CHAPTER-2

WORLD CLASS MANUFACTURING

AN OVERVIEW
Towards 21
st
Century
management of mfg. companies
Mode
i-Management by Edict
ii-Management by
procedure
iii-Management by
Policies
iv-Management by
Principals
Assessment
Inconsistent,wasteful
Inconsistent\quicker,wasteful
of talent
High level wisdom,limits
empowerment
Customer focused,employee
driven,data based
Customer based principals
1-Team up with customers,organize by families of
customers to products
2-Capture and apply customer,competitive and
best practice information
3-Dedicate to continual,rapid improvement in
quality,response time,flexibility and value
4-Frontline employees involved in change and
strategic planning
5-Cut to few best components,operations and
suppliers
GLOBAL MARKET
Markets are becoming more global in nature
Consumer demand is more homogenized on
international basis
An international business organization is a firm tht
engages in cross-border transactions
When operating in global market,a traditional
company is at a competitive
disadvantagebecause of inadequate
products,wrong scale of operations,wrong way to
produce and wrong way to market its products
GLOBAL MARKET(contd.)
This has resulted in emergence of following
1-Multinational corporation-is a firm with
extensive involvement in international business
2-Global companyis a firm that integrates
operations from different countries,considers
world s single market
3-Transnational company is a firm that seeks to
combine the benefits of global scale efficiencies
with benefits of local responsiveness
GLOBAL MARKET (contd.)
Demand for products is considered on a
worldwide .This results into higher
economies of scale and lower costs.
Logistics and inventory control systems are
global in nature
Within the global arena ,competition has
become intense due to greater number of
players and existence of opportunities
GLOBAL MARKET(CONTD.)
The world wide customers evaluate quality of
products\services from various dimensions such as
performance,features,reliability,serviceability,dura
bility,appearance ,customer service and safety
This calls for improvement in products\services to
meet the expectations of customer
Companies who have excelled on the international
level are referred as World class companies
World class company means that each product
\service would be considered best in class by its
customers.
BECOMING WORLD CLASS
World class performance comes from world class
practice,which is created by world class
management
Quality is no longer viewed as an act of faith but
as a contributor to business results
In going beyond quality ,the focus should provide
,new challenges and new targets and reinforce
what has already been achieved
BECOMING WORLD CLASS
(CONTD.)
QUALITY MATURITY PHASES-
1-Management decides they need quality
2-Management learns\talks about quality
3-Quality begins to be seen as a reality
4-Embedding the quality process
5-CEO establishes benchmarks from external
sources and drives the organization
6-Quality process and business objectives get
integrated
7-The company has become lean,fast and capable
.means World class
GLOBALISATION OF
PRODUCTION
Objectives
1-Reduce costs
2-Reduce risks
3-Improve supply chain
4-Provide better goods and services
5-Attract new markets
6-Learn to improve operations
7-Attract and retain global talent
WORLD CLASS
MANUFCTURING
Factors affecting global business conditions
1-Reality of global competition
2-Quality,customer & cost challenges
3-Rapid expansion of advanced manufacturing
technology
4-Continued growth and importance of service
sector
5-Scarcity of production resources
6-Social responsibility issues
Global competition reality
India,s liberalized economic policy started in 1992
Means Liberalization,Privatization & globalization
Indian manufacturers face tough competition from
foreign companies
Also inflation,fluctuating currency,turbulent
interest rates,volatility in international stock
market,huge national debts of many
countries,trade imbalance etc have created
complex financial conditions in global businesses
Global business in future will have the objective
of perfect product & service quality
TQM IN WORLD CLASS
MANUFCTURING
Many small\large companies have adopted total
quality management as a way of life
They focus on customers needs , and structure
their organization to deliver to these needs
Organization culture gets changed to achieve
perfect quality
To respond to customer,s needs ,many firms hve
adopted TQM,ISO 9000 and J IT manufacturing to
ensure reduced inventory costs and flexible
operations
AUTOMATION IN
PRODUCTION\SERVICE
OPERATIONS
i-Computer aided design(CAD)-Specialized
software\hardware for design of products
ii-Computer aided manufacturing(CAM)-
Translation of CAD information in automated
production machinery
iii-Flexible manufacturing systems(FMS)
Computers give instructions,robots handle parts
and materials\machines setting are changed
automatically to produce different products
Automation in production\service
operations(contd.)
iv-Automated storage and retrieval
systems(ASRS)-Computer controlled
warehouses.Includes automatic placement
\removal of parts as also automatic transportation
of parts
v-Automatic identification system(AIS)-Bar
coding,radio frequency\optical characters are
designed to present data and are read by scanners
that transmit data to computers
ISSUES
1-Growth of service sector-Service and
manufacturing sectors are inter-related
2-Scarcity of production resources-Scarcity of
various raw materials,personal skills require
judicious allocation of resources
3-Social impacts
i-Environmental impact-needs concern about
about waste disposal,air\water\ground pollution
etc
ii-Employee impact-Labor shortages,state\federal
laws etc require development of fair treatment
policies
GLOBAL COMPETITIVENESS
Competitiveness can be defined as the long term
viability of firm and is also measured by its
market share or its profitability
Competitiveness of a nation in the sense of its
aggregate competitive success in all markets
Distinctive\Core competencies represent
competitive advantage in capturing markets
Examples of Distinctive\Core competency are
automated production
technology,skilled\dedicated work force,ability to
bring new products in production,talented work
force etc
Competitive priorities of
Manufacturing
1-line production costs-Redesign of products,new
production technology,increased rate of
production,Reduction of scrap,reduction of
inventories
2-Delivering performance-higher finished goods
inventory,Faster production rates,Quicker
shipping methods,realistic promises,Better control
of production orders,Better information system
Competitive priorities of
manufacturing(contd.)
3-High quality product\Services-improve
product\services appearance\malfunction or defect
rates\performance and function,wear,Endurance
ability,after sales service
4-Customer service and flexibility-Change
production process,use of CAD\CAM,reduction of
work through J IT,increase in production capacity
TOP COMPETITIVE
PRIORITIES
1-Conformance quality
2-Product reliability
3-On-time-delivery
4-Low price
5-Fast delivery
6-Performance quality
7-Speedy new product introduction
RECENT TRENDS
Trends which demand considerable attention in
business since they influence planning and
decision making .Many are related to global
competition and the impact it has on
manufacturing firms
1-GLOBAL MARKET PLACE-WTO led to an
agreement among member nations to open their
economies,reduce tariffs and subsidies ,which has
resulted in level of competition throughout the
world
RECENT TRENDS(contd.)
2-OPERATIONS\MANUFACTURING
STRATEGY-More and more manufacturing are
now realizing the importance of operations
strategy and relating the same to overall business
strategy
3-TOTAL QUALITY MANAGEMENT-Here the
entire organization is committed\involved in
continuous improvement of goods and
services.Key features are Team approach,problem
solving etc
RECENT TRENDS (contd.)
4-TIME REDUCTION-Time reduction is being
achieved in processing,information
retrieval,product design and response to customer
complaints
5-TECHNOLOGY-Technological advances have
led to new products and processes.Computer
technology applications include Product
design,product features,process sing
technology,information processing and
communications
RECENT TRENDS (contd.)
6-FLEXIBILITY-The ability to adapt
quickly to changes in the mix of products
demanded and in product design has
become a major competitive strategy
7-WORKER INVOLVEMENT-A key to
worker involvement in the use of teams of
workers ,who solve problems and make
decisions on a consensus basis
RECENT TRENDS(contd.)
8-RE-ENGINEERING-Reengineering
focuses on improving processes such as
steps required to fill a customer,s request
9-ENVIRONMENTL ISSUES-World class
producers adopt the policy of
environmentally responsible
manufacturing means reducing
waste,pollution control,waste disposal etc
RECENT TRENDS(contd.)
10-CORPORTE DOWNSIZING-in order to face
competition and improve profits,world class
producers are reducing their Labour force
11-SUPPLY CHAIN MANAGEMENT-To
remain competitive ,the world class producers are
concentrating in managing supply chain efficiently
12-LEAN PRODUCTION-Lean production
systems are those that use minimal resources to
produce high volume\high quality \high variety
goods
GLOBAL CORPORTIONS
Characteristics of Global corporation
i-Facilities\plants are located world wide
ii-Components\parts\services are sourced on a
global basis
iii-Global product design\process technology are
used
iv-Process technology is standardized
v-Demand of products is considered world wide
vi-Logistics\Inventory control systems are global
in nature
ATTRIBUTES OF
EXCELLENT COMPANIES
i-A bias for action
ii-Close to the customer
iii-Autonomy and entrepreneurship
iv-Productivity through people
v-Hands on,value-driven
vi-Stick to the knitting
vii-Simple form,lean staff
REQUIREMENT OF
EXCELLENCE
i-EXTERNL QUALITY-Value added
performance exceeding customer
expectations.Means repeat sales,warranty return
rates,independent customer satisfaction
surveys,complaints,service wait time etc
ii-INTERNAL QUALITY-Defect free
processes,means yields,defect rates,error
rates,process capabilities ,percentage of processes
with fail safe mechanisms\procedures
Requirement of
excellence(contd.)
iii-DEPENDIBILITY-Ensure adherence to
promise,means on-time delivery to
customer,timely deliveries from suppliers
iv-RESOURCE USE-Eliminate waster and non-
value added steps,means labour productivity
ratio,inventory turnover,output rates
v-FLEXIBILITY-Ability\response to customer
changes quickly,means time to bring new
product,customer order lead time,setup times etc
Requirement of
excellence(contd.)
vi-HUMAN RESOURCE IMPROVEMENT-
Employees,customers,suppliers are the most
important and valuable assets,means effective
training,suggestion schemes,attendance rates etc
vii-INNOVTION-Advancing in the application of
product\process technology without waste,means
time to market,product feature comparisons with
competitors,number of patents ,percentage of
product line turnover
Requirement of
excellence(contd.)
vii-ENVIRONMENTAL SOUNDNESS-Business
operations without damage to the
environment.Means levels of
effluents\emissions,recycling percentage,accident
rate etc
viii-FINANCIAL RESULTS-Rate of return
ensuring satisfaction by Financial
supporters.Means Profit & Loss
statement,financial ratios,trends on actual costs
Comparison of performance
Five ways to make comparisons
1-STANDARDS-Means comparison with
accepted norms
2-PRIOR PERFORMANCE-Past internally data
can be complied
3-CUSTOMER EXPECTATIONS-External
performance measurement
4-SIMILAR OPERATIONS-Comparisons with
world class competitors
5-ULTIMTE STANDATDS-Set the ultimate goal
of Zero error standard
Factors of excellence of world
class companies
i-Strategy & culture
ii-Fix new skills among
managers\executives
iii-Creativity and innovation
iv-Adaptive to innovative changes
v-Customer\employee orientation
vi-People oriented recognition\reward
system
Factors of excellence of world
class companies(contd.)
vii-Team work,group activities,employee
empowerment
viii-Transformation oriented leadership-Leaders
led & inspire change
ix-Belief in quality,discipline and result
orientation
x-Prevention orientation and belief in never
ending improvements (Kaizen)
xi-Total quality management orientation
The path to becoming world class
Drive performance using people\technology
Leadership defines and communicates the
goals\tasks
Employees must be empowered to apply their skills
for efficient operations
Technology is the means to transform raw materials
into saleable products.
Technology supported with proper procedures and
trained\motivated personnel can ensure success
BUSINESS DRIVERS
Things which drive improvements
i-Quality-Process capability\performance
indices and refers to product which meets
customers needs
ii-First pass first quality-Refers to making
product right first time
iii-Throughput-Ensure efficient production
cycle time
BUSINESS
DRIVERS(CONTD.)
iii-Uptime-Ensure equipment availability at
full rate
iv-Cycle time-this is the elapsed time
between receiving raw materials and
shipping corresponding product
The business drivers as
indicated above are the elements of of an
appropriate control system
Time based competition
Using J IT(lean manufacturing) for time based
competition
BENEFITS
i-Customers will pay for quick response.Suppliers
will be benefited with fast delivery.Ensures faster
growth and greater market share
ii-The re-engineered processes increase
productivity,high quality & costs as comparable to
the competitors
Becoming a time based
competitors
i-It focuses on processes & not functions
ii-Managers are evaluated and rewarded on the
basis of their time metrics
iii-J ust in Time is the key to speed on the shop
floor
iv-Reengineering based on J IT concept is the key
to speed in all the firm,s processes.Reengineering
is the engine of Time based competition
WORLD CLASS SUPPLIERS
Choosing suppliers-While
selecting,flexibility,location,price,product\
service changes,reputation and financial
stability re key considerations
Evaluating sources of supply-must be
evaluated periodically on
price,speed,responses to changes
WORLD CLASS
SUPPLIERS(contd.)
Supplier audits-periodic audits of suppliers
provide a means of keeping up-to-date,suppliers
production\service,quality,delivery issues etc
Supplier certification-supplier certification
examines the policies\capabilities.If supplier
exceeds the expectations,they are certified as long
term relationship suppliers and sometimes called
World class suppliers
Supplier partnership
World class suppliers are viewed as partners of
world class manufactures and build long term
relationship,which could lead to improved
competitiveness in
i-Cost reduction in purchase\production costs
ii-Reduction in transportation\inventory costs
iii--Improvement in product design\quality\new
products\processes
iv-Reduction in throughput time
v-Improvement in customer satisfaction
WORLD CLASS
CUSTOMERS(BUYERS)
World class customers(buyers) are characterized
by seven drivers of partnering with suppliers
1-Excellent quality
2-Timeliness
3-Flexibility
4-Superior communication
5-Continuous improvement
6-Collaborative attitude
7-Trust
Characteristics of a good
customer towards supplier
i-Awareness \attractiveness to their suppliers
needs
ii-Record of keeping promises
iii-Willingness to share plans\information with
suppliers
iv-Willingness to explore process\product
improvement
v-Solving suppliers problems expeditiously
vi-Active feedback from suppliers and taking
corrective action,wherever required
Benefits achieved by being world
class customers in supplier
partnership
i-Cost saving-Better communication with
suppliers lowers administrative costs
ii-Time saving-By giving early
information,suppliers lead time can be reduced
iii-Better products\Processes-Based on suppliers
experience\expertise,he can offer better
products\Processes
iv-Improved customer organization and
professional skills-By spending time with
suppliers,customers learn new communication
skills\aspects of their organization
Today,s global business
conditions
For developing business strategy ,it is essential to
know the factors affecting today's global business
conditions
i-Reality of global competition
ii-Quality,customer service & cost challenges of
the supplier firm
iii-Rapid expansion of advanced production
technology
iv-Scarcity of production resources
v-Social-responsibility issues
Competitive priorities of
production
#-Low production costs
#-Fast and on-time delivery
#-High quality product\services
#-Customer services and flexibility
After setting competitive priorities
,operations strategy must determine the required
production system needed to provide the priorities
for the product\services
Performance of world class
manufacturers
Areas of production\operation management
relevant to achieve competitive advantage
1-Manufacturing\operations strategy-
Requires long term business plans such s
personnel training & development,market
development,new product\service
development,high tech. Production
process,R&D
Performance of world class
manufacturers
Characteristics of world class producers
i-Customer first
ii-Introduce new products\services faster
iii-Ensure Total Quality Management
iv-High labour productivity\Low production costs
v-Shop globally for supplies
vi-lean\flexible organization with balanced
inventory
V-Develop specialized \focus production facilities
vi-Encourage strategic alliances\joint ventures to
exploit opportunities
Performance of world class
manufacturers(contd.)
2-Forecasting in operations management-
Forecasting experts maintain sophisticated
computer software and get data such as market
research,industry trade association data etc to
ensure best long range estimate of sales of
new\existing products in global market and
monitor performance of forecasts
The effective forecasting of production
capacity,size of work force,quantity of materials
purchased ,inventory levels and working capital
requirement drives a closely managed production
planning system
Performance of world class
manufacturers(contd.)
3-Designing\Developing products and
production processes-World class producers plan
and design their production processes with
specific capabilities that are matched with the
competitive priorities of their business strategies
High product quality,high production
flexibility,low product cost and high customer
service are the major strengths.To achieve they
use various technologies such as using
CAD\CAM,continuous improvement,improving
flexibility & reducing costs by redesigning
production processes\doing automation etc
Performance of world class
manufacturers(contd.)
4-Production technology-selection and
management .World class producers view
advanced production technology as a competitive
weapon and do the following
i-Designing products to be automation
friendly,standardization of parts\increasing
quality of components
ii-Using CAD\CAM
iii-Adopting Flexible manufacturing
system,automated storage and retrieval
systems,automated assembly etc
Performance of world class
manufactures(contd.)
iv-Using computer controlled machines
v-Adopting flexible production systems
vi-Adopting computer integrated system
vii-Ensure better customer service,reduced costs
and improve flexibility
vii-Using automation processes with justification
vii-Training and building teams using new
production technology\processes
Performance of world class
manufactures(contd.)
5-Long range capacity planning and facility
location-World class producers carry out long
range business planning considering expected
changes in product life cycle and involve world
wide search for location of Plants
6-Facility Layout-World class producers strive
for flexibility in their layouts ensuring change in
production rates\designs quickly and use
Automated Layout Design Program,Computerized
Relationship Layout Planning,Computerized
Relative allocation of facilities techniques for
layout designing
Performance of world class
manufacturers(contd.)
7-Aggregate planning and Master
Production Scheduling-World class
producers develop strategies that enable
them to capture increasing share of world
markets and use current trends approaches
to achieve increased market share,high
product quality,low production costs and
high customer satisfaction
Performance of world class
manufactures(contd.)
8-Independent demand inventory system-Pull
system of production planning and control and
procurement through EOQ\Re-order level of
efficient Inventory system is used
9-Resource Requirement planning-World class
producers have incorporated MRP-II and ERP
system over a period of time ensuring continuous
improvements towards improved
productivity,lower costs and better customer
service
Performance of world class
manufacturers(contd.)
10-Shop floor planning and control in
manufacturing-In this type of production,world
class producers have effective MRP-II systems in
place which provide near real time information for
companies,their suppliers\customers.These
systems facilitate meeting customer delivery
promises,optimal loading of shops,low production
costs and high product quality
Performance of world class
manufacturers(contd.)
11-Planning and scheduling operations-World
class producers offering services have adopted
advanced\well known planning,analyzing and
controlling approaches and have recognized the
unique properties of service operations and have
developed novel management approaches for
service operations
12-Just In Time manufacturing-Elimination of
waste,enforced problem solving,building team
work,TQM,parallel processing,Kanban production
control and J IT purchasing are essential in world
class manufacturing
Pl
Performance of world class
manufacturers(contd.)
13-Supply Chain Management-World class
producers are forming partnership with suppliers
to expedite production of products of perfect
quality and use computers for solving complicated
logistic related issues
14-Productivity,Team work and
Empowerment-World class producers hire
workers who have problem solving abilities and
train them in multiple skills.Workers are educated
and empowered so that they can work in teams to
solve production problems and respond to
customer needs also.
Performance of world class
manufacturers(contd.)
15-Quality Management-World class
manufacturers are committing tremendous
resources to put in place TQM program aimed at
continuous quality improvement
16-Quality Control-World class companies have
comprehensive proactive total quality
management programs with specific projects
aimed at improving quality to meet customer
expectations
Performance of world class
manufacturers(contd.)
17-Maintenance Management and Reliability-
World class producers give much of responsibility
for repairs and preventive maintenance to workers
and they are made to feel that they own machines
and ensure avoid major breakdowns by ensuring
regular preventive maintenance.They also
implement J IT system to increase flexibility in
production and implement a sophisticated
preventive maintenance program
Path of world class
Manufacturing
i-Fewer suppliers
ii-Focused factories
iii-Simplification & variety reduction
iv-Scheduling to a rate of production
v-Fewer storage racks
vi-Frequent deliveries by suppliers
vii-Smaller manufacturing plants
viii-Minimum material handling
ix-Less paperwork
x-Fewer inspectors
i L b ff t k
World Class manufacturing
Strategy
The world class companies are required to build
an interface between marketing and
manufacturing,and follow actions such as
i-Invest more in R&D,emphasize less on short
term payoff.
ii-Improve manufacturing capability by investing
in people\equipments.
iii-Remove communication barriers.
iv-Labor force is to be murtured.
v-Build quality at design stage,emphasize on
process innovations.
World Class Service Delivery
Characteristics-Service excellence,Delight
customers,Expand customer expectations to a
level, competitors can not fill
Service quality-Raises customer
expectations,seeks challenges,improves
continuously
New technology-Source of first mover to gain
advantage
Work force-Innovative,create procedures
First line management-Is listened to by top
management as a source of new ideas
World Class Performance
Means winning the competitive race,running
faster\smarter than the competition.
Starts with through understanding of current
internal environment as well as its strengths and
weaknesses
If Total Quality Management is not
enthusiastically promoted\supported by
management,it will not be able to achieve Quality
at source
World Class Performance(contd.)
Strategy on the road to Excellence-
Manufacturing strategy starts with an
assessment of where a firm is now and a
vision of where it wants to be in future in
key indicators such as on-time delivery to
customer requirements,manufacturing lead
time,inventory turns,quality,new product
introduction time,supplier
relations,employee involvement ,flexibility
World Class Performance(contd.)
Vision-Answer questions with What-if for a
firm looking forward 3\5 years hence i.e. reduce
manufacturing cycle time by 70%,quality costs are
reduced by 25% etc
Control-Having assessed its strengths and
weaknesses and defined its vision,the company
must gain control over the current environment by
developing process to ensure integrated planning
from top to bottom.Requires education and
training to all employees in systems,policies and
procedures to support the user and process.
World Class Performance(contd.)
Simplification-Ensure continuous
improvement through team work on
changeover times,factory layout,restrictive
job classifications,supplier relations etc
Automation-Computer Integrated
Manufacturing,MRP-ii,J IT,Total Quality
control,Focused factories etc are supportive
of world class factories
World Class Companies in 21
st
Century
Previous Decade(1990-2000)-Competitive
priorities were Low price,New product
introduction speed,Quality,Delivery speed,Product
reliability
Present Decade(2000 onwards)-Competitive
priorities high quality at low price,means high
quality,timely availability and removal of non-
value adding wastes.requires finding external
partners ,who can perform valued function,with
advanced communications and efficient logistics
Customer focused Principals
1-Team up with customers,organize by families of
customers to products
2-Capture and apply customer,competitive and
best practice information
3-Dedicate to continual,rapid improvement in
quality,response time,flexibility and value
4-Frontline employees involved in change and
strategic planning-to achieve unified purpose
Customer focused
principals(contd.)
5-Cut to the few best components,operations and
suppliers
6-Cut flow time,distance,start up,and changeover
times all along the chain
7-Operate close to customer,s rate of use or
demand
8-Continuously enhance human resources through
cross training,job,and career path rotation and
improvements in health,safety and security
Customer focused
principles(contd.)
9-Expand the variety of rewards ,recognition,pay
and celebration-to match the expanded variety of
employee contribution
10-Continuously reduce variation and mishaps
11-Front line teams record and own process data
at the work place
12-Control root causes of cost and
performance,thereby reducing internal transactions
and reporting,simplify external communications
Customer focused
principles(contd.)
13-Align performance measures with universal
customer requires-quality,speed,flexibility and
value
14-Improve present equipment and human work
before considering new equipment and automation
15-Seek simple ,flexible,moveable,low
cost,readily available equipment and work
facilities-in multiples,one for each
product\customer family
16-Promote,market and sell your organization,s
increasing capability and competence-every
improvement made.
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