Evolution of WCM; Ohno’s View on WCM

A number of names have been used for the body of knowledge that we have referred to in this book as World-Class manufacturing. The most popular of these is just-in-time (JIT) manufacturing. In their authoritative work, Womack et al. (1990) coined the phrase ‘lean production‘ to describe this knowledge. Others have used evocative terms like stockless production, zero inventories and World-Class manufacturing. World-Class manufacturing was pioneered at the Toyota Motor Company (Toyota) in Japan, where it was simply called the Toyota Production System. The term ‘agile manufacturing’ was coined and made popular at the

Iacocca Institute of Lehigh University in the US, with the publication of a report titled 21^st Century Manufacturing Enterprise Strategy. The report presented a scenario in which an automobile company delivers a car designed by a customer in the sales showroom in three days.

For the agile manufacturer, the ‘entire business strategy and competitive edge centres on flexibility and fast response’ (Maskell 1991).

Indian managers typically associate the JIT philosophy embodied in World-Class manufacturing with JIT deliveries of supplies from vendors. This is a case of missing the wood for the trees.

Based on this limited understanding, some managers aver that world class manufacturing is not practical in India. As we will soon show, nothing could be further from the truth.

World-Class manufacturing was developed largely by Taiichi Ohno, who rose from a foreman to become a vice-president at Toyota, and Shigeo Shingo, a famous Japanese industrial engineering consultant. Ohno’s definition of World-Class manufacturing (Japan Management Association, 1986) is simple: ‘All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes.

This simple but profound explanation brings out the goal of World Class manufacturing: to bring manufacturing closer to the market. Some authors recommend negative working capital as the ultimate goal of manufacturing. This is not what Ohno had in mind. Hypothetically, a state of negative working capital requirement can be reached by aggressively man aging the accounts receivable and accounts payable. The World-Class manufacturing philosophy is that the order fulfillment process-as well as the product development process-must be continuously shortened through the elimination of waste.

Figure 3.1: Ohno’s View of the essence of World Class Manufacturing

Shingo (1989) has explained how this enables a World-Class response to the market. If a product is ordered for delivery within 10 days but takes 20 days to produce, it obviously cannot be produced to order. If this situation is accepted, the logical conclusion is that excess semiprocessed stock must be held to meet demand. Unfortunately, things are made worse by the fact that sales forecasts are inherently inaccurate. Some buffer stock must be held to provide for this. This phenomenon has been called ‘speculative production‘ by Shingo.

World-Class manufacturing focuses on reducing the order fulfillment process through methods which will be explained in this and the subsequent units. Shingo states that ‘this method of reducing production delays is the foundation of the Toyota Production System. When coupled with the practice of SMED, deliveries can be made even on very short notice without any inventory.’ (SMED is an acronym for Single Minute Exchange of Die. This concept will be explained shortly.)Thus, shortening the order fulfillment process has a number of desirable effects:

The manufacturer has the ability to deliver products on time without carrying large stocks.
Production is largely aligned to demand. Forecasts are required for relatively shorter time horizons and are more accurate.
Feedback from the market is faster because the time spent by finished Goods from the factory to the consumer is reduced.

The pioneers of World-Class manufacturing were very clear about what constitutes waste in manufacturing. As explained earlier, Shingo has identified seven kinds of waste. The basic idea is that any operation which does not add value is wasteful. Interestingly, over-production is considered to be the deadliest waste because it hides the other six wastes.

Monden (1983) provides a different, but equally useful, perspective on the basic idea of World-

Class manufacturing:

The basic idea in such a production system is to produce the kind of units needed, at the time needed and in the quantities needed. With the realisation of this concept, unnecessary intermediate and finished product inventories are eliminated. However, although cost-reduction is the system’s most important goal, it must achieve three other sub-goals on order to achieve its primary objective. They include:

Quantity control which enables the system to adapt to daily and monthly fluctuations in demand in terms of quantities and variety;
Quality Assurance which assures that each process will supply only good units to subsequent processes; and
Respect-for-humanity, which must be cultivated while the system utilities the human resource to attain its cost objectives.

In sum, the mission of World-Class manufacturing is to bring manufacturing closer to the market by eliminating waste. This mission is translated into reality through the objectives of cost reduction, quantity control, quality assurance and respect for humanity. The end result is that there is a streamlined pattern of work flow, which ensures that the output from the supply chain closely matches the demands placed on it by the market place. Organisational barriers (e.g. those between buyers and suppliers) and functional ones (e.g. those between production and other departments, like design, procurement and distribution, as well as those between production shops themselves) are disbanded to facilitate the establishment of flow in manufacturing.

The perception that World-Class manufacturing is not practical or desirable in India is based on a fallacy about its purpose and nature. The goals of World-Class manufacturing are, if anything, more relevant for the capital-starved Indian industry today than they are in Japan and in the West.

The origins of World-Class manufacturing can be traced back to 1926, when Toyoda Sakichi of the Toyoda Spinning and Weaving Company invented an auto-activated loom, fulfilling a 25- year dream (Ohno 1992).This loom stopped automatically if any one of the threads broke. This invention had a far-reaching result: an operator was not needed to stand by just to see that things were going all right. The machine had a built-in capability to distinguish between normal and abnormal conditions. Only in case of an abnormality would it require human intervention. Thus, one operator could look after several looms.

Ohno used the term ‘autonomation’-meaning automation with a human touch-to distinguish this kind of automation, from conventional automation, which simply reduces the effort of the operator. He described autonomation as one of the two pillars of the Toyota Production System, the other one being just-in-time. The patent for this 100m was sold to Platt Brothers of England for 1 million yen in 1930. This money was spent on automobile research.

Ohno (1992) gives the credit for the term just-in-time to Toyoda Sakichi successor, Toyoda

Kiichiro: ‘The words “just-in-time” pronounced by Toyoda Kiichiro were a revelation to some

Toyota people, one of whom became quite attached to the idea. And I have been attached ever since. In 1933, Toyoda Kiichiro announced the goal to develop domestically produced cars for the general public: ‘we shall learn production techniques from the American method of mass production. But we will not copy it as it is. We shall use our own research and creativity to develop a production method that suits our country’s situation.’

The Toyota Motor Company was founded in 1937, but was restricted to making trucks by the government during the World War II (Womack et al. 1990). At the end of 1949, Toyota saw layoffs and a bitter strike that was resolved only when Toyoda Kiichiro resigned, accepting blame for management failures. At that time Toyota had produced a total of 2,685 vehicles. In contrast, Ford’s Rouge plant produced 7,000 vehicles per day. It was the largest and most efficient plant in the world at that time. Toyoda Eiji, who took over at Toyota in 1949, studied this plant for three months in 1950. At the end of his study, he wrote back that in his view ‘there were some possibilities to improve the system’.

Some of the key features of the Japanese economy that time (ironically, some of these features quite accurately describe the Indian scenario today) were:

The domestic market was tiny in size, but demanded a wide variety of vehicles
The new labour laws introduced under the Macarthur regime had greatly strengthened the position of workers
There was no source of cheap immigrant labour
Japan was starved for capital. Industry could not afford to buy large, spanking new machines used in Western industry.

Ohno (1988) recalls that when the Allied army occupied Japan, someone from the General

Headquarters pronounced that US productivity was eight times higher than that of Japan. Taking this 8-to-l figure as an average, Ohno concluded that the figure for a key American industry like autos would in all probability be l0-to-1. Thus, the goal that Toyota management set for themselves was a ten-fold increase in productivity.

This was the background that leads to the development of World-Class manufacturing. The techniques were perfected over two decades, but came into prominence only after of 1973, when other companies were reeling from the oil shock but Toyota continued to perform well. The early eighties saw a spate of publications on these techniques.

In the meantime, Western industry had been largely preoccupied with computer-based

Manufacturing Resource Planning (MRP II) systems and flexible automation technologies, such as robotics. The initial response of many practitioners and consultants was to advocate either JlT or MRP II. Today, the consensus is that manufacturing applications of information technology

(IT), including Enterprise Resource Planning (ERP)-the present day avatar of MRP II-should be used if required to further the principles of World-Class manufacturing.