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Introduction

The world hates change, yet it is the only thing that has brought progress.

—Charles F. Kettering (1876–1958)

The evolutionary path taken by modern civilization has been closely paralleled—one might even say that civilization has been propelled along that path—by the ever-increasing improvement in the efficiency with which materials have been converted into forms that enhance the standard of living for the human user. In early times, manufacturing was carried out by an individual artisan who created a product for a specific user. The attributes of the product were tailored to meet the needs of the user. The modern manufacturing system—a complex arrangement that engineers, manufactures, and markets products for a diverse populace whose wants and needs are subject to frequent change—bears little similarity to its early predecessor.

This transformation of the manufacturing function into the complex technical, social, and economic organization it is today has been made possible by the discovery and improvement of many methods and processes. Some of these have revolutionized the technologies employed in the transformation of materials; some have made possible the creation of sophisticated organizations for the design, production, and marketing of products and services; and some have made it possible to create new and unique materials that have expanded design alternatives and formed the basis for entirely new products, processes, and industries.



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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE 1 Introduction The world hates change, yet it is the only thing that has brought progress. —Charles F. Kettering (1876–1958) The evolutionary path taken by modern civilization has been closely paralleled—one might even say that civilization has been propelled along that path—by the ever-increasing improvement in the efficiency with which materials have been converted into forms that enhance the standard of living for the human user. In early times, manufacturing was carried out by an individual artisan who created a product for a specific user. The attributes of the product were tailored to meet the needs of the user. The modern manufacturing system—a complex arrangement that engineers, manufactures, and markets products for a diverse populace whose wants and needs are subject to frequent change—bears little similarity to its early predecessor. This transformation of the manufacturing function into the complex technical, social, and economic organization it is today has been made possible by the discovery and improvement of many methods and processes. Some of these have revolutionized the technologies employed in the transformation of materials; some have made possible the creation of sophisticated organizations for the design, production, and marketing of products and services; and some have made it possible to create new and unique materials that have expanded design alternatives and formed the basis for entirely new products, processes, and industries.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE These developments have their origins in many activities, some internal to manufacturing and some well removed from it. It is not an exaggeration, however, to claim that some of the most profound changes that have affected the manufacturing enterprise can be traced to major developments that resulted from the complex interactions of society, technology, and the economy. Three of the most important of these are widespread and inexpensive transportation systems, communication systems that provide real-time interaction between people in almost any part of the world, and computers that assist in the design, control, and analysis of complex activities. Given the ability to ship most finished goods quickly and inexpensively almost anyplace in the world, companies no longer must locate their factories in or near the markets they serve. Neither do manufacturers require an extensive national industrial infrastructure to support local or regional factories with low levels of manufacturing integration. Modern communication technology has made it possible to manage manufacturing operations located around the world. A highly dispersed network of facilities and suppliers can now be created irrespective of their location. For example, the local availability of raw materials is not a determinant or predictor of successful manufacturing capabilities. Information concerning technological developments flows virtually unimpeded across national boundaries. Finally, the availability of modern computer technology has made it possible to analyze, design, and control the complex systems that characterize modern manufacturing operations. These three technical developments have had a profound effect on both the organization of the manufacturing enterprise and the strategies that manufacturing enterprises follow to survive. A consequence of these new capabilities is that manufacturers can now establish an effective presence in almost any market that will accept their products. Many manufacturers have been aggressive in entering markets far from their domestic bases, particularly here in the United States. The extent of the challenge that U.S.-based manufacturing faces is reflected in the recent estimate that 70 percent of U.S. manufacturing output currently faces direct foreign competition (see National Research Council, The Internationalization of U.S. Manufacturing, 1990). The increased competition that U.S.-based manufacturers experienced included other dramatic changes, all of which required a change in actions and attitudes if an enterprise hoped to remain competitive. Customers became unwilling to accept low-quality products. They expected and sought manufacturers who could offer them new products in a timely manner. Markets fragmented. Product life cycles shrank. New arrangements between vendor and purchaser were needed. Technological capability was expanding rapidly with the progress in firms and laboratories around the world. The old way of doing business—of treating markets and competition as local—was no longer adequate. A manufacturer who was unwilling or incapable of

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE adjusting to the new competitive environment was unlikely to survive. The response by U.S.-based manufacturers to these challenges has been broad and, on balance, largely encouraging. Product quality has been improved. Management practices are being changed to make better use of existing human resources. Manufacturing efficiencies are being increased through more effective selection and management of physical and human resources. Responsiveness to changing market conditions and customer needs has been enhanced. Industry coalitions are being formed to explore the opportunities and early ramifications of emerging technologies. Joint university-industry programs provide new educational experience to students while focusing university research efforts on problems that are relevant to industry (see Schonberger, 1986, 1987, and Stewart, 1991). Industry consortia, such as SEMATECH and the National Center for Manufacturing Sciences (NCMS), have been organized to fill the gaps in critical technical areas. Although these responses are encouraging, the competitive environment is constantly changing. Manufacturers around the world continue to make important product and process innovations and improvements. To survive in this competitive environment, an aggressive and effective program of continuing improvement involving all parts of the manufacturing enterprise must be established. To give focus to such a program, manufacturers must continuously scan the world to determine what constitutes the “best existing manufacturing practice” and who is the best manufacturer in the world (see Edmondson and Wheelwright, 1989). It is only by identifying these best practices that direction for continuing improvement can be provided. Only then will a manufacturer be able to approach “world-class” status and be able to survive in the global competitive environment. This does not imply that a manufacturer should copy and implement the best practices of others. Instead, manufacturers should learn from each other and seek to incorporate best practices as appropriate to their particular organizations. While it is a relatively straightforward process to identify the goals that a continuing improvement program should achieve, it is far more difficult to determine the steps needed to achieve those goals. A large part of the difficulty lies in the fact that a manufacturing company is a very complex system comprising a large number of complex but interdependent subsystems. Only a limited amount of work has been done to understand the problems of managing the totality of the manufacturing system and to identify the degree and nature of the interrelationships of its subsystems. This study focuses on the manufacturing system as an entity. It explores principles that have been demonstrated as generic to improving the effectiveness of manufacturing systems. It draws on the experience of many manufacturing experts and practitioners who participated in meetings and workshops and prepared papers for this volume. With their assistance, and acknowledging the growing body of literature in the fields of manufac-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE A Simple Game Played Very Quickly Economic warfare is the metaphor often used to describe the environment confronting globally competitive manufacturers. I would prefer an alternative metaphor to warfare: The game we're going to play in the 21st century is some combination of world class chess and what the world knows as football (and Americans know as soccer). American football has three characteristics that soccer doesn't have: huddles, timeouts, and unlimited substitution. Soccer has no hurdles, no timeouts, and very limited substitutions. We're going to play a much faster game than we've been playing in the past. World class chess is a very simple game. The one who can think farthest ahead will win. Designing a strategy for the future doesn't play to an American strength. SOURCE: Thurow (1992). turing technology, quality, management practices, and information systems, the committee has identified a group of operating principles that must be recognized, understood, and adopted by manufacturing organizations that aspire to be “world class.” Because of the universality of these principles, the committee has designated them as “foundations ” of manufacturing. These foundations are generic in that they are not specific to a particular industry or company; they are universal in that they can be applied in a wide variety of circumstances; they are operational in that they lead to specific actions and directions that should be taken. An elucidation of all the key foundations of manufacturing is well beyond the scope of the current study. No single study can expect to address all of the foundations for a field as diverse as manufacturing. What the committee seeks here is a framework for, and a description of, some of the principles that should be included in the foundations of manufacturing. Confirmation and enlargement of the views presented here are recognized as a long-term process worthy of much further intellectual study and pragmatic research. It is hoped that although this book does not provide definitive answers, it will provide some important insights into that broad topic described as the System of Manufacturing and that it will serve as an encouragement to readers to develop further understanding of the challenge of creating an effective, world-class manufacturing organization. With greater understanding, it will be easier to set goals, to develop plans that will command consensus, and to choose directions that will achieve continuing improvement of the system.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE This study is concerned with actions; actions that an organization must take if it is to become a world-class manufacturer. Resources —human, financial, managerial, and technical—must be effectively organized and used. Metrics must be established by which progress in continuous improvement can be measured. The organization must gain enough understanding of the manufacturing system and enough confidence in that knowledge to be willing to experiment and to learn. Ultimately, it is necessary to be able to predict the manufacturing system's response to changes. Technology must become a key factor in achieving and sustaining a competitive advantage. Organizational objectives, both short- and long-term, must be understood and accepted at every level without becoming distorted by functional bias. Finally, leaders must be effective and have the courage to lead. Not only must an organization meet all of these challenges if it is to become the “best-of-the-best,” but the constantly changing environment also requires that an organization continue to change and improve to retain that capability.