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Manufacturing 101 - Part 1 of 7

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Manufacturing 101

Real wealth is generated in three sources: agriculture—growing things and raising animals; extraction of minerals from earth and seas; and manufacturing. Other businesses simply redistribute wealth through services. For a balanced economy in any nation, it is important that manufacturing be run well.

 

The essential elements of manufacturing are: plants producing goods, their suppliers of goods and services, and their customers. Materials flow from suppliers through plants to customers. Planning and control systems link them with data. Purchasing and delivery data flow between plants and suppliers. Plans conforming to management policies, procedures and judgment flow from systems to plants, and actions send data back to systems reflect­ing performance. People take corrective actions or revise plans when significant deviations are detected. Customers place orders on plants for products or services; these cause data to flow between their and plant systems. Practically every business is both a supplier and a cus­tomer and therefore is part of one or more supply chains.

 

With modern data processing and transmission, data and the infor­mation it contains flow at blinding speeds like the lightning in figure 2. Compared to this, materials flow at glacial speeds. It was recognized clearly in the 1970s that speeding up and smoothing out materials flows was essential to operating manufacturing plants well and to meeting all management goals.

 

Many important changes from old to new ways of thinking and operating plants took place when the laws and basic principles of manufacturing were learned and adequate modern systems became available to all firms. Order points once defined an amount of inventory determining when replenishment orders were placed for an economic order quantity; this was replaced by material requirements planning, which linked when and how much of a component was needed to produce its parent items. Instead of starting early to improve on-time deliveries, it became clear that waiting to release manufacturing orders at the last minute resulted in much less work-in-process with attendant benefits in lower capital in­vestment, faster response to customers needs, improved on-time deliver­ies, and lower costs.

 

Traditional accounting practices could measure costs of idle direct labor and expensive machines, which were abhorrent to managers. It was not so easy to see the value of avoiding the waste and cost of committing valuable and scarce resources to items not needed now. Modern computer-based systems were first viewed as great aids to cope with myriad problems that couldn't be avoided. Common were beliefs that materials would be late, scrap and rework would be made, machinery would break down, and records would have errors.

 

The Japanese, who focused on improving execution before adopting planning innovations, proved such problems could be eliminated, or at least mini­mized. As a result, systems could be simplified and still be more effec­tive. Once, top priority in running work orders was given to "hot" items missing or needed earlier than planned; schedules developed by formal planning were poor and ignored, thus perpetuating the hot-list. Inven­tory cushions were carried to help cope with insoluble problems; how much to add on each item was an unanswerable question. Trying to plan the unplannable was futile. Just-in-Time proved to be the best answer.

Continued

Part 1  Part 2   Part 3  Part 4  Part 5  Part 6  Part 7


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