Manufacturing: Economics, Quality and Organisation - Coursework Example

Manufacturing Organization: Systems and Benefits By + Introduction The manufacturing organization of any firm is important as it determines not only the production performance of a company but it also impacts on the market prospects of that particular firm. In the modern world where the manufacturing sector has become highly competitive, decision makers have to implement manufacturing process that not only aim at production of quality products but also lead to cost savings and efficient use of resources (Ostwald, 2007). This principle of lean manufacturing has evolved over time and was first introduced by Toyota Motor Corporation back in mid-1930. Manufacturing processes can actually be used as a yardstick by the managers in measuring the performance of their firm relative to other firms. Manufacturers today face a lot of pressure from the many different stakeholders as they try to cope up with emerging trends in the manufacturing world. Shareholders, customers, suppliers and regulators all affect the operations of firms. The ability of a firm to quickly foresee and adapt to these pressures can be a major foundation of gaining competitive advantage over other firms. However, this is not easy as most legacy applications and the required infrastructure are inherently rigid and inflexible. The call to come up with new innovative operational system is top of the agendas of many organizations. This research examines how best manufacturers can leverage their business processes in manufacturing operations to meet the expectations of different stakeholders and achieve a competitive advantage. The research also aims at finding out the appropriate methodologies that can be used by firms to ensure the production process is efficient in that wastes in the production cycle are reduced, costs of production are lowered, output is increased as production lead times are reduced and the quality standards of the products are improved. Manufacturing Organizations (Efficiency) Manufacturing is the process of processing raw materials into a finished product normally done by large scale industrial operations with use of industrial machines. Manufacturers integrate elements of the organization system to meet the needs of customers in an effective and timely way. Manufacturers eliminate organizational obstacles to enable improved communication and enhance high quality production of goods and services. Factory Organization The factory organization of a firm comprises the following components; job shop, flow shop, linked cell, project and continuous process. A job shop is a facility that is capable of producing a wide range of products in small volumes. The production facility is for general purpose and is flexible enough to meet different needs. The major characteristics of a job shop include; a wide variety of products, equipped with general purpose machines, operated by skilled employees, low levels of production, scheduling and procedure planning is done by route sheets. A flow shop or an assembly line is a process where discrete parts are joined to make an end product. This operation is normally high in volume and produces products with similar characteristics and performance. This process is mostly highly automated and production process is continuous with a possibility of one routing only. The main features of assembly line include; plants are often designed for a single product line, it is very inflexible, the layout is product oriented and it is a more productive stage. Line balancing is very important at this stage. A batch process is one that does not have enough volume from a given product to effectively use the facility. The common components are made in volume and used to create the product needed. The layout is functional and components are manufactured in large batches and stored. This stage involves complicated routing of processes. Cellular Manufacturing Cellular manufacturing refers to the grouping together of products into classes by processing operations so that members of the same class are processed in a cell (Kamrani, 2005). The layout is cellular where products are grouped to make one class. Machines in cells are linked and one item is manufactured at a time. Cellular manufacturing also involves a multi-tasking work team who stand and walk as they operate machines. The machines here are slower, smaller and flexible. Lean Manufacturing Lean manufacturing is the systematic removal of waste in a production system. This type of manufacturing was exemplified by Japanese automobile company Toyota which focused on cutting down the production activities in its manufacturing processes. Lean manufacturing is a Japanese method which focuses on 3M’s, that is, muda which means waste, Mura which means inconsistency and muri which stands for unreasonableness (Briody, 2010). The wastes can be in form of excess production, early production or delays. An example of waste can be producing more than is needed before it is needed, doing more unnecessary work and maintaining excess inventory. Inconsistency relates to increases in the variability of manufacturing. Inconsistent processes will always lead to inconsistent results while consistent processes lead to consistent results. Finally unreasonableness applies to many managerial and manufacturing activities. Things such as playing blame games instead of looking for solutions amounts to unreasonableness. The 5 S’s of lean The 5 S’s include Seiri which stands for sort and necessary items, Seiton which stands for set in order and efficient placements, Seison stands for sweep and cleanliness, Seiketsu is for standardization and control improvement and lastly Shitsuke which stands for discipline and sustain (Compton, 2008). Just In Time A Just-in time manufacturing system involves flow systems where products arrive when needed (Curry, 2010). This system works best when the product mix is stable and the flow is uniform. It helps reduce inventory and highlight trouble stages in manufacturing. Kanban System In this type of control, products are held at a manufacturing station awaiting approval from downstream machine. Kanban is A Japanese word which refers to approval to continue with the process (Heim, 2002). Initially paper cards were used to authorize the movement but now day’s electronic messages are used. Production Kanban are used to authorize production activities while transport kanbans authorize movement tasks. Inventory Management Inventory management involves efficient oversight of the constant inflow and outflow of units in an existing inventory. The main objectives of inventory management are to ensure the company is keeping an optimal level of inventory to reduce the associated costs such as taxes on inventory held (Inventory Management, 2005). Time management is important in managing inventory as it helps make orders at appropriate times that would not affect the running of production activities. Inventory management also helps in preparation of records that are used to determine any tax dues which helps the company make sufficient budgets and avoid any conflicts with tax authorities. Manufacturing Organizations (Quality) Quality Control Quality control is a process of repetitive technical activities to measure and control the quality of products as they are being developed (Pisano, 2005). This process is aimed at ensuring data correctness and completeness, identify and solve omissions and errors, record and file inventory material and all quality control activities. Quality control activities may include general methods like data collection and use of standardised processes to calculate and estimate uncertainties. Quality Assurance Quality assurance includes planned activities of review techniques done by personnel who are not involved in inventory compilation (Irani, 2009). Independent third party reviews are performed after the finalization of inventory in line with quality control guidelines. The reviews are to verify if the quality objectives were met and support the usefulness of the quality control programme. Quality Systems A quality system is a guideline that has the standards an organization is working towards achieving (Desai, 2010). It states how these standards are to be achieved by the organization, that is, the responsible personnel, the expected actions and other documents that will be applied in the process. Proper understanding and implementation of this document is crucial as it provides techniques to be used in developing a successful quality system. The main emphasis is on quality which has an important on development. Quality Management – ISO 9000 Quality management is founded on a number of principles that are aimed at helping a company produce quality products and meet consumer expectations (Heim, 2002). Some of these principles include a solid customer focus and incentives for top management. High quality products bring a lot of business benefits both commercial and non-commercial. The ISO 9000 family concentrates on a number of issues relating to quality management. It contains standards which provide guidance for companies to ensure quality consistency. Six-Sigma Six-sigma is a measure of quality used in organizations that make every effort to achieve perfection (Ostwald, 2007). It is a data driven approach for eliminating faults in manufacturing processes. A six sigma defect is anything other than customer specifications while a six sigma opportunity is the total chances of a defect. Total Quality Management Total quality management is a management methodology aimed at achieving long-term attainment of customer contentment (Ostwald, 2007). This management tool uses strategic plans and effective communication to instil a quality culture in the running of activities of the management. It involves employee commitment towards customer focused service delivery. Kaizen Kaizen is a Japanese word which means rapid improvement activities often considered the main pillars of lean production. Kaizen focuses on cost elimination, increasing productivity and achieving long term sustainable improvement in given processes in the organization (Desai, 2010). The kaizen plan aims at involving workers in multiple activities and levels to solve a specific problem or improve a process in the organization system. Analytical tools are used to eliminate any wastes in a given process of production. Decisions are implemented rapidly and these activities do not involve huge capital outlays. The implementation process passes through several stages starting with preparation and planning station where a solution strategy is made after observing the existing problem. The implementation stage involves ensuring all members have the same picture of the problem at hand and manufacturing wastes are identified, solutions are brainstormed by members and action is taken. The follow up phase involves ensuring improvements are not temporal but sustained over the long period. Statistical Processes Control Statistical process control is a methodology that can be used by the management of an organization to monitor its process behaviour (Kamrani, 2005). The most used tool is the control chart which helps in differentiating two types of variations that is special cause variation and common cause variation. Special cause variation is exogenous and tells if the process is within statistical control or not. Common cause variation is intrinsic to the activities and is always present. Benefits of Manufacturing Organizations Organizations’ comprise of people performing activities and these activities and people are helped by technology in order to manufacture and deliver products to customers. Organizations have applications that belong to different technological generations and are unique in their own making. These applications cannot be able to integrate with each other due to their different orientations (Curry, 2010). As a result very vital and valuable manufacturing processes of organizations are done in a rather traditional manner. Integrating solutions can be used to upgrade these applications and lead to a much more efficient manufacturing process. Integration solutions can also facilitate firms to create an infrastructure that will improve the inter-relationships between different stages of manufacturing. Impacts of Organization Systems Financial Implications Adapting to a new organization system is costly as a lot of resources are spent not only on the plant and machinery but also on employee training, system implementation and monitoring. Normally, the boards of organizations would sanction the process after sources of funds have been identified. However, the long term impact is that production efficiency and increased productivity will out do the initial capital investment. Cost benefit analysis are carried out to determine the viability of the proposed system integration. Impact on Workforce Integration of new systems creates job opportunities for individuals with given expertise skills required in the new system processes. However, a new system might lead to employee layoffs due to the associated cost reduction measures adopted as well as employees’ lack of specific expertise skills required in the adopted system. Impact on Performance The general performance of organizations is expected to increase and the firm increases its comparative advantage by adopting a better system. Performances can be measured in terms of commercial success, that is , increases in profits or non-commercial success such as improved environmental responsibility due to acquisition of environment sensitive machinery that control pollution. Impact on Brand Quality The qualities of products are expected to improve due to integration of new organizational system. This could be brought about by an increased efficiency and use of raw materials and adoption of better production processes. Other Impacts The other expected effect of a new organizational system includes; Enterprise Reengineering, Workflow design and management and management decision support. Benefits There are many benefits that organizations enjoy by using organization systems. The most important benefits include increased productivity, decreased production costs and increase in efficiency and effective use of resources. Integration solutions enable the use of data and functionality embodied in the organizations prevailing applications instead of replacing them with new systems. Integration also brings s about long run benefits such as instant gains on real-time view of data and processes, which can improve decision-making. Organization systems also provide the elasticity to rapidly adapt business processes to put up with growth and meet emerging business challenges (Compton, 2008). Challenges Limited Knowledge of the Tools System thinking comes automatically for some individuals. However, for many individuals it is a completely different approach to problems. The structured tools and link of questioning used to achieve understanding of problems is not familiar to many (Irani, 2009). Managers will need to understand how to manage these differences in understanding and the difficulties that come with using different organization systems. Management and Facilitation of Multifunctional Teams The ability to create all-round functioning teams with all the stakeholders is not an easy function. It requires patience, active listening, encouragement and application of expertise skills in the practice of good group dynamics (Pisano, 2005). To add on that, for the whole process to be a success, the management and facilitators must avoid stakeholders’ conflicts of interests while guiding them towards the realization of the organization’s goals and objectives. Fostering the Courage to View Situations More Honestly System integration demands an admittance that the current structures and manufacturing practices are actually contributing to the existing problems in quality of products, use of resources and inventory management. The tendency to despise views of less experienced personnel and becoming defensive of the organizations practices works against realization of loopholes and hinder the improvement of the organization both in the market and production front (Briody, 2010). Overcoming these tendencies is necessary for organization systems to work. Machine A expenses Break-Even Analysis Machine A Machine B expenses Break-even Analysis machine A Machine B Expenses Machine B Break-even Analysis B2. True cost= direct costs+ overhead costs Batch = 2500 Time per component = 4 Direct costs = 2500*2= 5000 Labour costs (2500*4/60)15 = 2500 Total overheads = 3.5*2500 = 8750. True cost = 5000+2500+8750 = 16250 B3. year Cashflow machine A Cashflow machine B 1 -80000 -80000 2 5000 35000 3 8000 25000 4 12000 18000 5 20000 10000 6 25000 7000 7 30000 5000 i) Payback period Machine A – 7 years Machine B- 5 Years Project B since the capital invested is recovered faster (5 years) than in project B which takes 7 years. ii) A project with the lowest payback period might have less returns than a project with a higher payback period. b) NPV = P.V of cashflows – invested capital Project A @ 7% 5000*0.9346 + 8000 *0.8734 + 12000* 0.8163 + 20000*0.7629 + 25000*0.7130 + 30000*0.663 - 80,000 = (74429-80000)= -5571 Project B @ 7% 35000*0.9346 + 25000*0.8734 + 18000*0.8163 + 10000*0.7629 + 7000*0.7130 +5000*0.663 – 80000 = (85174-8000) = 5174. c) i) NPV machine A @ 4% 5000*0.9615 + 8000*0.9246 + 12000*0.8890 + 20000*0.8548 + 25000*0.8219 + 30000*0.7903-80000 = (84225-8000) = 4225. ii) I.R.R of machine A B4. i) average for each sample batch 25+25.1+24.8+25.1+25.1+24.9+25+25+24.9+25.1 =250/10=25 25.2+24.9+24.9+25+25+25.1+25.1+24.9+25.1+25.1=250.3/10=25.03 25+25.1+25.2+25.2+25.3+25.1+25+25.4+25+25.1=251.4/10=25.14 25.2+25.4+25.4+25.5+25.4+25.5+25.3+25.2+25.2+25.4=253.5/10=25.35 25.3+25.4+ 25.3+25.5+25.6+25.2+25.3+25.5+ 25.5+25.4=254/10=25.4 25.2+ 25.4+ 25.3+ 25.6+ 25.6+25.5+ 25.6+25.6+ 25.4+ 25.4=254.6/10=25.46 25.4+25.5+ 25.6+ 25.7+ 25.6+ 25.6+ 25.7+ 25.6+ 25.7+ 25.4=255.8/10=25.58 25.7+25.6+ 25.7+ 25.6+ 25.6+ 25.6+25.4+25.7+ 25.6+25.8=256.3/10=25.63 Range 1cm=10000mm 5mm=0.0005cm 24.995-25.005 25.0295-25.0305 25.135-25.1405 25.345-25.355 25.395-25.405 25.4595-25.4605 25.5795-25.5805 25.6295-25.6305 References Briody, E. K., Trotter, R. T., & Meerwarth, T. L. 2010. Transforming culture: creating and sustaining a better manufacturing organization. New York: Palgrave Macmillan. Compton, W. D. 2008. Design and analysis of integrated manufacturing systems. Washington, D.C.: National Academy Press. Curry, L. G., & Feldman, R. M. 2010. Manufacturing systems modeling and analysis (2nd Ed.). New York: Springer. Desai, D. K. 2010. Six sigma. Mumbai [India: Himalaya Pub. House. Heim, J. A. 2002. Manufacturing systems foundations of world-class practice. Washington, D.C.: National Academy Press. Inventory management Rev. ed. 2005. Lenexa, KS: ADVANSTAR Veterinary Healthcare Communications. Irani, S. A. 2009. Handbook of cellular manufacturing systems. New York: Wiley. Kamrani, A. K., Parsaei, H. R., & Liles, D. H. 2005. Planning, design, and analysis of cellular manufacturing systems. Amsterdam: Elsevier. Ostwald, P. F., & Muñoz, J. 2007. Manufacturing processes and systems (9th Ed.). New York: John Wiley & Sons. Pisano, G. P. 2005. Manufacturing renaissance. Boston, MA: Harvard Business School Press. Read More