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MBM & MBR -Lessons from Rouge. Dr. Yong W. Kim Dr. Thomas Johnson. Conventional Wisdom. Organization will reach its bottom-line goals best If it drives its employees and suppliers to achieve financial targets. Common Practice.

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Mbm mbr lessons from rouge

MBM & MBR -Lessons from Rouge

Dr. Yong W. Kim

Dr. Thomas Johnson


Conventional wisdom
Conventional Wisdom

  • Organization will reach its bottom-line goals best

  • If it drives its employees and suppliers to achieve financial targets


Common practice
Common Practice

  • Manager’s task: to motivate people to reach and exceed quantitative targets

    • Defined by financial measures

  • It will create unseen and unnecessary inefficiency and instability


New management thinking
New Management Thinking

  • What decides an organization’s long-term profitability:

    • The way it organize its work

    • Not how well its members achieve financial targets

  • Example: ABC and Pull system failures


Mbm mbr lessons from rouge
MBR

  • Focus on the bottom-line target

  • Achieving financial targets justifies inherently destructive practices


Mbm mbr lessons from rouge
MBM

  • Desirable end will emerge as a consequence of nurturing the activities of all employees and suppliers in a human manner

  • Means are ends

    • Opposed to “Ends justify any means”


Mbm requirement
MBM Requirement

  • Disciplined practices

  • Sustained attention to how work is done

  • Nurturing every step of the work at every moment

  • Manager's focus on minute particles (attention)

    • Cultivate employee’s creative talents


Manager in mbm
Manager in MBM

  • Cultivate and nurture conditions

    • Bond company talents and customer needs in a profitable union


Toyota and big three
Toyota and Big Three

  • The story contrasts the consequences of acting on the belief that order must be externally imposed with consequences of acting on the belief that order self-emerges from within.



Early 1950s
Early 1950s

  • Toyota and Big 3 struggled independently with a problem that confronted virtually all manufacturers following World War II

    • How could they satisfy customer demand for an increasingly varied range of new products, yet do so at mass-production prices?

  • Great opportunities for companies able to offer customers the widest range of styles and models at the lowest prices


Before world war ii
Before World War II

  • Henry Ford helped pioneer the concept low-cost repetitive mass production

  • Facility on the banks of the River Rouge in Dearborn, Michigan


Henry ford in 1920s
Henry Ford in 1920s

  • Dedicated to making one model

  • Operates around the clock

  • High profits are attributed to remarkable efficiency

    • Low cost per unit


Henry ford in 1920s1
Henry Ford in 1920s

  • Build a facility to produce one variant of a product and then run it without interruption at full capacity until demand was sated


Henry ford in 1920s2
Henry Ford in 1920s

  • If the variant is referred to as A,

  • Then most efficient and profitable schedule for producing A is

  • AAAAAAAAAA…where each A is assembled in a continuous flow, one at a time



Henry ford in 1920s work flow1
Henry Ford in 1920sWork Flow

  • Schedule pushes material at a relentless pace that was sustained by having machines and workers perform repetitive tasks

  • Give the simplicity of the flow and the repetitive nature of tasks it was not necessary to spend extra resources on activities to control and expedite the flow of material and information


Henry ford in 1920s work flow2
Henry Ford in 1920sWork Flow

  • Flow was dictated by the plant’s initial design (layout)

  • One vehicle per minute

  • Total lead time = 3 days and 9 hours from steel making to finished vehicles


Henry ford in 1920s3
Henry Ford in 1920s

  • A sign of mechanical roots

    • Relation between information and the flow of work

    • Primary information originates outside the process

    • Neither the materials nor the workers supply any information

    • Pushed by external information


Henry ford in 1920s4
Henry Ford in 1920s

  • Mass Production

    • Homogeneity of inputs and outputs (interchangeable)

    • Large scale

    • High speed of throughput

    • Uninterrupted work flow


How perceptions of low costs at the rough shaped the quest for variety after world war ii
How perceptions of low costs at the Rough shaped the quest for variety after World War II

  • Car-buying public grew more sophisticated

  • With more features and styles

  • After World War II, Toyota and Big 3 addressed differently the problem of how to produce varieties of automobiles at low cost

    • Different thinking


1982 meeting toyota and ford
1982 Meeting – Toyota and Ford for variety after World War II

  • Philip Caldwell

  • Eiji Toyota

  • “There is no secret to how we learned to do what we do, Mr. Caldwell. We learned it at the Rough”


Mass producing variety in batches what big 3 saw at the rough
Mass-Producing Variety in Batches for variety after World War IIWhat Big 3 Saw at the Rough

  • Old way faced a challenge

  • One way to meet these demands was to build a new plant dedicated to each new variant ….but….


Mass producing variety in batches what big 3 saw at the rough1
Mass-Producing Variety in Batches for variety after World War IIWhat Big 3 Saw at the Rough

  • Most manufacturers have remained committed to the mass-production thinking that says high profits depend on producing at low costs by running operations without interruption at full capacity for as long as possible


Mass producing variety in batches what big 3 saw at the rough2
Mass-Producing Variety in Batches for variety after World War IIWhat Big 3 Saw at the Rough

  • But in the context of making products in varieties, it is discovered that “running without interruption” and “running at full capacity” are not necessarily achieved as simply as they are when

    • the production schedule is AAAAAA

    • Work is organized in a continuous flow


Mass producing variety in batches what big 3 saw at the rough3
Mass-Producing Variety in Batches for variety after World War IIWhat Big 3 Saw at the Rough

  • Effects variety has on the production schedule

    • Changing from one variety to another takes time

    • Did not see the benefits to reducing the time it took to do individual changeovers


Mass producing variety in batches what big 3 saw at the rough4
Mass-Producing Variety in Batches for variety after World War IIWhat Big 3 Saw at the Rough

  • Big 3’s reaction

    • Took steps to reduce the total amount of time spent changing over

    • By separating the various processes through which material flowed continuously in the early River Rouge plant.

    • With processes separated, material for different varieties could be batched and processed “efficiently” in long runs that economized on changeovers


The system the big 3 created in response to ford system
The System the Big 3 Created in Response to Ford System for variety after World War II

  • Customer order

    • AA/B/AAA/BB/CCC/AAA

  • Batch production

    • AAAAAAAA/BBB/BBB

    • Reduces the number of interruptions and increases the percentage of time running

    • Reduces costs and, presumably, increases profitability


The system the big 3 created in response to ford system1
The System the Big 3 Created in Response to Ford System for variety after World War II

  • Producing varieties in long-running batches creates costs

    • Producing in batches means producing out of step with the flow of customer orders


The system the big 3 created in response to ford system2
The System the Big 3 Created in Response to Ford System for variety after World War II

  • To avoid having production deviate from consumption,

    • Time & resources must be spent on forecasting demand

    • Or on stimulating demand so that it fits what you are producing

  • Marketing / Centralized Scheduling/ Advertising => Overhead


The system the big 3 created in response to ford system3
The System the Big 3 Created in Response to Ford System for variety after World War II

  • Most mass producers addressed these added costs of batching variety

    • By speeding up the flow of output for each batch

    • By reducing the total amount of time lost changing from one variety to another


The system the big 3 created in response to ford system4
The System the Big 3 Created in Response to Ford System for variety after World War II

  • They attempted to control the costs of forecasting demand, discounting prices on unwanted output, and losing sales

    • By speeding up production, thereby reducing costs per unit

    • Honored the mechanic concept of “economics of scale”


The system the big 3 created in response to ford system5
The System the Big 3 Created in Response to Ford System for variety after World War II

  • Making varieties in batches

    • New ways of organizing work that additional costs besides costs caused by out-of-step


The system the big 3 created in response to ford system6
The System the Big 3 Created in Response to Ford System for variety after World War II

  • “Decoupled” batch production approach

    • Uninterrupted work only in each separate operation

    • Followed by transit to a central staging area

    • Where material waited till a schedule directed it to flow in varieties to a final assembly plant


The system the big 3 created in response to ford system7
The System the Big 3 Created for variety after World War IIin Response to Ford System


The system the big 3 created in response to ford system8
The System the Big 3 Created for variety after World War IIin Response to Ford System

  • Making all the pieces in this complicated “flow” come together in the right places at the right times

    • Required people and equipment not employed in the actual making of the products themselves


The system the big 3 created in response to ford system9
The System the Big 3 Created for variety after World War IIin Response to Ford System

  • Overhead:

    • scheduling, controlling, expediting, storing, inspecting, transporting, and reworking

    • “Information factory”

      • Separate from but alongside the material-flow factory

      • Needed to impose order on a batch-driven system that had been created to minimize the costs of producing output in varieties


The system the big 3 created in response to ford system10
The System the Big 3 Created for variety after World War IIin Response to Ford System

  • Answer to added costs of “information factory”

    • The same mass-production logic of economics of scale and speed

    • Profitability is assured if enough output is produced to reduce unit costs below the prices customers will pay


The system the big 3 created in response to ford system11
The System the Big 3 Created for variety after World War IIin Response to Ford System

  • Answer to added costs of “information factory”

    • To increase the speed and amount of output (i.e., throughput) even more, and then

    • Engage in advertising or other incentives to stimulate customer demand


The system the big 3 created in response to ford system12
The System the Big 3 Created for variety after World War IIin Response to Ford System

  • Real Problem

  • Most companies attributed the activities associated with batch production to complexity cased by producing varieties of product, not to complications caused by the way they organized work


The big 3 system examples of added activity
The Big 3 System: for variety after World War IIExamples of Added Activity

  • Separating parts of the system made inventories


The big 3 system examples of added activity1
The Big 3 System: for variety after World War IIExamples of Added Activity

  • Separating the system into independent stages (decoupling) created a need for production controllers and schedulers to coordinate the movement between these stages and from inventory to final assembly

    • MRP, IT


The big 3 system examples of added activity2
The Big 3 System: for variety after World War IIExamples of Added Activity

  • The balance between supply & demand is often forced by means such as

    • Building inventory

    • Investing in advertising campaigns

    • Reducing prices to clear out excess stock

    • Laying off people

    • Selling assets


The big 3 system examples of added activity3
The Big 3 System: for variety after World War IIExamples of Added Activity

  • Workers in each independent part of the system cannot receive immediate feedback from workers in the next operation


The big 3 system examples of added activity4
The Big 3 System: for variety after World War IIExamples of Added Activity

  • Decoupling creates a correlation between increasing varieties of output and decreasing the amount of time spent each day actually producing as opposed to changing over


The big 3 system examples of added activity5
The Big 3 System: for variety after World War IIExamples of Added Activity

  • Rising costs encourage the belief that if performance incentives are offered to workers, they will hasten production, thus helping drive down unit costs.

    • The outcome of incentives has proved to be analogous to what might happen should each musician in a orchestra be rewarded for playing faster and louder than the others