changing scenario in manufacturing

s mitra* and a k chatterjee+

this paper traces the development of new approaches to manufacturing management such
as mrp/mrp ii, erp, jit and opt during the last two decades. the evolution of these
approaches has been discussed in the context of historical development in manufacturing
starting from early in this century. earlier approaches typically are “reductionist” in
nature, in that they assume that the problem of the entire system can be solved by solving
efficiently each of its sub-systems in isolation. but with time, these approaches failed to
meet the expectations, and gave way to the adoption of more recent “holistic”
approaches like erp, jit and opt, which offer solutions by taking an integrated view of the
system. having discussed the new techniques, an attempt has been made to outline the
future of manufacturing management, where it is argued that it could possibly evolve to a
hybrid system with the systems view of the recent approaches and the optimisation
capability of or techniques.

1. introduction

the last two decades have witnessed the evolution of new approaches to manufacturing
management, illustrated by the growing body of literature in this field. material
requirement planning (mrp), manufacturing resource planning (mrp ii), just in time (jit),
optimized production technology (opt), and enterprise resource planning (erp) are some
of the approaches the companies are adopting to achieve manufacturing excellence. a
survey of american industries done by newman and sridharan (1992) shows that out of
185 firms from different manufacturing industries ranging from machine tools,
automobile components, furniture, plastics, and medical equipment to computers and
defense electronics, 56% were using mrp systems, while 22% were using reorder point
(rop) systems. about 8% reported using jit, while 5% used opt systems. 9% of the firms
reported using their own in-house developed systems.

in india too, these techniques have been successfully implemented by various

organisations. jit has been implemented in tvs suzuki, crompton greaves, maruti udyog,
eicher goodearth limited, godrej and boyce manufacturing company, hero honda, siemens
limited, sundaram clayton, tisco and many other companies (padukone and subba rao,
1993). sundaram fasteners limited and sundaram brake linings, two tvs group companies,
have implemented jit, and are moving toward lean manufacturing systems with supply
chain integration, cellular manufacturing and kaizen, or continuous improvement.
sundaram fasteners limited has introduced total productive maintenance (tpm) in 1995,
and it is the first indian company to get iso 9000 (suresh, 1998 and sridharan, 1998).
more recently, companies are going for erp solutions. companies like hindustan lever,
* fellow student, operations management, iim calcutta
+ professor, operations management, iim calcutta

1
telco, arvind mills, mahindra and mahindra, ranbaxy laboratories, and larsen and toubro,
among others, have opted for erp.

the objective of this paper is to put these approaches into perspective by examining them
in the context of the historical developments in manufacturing management starting from
the beginning of this century to date. an overview of manufacturing problem solving is
first presented in section 2. this is followed by a presentation on the new approaches in
section 3. in section 4, the new approaches are examined and an attempt to identify the
future scenario in manufacturing is made. the concluding remarks are presented in section
5.

2. history of manufacturing

manufacturing, by definition, involves transforming inputs into a desired set of outputs.

various types of problems ranging from forecasting of demand to planning for production
and distribution arise while managing the inputs, outputs, and the transformation process.
different approaches to manufacturing management have evolved over time to find
solutions to such problems. the manufacturing scenario during this century has also been
marked by increased degree of automation in the shop floor. transition from manual
operations to transfer machines to numerical control (nc) to flexible manufacturing
systems (fms), and finally to computer integrated manufacturing (cim) depicts the
evolution of the automation process.

f. w. taylor’s contribution, manifested by the scientific management movement at the

beginning of this century, provides a landmark in the history of manufacturing problem
solving. manufacturing environment at that time was mainly labour intensive. taking time
as a measure of efficiency, taylor contributed to the development of the concept of
“standard time”, which laid the foundation of planning in the context of manufacturing.
“work study”, as it was popularised later, thus consisted of measuring, and also
simplifying tasks by critical examinations of the same. taylor’s scientific management
had a wider perspective, where the basic objective could be summarized in terms of
determining the most efficient way of doing any task. the variation of the efficiency
objective in terms of time, cost and productivity soon percolated to different areas in
manufacturing. this was manifested in terms of development of different inventory
management and quality control models during 1910-1940.

a departure from the efficiency objective was, however, noted during 1927, with elton
mayo coming out with human relations approach focussing on the role of workers in
increasing productivity. the theory of socio-technical system, propounded by miller and
rice (1967) reinforced this further by advocating the dovetailing of task needs with social
needs of the workers.

during 1935-40 operations research (or) came into existence for solving military
problems. or, as a mathematical modelling approach, soon found its application in
manufacturing problem solving. methodologies available before or had their foundation
in mathematics and probability theory that were fairly developed at the beginning of this

2
century. however, the applications were limited to relatively simple systems. for example,
economic order quantity (eoq) model for purchasing decisions, statistical quality control
(sqc) model for quality inspections were solved using calculus and sampling theory
respectively. production planning and distribution problems, on the other hand, were ill
solved, and or, by 1950, provided the requisite methodology for formulating and solving
these complex problems. with commercialization of computers during 1951, it was
possible to exploit or methodologies to a greater extent. this also made possible solutions
of large scale manufacturing problems.

thus, from the beginning of this century till about 1960, manufacturing management was
dominated by piece-meal applications of work study, or, and related techniques catering
to the problems of different subsystems. the environment, on the other hand, changed
from labour intensive to fixed automation (eg. transfer lines) to programmable
automation (eg. nc). the fixed and programmable automations were characterized by high
volume and low to medium volume production respectively, and accordingly were
associated with mass production and batch production systems.
in the late 1960s, several ideas began to surface to improve manufacturing. the
marketplace was also undergoing changes both in terms of increasing demand of variety
products from the customers and increasing competition in the following decades. for
manufacturing this meant a shift from mass production system to batch and job shop
systems. by then, the advantages and economics of designing and planning for mass
production system vis-a-vis batch or job-shop production system had become quite
apparent. automation took the front seat with the objective of increasing efficiency by
cutting down the throughput time. application of group technology (gt) for manufacturing
systems with a variety of products having similar parts helped to exploit the benefits of
mass production in the context of batch production systems. single minute exchange of
dies (smed) made jit system a reality by cutting down the set-up time drastically (shingo,
1989). in the early 1970s, flexible automation (flexible manufacturing systems and
robotics) emerged to offer solutions for job shop. flexible automation helped in producing
variety products in small batches with virtually no time lost for changeovers (groover,
1989; asfahl, 1985). computer integrated manufacturing (cim) advocated systems
oriented approach where effort was directed towards achieving integration of the different
activities in an organisation through a common data base and flexible technology such as
cnc (computer numerical control) machines, automated material handling systems (rehg,
1994).
the first writing in manufacturing strategy also came up during this time (skinner, 1969).
other writings (hayes et al, 1978; wheelwright, 1978) followed and the need to spell out
clearly the manufacturing action plans, and integrating them with the overall business
strategy to gain competitive advantage were soon established. thus a shift from the piece-
meal approach to the holistic approach towards manufacturing problem solving was seen
during this time. this and the following decades were marked by the evolution of the new
approaches. material requirement planning (mrp) followed by manufacturing resource
planning (mrp ii) were developed during this period and offered as solutions to the
complex problem of production, material and resource planning. if or among the earlier
approaches was integrative, these were supposed to be more so. these approaches were

3
different from or in that no explicit mathematical programming was used. rather, an
integrated computerised framework or platform was provided which implicitly tied up the
different activities involved in planning through perhaps the simplest of equations
depicting the relationship among the variables of interest. application of or in specific
modules within the overall framework was not ruled out. augmentation of mrp ii
functionality incorporating all other functions such as finance, marketing, personnel etc.
led to the development of erp. the other major approaches that came up during these
decades were jit and opt. these approaches had the same basic objective, that of achieving
efficiency in manufacturing by integrating the same with the other activities of the
organisation. the means adopted and the focus however were different. jit as a philosophy
focussed on striving for excellence in all departments of manufacturing. excellence was
spelt out in terms of zero defects, zero inventory, zero setup time, zero downtime etc.
computerised system was not a necessity, rather the solutions or operationalising the
philosophy were rooted to a mix of technological development and behavioural science
principles. opt on the other hand was similar to mrp in that it was also a computerised
approach. focussing on bottleneck concept, advocating balancing of flow rather than
capacity, and having its root in a strong scheduling package, opt removed some of the
drawbacks in mrp and gained some of the advantages of jit.
the above presents an overview of the history of development in manufacturing during
this century. it should be clear from the above that the predominant approach for
manufacturing problem solving before 1960s has been marked by viewing the whole
system as a collection of several smaller subsystems. the implicit assumption was that the
problems of the entire system could be taken care of by solving the problems of the
different subsystems in isolation. the approaches evolving after 1960, on the other hand,
consisted in offering solutions through an integrated approach by looking at the entire
system rather than by looking at the parts. for a better understanding of this shift from the
“reductionist” to the “holistic” approaches, it is helpful to have a closer look at the new
approaches. these are presented in the following section under the three broad heads of
erp, jit and opt.
3. the new approaches
erp
mrp originated in the early 1960s in the us as a computerized approach for the planning
of materials acquisition and production scheduling. starting with the requirement of
different finished products over the planning horizon, the approach involved determining
the quantities of different components or raw materials to be manufactured or purchased
in different periods. the approach was essentially top down exhibiting a centralised,
hierarchical control structure (browne et al, 1989). mrp system was extended to mrp ii to
include rough cut capacity planning (rccp) and capacity requirement planning (crp) to
check for feasibility and to update the master production schedule (mps) until a workable
schedule is developed.
erp originated from mrp ii. however, unlike the latter that attempted to fit in the system to
the existing structure of the enterprise, erp generally advocated a re-look into the
company’s business processes, and could be applied both to manufacturing and service

4
organisations. erp was also meant to be more all-encompassing, in that besides taking into
account the company’s internal issues, it also considered factors external to the company
such as competition, time-to-market and so on.

erp embodied the planning process for efficient deployment of an enterprise’s resources –
man, machines, materials and money. with focus on customers, implying better quality
products and faster delivery, erp helped in real time control of operations with a greater
degree of accuracy. the erp software incorporated the best business practices in industry,
and tried to link the different elements of an enterprise so as to allow the organisation to
cope with the changing environment. today, many organisations are undergoing
transformation from function-oriented businesses to process-driven entities. erp enables
this both at the information systems level and at the applications level.

erp has a few problems. first of all, it is capital intensive. considerable investments for
implementation and training of erp software are required. secondly, the implementation
process is time-consuming. the gestation period varies from one year to one and half year,
and still at the end of the road it may not function properly. it has been seen that one-third
of the total erp installations worldwide fail to deliver because of poor planning, lack of
implementation details, lack of top management support and a host of other factors. since
it involves reengineering and transparency, top management support is required at every
step. also, dedication and commitment from all users at all levels in an organisation are
required for setting up and smooth operation of an erp system (kohli, 1998).
jit
jit system started in the early 1960s in the toyota automotive plants in japan. it attracted
the attention of the world in the early 1980s after the success of the japanese firms.
currently it is being used in a variety of industries like automotive, aerospace, machine
tools, computer and electronics. jit, like the other new approaches, attempts an integrated
solution to manufacturing problem solving (korgaonkar, 1992). however, unlike mrp, it is
a pull control system with the flow of materials synchronized to the end item usage rate.
advocating production based on the requirement, and striving for zero inventory, zero
defect, zero set-up time, etc. in the same breath, jit essentially implied advocating
“excellence” in all manufacturing activities. it was imperative that the philosophical
preaching be followed up to operationalise the objectives. methods (smed) to drastically
reduce set-up time helped in reducing batch size and hence inventory. installing limit
switches at relevant places on the machines so as to prevent defects rather than detect
defects helped in moving towards zero defects.
since jit originated in the automotive industries, one tends to associate its application with
mass production and repetitive manufacturing systems. however, today the jit philosophy
and jit manufacturing techniques, marked by integrating supplier into the system,
modular product design and cellular layout in the shop floor etc., are applicable to all
types of discrete parts manufacturing.
jit, too, has its failing. when it becomes difficult to accurately predict the demand and
restrict the product variety, implementation of jit solutions is almost impossible.

5
opt
opt, developed in the early 1980’s by goldratt and cox, took care of a number of
drawbacks in the mrp paradigm. as a philosophy, it focussed on the bottleneck
management, pointing out the importance of time saved in bottleneck. as a logical
extension, it advocated balancing flow and not capacity thereby gaining advantage
similar to jit. it may be noted while the fact that bottleneck governs the output rate was
known right from ford’s days, the traditional focus was on designing shop floor to
balance capacity and not flow. opt also posed a challenge to the traditional accounting
focus on efficiency and utilization measures, calling for not only a revision to accounting
practices, but also for a rethinking of the assumptions on which they were based.
by highlighting the difference between process and transfer batch, opt showed the way to
reduce the throughput time. lead time for production in opt was thus not taken a given
constant. instead, as it would normally be in practice, lead time was taken as dependent
on the schedule. this implied that opt provided an in-built scheduling module for the
purpose of implementation of the same. in fact, apart from being looked at as a
philosophy, opt can be taken as a tool equipped with a good scheduling package for
solving manufacturing planning problems.
opt has a few problems. it claims to generate an optimum schedule through its proprietary
algorithm. hence, there is no participating or learning approach; also it is very expensive.

4. future scenario in manufacturing

from the above discussion, it is apparent that manufacturing problem solving has
travelled a long way from the beginning of this century till date. during the course of this
journey, variety of tools and techniques have been offered as solutions. the major
difference between the techniques of yesterdays and the new solutions offered through
erp and the like today, lies in the effort of the latter for striving for an integrated business
solution rather than solving a manufacturing problem per se. in this section, the genesis of
the new approaches has been further examined to obtain an insight into the future of
manufacturing problem solving.
as noted earlier, techniques used in the early days of manufacturing problem solving were
typically based on industrial engineering, mathematics and probability theory. operations
research was developed along the same lines, in that it had its foundation in mathematics.
however, unlike the other approaches, integration was embedded in the modelling
methodology of or. as manufacturing became more and more complex, or modelling of
manufacturing problems turned out to be more and more difficult. multiple products
manufactured through multiple stages in production processes requiring different kinds of
resources with different types of interactions and sub-systems’ objectives led to large
monolithic mathematical programming models difficult to solve. simplified models, eye-
opener at times, were often of limited practical value. simulation as a part of or
methodology offered a trade-off in providing a “good” solution with more of real-life
incorporated, in terms of non-linearity and uncertainty. this perhaps called for a
rethinking, resulting in the development of holistic approaches, where the hopes were
pinned on the fact that in the face of growing complexity in manufacturing, these

6
approaches will, at the least, help preserve the overall perspective.
complexity in manufacturing mainly arose from the changing nature of demand from the
marketplace. demand for variety products, changing with time and often also marked by
uncertainty, posed a challenge altogether different from the earlier period, when much
lower variety was required. increased competition also implied that unlike taylor’s time,
mere cost minimisation objective is not enough. strategic priorities were redefined to
include not only cost but also quality, flexibility and delivery. gaining competitive
advantage implied taking competitor into account in the modelling. pursuing optimal
solution in a hierarchical fashion or piece-meal optimisation of sub-systems soon became
less important. instead, what was called for was technological breakthrough in all facets
of manufacturing, ranging from machines that will enable quick production of variety
products, ensuring quality, to automatic material handling, storage and retrieval systems
that will reduce the overall cycle time. on the software side, it was imperative to operate
with a single data base with all the sub-systems linked up through a computer. holistic
approaches such as erp, jit and opt thus followed as a natural sequel.

while a number of studies are reported on mrp and mrp ii, formal studies on erp are
limited, the same being the most recent development. jit, on the other hand, has been
under scrutiny as a part of the overall japanese manufacturing technique (schonberger,
1982) and has also been examined in various ways relative to mrp and mrp ii. opt in this
context, remains proprietary in nature with applications reported from uk and usa (koziol,
1988). though to start with, mrp and jit were typically meant for mass production system
and opt for job-shop system, today such barriers have given way, and the effort has been
to make erp, jit and opt universal.

as has already been noted, each of these approaches has advantages and disadvantages.
on the positive side, by and large all these approaches do successfully provide integrated
solution. erp, as it stands today, perhaps provides the most integrated approach. however,
it is confined to more of transaction reporting with most of the benefits accruing from its
solution being in terms of reduction in lead time by adoption of best practices. the process
of tapping the other major source of benefit, by applying optimisation for planning and
scheduling is yet to be reported on a large scale. the same refrain is found in the context
of mrp (baker, 1993) when it is pointed out that mrp is more of a management
information system rather than a decision-making system. opt supposedly scores better in
this respect by having the scheduling package at its heart. studies have reported the
similarity between the scheduling logic of opt in its early stage and jit system (goldratt,
1988). the potential drawbacks of jit are perhaps embedded in the same “simplified
lessons” in jit (schonberger, 1982) for which the approach has been found to be most
beneficial.

future manufacturing in this context would perhaps be a hybrid system with these
approaches complementing each other, to take advantage of strengths from each of them
(browne et al, 1989; giauque and sawaya, 1992). recently, money resource planning or
mrp iii, has been coined as an information integrating tool concerning both money and
material flows with focus on financial aspects rather than the traditional production
logistics aspects (gautam, 1996). buzacott (1995) while sharing his views on future

7
manufacturing felt that manufacturing systems would be either integrated or cooperative
in nature. for make-to-order or make-to-stock situations with known customer demand,
integrated manufacturing, based on computer and information technology, was felt to be
most appropriate. cooperative system, based on human interaction for problem solving,
appeared to be the solution for situations that are difficult and expensive to anticipate, as
in the case of innovations and new products introduction.

based on the above discussion and historical development traced earlier, it seems that
besides a hybrid or an integrated/cooperative system, the other distinct possibility of
future manufacturing could be an approach resulting from the combination of the
reductionist approaches of the past and the more recent holistic approaches. this would
perhaps be manifested in terms of a computer-integrated platform with erp or some
hybrid as the major driver linking different sub-systems with user interface and built-in
optimisation capabilities.

5. conclusion

in this paper, the gradual evolution of different production management paradigms was
discussed, and the main aspects of their differences were highlighted. it is observed that
the evolution took place to adapt to the changing environment. an attempt has been made
to outline the future of the manufacturing systems based on the changing customer
requirements. nowadays, manufacturing is faced with great challenges, particularly in
terms of variety of products, shorter product life cycles and faster delivery to the market.
in this situation, probably no one technique can exist in isolation. in fact, mrp/mrp ii, erp,
jit and opt are, perhaps, not competing with each other. taken together, they will help
understand the complexity of modern manufacturing systems, and form the base of future
manufacturing planning and control.

8
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problem for discussion : production planning

(source : applied mathematical programming by stephen p. bradley, arnoldo c. hax, thomas l.magnanti,
addison-wesley publishing company, 1977, pp 229-230.)

10
a tire manufacturing company has agreed to deliver the following during the next 3 months:
month nylon fiberglass

june 4000 1000

july 8000 5000
august 3000 5000

total 15000 11000

the company has two presses, a wheeling machine and a regal machine, and appropriate molds that can
be used to produce these tires, with the following production hours available in the upcoming months:

wheeling regal
machine machine

june 700 1500

july 300 400
august 1000 300

the production rates for each m/c & tire combination, in terms of hours per tire, are as follows:

wheeling regal
machine machine

nylon 0.15 0.16

fiberglass 0.12 0.14

the variable costs of producing tires are rs.5.00/ operating hour, regardless of which machine is being
used or which tire is being produced. there is also an inventory-carrying charge of rs.0.10 per tire per
month. material costs for the nylon and fiberglass tires are rs.3.10 and rs. 3.90 per tire, respectively.
finishing, packaging and shipping costs are rs.0.23 per tire. prices have been set at rs.7.00 per nylon tire
and rs.9.00 per fiberglass tire.

the manager is interested in determining the production plan that will meet the delivery requirements
and maximize the profit.

11