Chapter 1
Productivity and Manufacturing Management
Challenges to Manufacturers
Ø Changing markets
Ø Advancing technology
Ø Shortage of skilled labor
Ø International competition
Ø Shortage of capitol
Ø E-Commerce
Ø ISO/QS 9000
High Productivity is the key to our standard of living.
Productivity =Output / Input (units, parts, etc.) / Labor hour
Output is measured by:
Ø Direct labor hours
Ø Output per unit of material
Ø Output per dollars of capitol investment. (Janitor example)
Factors influencing productivity:
1. Worker’s skill, motivation, and effort
2. Quality of workmanship, machine technology
3. Effectiveness of management
Countries that have increased their productivity since WWII:
Ø Germany, Japan, France, Taiwan
Wage increases without increases in productivity, lead to increased product cost and inflation.
Increased manufacturing productivity leads to:
Ø Reduced costs
Ø Increased sales potential
Ø Increased cash flow
Ø More responsive customer service
100 washers / Hour vs. 105 washers / Hour
Measuring Productivity: An easy measurement for consistent products, very difficult for changing products
Productivity in the US
Ø Graph (Fig. 1-1)
Ø Real growth in productivity can only be achieved through technology
Ø Gain sharing with employees
Ø Capital investment in new technologies is sometimes limited due to demands for more pollution control equipment
Growth in productivity of international competitors
Competition made products of:
· World class quality
· Flexible manufacturing plants
· Short cycle times
· Continuous improvement
· Workforce comes from a better educational system
Mexico & NAFTA
Social and Economic Background of American Industry
· Henry Ford, Andrew Carnegie, George Eastman, Bill Gates
· Sherman Anti Trust Act prevented monopolies, promoted competition and growth in the US, disadvantage in international competition
· Effects of unions:
· Achieved higher wages, shorter hours, and retirement plans through forcing management to reduce costs and operate efficiently
· Slow downs, strikes and plant closing
International Competition
· More than 1000 plants with Japanese majority interest
· Japan’s strategy is long range planning versus US short term profits
· 95% of the 25 million new jobs created since 1970 were in services.
· Loss of shoe industry
· US corporations respond with joint ventures.
· Products that will always be made in US are breakfast cereals, soaps, paper products, cosmetics, and pharmaceuticals
5 Functions of Management
Planning – setting goals for the company and outlining the steps taken to reach these goals.
Organizing – is the process of dividing the overall job in to its various parts so that they can be assigned to people to carry out?
Staffing - involves the hiring, developing, and placing of qualified people in the various jobs.
Directing – is the process of issuing orders and instructions to carry out plans.
Controlling – an appraisal step that compares actual performance with plans, to be certain that plans are being carried out.
Characteristics of Modern Manufacturing
1. Manufacturing is Important – Requires sound planning, highly qualified engineers, well-trained workers, and modern facilities and equipment.
2. Quality – IBM, Cadillac, and others extol the fact that they are the recipients of the Baldrige Award
3. People – There is the realization that if you give employees a voice in operations, they are motivated and ingenious and will try to achieve the same goals as management.
4. Cost Control – Senior managers are questioning every function, eliminating some jobs, combining others, flattening corporate pyramids, and pushing responsibility ever lower in the hierarchy.
5. Focus and Specialization – Companies have learned that they cannot be good at everything and that they need to focus on what they do best, resulting in lowered cost of production and improved quality.
6. Old large, mass production plants can be horrible impediments to progress – Growing need for small, autonomous units.
7. Mechanization – Require well-planned continuous improvement making use of updated existing machines integrated with the equipment.
8. Computers – Computer capabilities promise to be an increasingly valuable aid to production management and will make it possible to provide quick solutions to complex problems.
9. Simulation and Mathematical Models – Increasing development of computer software has made it possible to try different manufacturing configurations prior to installation and select the best method.
Challenges and Opportunities in Manufacturing
· Need to return to excellence
· Produced 50% of the worlds products after WWII and only 25% today, but, we only have 5% of the worlds population
· Widespread distribution of manufacturing plants
· Our factories are close to their customers
· Shared manufacturing facilities
· World’s greatest research laboratories but poor at applying the technology
· American companies must produce world class products.
· Complete with Sony TVs, Honda autos
Review Questions
1. How may increased productivity offset increases in employee wages?
Wage increases without accompanying productivity increases to offset them can only lead to increased product costs and contribute to inflation.
2. Why is high productivity in a plant important?
Increased productivity can lead to reduced costs, increased sales potential, more responsive customer service, and increased cash flow and profits.
3. Is it easy or difficult to measure productivity?
Relatively easy in a company that produces the same product year after year.
For continuously changing products, effective productivity measurement requires the development of an index that takes into account the contribution of each facet of production and then tracking them. The principal reason is because it gives management a measure of operation efficiency and a mean of evaluation progress.
4. A significant increase in productivity in the long run cannot be achieved solely by increased worker effort. Is this statement correct?
An increase in productivity in the long run cannot be achieved solely y increased worker effort. The real growth can come about only through capital investment in newer and better machines, equipment, and facilities.
5. From a productivity standpoint, a number of foreign companies have become tough competitors of American companies. How have they been able to achieve this?
Other countries (particularly the Japanese) began to make products of world class quality in highly responsive and flexible plants-with short-cycle innovation and continuous improvement. They were able to take the difficult step of transferring innovation into new, highly technical products.
6. The eight richest countries with one-tenth of the world’s population possess over 50% of the world’s wealth. What impact may increased production and productivity in the underdeveloped nations have on manufacturing in the U.S.?
The long-term challenge to the United States is multidirectional. Mexico is looming as an increasingly strong manufacturing competitor and a free trade agreement will make its inexpensive labor available for increased manufacture and assembly of American products. The advent of the Common Market in Europe and the democratization of Eastern Europe pose continuing competitive environments for American manufacturers.
7. Define the management functions of planning, organizing, staffing, directing, and controlling in terms of some business or organization with which you are familiar.
Planning – connotes setting goals for the company and outlining the steps to be taken to reach these goals.
Organizing – is the process of dividing the overall job in to its various parts so that they can be assigned to people to carry out?
Staffing - involves the hiring, developing, and placing of qualified people in the various jobs.
Directing – is the process of issuing orders and instructions to carry out plans.
Controlling – is an appraisal step. It compares actual performance with plans, to be certain that plans are being carried out.
8. Although it was not always true, Japan has acquired the reputation of producing high quality products. What influence may this have had on the productivity of that country?
The great growth of Japan as an economic power has had a significant impact on the world. The Japanese have literally extended their business frontiers to all parts of the globe Their ability to produce high-quality products as competitive prices has posed a real challenge to many manufacturing establishments in the United States
9. Comment on the influence of the Malcolm Baldrige National Quality Award as a factor influencing quality attainments in American companies.
“The Baldrige Award for Quality is awarded not for a particular product, but for the process.” “Behind success is a complete transformation in Cadillac’s quality culture.”
10. What influence have strong trade unions had on the level of productivity attained in the plants they represent?
Unions contend that continuous pressure put on management for higher wages, shorter working hours, retirement plans and other benefits has forced management to reduce costs and to operate businesses efficiently. There may be a considerable element of truth in this assertion, but at the same time there has been a tendency for certain unions to resort to restrictive practice, to slow progress and even to have a influence on the closing of plants.
11. The elimination of trade restrictions can have great impact on where companies may endup manufacturing their products. As you look into the future, what do you foresee for American companies?
12. In the long run, what effect may the increasing use of computers and data processing equipment have on employment levels?
13. One of the characteristics of modern manufacturing is the recognition that a company’s greatest asset is its people. Comment on this statement.
14. By the year 2000, how do you envision the United States will be faring in the international marketplace?
15. It has been stated that the United States has an advantage over other nations in that it has widespread distribution of manufacturing plants in every nook and cranny of the nation. Comment on this statement.
One of our great advantages over foreign competitors is the fact that our factories are here and close to their customers.
16. Some of the “free market” advocates are of the opinion that if our shoe and other industries cannot compete with those of other nations, we should get out of the business. Comment on this philosophy.
17. Why do you think that manufacturers in the United States recently have become increasingly aware of the importance of manufacturing, quality, people, cost control, and other developments?
18. Describe the three things you must have to create wealth?
1. Natural Resources
2. Technology
3. Transportation
08/27/02