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CHAPTER-2
WORLD CLASS MANUFACTURING
AN OVERVIEW
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Towards 21st Century
management of mfg. companies Mode
i-Management by Edict
ii-Management byprocedure
iii-Management by
Policies
iv-Management byPrincipals
Assessment
Inconsistent,wasteful
Inconsistent\quicker,wastefulof talent
High level wisdom,limits
empowerment
Customer focused,employee
driven,data based
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Customer based principals
1-Team up with customers,organize by families ofcustomers to products
2-Capture and apply customer,competitive and
best practice information 3-Dedicate to continual,rapid improvement in
quality,response time,flexibility and value
4-Frontline employees involved in change andstrategic planning
5-Cut to few best components,operations and
suppliers
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GLOBAL MARKET
Markets are becoming more global in nature
Consumer demand is more homogenized oninternational basis
An international business organization is a firm thtengages in cross-border transactions
When operating in global market,a traditional
company is at a competitivedisadvantagebecause of inadequate
products,wrong scale of operations,wrong way to
produce and wrong way to market its products
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GLOBAL MARKET(contd.)
This has resulted in emergence of following
1-Multinational corporation-is a firm withextensive involvement in international business
2-Global companyis a firm that integratesoperations from different countries,considersworld s single market
3-Transnational company is a firm that seeks tocombine the benefits of global scale efficiencieswith benefits of local responsiveness
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GLOBAL MARKET(CONTD.)
The world wide customers evaluate quality ofproducts\services from various dimensions such asperformance,features,reliability,serviceability,durability,appearance ,customer service and safety
This calls for improvement in products\services tomeet the expectations of customer
Companies who have excelled on the internationallevel are referred as World class companies
World class company means that each product
\service would be considered best in class by itscustomers.
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BECOMING WORLD CLASS
World class performance comes from world classpractice,which is created by world class
management
Quality is no longer viewed as an act of faith butas a contributor to business results
In going beyond quality ,the focus should provide
,new challenges and new targets and reinforce
what has already been achieved
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BECOMING WORLD CLASS
(CONTD.) QUALITY MATURITY PHASES-
1-Management decides they need quality
2-Management learns\talks about quality
3-Quality begins to be seen as a reality 4-Embedding the quality process
5-CEO establishes benchmarks from externalsources and drives the organization
6-Quality process and business objectives getintegrated
7-The company has become lean,fast and capable.means World class
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GLOBALISATION OF
PRODUCTION
Objectives 1-Reduce costs
2-Reduce risks
3-Improve supply chain
4-Provide better goods and services
5-Attract new markets 6-Learn to improve operations
7-Attract and retain global talent
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WORLD CLASS
MANUFCTURING Factors affecting global business conditions
1-Reality of global competition
2-Quality,customer & cost challenges
3-Rapid expansion of advanced manufacturingtechnology
4-Continued growth and importance of service
sector 5-Scarcity of production resources
6-Social responsibility issues
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Global competition reality
India,s liberalized economic policy started in 1992
Means Liberalization,Privatization & globalization
Indian manufacturers face tough competition from
foreign companies Also inflation,fluctuating currency,turbulent
interest rates,volatility in international stock
market,huge national debts of manycountries,trade imbalance etc have createdcomplex financial conditions in global businesses
Global business in future will have the objectiveof perfect product & service quality
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TQM IN WORLD CLASS
MANUFCTURING Many small\large companies have adopted total
quality management as a way of life
They focus on customers needs , and structure
their organization to deliver to these needs Organization culture gets changed to achieveperfect quality
To respond to customer,s needs ,many firms hveadopted TQM,ISO 9000 and JIT manufacturing toensure reduced inventory costs and flexible
operations
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AUTOMATION IN
PRODUCTION\SERVICEOPERATIONS
i-Computer aided design(CAD)-Specializedsoftware\hardware for design of products
ii-Computer aided manufacturing(CAM)-
Translation of CAD information in automatedproduction machinery
iii-Flexible manufacturing systems(FMS)
Computers give instructions,robots handle partsand materials\machines setting are changedautomatically to produce different products
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Automation in production\service
operations(contd.)
iv-Automated storage and retrieval
systems(ASRS)-Computer controlled
warehouses.Includes automatic placement
\removal of parts as also automatic transportationof parts
v-Automatic identification system(AIS)-Bar
coding,radio frequency\optical characters aredesigned to present data and are read by scanners
that transmit data to computers
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ISSUES
1-Growth of service sector-Service andmanufacturing sectors are inter-related
2-Scarcity of production resources-Scarcity ofvarious raw materials,personal skills require
judicious allocation of resources
3-Social impacts
i-Environmental impact-needs concern aboutabout waste disposal,air\water\ground pollutionetc
ii-Employee impact-Labor shortages,state\federallaws etc require development of fair treatment
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GLOBAL COMPETITIVENESS
Competitiveness can be defined as the long termviability of firm and is also measured by itsmarket share or its profitability
Competitiveness of a nation in the sense of itsaggregate competitive success in all markets
Distinctive\Core competencies represent
competitive advantage in capturing markets Examples of Distinctive\Core competency are
automated production
technology,skilled\dedicated work force,ability tobring new products in production,talented workforce etc
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Competitive priorities of
Manufacturing
1-line production costs-Redesign of products,new
production technology,increased rate of
production,Reduction of scrap,reduction of
inventories 2-Delivering performance-higher finished goods
inventory,Faster production rates,Quicker
shipping methods,realistic promises,Better controlof production orders,Better information system
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Competitive priorities of
manufacturing(contd.)
3-High quality product\Services-improve
product\services appearance\malfunction or defect
rates\performance and function,wear,Endurance
ability,after sales service 4-Customer service and flexibility-Change
production process,use of CAD\CAM,reduction of
work through JIT,increase in production capacity
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TOP COMPETITIVE
PRIORITIES
1-Conformance quality 2-Product reliability
3-On-time-delivery 4-Low price
5-Fast delivery
6-Performance quality
7-Speedy new product introduction
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RECENT TRENDS
Trends which demand considerable attention inbusiness since they influence planning anddecision making .Many are related to globalcompetition and the impact it has on
manufacturing firms
1-GLOBAL MARKET PLACE-WTO led to anagreement among member nations to open theireconomies,reduce tariffs and subsidies ,which hasresulted in level of competition throughout theworld
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RECENT TRENDS(contd.)
2-OPERATIONS\MANUFACTURINGSTRATEGY-More and more manufacturing arenow realizing the importance of operationsstrategy and relating the same to overall business
strategy
3-TOTAL QUALITY MANAGEMENT-Here theentire organization is committed\involved incontinuous improvement of goods andservices.Key features are Team approach,problemsolving etc
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RECENT TRENDS (contd.)
4-TIME REDUCTION-Time reduction is beingachieved in processing,informationretrieval,product design and response to customercomplaints
5-TECHNOLOGY-Technological advances haveled to new products and processes.Computertechnology applications include Productdesign,product features,process singtechnology,information processing andcommunications
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RECENT TRENDS (contd.)
6-FLEXIBILITY-The ability to adaptquickly to changes in the mix of products
demanded and in product design has
become a major competitive strategy
7-WORKER INVOLVEMENT-A key to
worker involvement in the use of teams ofworkers ,who solve problems and make
decisions on a consensus basis
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RECENT TRENDS(contd.)
8-RE-ENGINEERING-Reengineeringfocuses on improving processes such as
steps required to fill a customer,s request
9-ENVIRONMENTL ISSUES-World class
producers adopt the policy of
environmentally responsiblemanufacturing means reducing
waste,pollution control,waste disposal etc
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RECENT TRENDS(contd.)
10-CORPORTE DOWNSIZING-in order to facecompetition and improve profits,world class
producers are reducing their Labour force
11-SUPPLY CHAIN MANAGEMENT-Toremain competitive ,the world class producers areconcentrating in managing supply chain efficiently
12-LEAN PRODUCTION-Lean productionsystems are those that use minimal resources toproduce high volume\high quality \high varietygoods
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GLOBAL CORPORTIONS
Characteristics of Global corporation
i-Facilities\plants are located world wide
ii-Components\parts\services are sourced on a
global basis iii-Global product design\process technology are
used
iv-Process technology is standardized v-Demand of products is considered world wide
vi-Logistics\Inventory control systems are global
in nature
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REQUIREMENT OF
EXCELLENCE
i-EXTERNL QUALITY-Value added
performance exceeding customer
expectations.Means repeat sales,warranty return
rates,independent customer satisfactionsurveys,complaints,service wait time etc
ii-INTERNAL QUALITY-Defect free
processes,means yields,defect rates,errorrates,process capabilities ,percentage of processes
with fail safe mechanisms\procedures
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Requirement of
excellence(contd.)
iii-DEPENDIBILITY-Ensure adherence to
promise,means on-time delivery to
customer,timely deliveries from suppliers
iv-RESOURCE USE-Eliminate waster and non-value added steps,means labour productivity
ratio,inventory turnover,output rates
v-FLEXIBILITY-Ability\response to customerchanges quickly,means time to bring new
product,customer order lead time,setup times etc
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Requirement of
excellence(contd.)
vi-HUMAN RESOURCE IMPROVEMENT-
Employees,customers,suppliers are the most
important and valuable assets,means effective
training,suggestion schemes,attendance rates etc vii-INNOVTION-Advancing in the application of
product\process technology without waste,means
time to market,product feature comparisons withcompetitors,number of patents ,percentage of
product line turnover
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Requirement of
excellence(contd.)
vii-ENVIRONMENTAL SOUNDNESS-Business
operations without damage to the
environment.Means levels of
effluents\emissions,recycling percentage,accidentrate etc
viii-FINANCIAL RESULTS-Rate of return
ensuring satisfaction by Financialsupporters.Means Profit & Loss
statement,financial ratios,trends on actual costs
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Comparison of performance
Five ways to make comparisons
1-STANDARDS-Means comparison withaccepted norms
2-PRIOR PERFORMANCE-Past internally datacan be complied
3-CUSTOMER EXPECTATIONS-External
performance measurement 4-SIMILAR OPERATIONS-Comparisons with
world class competitors
5-ULTIMTE STANDATDS-Set the ultimate goalof Zero error standard
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Factors of excellence of world
class companies
i-Strategy & culture
ii-Fix new skills amongmanagers\executives
iii-Creativity and innovation iv-Adaptive to innovative changes
v-Customer\employee orientation vi-People oriented recognition\reward
system
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Factors of excellence of world
class companies(contd.) vii-Team work,group activities,employee
empowerment
viii-Transformation oriented leadership-Leadersled & inspire change
ix-Belief in quality,discipline and resultorientation
x-Prevention orientation and belief in neverending improvements (Kaizen)
xi-Total quality management orientation
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The path to becoming world classDrive performance using people\technology
Leadership defines and communicates thegoals\tasks
Employees must be empowered to apply their skillsfor efficient operations
Technology is the means to transform raw materials
into saleable products.Technology supported with proper procedures and
trained\motivated personnel can ensure success
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BUSINESS DRIVERS
Things which drive improvements
i-Quality-Process capability\performanceindices and refers to product which meets
customers needs ii-First pass first quality-Refers to making
product right first time
iii-Throughput-Ensure efficient productioncycle time
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Time based competition Using JIT(lean manufacturing) for time based
competition
BENEFITS
i-Customers will pay for quick response.Supplierswill be benefited with fast delivery.Ensures fastergrowth and greater market share
ii-The re-engineered processes increaseproductivity,high quality & costs as comparable tothe competitors
i i b d
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Becoming a time based
competitors
i-It focuses on processes & not functions
ii-Managers are evaluated and rewarded on the
basis of their time metrics
iii-Just in Time is the key to speed on the shopfloor
iv-Reengineering based on JIT concept is the key
to speed in all the firm,s processes.Reengineering
is the engine of Time based competition
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WORLD CLASS SUPPLIERS
Choosing suppliers-While
selecting,flexibility,location,price,product\
service changes,reputation and financial
stability re key considerations
Evaluating sources of supply-must be
evaluated periodically onprice,speed,responses to changes
WORLD CLASS
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WORLD CLASS
SUPPLIERS(contd.)
Supplier audits-periodic audits of suppliers
provide a means of keeping up-to-date,suppliers
production\service,quality,delivery issues etc
Supplier certification-supplier certificationexamines the policies\capabilities.If supplier
exceeds the expectations,they are certified as long
term relationship suppliers and sometimes calledWorld class suppliers
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Supplier partnership World class suppliers are viewed as partners of
world class manufactures and build long termrelationship,which could lead to improvedcompetitiveness in
i-Cost reduction in purchase\production costs
ii-Reduction in transportation\inventory costs
iii--Improvement in product design\quality\newproducts\processes
iv-Reduction in throughput time
v-Improvement in customer satisfaction
WORLD CLASS
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WORLD CLASS
CUSTOMERS(BUYERS) World class customers(buyers) are characterized
by seven drivers of partnering with suppliers 1-Excellent quality
2-Timeliness
3-Flexibility
4-Superior communication
5-Continuous improvement 6-Collaborative attitude
7-Trust
Ch t i ti f d
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Characteristics of a good
customer towards supplier i-Awareness \attractiveness to their suppliers
needs ii-Record of keeping promises
iii-Willingness to share plans\information withsuppliers
iv-Willingness to explore process\product
improvement v-Solving suppliers problems expeditiously
vi-Active feedback from suppliers and taking
corrective action,wherever required
Benefits achieved by being world
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y g
class customers in supplierpartnership
i-Cost saving-Better communication with
suppliers lowers administrative costs ii-Time saving-By giving early
information,suppliers lead time can be reduced
iii-Better products\Processes-Based on suppliersexperience\expertise,he can offer better
products\Processes
iv-Improved customer organization andprofessional skills-By spending time withsuppliers,customers learn new communicationskills\aspects of their organization
T d l b l b i
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Today,s global business
conditions For developing business strategy ,it is essential to
know the factors affecting today's global businessconditions
i-Reality of global competition
ii-Quality,customer service & cost challenges ofthe supplier firm
iii-Rapid expansion of advanced productiontechnology
iv-Scarcity of production resources
v-Social-responsibility issues
Competitive priorities of
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Competitive priorities of
production #-Low production costs
#-Fast and on-time delivery
#-High quality product\services
#-Customer services and flexibility
After setting competitive priorities
,operations strategy must determine the required
production system needed to provide the priorities
for the product\services
Performance of world class
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Performance of world class
manufacturers
Areas of production\operation management
relevant to achieve competitive advantage
1-Manufacturing\operations strategy-
Requires long term business plans such spersonnel training & development,market
development,new product\servicedevelopment,high tech. Production
process,R&D
Performance of world class
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Performance of world class
manufacturers Characteristics of world class producers
i-Customer first
ii-Introduce new products\services faster
iii-Ensure Total Quality Management iv-High labour productivity\Low production costs
v-Shop globally for supplies
vi-lean\flexible organization with balancedinventory
V-Develop specialized \focus production facilities
vi-Encourage strategic alliances\joint ventures to
Performance of world class
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Performance of world class
manufacturers(contd.) 2-Forecasting in operations management-
Forecasting experts maintain sophisticatedcomputer software and get data such as marketresearch,industry trade association data etc to
ensure best long range estimate of sales ofnew\existing products in global market andmonitor performance of forecasts
The effective forecasting of productioncapacity,size of work force,quantity of materials
purchased ,inventory levels and working capital
requirement drives a closely managed productionplanning system
Performance of world class
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Performance of world class
manufacturers(contd.) 3-Designing\Developing products and
production processes-World class producers planand design their production processes withspecific capabilities that are matched with the
competitive priorities of their business strategies High product quality,high production
flexibility,low product cost and high customer
service are the major strengths.To achieve theyuse various technologies such as usingCAD\CAM,continuous improvement,improving
flexibility & reducing costs by redesigningproduction processes\doing automation etc
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Performance of world class
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Performance of world class
manufactures(contd.) 5-Long range capacity planning and facility
location-World class producers carry out longrange business planning considering expectedchanges in product life cycle and involve world
wide search for location of Plants 6-Facility Layout-World class producers strive
for flexibility in their layouts ensuring change in
production rates\designs quickly and useAutomated Layout Design Program,ComputerizedRelationship Layout Planning,Computerized
Relative allocation of facilities techniques forlayout designing
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Performance of world class
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Performance of world class
manufacturers(contd.) 10-Shop floor planning and control in
manufacturing-In this type of production,worldclass producers have effective MRP-II systems in
place which provide near real time information for
companies,their suppliers\customers.These
systems facilitate meeting customer delivery
promises,optimal loading of shops,low productioncosts and high product quality
Performance of world class
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Performance of world class
manufacturers(contd.) 11-Planning and scheduling operations-World
class producers offering services have adoptedadvanced\well known planning,analyzing andcontrolling approaches and have recognized the
unique properties of service operations and havedeveloped novel management approaches forservice operations
12-Just In Time manufacturing-Elimination ofwaste,enforced problem solving,building teamwork,TQM,parallel processing,Kanban production
control and JIT purchasing are essential in worldclass manufacturing
Pl
Performance of world class
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Performance of world class
manufacturers(contd.) 13-Supply Chain Management-World class
producers are forming partnership with suppliersto expedite production of products of perfectquality and use computers for solving complicated
logistic related issues 14-Productivity,Team work and
Empowerment-World class producers hire
workers who have problem solving abilities andtrain them in multiple skills.Workers are educatedand empowered so that they can work in teams to
solve production problems and respond tocustomer needs also.
Performance of world class
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Performance of world class
manufacturers(contd.) 15-Quality Management-World class
manufacturers are committing tremendousresources to put in place TQM program aimed at
continuous quality improvement
16-Quality Control-World class companies have
comprehensive proactive total quality
management programs with specific projectsaimed at improving quality to meet customer
expectations
Performance of world class
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e o a ce o wo d c ass
manufacturers(contd.) 17-Maintenance Management and Reliability-
World class producers give much of responsibilityfor repairs and preventive maintenance to workers
and they are made to feel that they own machines
and ensure avoid major breakdowns by ensuring
regular preventive maintenance.They also
implement JIT system to increase flexibility inproduction and implement a sophisticated
preventive maintenance program
Path of world class
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Manufacturing i-Fewer suppliers
ii-Focused factories
iii-Simplification & variety reduction
iv-Scheduling to a rate of production v-Fewer storage racks
vi-Frequent deliveries by suppliers
vii-Smaller manufacturing plants viii-Minimum material handling
ix-Less paperwork
x-Fewer inspectors
World Class manufacturing
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g
Strategy The world class companies are required to build
an interface between marketing andmanufacturing,and follow actions such as
i-Invest more in R&D,emphasize less on short
term payoff. ii-Improve manufacturing capability by investing
in people\equipments.
iii-Remove communication barriers.
iv-Labor force is to be murtured.
v-Build quality at design stage,emphasize onprocess innovations.
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World Class Service Delivery Characteristics-Service excellence,Delight
customers,Expand customer expectations to alevel, competitors can not fill
Service quality-Raises customer
expectations,seeks challenges,improvescontinuously
New technology-Source of first mover to gain
advantage
Work force-Innovative,create procedures
First line management-Is listened to by topmanagement as a source of new ideas
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World Class Performance(contd.) Strategy on the road to Excellence-
Manufacturing strategy starts with anassessment of where a firm is now and avision of where it wants to be in future inkey indicators such as on-time delivery tocustomer requirements,manufacturing lead
time,inventory turns,quality,new productintroduction time,supplierrelations,employee involvement ,flexibility
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World Class Performance(contd.) Vision-Answer questions with What-if for a
firm looking forward 3\5 years hence i.e. reducemanufacturing cycle time by 70%,quality costs arereduced by 25% etc
Control-Having assessed its strengths andweaknesses and defined its vision,the companymust gain control over the current environment by
developing process to ensure integrated planningfrom top to bottom.Requires education andtraining to all employees in systems,policies and
procedures to support the user and process.
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World Class Performance(contd.) Simplification-Ensure continuous
improvement through team work on
changeover times,factory layout,restrictive
job classifications,supplier relations etc Automation-Computer Integrated
Manufacturing,MRP-ii,JIT,Total Qualitycontrol,Focused factories etc are supportive
of world class factories
World Class Companies in 21st
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Century Previous Decade(1990-2000)-Competitive
priorities were Low price,New productintroduction speed,Quality,Delivery speed,Productreliability
Present Decade(2000 onwards)-Competitivepriorities high quality at low price,means highquality,timely availability and removal of non-
value adding wastes.requires finding externalpartners ,who can perform valued function,withadvanced communications and efficient logistics
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Customer focused Principals 1-Team up with customers,organize by families of
customers to products
2-Capture and apply customer,competitive and
best practice information
3-Dedicate to continual,rapid improvement in
quality,response time,flexibility and value
4-Frontline employees involved in change andstrategic planning-to achieve unified purpose
Customer focused
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principals(contd.) 5-Cut to the few best components,operations and
suppliers 6-Cut flow time,distance,start up,and changeover
times all along the chain
7-Operate close to customer,s rate of use ordemand
8-Continuously enhance human resources throughcross training,job,and career path rotation andimprovements in health,safety and security
Customer focused
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principles(contd.) 9-Expand the variety of rewards ,recognition,pay
and celebration-to match the expanded variety ofemployee contribution
10-Continuously reduce variation and mishaps
11-Front line teams record and own process dataat the work place
12-Control root causes of cost andperformance,thereby reducing internal transactionsand reporting,simplify external communications
Customer focused
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principles(contd.) 13-Align performance measures with universal
customer requires-quality,speed,flexibility andvalue
14-Improve present equipment and human work
before considering new equipment and automation 15-Seek simple ,flexible,moveable,low
cost,readily available equipment and work
facilities-in multiples,one for eachproduct\customer family
16-Promote,market and sell your organization,s
increasing capability and competence-everyim rovement made.
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