address if it is to reach world-class level. Historic Perspective: Journey towards WCM: Craft method: earliest way of organizing production of goods and services. Practiced by individuals or small firms. Customized products & services. E.g. Tailoring Industrial Revolution: 1700s

Industrial Revolution
Changes That Led to the Revolution The most important of the changes that brought about the Industrial Revolution were (1) the invention of machines to do the work of hand tools; (2) the use of steam, and later of other kinds of power, in place of the muscles of human beings and of animals; and (3) the adoption of the factory system.

The commencement of the Industrial Revolution is closely linked to a small number of innovations,[19] made in the second half of the 18th century:

Textiles Cotton spinning using Richard Arkwright's water frame, James Hargreaves's Spinning Jenny, and Samuel Crompton's Spinning Mule (a combination of the Spinning Jenny and the Water Frame). This was patented in 1769 and so came out of patent in 1783. The end of the patent was rapidly followed by the erection of many cotton mills. Similar technology was subsequently applied to spinning worsted yarn for various textiles and flax for linen. The cotton revolution began in Derby, which has been known since this period as the "Powerhouse of the North". Steam power The improved steam engine invented by James Watt and patented in 1775 was at first mainly used to power pumps for pumping water out of mines, but from the 1780s was applied to power other types of machines. This enabled rapid development of efficient semi-automated factories on a previously unimaginable scale in places where waterpower was not available. For the first time in history people did not have to rely on human or animal muscle, wind or water for power. The steam engine was used to pump water from coal mines; to lift trucks of coal to the surface; to blow air into the furnaces for the making of iron; to grind clay for pottery; and to power new factories of all kinds. For over a hundred years the steam engine was the king of the industries.

Iron making In the Iron industry, coke was finally applied to all stages of iron smelting, replacing charcoal. This had been achieved much earlier for lead and copper as well as for producing pig iron in a blast furnace, but the second stage in the production of bar iron depended on the use of potting and stamping (for which a patent expired in 1786) or puddling (patented by Henry Cort in 1784).

A few inventions. Replacement or extension of human and animal power with machines. Industrial Revolution. 1700s : a development in England : industrial revolution : two principles : widespread substitution of machine power for human, water and animal power. Establishment of factory system 1764 : James Watt : steam engine Mechanization of agriculture, textiles production Workers going away from homes to places where such machines were kept : emergence of factories This created the need to organize workers in logical ways to produce products 1776 : publication of Adam Smiths : Wealth of nations : economic benefits of division of labour or specialization of labour : work broken down in small specialized tasks : thus factories organized workers and planned and controlled their work . interchangeable parts Industrial Revolution 2: Steam Power Ships, Railways Internal Combustion Engine Generation of Electrical Power Steel Industrial Revolution 3: 1948: Transistor (Electronics) Scientific Management : Elements of scientific management : focused on skills, strengths, learning, specialization of workers How much time, physical efforts, mental level, responsibility & accountability Stopwatch studies, standard output of worker: quantity of work can be defined Separation of workers and management Work sequencing, material specs, incentives, improved supervision, Standardization, quantitative techniques Mechanized assembly Scientific Management : the players and their parts : Contributor Adam Smith Frederic Taylor year 1776 1856 contribution Division of Labour Father of scientific management

Frank Gilbreth Lilian Gilbreth Henry Gantt Carl Barth Harrington Emerson Morris Cooke Harris Walter Shewart Doge, Tippet Henry Ford

1868 1878 1861 1860 1885 1872 1914 1924 1920

Scientific management principles, time study, methods analysis, standards, planning , control Motion study, methods, construction contracting, consulting Fatigue study, human factor in work, employee selection and training Gantt charts, incentive pay system, humanistic approach to labour, training Mathematical analysis, slide rule, feeds and speed studies, consulting to automobile industry Principles of efficiency, methods of control Scientific management application in education and govt. EOQ SQC sampling Mass production techniques

Henry Ford 1863 - 1947: did not invent but applied principals of scientific management with dramatic results demonstrated efficiency of mass scale production, assembly line concept. 1970s: Japanese initiatives in quality. Deming & Juran. Toyota Concepts : TQM, JIT/Kanban, Cellular layout TPM(total preventive management) Target costing QFD(quality function deployment) Supplier partnerships Employee involvement Role of inventory Quality circles Team development 1900s: American initiatives: Realized importance of quality DFM ABC Benchmarking Re-engineering Employee ownerships/gain sharing/broad band pay systems Appraisal systems(peer appraisals) Agile manufacturing Aligning internal & external processes in supply chain Globalization IT

Eras of scale & cost strategies: after WW2 and through 1960s : emergence of large US companies: GM, GE, IBM, Ford 1970s : Japanese companies emphasized costs. Scale based & cost based thinking Introduction of new technologies: Craft, batch, mass production to computer integrated manufacturing, CAD, CAM. Simplification of jobs, lower labour costs Small organizations Flexible Responsive Service sector: Service: not a physical product, intangible Consumed at the time it is produced World-Class Manufacturing & Information Age Competition: Agriculture age: 8000 BC to 1750: land and natural resources as capital, physical labour, economic success: controlling land Industrial Age: 1750 to 1960 Machine & blue collar workers From land to capital(money) Information Age: information technology, knowledge workers: information technology breaks down barriers of space & time. Information age : mass customization, global, electronic technology, business process focus, fluid markets and suppliers, international competition, horizontal structure of organization, team responsibility Business Challenges of Information Age: Managing uncertainty Understanding customers Understanding globalization of business Business Model:

A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, cultural, or other forms of value). The process of business model construction is part of business strategy. In theory and practice the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies,

infrastructure, organizational structures, trading practices, and operational processes and policies. The literature has provided very diverse interpretations and definitions of a business model. A systematic review and analysis of manager responses to a survey defines business models as the design of organizational structures to enact a commercial opportunity.[2] Further extensions to this design logic emphasize the use of narrative or coherence in business model descriptions as mechanisms by which entrepreneurs create extraordinarily successful growth firms.[3] Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects managements hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit.[4] Business models are used to describe and classify businesses (especially in an entrepreneurial setting), but they are also used by managers inside companies to explore possibilities for future development. Also, well known business models operate as recipes for creative managers.[5] Business models are also referred to in some instances within the context of accounting for purposes of public reporting.
Business Model: plan(or formula) for earning profits. Calculates revenue-cost-profit streams, dynamics of revenue, cost structure, margins, earnings generated by products & strategies. Does the business make economic sense? Test of a business models success? If yes, business model is good, proven. Business models of Microsoft, DELL, Bata, Maruti (exclusive dealer network), Nokia(any buyer) Shehnaz Hussain (franchise), any small company(direct sales, no office), Philips ( distributors & dealers). Dell : adv. No dealer commission, disadvt. : office overheads Teaching Model: MIT : classes Harvard : presentations, case studies Distant learning model. Globalization

Globalization:
1. Spread & connectedness of production, communication, technologies across the world. 2. Political changes: Govts dictated by multinationals, decline of Government Powers 3. Diffusion of ideas 4. Globalization of brand 5. Powerful economic, political, social, cultural dimensions 6. Delocalization: absence of face to face interactions

Globalization' is commonly used as a shorthand way of describing the spread and connectedness of production, communication and technologies across the world . That spread has involved the interlacing of economic and cultural activity.

With increased economic interconnection has come deep-seated political changes poorer, 'peripheral', countries have become even more dependent on activities in 'central' economies such as the USA where capital and technical expertise tend to be located. There has also been a shift in power away from the nation state and toward, some argue, multinational corporations. We have also witnessed the rise and globalization of the 'brand'. It isn't just that large corporations operate across many different countries - they have also developed and marketed products that could be just as well sold in Peking as in Washington. Brands like Coca Cola, Nike, Sony, and a host of others have become part of the fabric of vast numbers of people's lives. Globalization involves the diffusion of ideas, practices and technologies. It is something more than internationalization and universalization. It isn't simply modernization or westernization. It is certainly isn't just the liberalization of markets. Anthony Giddens (1990: 64) has described globalization as 'the intensification of worldwide social relations which link distant localities in such a way that local happenings are shaped by events occurring many miles away and vice versa'. This involves a change in the way we understand geography and experience localness. As well as offering opportunity it brings with considerable risks linked, for example, to technological change. . Globalization, thus, has powerful economic, political, cultural and social dimensions.

Here we want to focus on four themes that appear with some regularity in the literature:

de-localization and supraterritoriality;

Globalization: delocalization and supraterritoriality

Globalization and de-localization. Many of the activities that previously involved faceto-face interaction, or that were local, are now conducted across great distances. There has been a significant de-localization in social and economic exchanges. Activities and relationships have been uprooted from local origins and cultures (Gray 1999: 57). One important element in this has been the separation of work from the home (and the classic move to the suburbs - see Putnam's discussion of the impact on this on local social relations). But de-localization goes well beyond this. Increasingly people have to deal with distant systems in order that they may live their lives. Banking and retailing, for example, have adopted new technologies that involve people in less face-to-face interaction. Your contact at the bank is in a call centre many miles away; when you buy goods on the internet the only person you might speak to is the delivery driver. In this last example we move beyond simple notions of distance and territory into a new realm (and this is what Scholte is especially concerned with when he talks of globalization). When we buy books from an internet supplier like Amazon our communications pass through a

large number of computers and routers and may well travel thousands of miles; the computers taking our orders can be on a different continent; and the books can be located anywhere in the world. The 'spaces' we inhabit when using the internet to buy things or to communicate (via things like chatrooms and bulletin boards) can allow us to develop a rather different sense of place and of the community to which we belong. Not everything is global, of course. Most employment, for example, is local or regional but 'strategically crucial activities and economic factors are networked around a globalized system of inputs and outputs' (Castells 2001: 52). What happens in local neighbourhoods is increasingly influenced by the activities of people and systems operating many miles away. For example, movements in the world commodity and money markets can have a very significant impact upon people's lives across the globe. People and systems are increasingly interdependent.
[T]he starting point for understanding the world today is not the size of its GDP or the destructive power of its weapons systems, but the fact that it is so much more joined together than before. It may look like it is made up of separate and sovereign individuals, firms, nations or cities, but the deeper reality is one of multiple connections. (Mulgan 1998: 3)

Businesses are classic example of this. As Castells (2001) noted they are organized around networks of production, management and distribution. Those that are successful have to be able to respond quickly to change - both in the market and in production. Sophisticated information systems are essential in such globalization. Globalization and the decline in power of national governments. It isn't just individuals and neighbourhood institutions that have felt the impact of de-localization. A major causality of this process has been a decline in the power of national governments to direct and influence their economies (especially with regard to macroeconomic management). Shifts in economic activity in say, Japan or the United States, are felt in countries all over the globe. The internationalization of financial markets, of technology and of some manufacturing and services bring with them a new set of limitations upon the freedom of action of nation states. In addition, the emergence of institutions such as the World Bank, the European Union and the European Central Bank, involve new constraints and imperatives. Yet while the influence of nation states may have shrunk as part of the process of globalization it has not disappeared. Indeed, they remain, in Hirst and Thompson's (1996: 170) words, 'pivotal' institutions, 'especially in terms of creating the conditions for effective international governance'. However, we need to examine the way in which national governments frame their thinking about policy. There is a strong argument that the impact of globalization is most felt through the extent to which politics everywhere are now essentially market-driven. 'It is not just that governments can no longer "manage" their national economies', Colin Leys (2001: 1) comments, 'to survive in office they must increasingly "manage" national politics in such a ways as to adapt them to the pressures of trans-national market forces'.
The initiation, or acceleration, of the commodification of public services was... a logical result of government's increasingly deferential attitude towards market forces in the era of the globalized economy... A good deal of what was needed [for the conversion of non-market spheres into profitable fields for investment] was accomplished by market

forces themselves, with only periodic interventions by the state, which then appeared as rational responses to previous changes. (Leys 2001: 214)

In other words, the impact of globalization is less about the direct way in which specific policy choices are made, as the shaping and reshaping of social relations within all countries.
Risk, technological innovation and globalization

As we have already noted, a particular feature of 'globalization' is the momentum and power of the change involved. 'It is the interaction of extraordinary technological innovation combined with world-wide reach that gives today's change its particular complexion' (Hutton and Giddens 2001: vii). Developments in the life sciences, and in digital technology and the like, have opened up vast, new possibilities for production and exchange. Innovations like the internet have made it possible to access information and resources across the world - and to coordinate activities in real time. Globalization and the knowledge economy. Earlier we saw Castells making the point that productivity and competitiveness are, by and large, a function of knowledge generation and information processing. This has involved a major shift - and entails a different way of thinking about economies.
For countries in the vanguard of the world economy, the balance between knowledge and resources has shifted so far towards the former that knowledge has become perhaps the most important factor determining the standard of living - more than land, than tools, than labour. Today's most technologically advanced economies are truly knowledge-based. (World Bank 1998)

The rise of the so-called 'knowledge economy' has meant that economists have been challenged to look beyond labour and capital as the central factors of production. Paul Romer and others have argued that technology (and the knowledge on which it is based) has to be viewed as a third factor in leading economies. (Romer, 1986; 1990). Global finance, thus, becomes just one force driving economies. Knowledge capitalism: 'the drive to generate new ideas and turn them into commercial products and services which consumers want' is now just as pervasive and powerful (Leadbeater 2000: 8). Inevitably this leads onto questions around the generation and exploitation of knowledge. There is already a gaping divide between rich and poor nations - and this appears to be accelerating under 'knowledge capitalism'. There is also a growing gap within societies (and this is one of the driving forces behind the English government's Connexions strategy). Commentators like Charles Leadbeater have argued for the need to 'innovate and include' and for a recognition that successful knowledge economies have to take a democratic approach to the spread of knowledge: 'We must breed an open, inquisitive, challenging and ambitious society' (Leadbeater 2000: 235, 237). However, there are powerful counter-forces to this ideal. In recent years we have witnessed a significant growth in attempts by large corporations to claim intellectual rights over new discoveries, for example in relation to genetic research, and to reap large profits from licensing use of this 'knowledge' to others. There are also significant doubts as to whether 'modern economies' are, indeed, 'knowledge economies'. It doesn't follow, for example, that only those nations committed to lifelong learning and to creating a learning society will thrive (see Wolf 2002: 13-55).

Globalization and risk. As well as opening up considerable possibility, the employment of new technologies, when combined with the desire for profit and this 'world-wide' reach, brings with it particular risks. Indeed, writers like Ulrich Beck (1992: 13) have argued that the gain in power from the 'techno-economic progress' is quickly being overshadowed by the production of risks. (Risks in this sense can be viewed as the probability of harm arising from technological and economic change). Hazards linked to industrial production, for example, can quickly spread beyond the immediate context in which they are generated. In other words, risks become globalized.
[Modernization risks] possess an inherent tendency towards globalization. A universalization of hazards accompanies industrial production, independent of the place where they are produced: food chains connect practically everyone on earth to everyone else. They dip under borders. (Beck 1992: 39)

As Beck (1992: 37) has argued there is a boomerang effect in globalization of this kind. Risks can catch up with those who profit or produce from them.
The basic insight lying behind all this is as simple as possible: everything which threatens life on this Earth also threatens the property and commercial interests of those who live from the commodification of life and its requisites. In this way a genuine and systematically intensifying contradiction arises between the profit and property interests that advance the industrialization process and its frequently threatening consequences, which endanger and expropriate possessions and profits (not to mention the possession and profit of life) (Beck 1992: 39).

Here we have one of the central paradoxes of what Beck has termed 'the risk society'. As knowledge has grown, so has risk. Indeed, it could be argued that the social relationships, institutions and dynamics within which knowledge is produced have accentuated the risks involved. Risk has been globalized.
Globalization and the rise of multinational corporations and branding

A further, crucial aspect of globalization is the nature and power of multinational corporations. Such companies now account for over 33 per cent of world output, and 66 per cent of world trade (Gray 1999: 62). Significantly, something like a quarter of world trade occurs within multinational corporations (op. cit). This last point is well illustrated by the operations of car manufacturers who typically source their components from plants situated in different countries. However, it is important not to run away with the idea that the sort of globalization we have been discussing involves multinationals turning, on any large scale, to transnationals:
International businesses are still largely confined to their home territory in terms of their overall business activity; they remain heavily 'nationally embedded' and continue to be multinational, rather than transnational, corporations. (Hirst and Thompson 1996: 98).

While full globalization in this organizational sense may not have occurred on a large scale, these large multinational corporations still have considerable economic and cultural power.

Globalization and the impact of multinationals on local communities. Multinationals can impact upon communities in very diverse places. First, they look to establish or contract operations (production, service and sales) in countries and regions where they can exploit cheaper labour and resources. While this can mean additional wealth flowing into those communities, this form of 'globalization' entails significant inequalities. It can also mean large scale unemployment in those communities where those industries were previously located. The wages paid in the new settings can be minimal, and worker's rights and conditions poor. For example, a 1998 survey of special economic zones in China showed that manufacturers for companies like Ralph Lauren, Adidas and Nike were paying as little as 13 cents per hour (a 'living wage' in that area is around 87 cents per hour). In the United States workers doing similar jobs might expect US$10 per hour (Klein 2001: 212). Second, multinationals constantly seek out new or under-exploited markets. They look to increase sales - often by trying to create new needs among different target groups. One example here has been the activities of tobacco companies in southern countries. Another has been the development of the markets predominantly populated by children and young people. In fact the child and youth market has grown into one the most profitable and influential sectors. 'The young are not only prized not only for the influence they have over adult spending, but also for their own burgeoning spending power' (Kenway and Bullen 2001: 90). There is increasing evidence that this is having a deep effect; that our view of childhood (especially in northern and 'developed' countries) is increasingly the product of 'consumer-media' culture. Furthermore, that culture:
... is underpinned in the sweated work of the 'othered' children of the so-called 'Third World'. [W]ith the aid of various media, the commodity form has increasingly become central to the life of the young of the West, constructing their identities and relationships, their emotional and social worlds... [A]dults and schools have been negatively positioned in this matrix to the extent that youthful power and pleasure are constructed as that which happens elsewhere - away from adults and schools and mainly with the aid of commodities. (Kenway and Bullen 2001: 187).

Of course such commodification of everyday life is hardly new. Writers like Erich Fromm were commenting on the phenomenon in the early 1950s. However, there has been a significant acceleration and intensification (and globalization) with the rise of the brand (see below) and a heavier focus on seeking to condition children and young people to construct their identities around brands. Third, and linked to the above, we have seen the erosion of pubic space by corporate activities. Significant areas of leisure, for example, have moved from more associational forms like clubs to privatized, commercialized activity. Giroux (2000: 10), for example, charts this with respect to young people
[Y]oung people are increasingly excluded from public spaces outside of schools that once offered them the opportunity to hang out with relative security, work with mentors, and develop their own talents and sense of self-worth. Like the concept of citizenship itself, recreational space is now privatized as commercial profit-making venture. Gone are the youth centers, city public parks, outdoor basketball courts or

empty lots where kids call play stick ball. Play areas are now rented out to the highest bidder...

This movement has been well documented in the USA (particularly by Robert Putnam with respect to a decline in social capital and civic community - but did not examine in any depth the role corporations have taken). It has profound implications for the quality of life within communities and the sense of well-being that people experience. Fourth, multinational companies can also have significant influence with regard to policy formation in many national governments and in transnational bodies such as the European Union and the World Bank (key actors within the glboalization process). They have also profited from privatization and the opening up of services. As George Monbiot has argued with respect to Britain, for example: the provision of hospitals, roads and prisons... has been deliberately tailored to meet corporate demands rather than public need' (2001: 4). He continues:
... biotechnology companies have sought to turn the food chain into a controllable commodity and [there is an] extraordinary web of influence linking them to government ministers and government agencies.... [C]orporations have come to govern key decisionmaking processes within the European Union and, with the British government's blessing, begun to develop a transatlantic single market, controlled and run by corporate chief executives. (Monbiot 2001: 5)

While with globalization the power of national governments over macro-economic forces may have been limited in recent years, the services and support they provide for their citizens have been seen as a considerable opportunity for corporations. In addition, national governments still have considerable influence in international organizations and have therefore become the target of multinationals for action in this arena. Branding and globalization. The growth of multinationals and the globalization of their impact is wrapped up with the rise of the brand.
The astronomical growth in the wealth and cultural influence of multi-national corporations over the last fifteen years can arguably be traced back to a single, seemingly innocuous idea developed by management theorists in the mid-1980s: that successful corporations must primarily produce brands, as opposed to products. (Klein 2001: 3)

As Naomi Klein (2001: 196) has suggested, 'brand builders are the new primary producers in our so-called knowledge economy'. One of the key elements that keeps companies as multinationals rather than transnationals is the extent to which they look to 'outsource' products, components and services. The logic underlying this runs something like the following:
.... corporations should not expend their finite resources on factories that will demand physical upkeep, on machines that will corrode or on employees who will certainly age and die. Instead, they should concentrate those resources in the virtual brick and mortar used to build their brands

Nike, Levi, Coca Cola and other major companies spend huge sums of money in promoting and sustaining their brands. One strategy is to try and establish particular

brands as an integral part of the way people understand, or would like to see, themselves. As we have already seen with respect the operation of multinationals this has had a particular impact on children and young people (and education). There is an attempt 'to get them young'. Significantly, the focus on brand rather than the inherent qualities of the product as well as advantaging multinationals in terms of market development also has an Achilles heel. Damage to the brand can do disproportionate harm to sales and profitability. If a brand becomes associated with failure or disgrace (for example where a sports star they use to advertise their brand is exposed as a drug-taker; or where the brand becomes associated in the public's mind with the exploitation of children - as for example has happened with some of the main trainer makers) then it can face major problems in the marketplace. Globalization and the multinationals. While there is no doubting the growth in scale and scope of multinational corporations - the degree of control they have over the central dynamics of globalization remains limited.
In reality, they are often weak and amorphous organizations. They display the loss of authority and erosion of common values that afflicts practically all late modern social institutions. The global market is not spawning corporations which assume the past functions of sovereign states. Rather, it has weakened and hollowed out both institutions. (Gray 1999: 63)

While multinationals have played a very significant role in the growth of globalization, it is important not to overplay the degree of control they have had over the central dynamics. Capitalism, free markets, instability and division Amartya Sen (2002) has argued that 'the market economy does not work by itself in global relations--indeed, it cannot operate alone even within a given country'. Yet, for some proponents of globalization the aim is to expand market relations, push back state and interstate interference, and create a global free market. This political project can be seen at work in the activities of transnational organizations like the World Trade Organization (WTO), the International Monetary Fund (IMF), and the Organization for Economic Cooperation and Development (OECD), and has been a significant objective of United States intervention. Part of the impetus for this project was the limited success of corporate/state structures in planning and organizing economies. However, even more significant was the growth in influence of neo-liberal ideologies and their promotion by powerful politicians like Reagan in the USA and Thatcher in the UK. A new orthodoxy became ascendant. In the USA a Democrat President renounced 'big government'; in Britain, the Labour Party abandoned its commitment to social ownership. The 'markets were in command' (Frank 2002: xv). The basic formula ran something like the following:
Privatization + Deregulation + Globalization = Turbo-capitalism = Prosperity (Luttwak quoted by Frank 2002: 17)

As various commentators have pointed out, the push toward deregulation and 'setting markets free' that so dominated political rhetoric in many northern countries during the 1980s and 1990s was deeply flawed. For example, the central tenet of free market economics - that unregulated markets 'will of their own accord find unimprovable results

for all participants' has, according to Will Hutton (1995: 237), 'now proved to be a nonsense. It does not hold in theory. It is not true'. Historically, free markets have been dependent upon state power. For markets to function over time they require a reasonable degree of political stability, a solid legal framework and a significant amount of social capital. The push to engineer free markets has contained within it the seeds of its own destruction.

The central paradox of our time can be stated thus: economic globalization does not strengthen the current regime of global laissez-faire. It works to undermine it. There is nothing in today's global market that buffers it against the social strains arising from high uneven economic development within and between the world's diverse societies. The swift waxing and waning of industries and livelihoods, the sudden shifts of production and capital, the casino of currency speculation - these conditions trigger political counter-movements that challenge the very ground rules of the global free market. (Gray 1999: 7)

Capitalism is essentially disruptive and ever-changing - and takes very different forms across the world. While it produces wealth for significant numbers of people, many others have suffered. The gap between rich and poor has widened as global capitalism has expanded. For example, David Landes (1999: xx) has calculated that the difference in income per head between the richest nation (he cited Switzerland) and the poorest nonindustrial country, Mozambique, is now about 400 to 1. 'Two hundred and fifty years ago, the gap between richest and poorest was perhaps 5 to 1, and the difference between Europe and, say, East or South Asia (China or India) was around 1.5 or 2 to 1' (op. cit.). The development of markets, the expansion of economic activity, and the extent to which growing prosperity is experienced by populations as a whole has been, and remains, deeply influenced by public policies around, for example, education, land reform and the legal framework for activity. Economists like Amartya Sen have argued that 'public action that can radically alter the outcome of local and global economic relations'. For him the:
... central issue of contention is not globalization itself, nor is it the use of the market as an institution, but the inequity in the overall balance of institutional arrangements-which produces very unequal sharing of the benefits of globalization. The question is not just whether the poor, too, gain something from globalization, but whether they get a fair share and a fair opportunity. (Sen 2002)

Strong markets require significant state and transnational intervention. To be sustained across time they also require stable social relationships and an environment of trust. Moreover, they can be organized and framed so that people throughout different societies can benefit.
Conclusion

One commentator has argued that there is a very serious case not against 'globalization',
... but against the particular version of it imposed by the world's financial elites. The brand currently ascendant needlessly widens gaps of wealth and poverty, erodes

democracy, seeds instability, and fails even its own test of maximizing sustainable economic growth. (Kuttner 2002)

The gap between rich and poor countries has widened considerably. However, as Sen (2002) has commented, to 'see globalization as merely Western imperialism of ideas and beliefs (as the rhetoric often suggests) would be a serious and costly error'. He continues:
Of course, there are issues related to globalization that do connect with imperialism (the history of conquests, colonialism, and alien rule remains relevant today in many ways), and a postcolonial understanding of the world has its merits. But it would be a great mistake to see globalization primarily as a feature of imperialism. It is much bigger-much greater--than that.

For example, while the reach and power of multinationals appears to have grown significantly, neither they, nor individual national governments, have the control over macro-economic forces that they would like. Ecological and technological risks have multiplied. Globalization in the sense of connectivity in economic and cultural life across the world, is of a different order to what has gone before. As we said at the start, the speed of communication and exchange, the complexity and size of the networks involved, and the sheer volume of trade, interaction and risk give what we now label as 'globalization' a peculiar force. All this raises particular questions for educators. Has the process of globalization eroded the autonomy of national education systems? How has it impacted on the forms that education now takes? What is the effect of an increased corporate presence and branding in education? What response should educators make? We examine these and other issues in globalization and the incorporation of education.

Business Model:
What is Business Excellence?

Business Excellence is often described as outstanding practices in managing the organisation and achieving results, all based on a set of fundamental concepts or values. These practices have evolved into models for how a world class organisation should operate. These models have been developed and continue to evolve through extensive study of the practice and values of the worlds highest performing organisations. Many countries have developed their own models and use these as frameworks to assess and recognise the performance of organisations through awards programmes. Since the 1990s there has been a general decline in award applications. However there has been an increasing trend for organisations to apply these models and integrate the principles and practice with their day-to-day operations thereby achieving the benefits business excellence brings. Find out more about who uses these models.
What are business excellence models? Baldrige Model

EFQM Model Award Programmes Who uses business excellence/models? How Organisations use Business Excellence Models Benefits of Business Excellence Use How Long Before I Can Expect Results? Choosing a Self Assessment Method

What are business excellence models?

Business excellence models are frameworks that when applied within an organisation can help to focus thought and action in a more systematic and structured way that should lead to increased performance. The models are holistic in that they focus upon all areas and dimensions of an organisation, and in particular, factors that drive performance. These models are internationally recognised as both providing a framework to assist the adoption of business excellence principles, and an effective way of measuring how thoroughly this adoption has been incorporated. Several business excellence models exist world-wide. While variations exist, these models are all remarkably similar. The most common include;
Baldrige (MBNQA) Used in over 25 countries including US and NZ European Foundation for Quality Management (EFQM) Used throughout Europe Singapore Quality Award Model - Singapore Japan Quality Award Model - Japan Canadian Business Excellence Model - Canada Australian Business Excellence Framework (ABEF) - Australia

Baldrige Model

The most popular and influential model in the western world is the one launched by the US government called the Malcolm Baldrige Award Model (also commonly known as the Baldrige model, the Baldrige criteria, or The Criteria for Performance Excellence). More than 25 countries base their frameworks upon the Baldrige criteria. The Baldrige model consists of practices that are incorporated into six Approach categories plus a Results category consisting of Leadership Strategic Planning Customer and Market Focus Measurement, Analysis, and Knowledge Management Workforce focus Process Management Business Results, creating value

The Baldrige Values include:

Visionary Leadership

Customer-Driven Excellence Organisational and Personal Learning Valuing Employees and Partners Agility Focus on the Future Managing for Innovation Management by Fact Social Responsibility Focus on Results and Creating Value Systems Perspective

EFQM model

The EFQM model consists of six process enablers and one results category:
Leadership Policy and Strategy People Partnerships and Resources Processes Customer Results People Results Society Results Key Performance Results

The fundamental concepts include:

Results orientation Customer focus Leadership and constancy of purpose Management by processes and facts People development and involvement Continuous learning, innovation and improvement Partnership development Public responsibility

Award Programmes

In general, business excellence models have been developed by national bodies as a basis for award programmes. For most of these bodies, the awards themselves are secondary in importance to the wide-spread take up of the concepts of business excellence, which ultimately lead to improved national economic performance. Often awards programmes operate at a local, regional and national level to recognise and celebrate the achievement of all levels of organisational maturity. It is through these award programmes that an organisation can be assessed and justifiably claim to operate at World Class levels of performance. Awards are usually only given to those organisations that have been assessed as excellent through a rigorous awards process using independent teams of evaluators to assess award applicants.

It was recently estimated that there are at least 76 countries operating a business excellence award programme at a national level.
Who uses business excellence / models?

Organisations across the world are using these business excellence models as a basis for continuous performance improvement. In the US nearly two million copies of the Malcolm Baldrige Model have been distributed since the awards launch in 1988, and this does not include copies that are available in books, state and local award programs, or those downloaded from the web. In Europe alone the European Foundation for Quality Management believes that at least 30,000 organisations are using the EFQM model. The EFQMs figure was based on the number of EFQM members, the members of its national partners, and those organisations that they know are using the model in their business.

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Benchmarking

Benchmarking is the process of comparing one's business processes and performance metrics to industry bests or best practices from other industries. Dimensions typically measured are quality, time and cost. In the process of benchmarking, management identifies the best firms in their industry, or in another industry where similar processes exist, and compare the results and processes of those studied (the "targets") to one's own results and processes. In this way, they learn how well the targets perform and, more importantly, the business processes that explain why these firms are successful. The term benchmarking was first used by cobblers to measure people's feet for shoes. They would place someone's foot on a "bench" and mark it out to make the pattern for the shoes. Benchmarking is used to measure performance using a specific indicator (cost per unit of measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of measure) resulting in a metric of performance that is then compared to others.[citation needed] Also referred to as "best practice benchmarking" or "process benchmarking", this process is used in management and particularly strategic management, in which organizations evaluate various

aspects of their processes in relation to best practice companies' processes, usually within a peer group defined for the purposes of comparison. This then allows organizations to develop plans on how to make improvements or adapt specific best practices, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to improve their practices.

Benefits and use

In 2008, a comprehensive survey [1] on benchmarking was commissioned by The Global Benchmarking Network, a network of benchmarking centers representing 22 countries. Over 450 organizations responded from over 40 countries. The results showed that: 1. Mission and Vision Statements and Customer (Client) Surveys are the most used (by 77% of organizations of 20 improvement tools, followed by SWOT analysis(72%), and Informal Benchmarking (68%). Performance Benchmarking was used by 49% and Best Practice Benchmarking by 39%. 2. The tools that are likely to increase in popularity the most over the next three years are Performance Benchmarking, Informal Benchmarking, SWOT, and Best Practice Benchmarking. Over 60% of organizations that are not currently using these tools indicated they are likely to use them in the next three years.

Collaborative benchmarking
Benchmarking, originally described [Rank Xerox]], is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (e.g. subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association. Another example is the UK construction industry which has carried out benchmarking since the late 1990s again through its industry association and with financial support from the UK Government.

Procedure
There is no single benchmarking process that has been universally adopted. The wide appeal and acceptance of benchmarking has led to the emergence of benchmarking methodologies. One seminal book is Boxwell's Benchmarking for Competitive Advantage (1994).[2] The first book on benchmarking, written and published by Kaiser Associates,[3] is a practical guide and offers a seven-step approach. Robert Camp (who wrote one of the earliest books on benchmarking in 1989)[4] developed a 12-stage approach to benchmarking. The 12 stage methodology consists of: 1. Select subject 2. Define the process 3. Identify potential partners

4. Identify data sources 5. Collect data and select partners 6. Determine the gap 7. Establish process differences 8. Target future performance 9. Communicate 10. Adjust goal 11. Implement 12. Review and recalibrate The following is an example of a typical benchmarking methodology:

1.Identify problem areas: Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, re-engineering analysis, process mapping, quality control variance reports, financial ratio analysis, or simply reviewing cycle times or other performance indicators. Before embarking on comparison with other organizations it is essential to know the organization's function and processes; base lining performance provides a point against which improvement effort can be measured. 2.Identify other industries that have similar processes: For instance, if one were interested in improving hand-offs in addiction treatment one would identify other fields that also have hand-off challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms. 3.Identify organizations that are leaders in these areas: Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study. 4.Survey companies for measures and practices: Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants. 5.Visit the "best practice" companies to identify leading edge practices: Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group. 6.Implement new and improved business practices: Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.

Costs
The three main types of costs in benchmarking are:

Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labor time.

Time Costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required. Benchmarking Database Costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

The cost of benchmarking can substantially be reduced through utilizing the many internet resources that have sprung up over the last few years. These aim to capture benchmarks and best practices from organizations, business sectors and countries to make the benchmarking process much quicker and cheaper.

Technical/product benchmarking
The technique initially used to compare existing corporate strategies with a view to achieving the best possible performance in new situations (see above), has recently been extended to the comparison of technical products. This process is usually referred to as "technical benchmarking" or "product benchmarking". Its use is well-developed within the automotive industry ("automotive benchmarking"), where it is vital to design products that match precise user expectations, at minimal cost, by applying the best technologies available worldwide. Data is obtained by fully disassembling existing cars and their systems. Such analyses were initially carried out in-house by car makers and their suppliers. However, as these analyses are expensive, they are increasingly being outsourced to companies who specialize in this area. Outsourcing has enabled a drastic decrease in costs for each company (by cost sharing) and the development of efficient tools (standards, software).

Types

Process benchmarking - the initiating firm focuses its observation and investigation of business processes with a goal of identifying and observing the best practices from one or more benchmark firms. Activity analysis will be required where the objective is to benchmark cost and efficiency; increasingly applied to back-office processes where outsourcing may be a consideration. Financial benchmarking - performing a financial analysis and comparing the results in an effort to assess your overall competitiveness and productivity. Benchmarking from an investor perspective- extending the benchmarking universe to also compare to peer companies that can be considered alternative investment opportunities from the perspective of an investor. Performance benchmarking - allows the initiator firm to assess their competitive position by comparing products and services with those of target firms. Product benchmarking - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses.

Strategic benchmarking - involves observing how others compete. This type is usually not industry specific, meaning it is best to look at other industries. Functional benchmarking - a company will focus its benchmarking on a single function to improve the operation of that particular function. Complex functions such as Human Resources, Finance and Accounting and Information and Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison. Best-in-class benchmarking - involves studying the leading competitor or the company that best carries out a specific function. Operational benchmarking - embraces everything from staffing and productivity to office flow and analysis of procedures performed.[5] Energy benchmarking - process of collecting, analysing and relating energy performance data of comparable activities with the purpose of evaluating and comparing performance between or within entities[6]. Entities can include processes, buildings or companies. Benchmarking may be internal between entities within a single organization, or - subject to confidentiality restrictions - external between competing entities.

Tools
Benchmarking software can be used to organize large and complex amounts of information. Software packages can extend the concept of benchmarking and competitive analysis by allowing individuals to handle such large and complex amounts or strategies. Such tools support different types of benchmarking (see above) and can reduce the above costs significantly.

Metric benchmarking
Another approach to making comparisons involves using more aggregative cost or production information to identify strong and weak performing units. The two most common forms of quantitative analysis used in metric benchmarking are data envelope analysis (DEA) and regression analysis. DEA estimates the cost level an efficient firm should be able to achieve in a particular market. In infrastructure regulation, DEA can be used to reward companies/operators whose costs are near the efficient frontier with additional profits. Regression analysis estimates what the average firm should be able to achieve. With regression analysis, firms that performed better than average can be rewarded while firms that performed worse than average can be penalized. Such benchmarking studies are used to create yardstick comparisons, allowing outsiders to evaluate the performance of operators in an industry. Advanced statistical techniques, including stochastic frontier analysis, have been used to identify high and weak performers in industries, including applications to schools, hospitals, water utilities, and electric utilities.[7] One of the biggest challenges for metric benchmarking is the variety of metric definitions used among companies or divisions. Definitions may change over time within the same organization due to changes in leadership and priorities. The most useful comparisons can be made when metrics definitions are common between compared units and do not change so improvements can be verified.

Facility Design & Management: Facility: infrastructure, and organizations supporting main activity A good plant design affects production efficiency. Interaction between work, workers, and workplace. Objectives: minimize wastage of energy, movement, and time. Facility Management: Multidisciplinary, multiskills - Maintenance - Space management - Real estate

Manufacturing practices for WCM: Investments in info systems Lean production practices Linking mfg strategy to business strategy Social attitudes Intensity of Competition Kaizen based tools Following concepts(buzzwords) are part of WCM : Agile production TQM JIT/Kanban Toyota production system Cellular layout Joint product/process design concurrent engineering Total preventive maintenance(TPM) Target costing Quality function deployment Supplier partnerships Employee involvement Quality circle Design for manufacturing Benchmarking Re engineering Quick response/supplier managed inventory system Peer appraisal system Broad band pay system (incentives) Employee ownership/gain sharing

Examples of world class manufacturing companies: Japanese :Toyota, Sony, Honda American : HP, GM, Motorala, GE

French: Legrand, Renaults, Peugeot, Valeo,

Fig. above shows practices of World Class Manufacturing

Systems & Tools for World-Class Manufacturing Information Management Tools: Product & Process Design tools: CAD, CAM Group Technology JIT SQC Bar Code Systems MRP-2, ERP, Supply Chain Management Fsz l[. Material Processing & Handling Tools: FMS CNC AGV(Automatic Guided Vehicles)

Automatic Storage & Retrieval Systems Poka Yoke (Error free) Rapid Prototyping Lean Production Single Minute Exchange of Dies Facility Design & Management Teamwork, Motivation, and Rewards ------------------------------------------------------------------------------------------------------26.08.13 Syllabus for Mid Term: Defining WCM Historical Perspective Manufacturing Practices in WCM Information Age Competition Globalization Business Models & Business Excellence Models Benchmarking Systems & Tools for WCM Facility Design & Management -------------------------------------------------------------------------------------------------------

What is the difference between services and manufactured products ?

Services Intangible outputs Outputs can not be inventoried, delivered in real time when customer demands Extensive customer contact Short lead times Labour intensive Service quality subjectively determined Organization : flat

Products

Taller

Products require associated services. E.g. a TV require broadcasting services, serials, movies, news. Products and services inseparable. Communication services Hospitality Rise of service sector: Changes in economy Customer expectations and demands Opportunities offered by new technologies

Manufacturing productivity trends: 1. Division of labour 2. Scientific management : reducing a complex job into a series of simple tasks. Scientifically analysed and optimized. 3. Improvement in machine sizes and speed 4. Improved machine tools 5. Stronger engineering materials e.g. steel, alloys 6. Conveyers 7. Computerization Indian Scenario: Vast domestic market Relatively low cost workers Advance technical skills: IT Large no. of engineering graduates Improving infrastructure : roads, ports, power, airports Indian WCM Review Questions Unit 1: 1. Why is world class manufacturing the need of todays highly competitive market? 2. What were major contributions of Japan & US in the journey to manufacturing excellence? 3. What forces made the global decade to be so? 4. The quality revolution set the pace towards manufacturing excellence. Discuss. 5. Why is sustainable improvement & growth more important of organizations? 6. How was labour productivity achieved in past? What are the factors responsible for todays productivity trends.

Quality
Quality : - superiority, excellence - Lack of manufacturing defects or services defects - Related product features or price - ANSI, ASC : totality of features and characteristics of a product or service that affects its ability to satisfy given needs. - Fitness for use. - Meeting or Exceeding customer expectations. - A predictable degree of uniformity and dependability, at low cost and suited to market. Example : Milk expiry date Quality in manufacturing: dimensions of quality: 1. Performance

2. 3. 4. 5. 6. 7. 8.

Features Reliability Conformance Durability Serviceability Aesthetics Perceived quality: subjective service : Time : waiting time Timeliness Completeness Courtesy Consistency Accessibility & convenience : easy to obtain? Accuracy right first time? Responsiveness

Quality in 1. 2. 3. 4. 5. 6. 7. 8.

Determinants of quality: Design Manufacturing Materials Culture Cost of quality:

1. Appraisal costs : inspection, testing etc. 2. Prevention costs : costs to analyze, identify causes of defects, implement corrective action, train personnel, purchase new equipments 3. Internal failure: defects occurring within the system: scrap, rework, repair 4. External failure: customer warranty, loss of goodwill, handling complaints.
Evolution of quality management: four phases Inspection Quality control Quality assurance TQM Contribution of quality gurus: Walter Shewart : 1924: SQC to improve quality of Bell telephones.

W. Edwards Deming: taught quality in 1950 in Japan. Improved quality in Japan Improving quality improves productivity. Focus on customer values. Most quality problems are due to the faulty system and not because of employees.

Plan-do-check-Act (PDCA) cycle : Plan : study the process, identify potential improvements & develop an improvement plan Do : try plan on a test basis, document results Check : evaluate results to see if plan works Act : permanently implement improvements Demings 14 points for managers : 1. 2. 3. 4. 5. create constancy of purpose towards product quality to achieve organizational goals Refuse to allow commonly accepted levels of poor quality stop depending on inspection Use fewer suppliers, selection based on quality not price install programs for continuous improvements in costs, quality, service and productivity 6. train all employees on quality concepts 7. focus supervision on helping people a better job 8. eliminate fear, create trust, encourage two way communication 9. eliminate barriers between departments, encourage joint problem solving 10. eliminate the use of numerical goals and slogans to make workers harder 11. Use statistical methods for continuous improvement of quality and productivity instead of numerical quotas 12. Remove barriers to pride of workmanship 13. Encourage education and self-improvement for every one 14. Clearly define managements permanent commitment to quality & productivity Joseph M Juran: when performance is out of control, look at vital few. Top management contribution to quality. Philip B Crosby : quality is free. Do it right first time. there are no acceptable no of defects. Goal : zero defects Armand Feigenbaum : total quality : quality at source, product quality more important than production rates Kaoru Ishikawa : quality circles Tagushi : quality must be designed into the product. cost of defects on society, design of experiments. TQM : objective : to build an organization which will produce products and services which are considered best in class by customers. All areas & functions: sales, production All activities: designing, costing All employees: Always All places: factory, offices 1. Top Management commitment & involvement - management support, budgets, investments in quality, design, process 2. Customer involvement : feedback, discussions, before products are designed QFD : quality function deployment : a formal system for identifying customer wants, eliminating wasteful product features. Formal customer inputs into product design.

3. Designing products for quality: - Robustness : products must function in all field conditions - Designing for production : less wiring, easy assembly, should not require much thinking , fewer parts, less scope for errors - Designing for reliability : component reliability(CR) : SR (system reliability) = CR1 x CR2 x CR3 CRn : graph of System Reliability Vs. No. of components at various CR. Improving system reliability : overdesign of components Design simplification : the number of interacting parts Redundant parts : back up components 4. Designing production process for quality: internal customers Process capability index : PCI = (UL LL)/6 sigma Sigma = the standard deviation of a product characteristics from a production process, a measure of the long term variation of a product characteristics from a production process. PCI > 1.00, process has capability PCI < 1.00 Process does not have capability ( diagram of PCI = .8, PCI = 1, PCI = 1.2 5. Developing supplier partnerships : suppliers also participate in design, companys training programs, long term orders 6. Building teams of empowered employees - employee training programs, ex, training programs in Philips - work teams and empowerment : authority to act - quality at source : each worker quality control station SQC training Right to stop production Quality circles Assign responsibility of improving quality to workers

7. Benchmarking ( internal standards) & 8. continuous improvements KAIZEN :

CONTINUOUS OR ON GOING IMPROVEMENT Small step by step improvements Smaller improvements are realizable, predictable, controllable , acceptable TQM a tool for global competitiveness Customer selective Increased quality, increased productivity Customer driven standards Employee participation Kaizen Quality circles TQM tools & techniques: QFD : planning technique Quality function deployment(QFD):To convey customer requirements to all departments. Quality function Focused on delivering products and services that satisfy customer requirements.

Involve customers in new product development QFD links the needs of the customers with design, development, engineering, manufacturing, and service functions. QFD is : 1. Understanding customer requirements 2. Quality systems thinking, psychology, knowledge 3. Maximizing positive quality that adds value 4. Comprehensive quality system for customer satisfaction 5. Strategy to stay ahead Four phases of QFD: Phase 1: Listen to the customer. Accurately understand. Analyze vs. capability & strategic plans. Phase 2: identify the area of priority breakthrough that will result in dramatic growth Phase 3: breakthrough to new technology Phase 4: production of new products in highest quality. 1. 2. Concurrent engineering: approach to stream line product development 3. The seven QC tools: flow charts, check sheets, Histograms, Pareto analysis, cause & effect analysis, scatter diagrams, control charts 4. The Deming cycle: methodology of continuous improvement. PDCA cycle: Plan, Do, Check, Act. DMAIC cycle : Define, Measure, Analyze, Improve, Control. 5. Benchmarking : search for best practices: helps companies learn their (and their competitors) strengths and weaknesses. First initiated by Xerox. They found: a. Their unit manufacturing costs equaled the Japanese(Canon) selling prices in the US. b. Their production suppliers were nine times that of best suppliers. c. Assembly lead times were ten times higher. d. Product lead times were twice as long. e. Defects per hundred machines were seven times higher.

Bench 1. 2. 3. 4.

marking process can be described as follows: Determine which function to benchmark. Identify the key performance indicators. Identify the best in class companies. Measure the performance of the best in class companies and compare results with your own performance. 5. Define and take action to meet or exceed the best performers.

Motorola encourages every one in the organization to ask: who is the best person s in my own field and how I might use some of their technique and characteristics to improve my own performance in order to be the best in my class. (executive, machine operator etc.) Quality as a culture: Factors affecting quality management: (Barriers to quality management) Financial & human Resources Documentation of processes, products, services Mind set of top management

Long term corporate directions Training & education

5S principles: clean it up and make it visible: Five S : seri, seiton, seiso, seiketsu, shitsuke 1. Sort: sort through items and retain only what is needed. Dispose of others. 2. Straighten(orderliness): a place of everything and everything in place. 3. Shine(cleanliness): cleanliness facilitates inspection and exposes abnormal and prefailure conditions. 4. Standardize(create rules): develop systems and procedures to monitor & maintain these. 5. Sustain(self discipline): maintain stabilized work place as a continuous process.

Flow charts: diagram of the sequence of operations in a manufacturing process.

Check sheets (Data collection forms) : data collection forms that facilitate the interpretation.

The check sheet is a simple document that is used for collecting data in real-time and at the location where the data is generated. The document is typically a blank form that is designed for the quick, easy, and efficient recording of the desired information, which can be either quantitative or qualitative. When the information is quantitative, the checksheet is sometimes called a tally sheet. A defining characteristic of a checksheet is that data is recorded by making marks ("checks") on it. A typical checksheet is divided into regions, and marks made in different regions have different significance. Data is read by observing the location and number of marks on the sheet. 5 Basic types of Check Sheets:

Classification: A trait such as a defect or failure mode must be classified into a category. Location: The physical location of a trait is indicated on a picture of a part or item being evaluated. Frequency: The presence or absence of a trait or combination of traits is indicated. Also number of occurrences of a trait on a part can be indicated. Measurement Scale: A measurement scale is divided into intervals, and measurements are indicated by checking an appropriate interval.

Check List: The items to be performed for a task are listed so that, as each is accomplished, it can be indicated as having been completed.

An example of a simple q
Quality related data: attribute, variable. Attribute : defects or no defects. No continuous scale. invoices with errors, invoices without errors. Parts which confirm to specifications, number of surface defects on an automobile panel. Variable: variable data collected by numerical measurements on a continuous scale. Histogram: graphical representation of variation in a set of data. Frequency or number of observations of a particular value within a specified group. Histograms provide clues about the characteristics of the population from which a sample is taken.

A histogram is a bar graph that shows how frequently data occur within certain ranges or intervals. The height of each bar gives the frequency in the respective interval.

Examples of Histogram

Pareto analysis is a statistical technique in decision making that is used for selection of a limited number of tasks that produce significant overall effect. It uses the Pareto principle the idea that by doing 20% of work, 80% of the advantage of doing the entire job can be generated. Or in terms of quality improvement, a large majority of problems (80%) are produced by a few key causes (20%). Pareto analysis is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one.[citation needed] Pareto analysis is a creative way of looking at causes of problems because it helps stimulate thinking and organize thoughts. However, it can be limited by its exclusion of possibly important problems which may be small initially, but which grow with time. It should be combined with other analytical tools such as failure mode and effects analysis and fault tree analysis for example.[citation needed] This technique helps to identify the top 20% of causes that needs to be addressed to resolve the 80% of the problems. Once the top 20% of the causes are identified, then tools like the Ishikawa diagram or Fish-bone Analysis can be used to identify the root causes of the problems. The application of the Pareto analysis in risk management allows management to focus on the 20% of the risks that have the most impact on the project.[1]

Scatter diagrams

A scatter plot or scattergraph is a type of mathematical diagram using Cartesian coordinates to display values for two variables for a set of data. The data is displayed as a collection of points, each having the value of one variable determining the position on the horizontal axis and the value of the other variable determining the position on the vertical axis.[2] This kind of plot is also called a scatter chart, scattergram, scatter diagram or scatter graph.
[hide]

Process input vs. quality

Control charts

Quality drives the productivity machine: if production does it right first time, and produces products and services free of defects, waste is eliminated and costs are reduced. Other aspects of quality picture : JIT and lean manufacturing : JIT ; system of enforced problem solving Product standardization : Automated equipments : robots Preventive maintenance : Quality circles : 3 15 persons Volunteers Regular meetings

People with same background Objectives : analyze, identify, problem, search for solutions To work related problems Philosophy : workers direct involvement TQM Total customer satisfaction All departments All products All aspects of q Involve every one Total commitments 9.

ISO 9000 standards : ISO 9000 : quality management systems : fundamentals & vocabulary ISO 9001 : quality management systems : requirements ISO 9004 : Quality management systems guidelines for performance improvements ISO19011 : Guidelines on quality & environment auditing These standards are based on 8 quality management principles that reflect best management practices

Customer focused approach Leadership Involvement of people Process approach System approach to management Continual improvement Factual approach to decision making Mutually beneficial supplier relationship These standards provide guidelines for better management of quality but do not provide any levels of quality that must be obtained. Method of certification : passing repeated audits, no non compliances. In India BS standards IEC standards Quality control: 7. Statistical concepts in quality control

A flow of products is broken into discrete batches called lots. A quality control lot is produced under same operating conditions. Lots are then sampled to determine if lots meet quality standards. Random sampling : a unit in the lot has same chances of inclusion in the sample. Sample is likely to be representative of the lot. What is size and frequency of lot? Cost & quality considerations. When to inspect : after operations that are likely to produce defectives, inspect before costly operations, inspect before assembly operations, for automatic machines, inspect first and last pieces and a few in between. Central Limit theorem : Sampling distribution can be assumed to be normally distributed sampling distribution can be assumed to be normally distributed unless sample size is small. 1. the mean of population distribution is equal to population mean. 2. the standard error of the sampling distribution is smaller than population standard deviation by a factor 1/ n Control charts for variables: upper control limit, lower control limit : SPC statistical process control Acceptance Plans Al parts, purchased and manufactured are subjected to quality control. Types of inspection : 10%, sampling Classification of defects : critical, major, minor Operating characteristics is a graph of the performance of acceptance plan. When lot is large compared to sample, a binomial graph will result. N : total production lot n : sample size c : maximum no. of defectives Acceptance quality level (AQL) : Used to define good lots. If lots have no more than AQL defectives, they are considered good lots. Consumers risk : with a acceptance plan, percent possibility that bad lot can be accepted: LTPD : lot tolerance percent defective :used to define bad lots . If lots have greater than LTPD defectives they are considered bad lots Producers risk : the percent possibility of rejecting a good lot An acceptance plan is the overall scheme for either accepting or rejecting a lot based on information gained from samples. Acceptance plan identifies size and type of samples, and criteria to be used to either accept or reject the lot. Single, double, sequential samples. OC curve of an ideal plan : vertical rectangle OC curve for varying sample sizes OC curve for varying percentage defectives

A typical example of AQL : Critical : .65%, Major : 1.5% Minor 4% Sampling Plans : Single e.g. N=4000, n= 80, c= 2 Double : N=4000, n1=50, c1=0, n2=50, c2=3 ( in the cumulative sample n1+n2 Rejection number r1= 3, r2=4 Multiple an extension of double : N=4000, n1=20, c1=0, n2=20, c2=1, n3=20, c3=2, n4=20, c4=3, r1=4, r2=6, r3=8, r4=10 Sequential Single double multiple Comparison : Administrative simplicity highest Sampling inspection cost highest Reliability of info on level of quality largest Acceptability to producer lowest SPC : 1. variability of process is inherent in any process 2. two types : internal ( chance), external (assignable) 3. variations due to chance causes are statistical 4. variation pattern due to chance causes : bell shape, normal distribution curve 5. symmetrical about mean 6. area under curve unity (normalized) 7. avg. + 1 sigma = 68.26% 8. avg. + 2 sigma = 95.45% 9. avg. + 3 sigma = 99.73% 10. Avg. + 6 sigma = 99.997% 11. Process variability ( precision) , process centering(accuracy) : 12. Upper & lower spec limits : design limits 13. good process variability but bad centering 14. process variability (natural tolerances)is just adequate control charts : for variables : avg. x charts range r charts for attributes : percent defectives p charts no. of defectives c charts

Inspection Assurance , prevention Total quality Kaizen 6 sigma Acceptance sampling : AQL Quality circles FMEA Taguchis design of experiments Quality systems : Organization of q department, planning, objectives, investments Training Quality Control : mechanism by which products are made to measure up to specifications determines from customer requirement and transformed into engineering and manufacturing requirements. It is concerned with making things right than rejecting those which are wrong. Q control refers to systematic control of variables in manufacturing process which affect excellence of end product Assurance (prevention)

8.10.09 What manufacturer/designer should provide in the product and what customer desires : 1. safety e.g medicines 2. Reliability e.g. mobiles 3. functionality, specifications 4. aesthetics : esteem value 5. serviceability How to check these? For mass scale production sampling plan Why sampling ?

1. 100% too expensive, testing may require destructive testing 2. Even after 100%, on guarantee that outgoing will be fault free: inspection fatigue 3. acceptance or rejection is of total lot : greater responsibility for mfg. For critical items 100% medicines , loudspeakers, Sampling plans : operating characteristics curve : varies with sampling plan N, n, c Producers risk Customers risk Ex. Draw hypothetical OC for n=300, c=6, n=100, c=2, n=25, c=4 Double sampling: N1, c1 If d>c1 but less than c2, Take another sample of n2 Combined sample n1 + n2 D < c2. Q planning: Planning Implementation Monitoring& control Set q objectives Specifications Vendor q Set sqc Training Implementation : Invest in q equipment, organization

Concepts : Taguchi : do not be satisfied with defects < target, minimize them L(y) = k (y-m) ^2 Design of experiments : input parameters adjusted randomly hoping to achieve process improvement Orthogonal matrics Run 1 2 3 4 x 0 0 0 0 y 0 0 1 1 z 0 1 0 1 Output 352 340 326 362

5 6 7 8

1 1 1 1

0 0 1 1

0 1 0 1

404 417 493 432

X is important input , significant change when it changed from 0 to 1 Ishikawa : FMEA KAIZEN : CONTINUOUS OR ON GOING IMPROVEMENT Small step by step improvements Smaller improvements are realizable, predictable, controllable , acceptable Quality circles : 3 15 persons Volunteers Regular meetings People with same background Objectives : analyze, identify, problem, search for solutions To work related problems Philosophy : workers direct involvement Six sigma Sigma level 1 2 3 4 5 6 yield 31 69 93 99.4 99.98 99,997 defects per mil 700K 300K 66K 6K 233 3.4

Why do we need 6 sigma? What if 3 sigma were applied ? 1. no modern computer will function 2. 10 mil health care claims will be mishandled 3. 54K chq will be lost 4. 270 mil credit card transactions will be defective 5. 540 K erroneous call details Why 6 sigma : 1. technological complexities : computers have to be zero defect 2. IC mfg. so complex, so many stages, ( min 9) it has to be zero defect

Facility Design and Management: Good plant design considers: production efficiency Minimum wastage of energy, movement, time Assembly line design Flexibility in manufacturing Modularity Automation Facilities management: Multidisciplinary profession: involving engineering, architecture, design, accounting, finance, management, behavioural science. Affects work, workplace, workers, productivity Requires broad & diverse set of skills Roles and responsibilities of a facility manager: Space management: Space policies Space inventory Space allocation Furniture: specifications, purchase, inventory, moves Interior design Hazardous materials Waste Future requirements Maintenance: Preventive Breakdown Housekeeping Landscaping Furniture, machines, building Real estate: Building leases Site selection Acquisition, disposal Purchase building Property appraisal Financial planning: Operational Budgets Capital budgets

Major term loans Administrative services: Documentations, Records Security Telecommunications Copy services Shipping/receiving Mail services Health & safety: Ergonomics Energy management Indoor air quality Recycling program Emissions Architecture/engineering Construction management Building systems Architectural design Code compliances (e.g. Noise, space per person) Facility planning: Operational plans Emergency plans Strategic plans Energy plans Modular Design Cells: a group of process functions Pre assembly, pre fabrication Replacement of one module with another Flexibility in production systems: Product mix flexibility Routing: different, alternate processes Expansion: capacity, quantity Reconfiguring : Benefits of high flexibility : Better utilization of machines Group technology cells: benefits of mass production in batch production NC machines FAR : flexibility audit and redesign Method of diagnosing organizations flexibility and guiding the transition process. Definition of flexible manufacturing system: an integrated, computer controlled complex of automated material handling devices and NC machines tools that can simultaneously process medium sized volumes of a variety of part types.

FMS: High investments Should be a perfectly controlled system, loss of qty, quality not acceptable Should be heavily utilized Prevent any breakdown Importance of planning to keep machines busy, continuous RM supply With FMS, focus shifting from production (the operator) to the pre production stage(planning & design) Higher level skills required from workers, multi skilled, having skills extending beyond their traditional area of competence, may be asked to diagnose faults, minor repairs.(mechatronics engineer) Automation: fundamentals, needs, implementation Automation is a technology in which a process or procedure is accomplished by means of programmed instructions, usually combined with feedback control to ensure proper execution of instructions. Three basic components: power, machine programming, feedback control Block diagram :

Power source | Program execution + control process ^ V ---Feedback-----Application of automation in manufacturing: Automated guided vehicles, conveyers, material handling Storage-retrieval systems Industrial robots CNC Unattended production Automated loading and unloading of parts AGV for moving parts between machines Comprehensive computer control system Automated cleaning Automated inspection Capable of producing hundreds of parts Machine centers: operated for long hrs. Adaptive controls: can adjust operational speeds, motion paths to optimize manufacturing processes or to satisfy constraint conditions against variations in manufacturing caused by change in toughness of work material, tool wear CIM : computer integrated manufacturing: integrates manufacturing environment of a company through shared databases.

Assembly line design: Used in mass production, low worker skills required, limited training, dedicated machines or robots Objective to increase efficiency, minimizing cost Requires design of product, processes, plant layout before construction of the line. DFA Line balancing: cycle time, throughput time Used in mass production Efficiency Low throughput time Low cycle time Henry Ford: pioneered concept of mass production & assembly lines Material flow systems: Like cardiovascular system To provide and maintain supply of rm, tools, and consumables. Works across department boundaries Its effectiveness affects performance of the manufacturing system in which it is embedded. A good design can reduce work of a material flow system. No. of components, no. of setups, no. of processes increase material flow. One-shot manufacturing: full manufacturing on one machine. Versatile machines. Material flow analysis: technique performed before establishing physical layout. Main purpose: to determine logical position of each processing entity(machine, workstation) by analyzing the flow sequence of the products. In a multi product flow line Four types of flow movements: Repeat, In sequence: most desirable, least flow distance Backtrack: least desirable, larger flow distance Bypass Integration with suppliers Elimination of inventory Supply chain Types of line configuration: Serial lines: single stations along a straight line, conveying system, each station performs one or more tasks on the partially finished product. U shaped lines: JIT system, workers in the center of U, can monitor each other, collaborate, acquire multiple skills, higher motivation, improved quality, increased flexibility. Parallel stations: longest task time may exceed cycle time. Workers perform parallel or serial identical set of tasks. Parallel independent lines: duplication of lines, requires more equipments, if one line is closed other will continue to give production

Work centers: for complex products, assembly decomposed into subsystems(work centers) which are easier to manage than the entire system. Routing between work centers is fixed. Review Questions: 1. Discuss the advantages of various types of line configurations. 2. What do you mean by adaptive controls? 3. What are the typical roles and responsibilities of a facilities manager? 4. A material flow system design impacts productivity in the long run by reducing wastage. Discuss. 5. There are many application of automation industry. Give a comprehensive account of the advantages, and the possible implications if any company decides to go for automation. 6. How many types of flexibilities are there in a production system? Explain each. 7. How is the emphasis on skills shifting because of increased automated processes? Discuss.

1. What are the broad categories of technological advances? Hardware technologies: Greater automation Perform labour intensive tasks e.x. NC machine tools machining centers industrial robots automated material handling systems AMH AGV AS/RS automated storage and retrieval systems Software based technologies: CAD CAPP computer aided process planning Automated manufacturing planning & control systems MP & CS CIM computer integrated manufacturing CAM computer aided manufacturing 2. What are industrial robots? Do robots have to be trained? Robot : a programmable multifunctional machines that may be equipped with end detectors. Suitable for manual repetitive activities Dangerous, dirty tasks May have advance capabilities : vision, tactile sensing, hand to-hand coordination, mobility, can be taught a sequence of motions in three dimensional space

3. Technological investments can be very high. Discuss benefits and risks involved in these investments. a. Cost reduction: labour costs : replacing people with robots Material costs Inventory costs Quality costs Maintenance costs b. Other benefits: increased product variety Improved product features Shorter cycle time Greater product output Risks : technological : untested, Operational : disruptions Market : obsolescence Organizational problems in absorption

The Seven Keys to World-Class Manufacturing

Why is information on this list? Because information truly is power. Information is what allows you to know whats happening inside and outside of your enterprise so you can manage what you are able to and otherwise deal with those things you cannot manage. Without accurate, timely information, you are blind. Exceed Customer Expectations Streamline Outsourcing /Manage Global Enterprise How can your company become and remain world class? There are seven keys to becoming a world-class manufacturer that distill the broad concepts above into specific actions that can be addressed and accomplished in your company. Each is presented with a brief discussion and examples of its impact on a manufacturing organization and its competitiveness. A more detailed discussion of each of the seven keys is available from MAPICS, Inc. The keys to success, in no particular order, are: Reduce Lead-Time Reduce Operational Cost Increase Visibility to Business Performance Reduce Time-to-Market

 Satisfy Customer Expectations Streamline Outsourcing Processes Manage Multiple Locations and Global Operations Each of these objectives is important in and of itself; however, taken together, they describe the focus of the activities and attitudes that define world class. Reduce Lead-Times Shorter lead-time is always a good thing. In many markets, the ability to deliver sooner will win business away from competitors with similar product features, quality and price. In other markets, quick delivery can justify a premium price and will certainly enhance customer satisfaction. In all cases, shorter lead-time increases flexibility, reduces the need for inventory buffers and lowers obsolescence risk. Lead times are cumulative and bi-directionalthat is, order handling, planning, procurement, inspection, manufacturing, handling, picking, packing and delivery all contribute to the lead-time; and the time it takes to get signals down the supply chain to initiate each activity adds to the overall time it takes to get the job done. Business rules and policies can drive undesired effects. Purchasing rules too focused on unit cost lead to large quantity buys that result in high inventory and long leadtimes. Ironically, this type of buying can also lead to shortages, since longer lead times mean you will be making and buying to a more inaccurate forecast. The best combination of price and lead-time often comes from a stable buyer-supplier relationship based on longterm contracts with deliveries according to a forecast that is shared with the supplier and updated frequently. The same is true on the customer side. Instead of focusing on securing large, one-time, single orders that clog up the supply chain, companies must focus on creating long-term contracts with customers and sharing forecast information with customers to reduce lead times. The same issues concerning large lot sizes also apply to internally produced parts and products. Large lots, driven by a focus on lowest unit cost, raise inventory and lengthen lead-times while reducing flexibility and responsiveness, increasing eventual cost through premium expediting instead of using large fixed lots, companies must dynamically adjust the lot size based on market demand, product mix and capacity. Ongoing

continuous improvement efforts focused on reducing setup times can help companies reduce lot sizes, which provides flexibility in responding to market demand. Appropriate measurements contribute to high performance on the plant floor. On-time shipment and inventory turns are good examples of high-level measures that tie to company objectives. Focusing on isolated measurements like equipment utilization on nonconstraining resources encourages busy work that creates excess inventory and longer lead-times. Shopfloor measurements must encourage overall performanceshipping orders on time at minimal total cost and minimal total cycle times. Performing manual transactions often slows down the supply chain and adds to lead-time. Reporting transactions at each operation or creating a paper purchase order before suppliers work on a component are just two examples. In addition, manual transaction reporting often introduces errors and impacts work productivity. Companies must eliminate non-value add transactions and automate transactions to speed up the supply chain. For example, backflushing can be used on the shop floor, and supplier purchase orders can be electronically sent or completely eliminated using VMI programs. Reduce Operational Costs Although recent developments in planning and customer relationship management have focused more on top-line benefits (increased revenue), the bottom line is still greatly dependent on controlling costs. Companies with a lower operational cost structure enjoy an obvious advantage in profitability and the ability to adjust pricing to meet competitive pressures if necessary to maintain or gain market share. Costs are really just part of the scoreboard. When a company implements world-class operational processes, it improves multiple measurements simultaneously, including cost, lead times, inventory and customer

service. This approach contrasts with a pure cost reduction focus without associated business process change, which can negatively impact other operational measurements. Localized cost reduction efforts can often increase costs in other areas. Moving production

overseas to an area with lower labor rates, for example, will increase costs for procurement, transportation, inventory and reduced flexibility, among others. The relative cost of source/make/deliver, and therefore the opportunities for cost reduction, will vary with the industry that the manufacturer is in and the kind of products the manufacturer makes. Most manufactured products today have relatively little direct labor content, generally less than 20% and often less than 10%, whereas the material content of most products is more than half of cost-of-goods sold (COGS). The rest is overhead. Since most direct labor costs tend to be fixed, effective deployment of these resources can reduce unplanned manufacturing overtime, premium expediting and outsourcing in addition to dramatically reducing cycle times. Since material cost is the dominant cost, significant opportunities exist in reducing this cost by analyzing current spending and devising effective sourcing strategies for material. Overhead reduction is always a fertile area for cost reduction, using automation to streamline the procurement, manufacturing and customer management processes. Additionally, fulfillment costs are an area that has not received as much attention as it deserves; inventory cost, transportation and storage account for a significant part of the cost of doing business. Fortunately, improving customer service can also generate cost benefits at the same time. Increase Visibility to Business Performance Todays fast-moving, ever-changing manufacturing environment demands faster responsiveness to changes in the market, product innovation and supply chain events. In this environment, ignorance is one of the greatest threats to a manufacturing companys health and success. Executives and senior managers must understand how the enterprise is meeting strategic objectives. Middle-level managers need visibility into how they are performing against tactical objectives. Responsible individuals must be notified immediately when supply chain issues threaten the completion of objectives, so actions can be taken to ensure customer delivery and quality requirements continue to be met. A well-implemented and effective enterprise information system delivers overall visibility into the health of the company and its operations and provides detailed

information for performance measurement, process management, and problem identification and remediation. Such a system can help improve revenue through competitive advantage, can help you understand your business and therefore, manage it better, reduce operational costs, improve performance and improve results for all stakeholdersowners, executives, managers and employees. An enterprise information system will capture literally thousands of pieces of information each day, as activities are reported throughout the enterprise. All of this detailed data is of little use without placing it in context and seeing each activity in relationship with all the other activities and the overall plan. To turn data into meaningful information is an up-and-down process. Bits of data, taken together and summarized, form higherlevel contextual information that shows status, accomplishments and importance. From high-level summaries, the observer must be able to dive back down to details to understand exactly what is happening and how to drive those activities toward the goals and objectives.

Management information and analysis is only as good as the data it is based on. Therefore, it is important to make sure that data is collected as quickly as possible and with the least amount of human intervention, which tends to introduce delays and errors. It is equally important to collect data from supply chain partners through automation as much as possible. Electronic Data Interchange (EDI) is the most commonly used method today but EDI is rapidly being replaced by XMLbased e-commerce communications and Web-based portal technologies. All systems should be integrated so information can pass freely between them without manual re-entry. Many manufacturers are left with islands of automation after implementation of specialized information systems in isolated portions of the business over the years. While each contains valuable information, absence of integration prevents the effective use of that information for overall management and coordination of effort toward company objectives. Reduce Time-to-Market Developing and introducing new products and services is vital to most manufacturing companies. Good ideas are not enough; well-managed processes for bringing new products to market can lead to significant competitive advantages. Those activities, however, represent a significant risk that can lead either to missed opportunities or to huge financial losses. In addition to new product development, the same processes and resources are applied to product improvements, corrections and variations throughout the product lifecycle. Based on market research, customer request; technological advances, regulatory concerns or competitive pressures, products are often subject to frequent engineering changes. Changes and improvements are easiest to makeand least costly and disruptiveearlier in the process. It is good business practice to collaborate with all operational areas of the business when the product and process are still being designed. Cooperation should be focused on making sure the new product meets market needs (marketing and sales), is priced to sell and generate a profit (marketing and accounting), can be manufactured efficiently (production, production engineering, quality, purchasing and key suppliers), and

can be maintained and serviced (service). Because customer expectations are increasing, and competition is coming from new players around the world, bringing better and cheaper products quickly to market is more crucial than ever. Research and development is a key success factor in a manufacturers survival and growth. Efficiency and responsiveness of R&D processes will impact the top line as well as the bottom line. Customers are now quick to compare and switch vendors. The Internet empowers buyers by providing fingertip access to many more suppliers around the globe; they can even customize products over the Internet without having to ask an engineer to quote their specific requirements. These capabilities change behaviors and expectations, and success in todays markets can only be achieved through innovation, agility and aggressive marketing. Satisfy Customer Expectations The ultimate key to success in any business enterprise is to please your customers. The most successful companies dont just meet customer expectations, they exceed them and beat the competition by setting the bar at a level that makes it difficult if not impossible for others to surpass. Successful manufacturers manage the entire customer relationshipfrom prospect to post-sales service and supportthis involves the entire organization in a customer focus. Whether or not they have direct contact with the customer, contributors must keep the customers need in mind as they plan and carry out dayto-day operations. Its important to truly understand the customers goals and objectives. Your products and services must strive to support the customers vision. Communication is very important; neglect is the number one reason that customers terminate a relationship. The key is to give customers access to all appropriate information about your relationship and make it readily available whenever and wherever they might need itthe Web is your ally in achieving this objective. As most companies have painfully learned in recent years, customers often change their mind. To be fair, market conditions are such that product cycles and demand patterns are constantly changing. Agility is extremely important. A solid, collaborative partnership with customers will provide you with the most reliable

advanced information and therefore the earliest warning of upcoming changes. In short, the best strategy is to make the customer want to do business with you. Strive to be the preferred supplier through competitive products, high quality, the right price and superior customer service. Arguably, the most important aspect of customer service is on-time performance. There are two sides to on-time delivery: Promising a realistic date; then delivering on that promise. It is imperative that you take that promise seriously, meaning that it is not given lightlyall considerations and constraints are factored in before committing to a delivery date. Performance measurements are a must; if you dont know how you are performing, you cannot improve upon it. It is not unusual for companies to consistently have 98% - 99% success in meeting agreed-to shipment dates. Quality must be considered a given. Work with your customers and engineering as early as possible in the product development cycle to determine the required measurements. Measuring and improving all processes through the order and fulfillment cycles, with an eye toward continuous improvement, will allow you to achieve or even surpass expectations. Streamline Outsourcing Processes Outsourcing of manufacturing operations is a common practice today because it offers flexibilitythe ability to change products or processes rapidlyand can often save money by exploiting economies of scale or other favorable cost factors the contractor has to offer. There are two approaches to outsourcing; a single process step or group of steps may be performed by an outside resourceheat treating, for example, or electroplating or the entire manufacturing process might be contracted out to a third party. In either case, the manufacturer relieves demand on it own plants and has an opportunity to concentrate on its core competencies, which might not include volume manufacturing, while its partner(s) provide the resources for producing products. Depending upon your current resources and circumstances, outsourcing a part of the manufacturing process could save you from having to expand your manufacturing space (perhaps even adding a new plant), searching for and hiring experienced resources, training the new hires and various costs involved in

ramping up a new production line or process. Capital assets can become a liability in a fast-changing marketplace. As customer demands and technologies change the nature and makeup of products, it can be an advantage to not be tied to a relatively inflexible physical plant. For companies large and small, the goal is to become a world-class organization and to be able to compete in todays global markets. For manufacturers, the fastest and easiest way to achieve this goal is through partnerships with companies that have attained superior capabilities in particular phases of the processlike production. By partnering with world-class contract manufacturers you can reap the benefits almost immediatelywell-managed processes, high quality, on time deliveriesand increase your performance and delivery to meet your customers expectations. At the same time, you can focus your own resources on the things that you do best-product innovation, design, marketing, distribution, sales or manufacturing. Manage Global Operations Theres no question the world is shri nking, and virtually every business is now involved in some form of international tradewhether marketing and selling to customers in other countries or simply using parts or materials that are produced elsewhere. We can thank the Internet, or blame the Internet if you prefer, for opening markets to product and services almost without regard to time and distance. The glass-is-half-full crowd will view these developments as the onset of unlimited opportunity. If you tend toward the half-empty-glass crowd, you are likely to see significant threats in virtually unlimited competition from literally any place on earth. Like it or not, every executive must recognize this new reality and factor global business into plans, processes and strategies. Design products to appeal to international markets. Search for suppliers in other geographies. Understand local regulations and expectations, import/export processes and requirements. Consider language challenges in labeling, documentation, and marketing. Establish new sales channels or coordinate manufacturing operations across geographies and time zones. The Internet is a key tool for joining the global business community and conducting business around the globe. Globalization and e-commerce have changed

traditional business behaviors and practices. If manufacturers dont expand into new geographic markets, their market share is likely to shrink as new competitors will be entering their own territory and targeting their historical customers. Companies must adapt their products and services to those new potential customers. They must leverage the Internet to quickly establish a virtual presence. They must use collaborative technology in order to respond to customers requirements better and faster. Manufacturers often grow and enter new markets by acquiring or merging with other companies. This usually means, however, that different facilities within the newly merged enterprise are using different systems on different hardware platforms, they might have different part numbers for the same items, and operating procedures are undoubtedly different. The challenge is to bring as much uniformity to the varied facilities as practical without destroying the uniqueness and competitive edge that the individual units displayed before the merger. The new divisions have to communicate, exchange many kinds of data (product information, customers, suppliers, employees, etc.), coordinate and synchronize logistics operations, provide visibility on materials and components requirements, optimize fixed assets utilization across multiple facilities, consolidate financials and much more. A natural consequence having operations scattered through multiple locations, whether around the world or in a specific region, is the need to gain visibility across all sites. Visibility can lead to more negotiating power for purchased parts, more efficient centralized credit and collections and accounts payable and opportunities for improved customer service by having (information) access to world-wide inventories and production capabilities. Unlocking the Potential The keys to becoming a world-class manufacturer are not a secretthey are not even especially profound they are simply a distillation of the experiences of leading companies and how they have managed to excel in their chosen markets. Any company can take advantage of the wisdom and the practices developed in more than a hundred years of manufacturing since the Industrial Revolution, but many simply do not have the insight or the will to recognize what must be done and to accomplish it.

It is a poor workman who blames his tools for shoddy work, but it is also true that professionals understand the value of good tools and insist on having and using the best whenever possible. When selecting a production machinea machining center, insertion machine, automated assembly line or robotyou would certainly look for one that can handle the tasks you have in mind, but also one that is flexible enough to adapt to additional products and uses that may arise in the future. This practice is even more important with an information system because the handling and use of information is changing faster than any other technology on the planet. And, remember that information management is a fundamental support for each and every one of the keys to world-class performance. When looking at enterprise systems or supply chain systems (whichever term you prefer), some people tend to get distracted by details of the technology and miss the bigger picture. Keep in mind the reasons you are looking for a system in the first placeto provide tools to manage the information that is essential to effective business management. And thats the application software, not the hardware or operating system. On the technology side, you only have to ensure, as much as you can, that the equipment is capable of supporting your business needs today and in the foreseeable future, and that the supplier(s) will be around when you need them. Of course, no one knows the future, but you can certainly improve your odds with careful selection. Connectivity and interoperability (for data communications, supply chain collaboration and workflow messaging) are important issues that are reliant on underlying technology; however, any and all mainstream technologies today are fully capable of participating in these kinds of connections. In addition, many industry groups are working hard to develop and publish neutral standards, guidelines and protocols that will link disparate systems and further enable the connectivity that is so vital to supply chain collaboration and interaction. Information-enabled collaboration and coordination are what makes a supply chain work. The keys to world-class manufacturing leverage information to generate cost savings, efficient operations and responsiveness, superior customer service and well-managed resourcesno matter where they are located or how complex your facilities and relationships might be. Being world class is all about being as good as any

competitor in the world, and just a little bit better, quicker, smarter, or more responsive than the rest. Worldclass manufacturers can choose their battles and compete on their own terms. They are in control of their own destiny and are seldom, if ever, blindsided by something they havent anticipated or cannot handle. World-class manufacturers use information as a strategic tool for becoming and remaining the best they can be. MAPICS is a visionary, global software company focused exclusively on delivering collaborative business applications and expert consulting services that help manufacturers become world class. Copyright 2002 MAPICS, Inc. MAPICS is a registered trademark of MAPICS, Inc. All other brand and product names may be trademarks of their respective owners. MPWPKEY

Topics in Human Resource Management Team work, motivation, rewards, Multi-skilling

Teams: a group of people with common focus and a strong sense of identity. different than a group of individuals. Meetings : a group of people. Achieves results collaboratively A relatively small group of people Complementary skills Committed to common purpose Performance goals Ways of working together Mutually accountable Ask following questions about your team: How large is the team? Self managing: What about interpersonal problems within teams? Team members themselves have to solve them. Responsibility for team performance on team members. Models of team development: inclusion, assertion, cooperation Groups develops into healthy, effective teams with a common focus, strong sense of identity. Team building: manager as facilitator. Teamwork as a means to improve performance. Team building on going process. Self managed Teamsmanship: spirit of being in a team Group becoming a team Being proud to belong to their team

promoting group harmony, smoothing and protecting everybodys ego. Contributing and acknowledging contribution of others. A team person: likes to work in a team

Team environment: whether relationships within team are cordial or not. Any hostility? How high is moral? Clear vision Participation Debate differences without hostility Resolve conflicts through a mechanism Self directed teams Empowered teams Leadership: strong leadership required. Without leadership waste of efforts, possible bad decisions, possible failed products & services. leadership collaborative rather than hard line authority or command Instead of using word leader, use words like coach, facilitator, mentor, resource provider. Team cohesiveness: Interpersonal relationships, bonds formed Leads to greater satisfaction Reduces conflict Factors conducive: working in close physical proximity, sharing similar type of work, sharing similar values or attitudes, being of similar age group or gender, having effective communication channels, having a small group size. Fostering Teamsmanship(foundations of Teamsmanship): guidelines: Establish specific meeting times Stop & start on time Set ground rules Address infringements of ground rules as soon as they occur Do not go to next topic until current topic is clearly understood Set a time table for task accomplishment Team communication techniques: Develop paraphernalia, e.g. notes, team logo, newsletters. Use positive remarks: lets talk about it Sounds like a great idea Lets try it Tell us more about it How can we help No one else thought about it Thats excellent Avoid defeatist or procrastinating remarks: Dont move so fast It is not our problem I dont think it will work You dont understand the problem Yes, but. . . The management wont let us do it.

We will think about it later It is not in the budget We are too busy It is too soon for that Think we than me. Act as good team members Let the other speak first Do not say I understand, listen and mirror ( repeat in different words) Ask if you have understood correctly If you do not agree, begin with my experience is. . . or other neutral statement Avoid these: I know how this should be done I thought no one cared It is not in my job description That is my territory, not yours This does not require consensus No one asked me what I thought If I had asked the group, we never would have made this decision I am paid to make these decisions

Understanding team roles: Team roles: position as a member of team: coordinator, leader, motivator, spokesperson Functional roles: researcher for a particular topic, expert in a particular subject Example: team has to launch a product Team roles: someone monitors project progress and compares with planning. Coordinate efforts, team leader Functional roles : development engineer, packaging, marketing Balance of functional & team roles. Effectiveness if roles are balanced Division of roles depending on personal traits Roles & responsibilities, areas of contribution(technical or professional) and responsibility Trust & openness Post activity feedback from team members Discover hidden talents and experiences of team members Bonding, Sharing Process-focused teams: Final output is important, so is the process to achieve that output Means are as important as end. What is the best process suiting the skill level of team members? Best process: predictable (tested and tried, no surprises), dependable (no mistakes) Managers as facilitators : Traditional : plan, direct, control New : leader, coach, team-builder, facilitator Facilitation: enabling groups and individuals to succeed. By designing and managing structures and processes that help individuals and groups do their work. Best possible actions to take to improve teams results. First Go slow to go fast. Group intelligence prevails. Group can outthink the individual.

Competency based reward systems: Money Intrinsic rewards: feel good factors: fun, growth, teamwork, challenges, accomplishments People are not workers but associates, members of teams Performance measurement: Appraisals : Goals at the start of the year, at the end Honest feedback Appraisal ratings should be used to make compensations, promotions, termination, and other decisions Own appraisal Recognition: great motivational tool: how do we change human behavior? How to make a person come in time, not missing deadlines. What People do depends on what happens to them as a result. If a person does something and the result is positive, rewarding, pleasant, the person will keep on doing that thing. Will stop if consequences are negative, punishing, distasteful. If no consequences, behavior will be abandoned. Methods of recognition: Thank people personally Use team members names in performance reports Formal recognition Thank in public meetings Discuss individual & team performance Issue certificates or tokens(buttons, pens)

Define : a. Lean Production, b. Group Technology, c. Cellular Layout, d. elimination of waste Lean Production : Integrated activities designed to achieve high-volume, high-quality production using minimal inventories, work-in-progress, and finished goods. Parts arrive at work stations just in time. Nothing is produced until it is needed. It is also a pull system. Lean system attacks waste, exposes problems and bottlenecks, achieves streamlined production. Group technology: GT is a philosophy in which similar parts are grouped together into families of parts and the processes required to make the parts are arranged in a specialized work cell. The group technology cells eliminate movement and queue(waiting time) between operations, reduce

inventory, and reduce number of employees requires. Workers therefore must be multiskilled, capable of operating several machines and processes. Cellular layout : Cellular layout allocates different(dissimilar) machines into cells to work on products that have similar shapes and processing requirements. Such layouts are used in metal fabrication, computer chip manufacturing. The overall objective is to gain the benefits of product layout in job-shop kinds of production. These benefits include: 1. Better human relations: small work teams 2. Improved operator expertise. 3. Less in process inventory and material handling. 4. Faster production setup. Waste elimination: Waste : anything other than minimum amount of equipment, materials, parts and workers ( working time) which are absolutely essential to production. Seven prominent types of wastes to be eliminated: 1. Waste from over production 2. Waste of waiting time 3. Transportation waste 4. Inventory waste 5. Processing waste 6. Waste of motion 7. Waste from product defects The seven elements that address elimination of waste are: 1. Focused factory networks 2. Group technology 3. Quality at source 4. JIT production 5. Uniform plant loading 6. Kanban production control system 7. Minimized set up times

Costing & Valuation P09/MU2402/EE/20091115 Q1. What is traditional production cost system? How does it differ from target cost system? Traditional costing : material + Labour + OH Q2. What do you understand by cost reduction? How does it differ from cost saving? Q3. What do you understand by ABC analysis? How is it relevant to process improvement? Q4. Product & process costing together represent a complete picture to a manager about cost effectiveness. Discuss. Q5. Correlate cost reduction and performance improvement in the context of service organizations. Q6. Direct & fixed costs need to be managed differently. Discuss. Q7. What are the various approaches of costing? Make a comparative analysis of all by taking any specific industry of your choice. Q7. What are the traps to avoid in product costing? Q8. From which level of management must the cost targets be driven and why? Q9. What are the two methods of product costing? -----------------------------------------------------------------------------------------------

Types & Methods of Costing: Costing & pricing. Enterprise Valuation: what is the current financial standing of the organization? Cost to produce, sell, distribute, service, retain customers. Capture all costs by using ERP & updating data bases. Pricing challenge: product options, variations, configurations. Hard to compare prices. Calculating Unit product cost: complex accounting systems to keep track of different costs. Direct costs : RM, Labour, variable OH: relatively straight forward Fixed manufacturing OH: are difficult to apportion. Variety of products Excess (idle) capacity Inefficiencies Excess production Is Costing or watching over various overheads, a one time activity or quarterly or monthly or weekly or daily? Financial reporting is on yearly basis. Traditional approach : cost plus pricing. Not suitable for todays liberalized environment. Price = material + labour + OH + Profit

Target costing: a cost management tool Purpose : to reduce overall cost of product in its entire life cycle With help of production, engineering, research & design Used by Japanese since 1970. Now becoming acceptable in US. Target cost: Max amount of cost that can be incurred on a product and with it the firm can still earn the required profit margins from the product. It is that estimated cost which enables the firm to remain and compete in the market in the long run. Who is responsible for target costing: top mgmt, COO, cross functional team: production mgmt, sales, dev, purchasing, finance. Product costing: Tracking and studying all expenses : production, sales: RM, transportation, Accuracy critically important. Two methods of product costing: Variable costing: fixed manufacturing oh is excluded from inventory cost, expensed immediately in the period incurred. Absorption costing: fixed manufacturing oh is included in inventory cost. Used for external reporting. Process costing: Costs are accumulated according to each department, cost center, or process. There may be more than one processes and cost centers in one department. So better to go by cost centers. Activity-based costing: A management practice that looks at how an entitys activities use resources and relate that use to output. A cost accounting method that allows organizations to determine actual costs associated with each product and service without regards to organization structure. Breaks down organizational processes into discrete activities Measures each activitys cost and performance effectiveness. Activities are assigned costs based on resource use. Costs are then tied to cost objects, such as products or customers. Any costs that can not be traced to activity or output is then assigned on the basis of experience or cause and effect basis. ABC is a journey rather than final result. Cost pools. Goal of ABC : set up activity based target costs which every one can see. Transparency. Steps : 1. Develop a cross-functional team to do analysis within the organization. Assign ownership. It can be outside group, however ownership should remain internal. In the org. who is the owner? Finance? 2. Identify processes

3. Prepare a detailed activity analysis for each internal process. Steps taken, who does what, with what resources. Breakdown activities to very basic level. Study activity in real time or historical. Discuss with people on the job or off the job. Other functions. 4. Estimate costs for each activity, variable and fixed. Support functions: HR, Admin., R & D. 5. Select method to be used to transfer the costs to the object we wish to cost. 6. Develop final cost estimates for the system.

Traditional costing: total overhead | | - - - > labour hr allocation to the product | | End product costing Activity based costing: Total overhead | |- - - - - > pooled, based on activities | | Cost Pools | |- - - - - - > cost driver allocation | end product costing Overhead allocation by an activity approach Basic data Activity Machine set ups Quality inspections Production orders Machine-Hrs worked Material receipts Number of units produced Total Traceable costs 2,30,000 1,60,000 81,000 3,14,000 90,000 Total events Of Transactions 5,000 8,000 600 40,000 750 25,000 8,75,000 Rate per event Rs. 46/setup Rs.20/insp. Rs. 135/order Rs. 7.85/hr Rs. 120/Receipt Product A 3000 5000 200 12,000 150 5,000 Product B 2,000 3,000 400 28,000 600 20,000

Overhead cost per unit of product Activity Machine set ups @ Rs.46/setup Quality Insp. @ Rs.20/Insp. Product Orders @ Rs. 135/order Machine-Hrs Worked @Rs. 7.85/Hr Material Receipts @ Rs. 120/Receipt Total OH cost assigned No. of units Produced OH cost per Unit events 3,000 5,000 200 12,000 Product A amount 1,38,000 1,00,000 27,000 94,200 events 2,000 3,000 400 28,000 Product B amount 92,000 60,000 54,000 2,19,800

150

18,000 3,77,200 5,000 Rs. 75.44

600

72,000 4,97,800 20,000 Rs. 24.89

Cost reduction and performance Improvement:

Cost reduction: real and permanent reduction Planned program of cost reduction Without impairing suitability for use. Maintaining quality, specifications Reduction in expenditure, waste, non essential activities cost reduction by improving productivity, methods, and techniques cost reduction by managerial decisions : basic design, subcontracting day-to-day control identify improvement opportunities systematic approach develop effective performance measuring systems Cost saving : not due to deliberate efforts, unplanned Market price fluctuations Change in tax rates Cost control: Monitoring all cost factors, comparing with targets, reporting system Pricing: Effective pricing based on value of the product. Pricing challenge: product options, variations, configurations. Hard to compare prices Companies who price correctly have :

Insights into what the customer value. Understand total cost to serve. Insight into specifics of their product portfolio. Have organizational energy to sustain pricing power. Value and thus your pricing may differ from customer to customer, region to region.

Strategic Linkages : Environment Alliances, partnerships, mergers, and acquisitions Vertical integration vs. outsourcing Bridging marketing and operations divide Multi company planning Manufacturing planning Effective product decisions Smoothing demand turbulence Strategic linkages : internal & external linkages that are critically important for enhancing an organizations alignment(adjustment, adaptation) with its environment for sustainable competitive advantage. Three phases : Understanding broad, relevant environment by scanning. Org. must continuously scan & analyze their environment. Mapping(e.g. listing) of potential partners in terms of interest, concerns, conceivable contribution to its alignment.(suppliers, customers, law makers, financial institutions) Development of short- and long-term strategic linkages enhancing organizations capabilities to compete and adapt. Two types of environment: distant, close Distant : elements that organization can not influence, but organization is influenced by them. E.g. fiscal policies of USA. Close : that influence organizations performance and can also be influenced by managers at the same time. Competitors in the same industry. Local govt. Principles of Competitive Strategy. Managers must have a deep understanding of a companys situation - its external environment and internal environment. Then only they can craft companys business/manufacturing strategy. This understanding requires thinking strategically about two facets of companys situation: 1. The industry and competitive environment in which company operates, forces acting to reshape this environment. 2. Companys own market position and competitivenessits resources and capabilities, its strengths and weaknesses vis--vis rivals, and its windows of opportunity. SWOT The strategically relevant components of a companys external environment:

1. Macro environment: Gen economic conditions Legislation & regulations Technology Population demographics Societal values and lifestyles 2. Immediate industry and competitive environment: Five Competitive forces. a. Rival sellers, advertisements, promotions, aggression b. New entrants: resources of new entrants, entry barriers c. Substitute products: sugar/artificial sweetners, eyeglasses/contact lenses, newspapers/ TV, movie theatres/movie channels/DVD players substitutes of same quality? Easily available? Cost? d. Supplier bargaining power, supplierseller collaboration Microsoft, Intel, Indal, Dell computer collaborates with Intel e. Buyer bargaining power, seller-buyer collaboration. Govt a big buyer, DGC rate contracts, Reliance Fresh, Wal-Mart Alliances, Partnerships, mergers, and acquisitions: Demanding competitive race: global race to build presence all over the world, build resource strength and business capability to compete successfully. Resource gap, technology gap. What to do? Strategic alliances or collaborative partnerships : in which companies join forces to achieve mutually beneficial strategic outcomes. Go beyond company to company dealings. No possible change in ownership. Strategic partnerships: alliances, mergers, acquisitions, outsourcing/vertical integration. Oracle : 1500 alliances IBM, Microsoft : 200 alliances Samsung : 34 major strategic alliances Large corporations : 30 to 50 alliances MIT ties up with Harvard to introduce new teaching techniques and go ahead of other institutes. Examples: HP taking over Compaq, Tata taking over Corus, Mittal taking over Arcelor, Microsoft buying Hotmail, Intel tying up with PC manufacturers, programmers, economic blocks outsourcing Objectives of partnerships: 1. To increase competitive advantage in domestic & international market. 2. To help defend against competitive challenge. 3. To achieve some strategic goals e.g. to increase market shares, to increase profits. 4. To help bypass the costly and slower process of building capacity internally. Competitor develops products faster, achieve better quality at lower cost, has more resources. How to catch up with such a competitor? Find Strategic partner.

Reasons for forming alliances : 1. Collaborate on new technologies: Samsung-Google(Android) 2. Develop new products: Airbus Industries 3. Strengthening mfg. weakness 4. Improve supply chain efficiency(Tata-Fiat) 5. Gain eco of scale 6. Acquire or improve market access(Tata-Fiat) 7. Access valuable skills & competencies Alliances with whom? Alliance partners? Various, depending on objectives. All types of alliances. With other manufacturer of different products, with manufacturers of same products i.e. competitors; suppliers, dealers. 1. Alliances with distributors, suppliers : to gain efficiencies in supply chain management. E.g. Philips & its exclusive distributors Utilize dealer network for economizing on distribution costs, improve access to customers. E.g. Tata & Fiat 2. Alliance between domestic & foreign co. to enter/penetrate foreign market. Maruti & Suzuki, All BPO are collaborative, to enter Chinese markets, foreign companies tie up with local ones. Local co helps with govt. regulations Knowledge of local market, guidance on customer preferences, knowledge of unfamiliar markets and cultures Set up mfg. facilities Assist in distribution, marketing, promotion 3. Alliances with competitors : e.g. Dell & IBM for parts. 4. Alliances for cooperation: Intel with component suppliers and software developers. 5. Alliances (ganging up) against another alliances, e.g. wireless technology vendors against fiber optic, cable system vendors. Alliance success: Depends on how well partners work together. A successful alliance: Merck and J & J for Pepcid AC. Depends on how well goals are defined. Pratt & Whitney + GE against Rolls Royce. Alliance Risks : Frictions & conflicts todays partner, tomorrows competitor. Alliances are temporary. A company that wants to be industry leader must eventually develop its own capabilities. Mergers & Acquisitions : Merger : two equal sized companies join to form a new co. New ownerships. Chrysaler(American) & Daimler Benz(German) Acquisition: one co buying another. Owner ship ties are more permanent than alliances. Why merge or acquire when alliance possible? Deeper access to capabilities and resources. Advantages : Source of competitive advantage, strengthening cos i ndustry position. Fill resource gap, financial

Technology gaps(Cisco acquired 75 small, technology companies), Wider range of products: Pepsi acquired Quaker Oats, Coca Cola acquiring Thumbs Up (Parles soft drinks business) Wider geographical coverage(Infosys acquired small software companies abroad) More R & D Increased capacity Cost savings Build market presence in other countries, globalization : Daimler Benz with Chrysler While mergers & acquisitions are common with foreign companies, Indian company to Indian company mergers & acquisitions are not so common. Reason? Indian companies do not possess original technology. Also labour problems. Saraswat bank taking over Kolhapur cooperative bank or Karad Bank, more so these were sick banks and were available cheap. Problems : Skills needed to manage new entity Resistance from employees Conflicts in Management styles and cultures Sometimes judgments go wrong and expected benefits dont materialize. Ford JLR Airtels acquisition of MTL (South Africa) is in trouble. So is Tatas acquisition of JLR & Corus. Mittals acquisition of Arcelor is not producing enough profits. Vertical Integration: Defn. : Expanding companys value chain of activities. Extends companys competitive scope with in the same basic industry. Firms ownership of vertically related activities. Better control, coordination, Less vulnerability against suppliers Lower costs because suppliers profit not included Critical components in house Types of VI: Forward, upwards : distribution, retailing Backward, downwards : manufacturing what was earlier bought. Backward Integration: cost & differentiation advantages, profit margin of supplier is not applicable. Forward integration : Exclusive sales channel, better control. Better service. Closer to customer. Independent dealers may not promote companys products as they have no loyalty to the company. Example: company owned petrol pumps. Big companies want to be in retail business. Disadvantages of Vertical Integration: Increases capital investments, increases business risks May not get economies of scale in all segments, or balancing capacities e.g. in TV production & PCB production, speaker production. Different types of managerial skills : In a TV unit : TV assembly, part manufacturing. In case of forward integration : manufacturing, distributing, and retailing require different skills.

Outsourcing Search for cost reduction, fill capacity gaps, fill capability gaps. Broaden product range, Focus on core strengths in marketing, distribution, brand building. Core competences Flexibility against change in customer needs, technology, and industry conditions. Examples : Philips to Penguin, LG to Jabil, Onida to for black & white TV What to outsource? An activity can be performed better An activity can be performed cheaply Activity not crucial Activity requiring too much manpower. When to outsource: Product type Company has Capability No Capacity No Modular Risky Product type Integral very risky Toyota El systems Yes No Good Idea Toyota Tr. Systems, Philips radios Risky IBM PC Possibility Possibility

No

Yes

bad idea

Yes

Yes

bad idea Toyota engines

Modular Product : made of interchangeable & independent parts. Interface between components are standardized. Bicycles, PC, transmission components Integral Products :made of tightly related components, customized for the product. Medical equipment, machine tools, airplanes, cars, engines, electronic systems. Outsource routine activities Disadvantages : increased dependence on others, exposure of companys resources to outsiders. Vertically related activities. Successive stages. Car manufacturing, oil companies. Buliders. Different stages in production.

How many stages are with the company? Companys ownership of vertically related activities. Degree of vertical integration: degree of ownership & control. Vertical integration : ratio of firms value addition to its sales revenue. Direction of vertical integration: forward, backward Vertical integration vs. outsourcing: Coordination Strategic control Intellectual property Investment Effective product decisions: Products & services create an image of the firm. Customers feelings, perceptions. Benefits products give to customer. Firms must communicate benefits. Good value for money Economy of use Good design Availability Ease of use Novelty, innovation Safety Multicompany Planning: Advanced Planning Systems Extending planning beyond immediate enterprise. Supplier planning, demand planning QRM/TBC: quick response manufacturing/time based competition TBC Strategy used by Japanese in 1980s. Use of speed to gain competitive advantage : delivery faster than competitor Reduction of lead time in all stages: design, engineering, process planning, procurement, assembly Need to forecast Expanded variety FMS Innovation External : responding to customers needs by rapidly designing, ma nufacturing Internal: as above

Vendor managed Inventory: Lower cost implementation of purchase control Supplier continuously monitors inventory levels and replenishes as per agreed, authorized policies Summary purchase order, a single invoice at the end of the month Ownership of inventory: VMI company owned or supplier owned, line on production floor Steps : Capture data Guide decisions on products

Replenish as needed Eliminate obsolescence Choose right VMI partner

ECR: efficient customer response Integrated supply chain management system, Originated in US 1993 A managerial approach, customer driven Aim to improve customer service & efficiency Distributors and suppliers working closely to to bring better value to customer. focus on efficiency of total system: reduces total costs, inventories Pull system A seamless interface from consumer purchase to manufacturing schedules Four strategies:

1. Efficient stores management: how many items to carry on one category, what other specific details, how much space to allocate 2. Efficient replenishment: shorten order cycle, costs, continuous replenishment programs 3. Efficient promotion(avoid inflation of inventories, good promotion should affect customer purchase decisions) 4. Efficient new product intro:

Demand forecasting: Forecast, inventory management, revenue management A continuous process Web based tracking of real time supply chain variables(adaptive logistics management)e.g. product movements, inventories, service levels, revenue streams, Reduce forecasting errors Demand turbulence : bullwhip effect : can be avoided if customer demand is immediately transferred to suppliers, sharing of information(sales, capacity, inventory) continuously. even with customers. Electronic ordering systems. Every day low pricing: (EDLP): prices consistent over time, somewhat higher than their HiLo competitors(Wal-Mart) Review questions:

1. What are the three major interrelated elements of demand forecasting ? 2. Four major ECR strategies? 3. Perceived benefits in a product on which various product related issues are based.: good value for money, ease of use, novelty, availability, good design, safety, economy of use

How should managers handle demand turbulence in order to optimize inventory? Why is there so much concern over quick responsiveness at each level and process? Does it give competitive advantage? How? Case study 1 : Marriage between marketing and operations : Amazon Story Remember the last time you ordered a book from Amazon.com? You might recall that Amazon.com offers a variety of different shipping promises, such as usually ships in 24 hrs, ships in three to five days, or special order. The reason? The economics of inventory. Although Amazon offers some 4.5 million titles, it cant afford to keep all these books in inventory. Amazon holds the most popular titles in its own distribution center and typically can ship those books in 24 hrs. A second tier of books is stocked by book wholesalers. Some wholesalers can fill an order in 24 to 48 hrs, enabling Amazon to meet its promise of ships in two to three days. Other wholesalers may take a few more days, so Amazon promises three to five days. At some life cycle of the book, wholesalers stop carrying inventory and only the publisher can fulfill an order-usually from inventory, but sometimes through a new print run. The longer lead-time from the publisher forces Amazon to extend its promise to one to two weeks. So a simple differentiated service policy-in this case based on lead time allows Amazon to address the inherent conflict between marketing and operations. Marketing wants to offer the broadest possible array of titles to reinforce Amazons positioning as having Earths Biggest Selection and to deliver these titles instantaneous to reinforce the convenience of on line shopping. Operations on the other hand cannot support such a proposition at least not cost effectively. So, by examining the economics of inventory and understanding the value of lead time to customers, Amazon sets shipment lead times to define appropriate compromises between marketing and operations. Q1. Discuss Amazons distribution mechanism Q2. How Amazon manages its business to be the best in services and cost effective? Case Study 2: Kodak Kodak faced a competitive challenge when Fuji announced a new 35 mm single use camera. Kodak had no competitive offering and its traditional product design process would have taken seventy weeks to produce a rival to Fujis camera. Kodak wanted to re engineer its product development process. Kodaks old product development process was partly sequential and partly parallel but entirely slow. Designing the camera was conducted in parallel where all parts were designed simultaneously and integrated at the end. This system engenders problem because some of the engineers made change in the design for improvement, but were not communicated to other groups. The design of the manufacturing tools was tacked sequentially, but had long wait time in between two steps. At Kodak the manufacturing engineer did not even begin their work until twenty-eight weeks after the product designers had started.

What according to you is the main cause of long product development time in the above case? Kodak wants to re engineer their product development process. Suggest appropriate solution. Q1(P09/MU2402/EE/201005) Discuss in brief the evolution in manufacturing performance. Replacement of human & animal power with machines Industrial Revolution. 1. 2. 3. 4. 5. 6. Activities at home transferred to factories. Division of labour Interchangeable parts Scientific management Quantitative techniques, OR Manufacturing performance declined from 1950 to 1975, and steadily increased from 1975 to 2000. 7. World War 2 ended in 1945. World economies took time to recover. 8. Importance of human elements: Job design based on behavioral models. Five principles of job design: task identity, task variety, task autonomy, feedback, skill variety. Physical factors : calorie requirements. Ergonomics. 9. Quality revolution. TQM, six sigma, QFD, Demings, Juran 10. Earlier way production systems : craft job shop, project, customized products and services. 11. Internet: opportunity to work faster and better 12. In 1970 : Japanese initiatives in quality : JIT, Kanban, cellular layout, QFD, TPM, Inventory management, target costing, employee involvement, visual management, quality circle, 13. In 1990 : American efforts: DFM, Malcom Baldridge Award, benchmarking, reengineering, supplier managed inventory, employee ownership/gain sharing, activity based costing, Broadband pay system, peer appraisal, alignment of internal and external processes in the management of supply chain. 14. Globalization 15. Use of IT Q2(P09/MU2402/EE/20091115 How was labour productivity achieved in past? What are the factors responsible for todays productivity trends. Labour productivity = output / labour input 1. Specialization of tasks : division of labour (Adam Smith) 2. In 1850 : Scientific Management : Frederic Taylor : reducing a complex job into a series of simple tasks. 3. Substitution of manual labour with water or steam power. 4. Larger and more accurate machines.

5. Better engineering materials : harder & stronger : steel for wrought iron, high speed steel, synthetic carbides for cutting and grinding 6. Moving assembly lines, mechanical integration 7. Increasing capital investments in machines, automation

Manufacturing Outputs & Production systems Competitive advantage : superior values to customer. How manufacturing creates value? Four types of value: form, time, place, and possession. Possession created by sales. Others by mfg. called mfg outputs. Mfg. networks : includes distribution centers, mfg. facilities, offices, R & D Labs, etc. Mfg facility consists of one or more macro factories : Godrej washing machine and Fridge mfg facility: each Macro factory consists of focused factories : Moulding plant, machining plant, assembly plant: all in one mfg. complex. Each macro factory has a number of micro or focused factories. Focused factory: a well defined production system . Six Mfg. Outputs : cost, quality, performance, delivery, flexibility, innovativeness Table 5.1 Output Cost Definition Cost of material, overhead, and other resources used to produce a product. Low cost a better opportunity for profit. Difficult to estimate OH costs. Proper cost accounting system in factory. Extent to which products confirm to specs and customer expectations and how tight or difficult the specs and expectations are. Ex. : Car specs : measurable parameters: Power, Speed, Noise, Consumption. Tools & Technologies ( SQC, six sigma, standardization) provide quality Products features and the extent to which features permit the product to do things. Ex. Car features: Safety, Comfort, Aesthetics(looks)

Quality

Performance

Delivery time & Delivery time reliability Flexibility

Innovativeness

Provided by highly skilled workers, concurrent engineering, design complexity Time between order taking and delivery. How often orders are late? How late ? Extent to which existing products can be increased or decreased to respond quickly to meet customer needs. A mass production set up very efficient & economical but not flexible. Ability to quickly introduce new products or make changes in existing products. A job shop production not efficient & economical but can implement innovativeness. A tailor can be more innovative than a ready made garment factory.

Elements that quantify the Outputs : Table 5.2 Output Measures (of the output) Cost material cost, labour cost total manufacturing OH cost Inventory turnover : RM, WIP, FG Capital productivity Capacity utilization Materials yield Indirect costs : R & D, HR Quality Internal failure cost : scrap, rework External failure cost : filed failures, returns Quality of incoming material % defectives Warranty costs as a % of sales Reworks as a % of sales Number of standard features Advanced MTBF Assured delivery time % of on time deliveries Avg. lateness Cycle time, throughput time No. of products No. of versions, options Min. order size Avg. production lot size Machine versatility : no. of types parts processed Improvements per year: change orders No. of new products introduced per year Level of R & D investment Lead times to design and introduce new products.

Performance

Delivery

Flexibility

Innovativeness

Tradeoffs & Competitive Advantage: Factories can not provide all outputs at their highest levels. Standardization (low cost) Vs. Innovativeness Flexibility Vs. Productivity Cost Vs. performance Manufacturers therefore choose ton optimize one or two outputs. They select production systems which help them optimize these outputs. They choose to compete on one or two of these outputs. Competing on cost: Generic products, Standard items have similar features and prices. In that case manufacturer competes on cost. Cost then becomes most important output. Tata Motors : More car per car. Competing on quality : Mcdonald, Toyota Toyota slogan : There is quality, there is Toyota quality. Christion Doir : cosmetics : A name synonymous with quality. Ford : Quality is job one. Chitale Bandhu Vaishali Competing on performance: Honda Racing: Performance first. Honda Power Equipment : Honda engineering makes the difference. Mercedes : Engineered like no other car in the world. Philips : Lets make things better. Tide detergent : If its clean, it got to be tide. Amul : Taste of India Three kinds of product features: Dissatisfiers : customer expect some features Satisfiers : customers want some features Delighters : exceed customer needs and expectations.

Competing on delivery : Fedex. At one time Intel had this slogan : We deliver. Airlines. Competing on Innovativeness : HP : Invent Seiko : Innovation & Refinement 3M : Making innovation working for you. Sony Philips Apple Competing on flexibility : range of products, customizations. Design your own house.

Competing on several outputs. Manufacturing capability: Production systems with high levels of manufacturing capability: provide high levels of manufacturing outputs Make changes quickly and easily

A progressive company may go through these stages of manufacturing capability: A measure of overall level of manufacturing capability: Increasing level of manufacturing capability ----- Infant 1.0 Production system barely contributes to companys success. When company is newly formed focus is on product design and marketing When company is small it is not able to invest initially in production infrastructure When company is Poorly managed Mfg. low tech, unskilled Avg. 2.0 Production system keeps up with competitors and maintains status quo. Follows industry wide practices. Similar process technologies. New technologies adapted only when most companies in the industry use them. Avg. levels are adequate when market is growing. When markets are saturated, extra efforts required. Manufacturing consists of Standard, routine activities. Review questions: 1. What are the four types of product values? Which values are created in production? 2. What are the six attributes ( also called outputs of production) of products, a factory must try to optimize? 3. Is it possible to optimize all these attributes simultaneously? If not, what is the tradeoff? 4. How to determine if a manufacturing is innovative? What are the measures of : Innovativeness? Adult 3.0 Production system provides market qualifying and order winning outputs at target levels. Focused factories. Management has Long term view. Marketing decisions are consistent with manufacturing strategy. They have resources. Provides more than one output at highest level. E.g. highest quality at lowest cost. Develop own technologies. High Investments Production system is an important source of competitive advantage. World Class 4.0 Production system tries to be best in industry in each activity in each production subsystem.

Flexibility? Delivery? Performance? Quality?

5. 6. 7. 8.

Why is WCM the need of todays highly competitive market? What were the major contributors of the US in its journey to manufacturing excellence? The quality revolution in Japan set the pace towards manufacturing excellence. Discuss. Why is sustainable improvement and growth more important for organization?
Customer Focused Principles

Total customer service: Purpose of business to serve customers. How customers perceive the service your business provides? Typical customer service measurements are transaction based. On time delivery Lead time Customer surveys: often structured to gather info based on criteria company believes is important than how actually customer experienced your service. End result: surveys results are defined on the service providers terms. Design your processes and systems around your customers Provide total customer service. Total customer service: every step in the process that involves the customer should have highest level of service. End-to-end thinking about every business process & delivery system that touches the customer. 1. Defining customer requirements 2. Selection & sourcing: how does the customer search for the product 3. Purchasing & ordering: 4. Producing & packaging 5. Shipping & delivering the product 6. Receiving the product (intact?) 7. Product use 8. Invoicing & payment: accuracy 9. Service 10. Warranty 11. Returns These systems must work in harmony. Test your customer service: Become a customer. Take an end to end journey through customer interaction system.

World Class Manufacturing Organizations are customer focused : 1. Customers are demanding : know about what is available, higher incomes, large number of sellers 2. World is becoming highly competitive: large no. of sellers, technology available to all 3. Earlier : product focus, product features & specs, lower cost 4. Now : q, lead times, efficiency 5. Two critical criteria : customer satisfaction, total value to customer 6. Not just responding to customer needs but anticipating 7. Process management: every business process has a immediate customer. Marketing department is customer of manufacturing department. Manufacturing department is customer of R & D. 8. Three steps to customer focus : Define customer value : market research, marketing info system, core competences Develop customer value: new product dev., pricing & value positioning, design of distribution channel, selection of alliances and partners Deliver customer value : logistics, sales function, after sales service, customer support CVM : identify values that can be delivered not only by products but also by processes & services. Engineer business capabilities to deliver ideal customer defined value at each customer interaction. Alignment between customers vision of ideal value delivery and capabilities of the business to deliver that value. 1. How to attract customers and attain growth. 2. Competition is forcing products to be equally advanced and prices the same. 3. Identify deliverable value: by products, processes, services. 4. Monitor & maintain alignment between customer values and business capabilities 5. Goal : to deliver optimal values to customer; improve capabilities, organization, infrastructure, value chain with customer defined values. 6. Methodical approach- long term approach-alignment of companys essential capabilities its processes, organization, infrastructure, value chain to meet current and future customers needs & benefits by companys products, services, processes, and relationships.. Mass customization. 7. Identify market : tightly define scope, focus on well defined markets. Customer service segmenting: what customer wants before purchasing, during, and after 8. Who are our customers?- distributor? End user? Dealer? All of them? Immediate & end users 9. What do they expect? Not only Market research, brainstorm, staff meeting, survey, but also open ended questions, in depth interviews. 10. How are you different than your competitor? 11. Schonbergers 16 principles ( 1990): assess on a scale of 1 to 5, high score : mature, customer focused. Teaming with customer Info from customer Improve quality rapidly

Manage change Lean with the few best Shorten time Match customer demand rate Training for new roles Variety in compensation Reduction in variation Market improvement Data owning by front liners Targeting root causes Performance measures alignment Capacity improvement Simple equipment

Customer Focused Principles : Eight broad categories :

Customer orientation Design

Operations Capacity Quality Information Marketing Human resources

Customer Orientation:
Defn. : Comprehensive, continuous establishing and analysis of customer expectations, internal & external realization into: Entrepreneurial performance Interactions intended to establish stable customer relations in the long term. Overcapacity: customers in short supply but products are many. Buyers market: Attn. on Customer preferences and not on products: Change to sense and respond to make and sell Attract & retain customers. Create Customer values and deliver. Superior value. Meet & exceed customer needs better than competition. Example : McDonalds global success due to: creating good food and delivery system suitable for fast food restaurants. High standards of QSCV Quality, Service, Cleanliness, Value. Same standards all over. Thus customer value depends on many factors apart from product itself. Customer satisfaction index(indices): Survey the customers Plot results w.r.t. time to reveal changes in satisfaction level. Method :

Identify what customers choice criteria : what customers think as important while evaluating competing products. Developing measuring scales to quantitatively assess satisfaction. Statements followed by strongly agree, strongly disagree types of response boxes. Question new customers on why they bought. Question customers on why they ceased buying (defectors). Try to retain such customers.

Questions : 1. Why are companies emphasizing the need for customer focus in their business plans on such a serious note? 2. In todays competitive business environment, customer satisfaction has gone far beyond its notion of satisfying them to actually delighting them. Discuss.

Product design :
Design : a series of activities by which info known and recorded about a designed object is added to, refined (i.e. made more detailed), modified, and made more certain. Process of design changes the state of info that exists about the designed object. During successful design, info about the product increases, and product becomes less abstract. Design is therefore a process that modifies info we have about an artifact or designed object. Manufacturing changes the physical form. Concurrent engineering. Design has to be a fast activity. Design for customer Three fundamental elements of design: aesthetics : aspects that impact human senses : colour, texture, smell, noise, form, taste. Strenuosity : load bearing functions : stress, displacement, current capacity, thermal endurance, wear Kinaesthetics : mechanisms of design : levers, gears, electrical circuits, hydraulics, that enable kinematic realization of the design.

Four Processes that affect design : Reduction Simulation Optimization Modularization Reduction : design is reduced in complexity but still achieves its purpose. Simulation : developing & operating a mathematical model to determine how it will function. There may be several models. Optimization : selected aspects : costs, thermal efficiency, material usage etc. Modularization : composition : composed of separately assembled units. Easily interchangeable parts(modules)

Design processes : several iterations : initial design (concept), detailed design, design analysis, prototype, testing, evaluation, small production, changes, release for production Design improvements for mass production Design automation : CAD, automated tolerance analysis, CAPP (computer aided process planning), CNC machining, inspection using coordinate measuring machine(CMM), robot assembly, auto insertion Islands of automation Concurrent engineering: integration of design and manufacturing, considerations in design. Maintenance. Less iterations, lower production costs. DFM: a philosophy and a mind set in which manufacturing input is used at the earliest in design stage. Aspect of design process in which the issues involved in manufacturing are considered explicitly. E.g. tooling cost or time, processing cost or control, assembly time and cost, human concerns in manufacturing like worker safety.

Product design : Generating a steady of new products to market extremely important to competitiveness Response to customer changing needs Ability to identify opportunities Have courage of conviction to invest in development a major challenge that impacts long term success of a company . an integrated effort involving all functional areas in the company Company strategy : to continuously design / develop new products Competitive requirement : for survival and growth, to keep competitors away

Product design and development can be due to other reasons too: 1. to introduce low cost products, or reduce cost of existing products 2. to introduce new features 3. to improve reliability 4. to introduce new technology : 5. To change aesthetics Examples : 1. After Apple introduced iPhone with touch screen, other companies also did the same. Constant innovations in Mobiles, computers, software field, 2. Tata Nano : to introduce a new class of cars 3. TV : picture tube, LCD, LED, Plasma 4. Radio : MW, SW, FM, with torch, 2 in 1, with CD player

Definitions : Design : translation of requirements into a form convenient for production or use Research : planned and deliberate efforts to discover new ideas Development : improvement in existing technique or system Innovation : generation of new ideas Prototype : model of a product or part of product, functional, used for demonstrating looks, features, functions. Not a production piece Requirements of a good design : 1. Function : should meet customer requirements 2. quality : Reliability : trouble free service over its life 3. Maintainability 4. Producibility 5. Simplification 6. standardization and variety reduction 7. Cost Stages in Product design 1. 2. 3. 4. 5. Conceptualization: features, draft specs, aesthetics (industrial design) Execution resulting in prototype Evaluation Repeat steps 2 & 3 if not acceptable Actual trials 1. 2. 3. 4. 5.

Product categories : Generic: market pull products Technology push products : new technology, market has to be established Platform products :built around established technologies Process intensive products : characteristics of products are highly constrained by process: product design can not be separated from process Customized products : New products are variations of existing configurations High risk products: technical or market uncertainties create high risks of failure Quick build products : rapid modeling and prototyping enables design-buildtest cycles Complex systems :system consists of several sub systems and components: Concurrent engineering : Different teams are assigned to develop different components: parallel developments by several specialists Sporting goods, furniture, tools iPod Mobiles, computers, printers Semiconductors, fast foods, chemicals, paper Motors, switches, batteries : new dimensions, materials Pharmaceuticals, space systems Software, TVs Airplanes, automobiles

General (generic)Product design process : PHASE Functional areas Marketing. . . . .. Define: Market opp., segments

Design. . . . . . . Product Platform & architecture Assess new tech Nologies: e.g. TV: LCD, Plasma?

Phase 0: Plng. Mission Statem ent Target Market Busines s goals, Assump tions, constrai nts Phase 1 Concept Dev. form, Functio n, feature s, specs, eco justifica tion Phase 2 System Level Design: Definin g sub system s& comp. Phase 3 Detail design

Manufacturing .. Identify Prodn. Constraints Set supply chain strategy

Other functions. .. Research : Available Techno. Finance: Provide Planning goals Gen. Mgmt. : Allocate project Resources

Identify : Customer needs Competitive products

Feasibility of product concepts Alternate concepts Dev. Ind. Design concepts Build & test experimental protos.

Mfg. costs Prodn. Feasibility

Finance: facilitate eco Analysis Legal:patent issues

Dev.Plans for variants Target sales price

Refine Ind. Design Define major sub Systems & interfaces

Identify Suppliers for Key comp. Make-buy? Target cost? Assy. scheme Process flow dia. Tooling, Quality start Procurement Of long lead components

Finance: Facilitate make Buy decisions Service : service issues

Dev. Marketing plan

Complete ind. Design, Finalize materials, Tolerances, drawings Issue documents

Phase 4 Testing & Refine ment Phase 5 Prodn. Ramp up

promotion

Test marketing

Test : reliability., life, performance obtain approvals implement design changes Evaluate early prodn.

Train workers Finalize : assy. quality

Sales : plan

Begin full prodn.

Designing for the customer : QFD (Toyota) : interfunctional teams Value analysis/Value engineering DFMS : designing products for manufacturing & assembly Measuring product development performance : time , quality, productivity Speed and frequency of bringing new products Quality of products Productivity : resources used

Capacity :
A set of resources used to create value for the customer, cost of capacity lower than what customer pays. Without capacity not possible to create value. Set of human resources and equipment company can use to produce goods or services to sell. Capacity of a worker, machine, work center, plant, or organization : Amount of work that can be done in a specified time period, to produce output per period of time. Capacity is the rate of doing work, not the qty of work done. Capacity is the rate at which work is withdrawn from the system. Capacity : in terms of labour hours, machine hours, material handling, or of any manufacturing resource. CRP : capacity requirement planning: mostly calculates for labour and machines. Capacity Management: Manufacturing resources : Direct manufacturing labour Machines Tools, Fixtures Material handling equipment Warehouse space Quality measurement systems Indirect labour CRP : capacity requirement planning: computerized systems mostly include direct labour, machine hours. However capable of including and analyzing all resources. Capacity management: concerned with supplying necessary resources. Responsible for Determining capacity needed to achieve priority plans

Providing, monitoring, and controlling that capacity so that priority plans can be met. Planning & controlling Capacity decisions affect : Product lead times Customer responsiveness Operating costs Ability to compete Growth Inadequate capacity: Loose customers Limit growth Excess capacity: Drain resources Prevent investments in more lucrative ventures Critical decision: when to increase, when to decrease capacity., Capacity Planning: Process of Determining the resources required to meet the priority plan Methods needed to make that capacity available. Takes place at each level of planning: Production planning Materials requirement planning Master production schedule These priority plans can not be implemented unless the firm has sufficient capacity to fulfill demand. Capacity planning links various production priority plans schedules to manufacturing resources. Capacity to be adequate to meet demand. Time horizons : long range (> 1 year), applicable to buildings, heavy machines. Intermediate(upto 18 months) : alternatives to change : hiring, layoffs, new tools, minor equipment purchase, subcontracting Short range(< 1 month): daily or weekly schedules. Change : OT, personnel transfers, alternate production routings. Problems in planning capacity: Wild fluctuations in demand Inflexibilities of plant Variabilities of plant Demand chain amplification Differences between demand and actual orders Tactical over ordering Dimensions of manufacturing capacity:

Type: Standard or advanced Rigid or flexible Capital intensive or not Automated or manual Amount: Quantity of capacity : theoretical/nominal, actual(utilized)- can change from day to day. Expressed as machine hours in a day or week, a year Labour hours Cost : total economic value to acquire, run, maintain, or even later discard Why the difference between nominal & utilized capacity personnel scheduling Set up time Maintenance Lack of demand Capacity cannot be stored. Alternative, produce even if no demand. Inventory costs. Capacity policy : statement of commitment of investments. Max capacity. Master schedules based on max capacity. Guidelines re subcontracting, investments Subcontracting to increase capacity. WIP, FG inventories.

Operational excellence: operational efficiency Required for world class quality Enhanced productivity Better delivery of goods & service to customers At competitive prices Best value strategy best price & performance Focus on high quality, quick customer service, quick delivery improvement in supporting business process improvement. Standardization Automated processes Purchases Process innovations Success of mass production TQM Business process re engineering Lean supply chain Agile manufacturing Core competency Global perspective Learning economies Quick intro of new products High performance Value engineering

Quality: Quality initiatives Top management commitment Balancing both quality and quantity Six sigma Increased unit operations yield Reduced cost Improved productivity Information for control & operations: Strategic benefits: Systems integration, external & internal All can access data base Managers are able to identify, analyse, and manage new developments Assess risks and consequences Learning has become focus of manufacturing plants Information driven manufacturing : customer orders and market demands, no building of inventories Capacity drive manufacturing : production planning & control, first manufacture and then offer persuasively Marketing/Promotion Market analysis Macro forces: economic, political-legal, socio-cultural, technological 5 competitive forces Decide promotional mix: advertising, personal selling, sales promotion, PR, direct marketing, internet, on line Adv. & disadv. Of each strategy, changing strategy over time in response to customers Customers demand more involvement bottoms-up strategy: listen to them & let them co create the product. Customization Two distinct sets of activities on value chain: Product definition and market intelligence: marketing domain Product development, process & technology: manufacturing domain Products : dissatisfiers, satisfiers, delighters Demographic factors Maximizing customer satisfaction Human Resource: How best to deploy HR assets to create value for the customers. Great companies respect their employees. Invest in people. Update their skills. Develop leaders. Building a sustainable work community Empowered workers: giving more authority, decision making, skilled workers Theory X managers: workers work best when closely supervised.

Theory Y managers: employees can act independently to benefit organization and customers. Eliminate terms like supervisors and supervision. Team work.