CRICOS Provider 00115M Contact THANK YOU INNOVATIVE RESPONSIBLE ENGAGED MGT1FOM TOPIC 5 Managing Production ‘Fordism’ versus ‘ToyotaismLearning Objectives • At the conclusion of this topic, the student should be able to: – Describe the elements of a Fordist production system; – Explore the factors that have contributed to the demise of Fordism; – Identify the main features of a lean production system, and contrast this system with alternative forms of production; – Provide relevant examples of mass and lean production systems.Managing Production • Scientific Management contributed significantly to ideas about the best way to manage production from a ‘micro’ perspective (ie: from the point of view of what each individual worker contributes); • As technology improved and automation was introduced, a new set of challenges ensued; • These challenges were faced in the first instance by the automobile industry in the US.Mass production & the Automobile industry • Largest global industry • Developed in US, but now dominated by Japanese production methods • Major influence on contemporary management practices • 4 production regions: – North America – Japan – Europe – Low labour cost (varies): • Mexico, Brazil, Korea, IndonesiaCraft production: 1890s • ‘Hand-built’ cars to order; • Components made by subcontractors: – No standard gauging system; and – No tools to cut hardened steel. • Varied quality of components; • ‘Fitters’ fit each component by hand.Characteristics of craft production • Highly skilled, largely self-employed, workforce; • Built on decentralised organisation coordinated by owner/entrepreneur; • Use of general purpose metalworking tools; and • Low production volume, with no two cars exactly the same.Weaknesses of craft production • Production costs not reduced by volume (no economies of scale); • Consistency and reliability hard to achieve; • Quality problems because lack of systematic testing; and • Inability of small producers to achieve technological innovation.Mass production: 1914? • Machine tools able to work hardened steel; • No warping from hardening process; • Standardised parts; • Innovative design; and • Car components easier to assemble.Ford’s innovations • Assemblers specialised in a single task: – Average task cycle reduced from 514 to 2.4 minutes. • Moving assembly line (1913); • Less labour per automobile; and • Economies of scale: unit costs decline as volume increases.Craft versus mass production: 1913 vs 1914 Craft or mass Minutes of effort to assemble Late craft 1913 Mass 1914 % reduction in effort Engine 594 226 62 Magneto 20 5 75 Axle 150 26.5 83 Complete vehicle 750 93 88The Ford workforce • 7,000 workers; • More than 50 languages; • Single tasks for assemblers; • Only limited training needed (minutes); • Pace set by assembly line; and • ‘Standardised’ worker.Specialised work • Foremen; • Machine repairers; • Quality inspectors; • ‘Reworkers’ – craft workers who corrected flaws at the end of the line; and • Specialist engineers: – Industrial engineers (assembly operations); – Manufacturing engineers (production machinery); and – Product engineers (product design).Organisation • Ford initially an assembler (eg bought engines, chassis, and other parts); • By 1915, parts manufacture done by Ford; and • Vertical integration – included coal and iron mines, steel mills,glass factories, railway lines, ships etc.Tools • Specialised, single-purpose machinery; • Machines laid out in assembly sequence; • Mostly automated; • High capital expense; • Low skill; and • Low unit costs.Product • Initially one basic design; • Ease of repair – car repaired and maintained by user; • Growth in demand fed by falling prices; • Variable quality; and • Emphasis on speed and volume of production (yield).Mature mass production • US dominance peaked in 1955; • 3 large auto manufacturers accounted for 95% of US market; • 6 models accounted for 80% of sales; • Growing unionism, entrenching seniority, job rights and work rules; and • Increased competition from Europe.The rise of lean production • Toyota moved into car production post-WW2; • Tiny domestic market, demand for wide range of vehicles; • Labour laws strengthened position of workers. No immigrant workers; • Import of Western production technology difficult (shortages of capital and foreign currency); and • ‘Lean production’ – craft production for mass markets.Example: stamped body parts • Bodies produced by welding together 300 parts; • Parts are stamped from large rolls of steel sheets then pressed (stamped) into shape; • Could produce >million units/year (high wastage rates); and • Presses dedicated to single part – required specialised skills to change.Toyota presses • Re-designed from second-hand American presses; • Quick to change – 3 minutes; • Easy to change – could be done by assemblers; • Fewer presses producing many parts in small lots; • Economies achieved by: – Low inventory; and – Less quality problems (problems show up earlier). • But required a more skilled and motivated workforce.Company as community • Major strike in 1946 established employment relations: – Lifetime employment; – Pay based on seniority; – Share of profits through bonuses; and – Workers flexible in work assignments. • Workforce becomes a fixed cost, therefore incentives for company to invest in skills.The production process • Workers organised into teams; • Team leader works as part of the team; • Teams responsible for a range of tasks (repairs, quality control, rework etc); • Teams spent time reviewing process improvements; and • Workers trained to trace errors systematically.The production process • Constantly improving: – Quality; and – Process efficiency. • Declining rework rates.The supply chain • US relations with suppliers based on bids for contracts; • Short term relationships; • Suppliers in competition; and • Limited information meant little opportunity for collaboration or quality improvement.The Toyota supply chain • Suppliers involved in new product development; • Contracts based on performance specifications, but left up to the supplier to develop; • Exchanges of personnel between Toyota and suppliers; • Exchanges of technology innovations; and • Toyota acquires equity in supply firms, and supply firms in each other.Just-in-time inventory management (Kanban) • Mass production based on large inventory stocks; • JIT: parts produced in a previous step only to supply immediate demand in next step; • Mechanism: containers carrying parts; • Used containers returning to previous step triggers production of new parts; and • No safety net.Product development and engineering • Project teams of experts, rather than specialised divisions; • Career paths rewarding strong team players; and • Emphasis on: – Responsiveness to consumer demand; and – Flexible production.Market responsiveness • Fragmentation of demand: – 2-car households; – New, sophisticated features; – Youth market; and – Increasingly specialised commercial demand. • Growing emphasis on reliability.Lean production and demand • High reliability; • High product variety (Toyota can produce twice the range with the same budget); and • Shorter product cycles.Conclusion • Mass production in the automobile industry replaced by lean production; • Emphasis on: – Flexible production techniques (rapid adjustment to new products); – Low or zero inventories; – Total quality management (TQM) – quality control throughout the whole process; – Teams of multi-skilled workers; and – View of employees as a capital investment rather than a variable labour cost.CRICOS Provider 00115M Contact THANK YOU THANK YOU INNOVATIVE RESPONSIBLE ENGAGED