Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
CHAPTER 5:
Manufacturing
5-2
•
The quality imperative
•
Manufacturing perspective
•
Manufacturing strategy
•
Contemporary
manufacturing
developments
Overview of manufacturing
5-3
The 8 dimensions of product quality
•
Performance
–
How well the product performs in
comparison to how it was
designed to perform
•
Reliability
–
Likelihood that the product will
perform throughout its expected
life
•
Durability
–
The actual life expectancy of the
product
•
Conformance
–
Does the product meet its
specifications as designed
•
Features
–
What different functions or tasks
can the product perform
•
Aesthetics
–
Is the styling, color, workmanship
pleasing to the customer
•
Serviceability
–
What is the ease of fixing or
repairing the product if it fails
•
Perceived Quality
–
Based on customer’s experience
before, during and after they
purchase a product
5-4
•
Total quality management (TQM) is a
philosophy focused on meeting customer
expectations with respect to all needs,
across all company functions, and
recognizing all customers, both internal and
external
•
TQM’s basic conceptual elements are:
–
Top Management commitment and support
–
Maintaining a customer focus in product, service
and process performance
–
Integrated operations within and between
organizations
–
A commitment to continuous improvement
Total quality management
5-5
Management standards have been established
by the ISO in both quality and environment
The International Organization for Standards
(ISO) was formed after World War II
ISO 9000—International Quality Standard
First one established in 1994
Currently transitioning to ISO 9000:2008
ISO 14000—International Environmental
Standard
First one established in 1998
Current one is ISO 14001:2004
5-6
ISO certified suppliers are frequently
preferred by procurement departments
They have to conform to an externally defined
set of standards for quality and delivery of
service
They are usually more open to sharing supply
chain information
They welcome building relationships with their
customers
•
They have formal processes in place for continual improvement of their
products, services, and processes
•
They are easier for procurement folks to initially qualify and periodically
audit
–
Certification is done by an external register agency
–
Firms have to be re-certified every three years
5-7
•
Brand power is the measure of customer
preference based on reputation, product
quality and supply chain capabilities
•
Volume is traditionally treated according to
the principle of economy of scale
–
Average cost to produce product declines as
manufacturing volume increases
–
Particularly important when high fixed costs are
present
•
Variety involves frequent product runs and
high repetition of small lot sizes
–
Processes that can rapidly switch production
from one product to another while retaining
efficiency are said to have economy of scope
Manufacturing perspectives
5-8
•
Constraints interact with volume and variety to create
realistic manufacturing plans
–
Capacity is how much can you produce in a given unit of time
–
Equipment considers how flexible it is
•
Is one particular piece a bottleneck?
–
Setup/Changeover considers how quickly can you change from
one variety of product to another
•
Leadtime is the measure of elapsed time between release
of a work order to the shop floor and completion of all work
on the product to achieve ready-to-ship status
Manufacturing perspectives continued
5-9
•
Job shop creates a custom product for each customer
•
Batch process manufactures a small quantity of an item in
a single production run
•
Line flow process has standard products with a limited
number of variations moving on an assembly line through
stages of production
•
Continuous process is used to manufacture such items as
gasoline, laundry detergent and chemicals
•
Modifications of the above can create new options
–
Mass customization produces a unique product quickly and at a
low cost using a high volume production process
The four basic manufacturing processes
5-10
•
Engineer to Order (ETO) is used when products are unique and
extensively customized for the specific needs of individual customers
•
Make to Order (MTO) relies on relatively small quantities, but more
complexity
–
Requires much interaction with customer to work out design and specification
–
Usually shipped direct to customer
•
Assemble to Order (ATO) is when base components are made,
stocked to forecast, but products are not assembled until customer
order is received
–
Manufacturing postponement practiced here
•
Make to Stock (MTS) features economies of scale, large volumes,
long production runs, low variety, and distribution channels
Manufacturing strategies should match
market requirements
5-11
The choice of strategy determines which
performance cycles the customer experiences
Figure 5.1 Manufacturing Strategy and Performance Cycles
Product Design Procurement Cycle Manufacturing Cycle Customer Delivery
Cycle
ETO
Strategy
MTO
Strategy
ATO
Strategy
MTP
Strategy
Total Cycle Experienced by Customers.
5-12
Product
Variety
Volume Strategy Customer
Leadtime
Job Shop Very high Very low ETO/MTO Very long
Batch High Low ETO/MTO/
ATO
Long
Line Flow Limited High ATO/MTP Short
Continuous
Flow
Very limited Very high MTP Very short
Table 5.1
Manufacturing process characteristics
5-13
•
Total cost of manufacturing (TCM) includes:
–
Procurement and production activities
–
Inventory and warehousing activities
–
Transportation activities
•
TCM generally expressed as cost per unit
•
Procurement and production costs go down
as volume goes up
•
Inventory and warehousing costs go up as
volume goes up
•
Transportation costs go down as volume goes
up, but level off at high volumes
Total cost of manufacturing
5-14
TCM per unit ranging across strategic
alternatives
Click to edit Master text styles
Second level
Third level
Fourth level
Fifth level
/MTS
Figure 5.2 Total Cost of Manufacturing
5-15
•
Mass customization
•
Flexible manufacturing
•
Lean systems
•
Six sigma
•
Requirements planning
•
Design-for-manufacture
•
Design-for-logistics
Contemporary manufacturing developments
5-16
Manufacturing characterizations
Flexibility Economies of scale Responsiveness
Engineer to
Order (ETO)
Make to Order
(MTO)
Assemble to
Order (ATO)
Configure to
Order (CTO)
Make to Stock
(MTS)
5-17
•
Flexibility strategy defines the role that operations
plays in the business and overall supply chain
strategy
•
Four Competitive Strategies
–
Mass Customization
–
Fast Lean Launch
–
Volume Response
–
Robust Operation
Flexibility-based strategies
5-18
Manufacturing capability examples
•
Mass Customization
•
Fast, Lean Launch
•
Mix/Volume Response
•
Robust Operations
5-19
What is it?
•
Objectives, key capabilities
Where does it work?
•
Market, industry, technological characteristics
What does it take to succeed?
•
Resources and relationships
•
Priorities, processes, and practices
•
Cross functional interfaces
•
Metrics
For each strategy we’ll discuss:
5-20
Individually customized products produced at the low
cost of standardized, mass produced goods.
•
Objective
–
Wide product menu with reasonable cost and OTD lead time
–
“On-Demand”, “To Order”, “Postponement”, “Agile Mfg”
•
Examples: Dell, Cannondale, Cheesecake Factory, Knightly Tours
Mass customization:
What is it?
Delivered Cost (or Lead-Time)
Product Customization
Conventional Demand-Supply Chain
MC Demand-Supply Chain
Standard Custom
5-21
Market Characteristics:
•
Sufficiently large customer segment that values “translatable variety”
•
Turbulent, dynamic market
•
Unpredictable demand - but not entirely unpredictable!
•
Little impact of regulation or other constraints (designer drugs?)
Product/Process Characteristics:
•
Modular or adjustable product building blocks
•
Predictable components/functions interactions
•
Standardized process/skill building blocks
•
Reasonable lead times, steps, work content
Mass customization:
Where does it work?
5-22
•
Sense
–
Direct relationships with customers – demand management
–
Technologies: measurement, data capture, communication, CRM, POS
•
Interpret
–
Technologies: imaging, data translation, configuration management,
CAD/CAE/CAPP
–
Product modularity and good configuration management
•
Respond
–
Close relationships with supply chain elements (VI?)
–
Technologies: CAM, FMS, mixed model lines, digital tracking and control,
cellular mfg
•
Critical functional integration:
–
Mktg-Sales-(Design)-Mfg
Mass customization:
What does it take to succeed?
5-23
Fast and reliable new product launch with few
engineering changes
•
Objectives
–
Overlapping ramps (up and down)
–
Reduced time to full scale production (“going vertical”)
–
High launch quality with few engineering changes required
Capability: Fast lean launch
Production rate
Conventional Launch
Lean Launch
Time
5-24
Structural and Infrastructural Elements
–
Design–launch–build teams, DFMA, Process simulation, CE
•
Production engrs and plant workers involved 36 months before launch (vs. 9 months
before launch in old system)
–
Hi fidelity (on-line) prototype and pilot production (release for tooling)
–
Adaptable plant hardware (e.g., conveyances, IS, …)
–
Manage varying conditions (product, process, geography) with
standardized launch process
–
Smart use of platform design and modularity strategies
–
Learning organization – ability to quickly develop and adopt new skills
and processes
Lean launch example: BMW
5-25
•
Manage reaction to “discipline” imposed on product design
•
Shape value system to add launch quality as a priority while
preserving design flexibility
•
Find manufacturing talent to make contributions in NPD
•
Balance competing priorities of production vs. prototyping on the
shop floor
•
Manage critical functional integration: Design-Mfg
Lean launch: Key challenges