Continuous Process Improvement: So Who Cares?

BADM 701 Dr. Ron Lembke Continuous Process Improvement: So Who Cares?

Andrew Carnegie • Telegraph operator to RR division superintendent • Adopted latest technology, built first steel plant laid out to optimize flow • Focused on knowing, lowering unit cost • Raise prices with everyone else in booms, slash prices in recession

U.S. Steel Production Production: U.S. England 1868 8,500 111,000 1902 9,138,000 1,862,000 Steel Prices: (per ton) 1870 $100 1890 $12 How? Continuous Process Improvement

The Richest Man in the World • Found out strike organizers, fired before • 1886 “Triumphant Democracy,” Forum magazine- workers’ right to unionize • 1889 “Gospel of Wealth”: rich need to help the poor ($25m annual income) • 1892 Homestead strike: 12 hour gunfight, Pinkerton defeated (12 died), state militia called in, strike breakers hired • 1901 sells out to J. P. Morgan: $480m • Built 2,500 libraries. • “The man who dies rich dies disgraced.” • 1919 dies, having given away 90%

#2 Richest person EVER • Data from Forbes. Picture from BusinessIntelligence.com

Skibo Castle

Henry Ford • Continuous Process Improvement • Advances in metal cutting allowed him to cut pre-hardened steel, produce identical parts • Standardized parts facilitated standardization of jobs, moving assembly line • Model T: 1908 $850 1920s: $250

Ford’s Rouge Plant

Vertical Integration • Owned forests, iron mines, rubber plantation, coal mines, ships, railroad lines • Dock facilities, blast furnaces, foundries, rolling mills, stamping plants, an engine plant, glass manufacturing, a tire plant, its own power plant, and 90 miles of RR track • 1927 Model A Production begins • 15,000,000 cars in 15 years • 120,000 employees in WWII

Rouge Plant

Details to the Max In his autobiographies “My Life and Work” (1922), and “Today and Tomorrow” (1926), Ford gives great detail on innovations he and his company have made, including: • Glass making, Artificial leather • Steering wheels out of Fordite • heat treating -- saved $36m in 4 years (1922) • Forging parts, wiremaking • Riveting, bronze bushings, springs • Why Black for cars?

Kingsford Charcoal

Managing Workers • “It is a reciprocal relation -- the boss is the partner of his worker, the worker is partner of his boss. Both are indispensable.” -- MLAW p. 117

Paying for Good Employees • “One frequently hears that wages have to be cut because of competition, but competition is never really met by lowering wages. The only way to get a low-cost product is to pay a high price for a high grade of human service and to see to it through management that you get that service.” T&T p. 43

Mindless Work • “Repetitive Labour -- the doing of one thing over and over again and always in the same way -- is a terrifying prospect to a certain kind of mind. It is terrifying to me. I could not possibly do the same thing day in and day out, but to other minds, perhaps I might say to the majority of minds, repetitive operations hold no terrors. In fact, to some types of mind thought is absolutely appalling. To them the ideal job is one where their creative instinct need not be expressed.” MLAW p. 103

Mindless Work When you come right down to it, most jobs are repetitive. A business man has a routine that he follows with great exactness; the work of a bank president is nearly all routine; the work of under officers and clerks in a bank is purely routine. Indeed, for most purposes and most people, it is necessary to establish something in the way of a routine and to make most motions purely repetitive -- otherwise the individual will not get enough done to be able to live off his own exertions. -- MLAW pp 103-4.

Shigeo Shingo and Toyota • Toyota’s quest for Quality • Focused on allowing product to flow through the plant as evenly as possible. • Cheap affordability to JD Power #1 • Reduce waste? Continuous process improvement • Learned all about it from whose book? 1977 1989

U.S. Auto Quality

Continuous Process Improvement: So Who Cares?