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Executive Summary

The objective of this study is to identify ways to make the system of manufacturing so efficient, so responsive, and so effective that it will make the organization of which it is a part the most competitive in the world. The committee concludes that this will be possible only through an enhanced understanding of the manufacturing system and a willingness to persist in a continuous examination of the conventional wisdom for managing and controlling that system. It is of prime importance that manufacturers constantly remind themselves that the adoption of a “system view” is critical to accomplishing the desired objectives.

This study argues that the modern manufacturing organization cannot be competitive if it continues to operate as a loosely coalesced group of independent elements whose identity depends on a discipline or a detailed job description. The study explores principles that have been demonstrated as generic to improving the effectiveness of manufacturing systems. The study draws heavily on the experience of U.S. manufacturers and a rapidly growing body of scholarly work linked closely to changing industrial practices. Particularly relevant research and publishing includes such topics as concurrent product and process engineering, total quality management, just-in-time manufacturing and distribution processes, quality function deployment, lean production, and incorporation and management of innovation.

With the assistance of many experts and practitioners who have participated in meetings and workshops and written papers as background material



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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE Executive Summary The objective of this study is to identify ways to make the system of manufacturing so efficient, so responsive, and so effective that it will make the organization of which it is a part the most competitive in the world. The committee concludes that this will be possible only through an enhanced understanding of the manufacturing system and a willingness to persist in a continuous examination of the conventional wisdom for managing and controlling that system. It is of prime importance that manufacturers constantly remind themselves that the adoption of a “system view” is critical to accomplishing the desired objectives. This study argues that the modern manufacturing organization cannot be competitive if it continues to operate as a loosely coalesced group of independent elements whose identity depends on a discipline or a detailed job description. The study explores principles that have been demonstrated as generic to improving the effectiveness of manufacturing systems. The study draws heavily on the experience of U.S. manufacturers and a rapidly growing body of scholarly work linked closely to changing industrial practices. Particularly relevant research and publishing includes such topics as concurrent product and process engineering, total quality management, just-in-time manufacturing and distribution processes, quality function deployment, lean production, and incorporation and management of innovation. With the assistance of many experts and practitioners who have participated in meetings and workshops and written papers as background material

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE for this volume, 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 show directions that should be taken. It is the committee's strongly held conviction that the worldwide competitive environment will richly reward the manufacturers who adopt these principles while penalizing those who do not. Although success in implementing the foundations depends on many things, the committee emphasizes that they represent a system of actions that cannot be embraced piecemeal. The foundations are as interrelated and as overlapping as are the elements of the manufacturing system they are intended to improve. The foundations must be viewed as a system of action-oriented principles whose collective application can produce important improvements in the manufacturing enterprise. Goals and Objectives What should be a manufacturer's goal if it is to compete successfully in the global marketplace? This goal is often referred to as being a “world-class” manufacturer, a term used to convey the sense of excelling. The Japanese describe it as striving to be the best-of-the-best. FOUNDATION: World-class manufacturers have established as an operating goal that they will be world class. They assess their performance by benchmarking themselves against their competition and against other world-class operational functions, even in other industries. They use this information to establish organizational goals and objectives, which they communicate to all members of the enterprise, and they continuously measure and assess the performance of the system against these objectives and regularly assess the appropriateness of the objectives to attaining world-class status. The Customer A manufacturing organization serves a variety of customers. In addition to the customers who expect to purchase high-quality products and services, the owners or stockholders may also be thought of as customers in that they expect a reasonable return on the investment that they have made in the company. The employees are customers in that they expect an em-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE ployer to recognize their contribution to the success of the company and to provide them with a reasonable reward for their efforts. These are the stakeholders in the organization in that each has made a personal commitment to its success. The stakeholders have special expectations and needs that must be met. FOUNDATION: World-class manufacturers instill and constantly reinforce within the organization the principle that the system and everyone in it must know their customers and must seek to satisfy the needs and wants of customers and other stakeholders. The Organization The complexity of the manufacturing system arises from many directions: the interdependence of the elements of the system, the influence of external forces on it, the impact that it can have on its environment, and the lack of predictability in the consequences of actions. FOUNDATION: A world-class manufacturer integrates all elements of the manufacturing system to satisfy the needs and wants of its customers in a timely and effective manner. It eliminates organizational barriers to permit improved communication and to provide high-quality products and services. The Employee Creating a world-class manufacturing organization begins with recognition that the most important asset of the organization is its employees. When properly challenged, informed, integrated, and empowered, the employees can be a powerful force in achieving the goals and objectives of the organization. FOUNDATION: Employee involvement and empowerment are recognized by world-class manufacturers as critical to achieving continuous improvement in all elements of the manufacturing system. Management's opportunity to ensure the continuity of organizational development and renewal comes primarily through the involvement of the employee. The Supplier or Vendor It is essential that the barriers that have existed between supplier and purchaser be attacked as actively as are the barriers between the elements in a manufacturing organization. The sharing of goals, the exchange of infor-

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE mation, the interchange of people, and the making of long-term commitments are some of the ways in which these barriers are being overcome. FOUNDATION: A world-class manufacturer encourages and motivates its suppliers and vendors to become coequals with the other elements of the manufacturing system. This demands a commitment and an expenditure of effort by all elements of the system to ensure their proper integration. The Management Task Imaginative, creative leadership at every level of an organization is critical to building on the foundations of world-class manufacturing systems. Management creates the culture within which the organization functions. Management must exhibit the concern for the health and well-being of the organization's human resources. Management must insist that the organization look beyond its borders to interact with its customers, its suppliers, and the educational systems that are training its present and future employees. It is a challenge to the organization to find the proper management for the circumstances in which it finds itself. FOUNDATION: Management is responsible for a manufacturing organization 's becoming world-class and for creating a corporate culture committed to the customer, to employee involvement and empowerment, and to the objective of achieving continuous improvement. A personal commitment and involvement by management is critical to success. Metrics Performance evaluation is a process applied throughout the manufacturing organization to measure the effectiveness in achieving its goals. Because of the variety, complexity, and interdependencies found in the collection of unit processes and subsystems that define the manufacturing system, appropriate means are needed to describe and quantify rigorously the performance of each activity. FOUNDATION: World-class manufacturers recognize the importance of metrics in helping to define the goals and performance expectations for the organization. They adopt or develop appropriate metrics to interpret and describe quantitatively the criteria used to measure the effectiveness of the manufacturing system and its many interrelated components.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE Describing and Understanding It is difficult to conceive of improving the current status of the system without first having a clear description of its status and character. This requires identifying the interrelationship and theoretical limits of the operational variables. It demands that important system parameters be identified and measured. FOUNDATION: World-class manufacturers seek to describe and understand the interdependency of the many elements of the manufacturing system, to discover new relationships, to explore the consequences of alternative decisions, and to communicate unambiguously within the manufacturing organization and with its customers and suppliers. Models are an important tool to accomplish this goal. Experimentation and Learning Organizational learning is a broad-based strategy for capturing and making available to members of the organization information and knowledge that enable them to benefit from experimentation and the experience of others. Too often in manufacturing, sources of information become scattered and isolated and individual learning experiences are not automatically converted to organizational memory and made available for all members to draw and build upon. The rate at which an organization improves its performance as a result of learning is perhaps one of the principal determinants of whether it can become best-of-the-best. FOUNDATION: World-class manufacturers recognize that stimulating and accommodating continuous change forces them to experiment and assess outcomes. They translate the knowledge acquired in this way into a framework, such as a model, that leads to improved operational decision making while incorporating the learning process into their fundamental operating philosophy. Technology U.S.-based manufacturers have often adopted the view that technological prowess is a viable means of compensating for other shortcomings. It is the committee's strong conviction that a manufacturer can make the best use of technology only after it has embraced and is practicing the foundations described above. Only then can technology become a powerful force in achieving a competitive advantage.

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MANUFACTURING SYSTEMS: FOUNDATIONS OF WORLD-CLASS PRACTICE For management, selection of the proper technologies from among technological opportunities is becoming a complex challenge that may be different for each manufacturer and for individual facilities. Each manufacturer must develop a strategy that encourages the search for the best and most important technologies, develops a procedure for effectively analyzing technological opportunities, creates or acquires the expertise needed to implement those technologies, and commits the necessary financial and human resources to introduce the new developments when they become available. FOUNDATION: World-class manufacturers view technology as a strategic tool for achieving world-class competitiveness by all elements of the manufacturing organization. High priority is placed on the discovery, development, and timely implementation of the most relevant technology and the identification and support of people who can communicate and implement the results of research. Implementing the Foundations The implications of the competitive environment that has evolved over the past 20 years are profound. Just as no single element in the manufacturing system can ensure that an enterprise will be successful, so can no single sector of the national infrastructure ensure that the industrial sector will be competitive. A commitment to renewal of the U.S. manufacturing sector is essential. A willingness to learn from each other is critical. No one can afford to take the risk of waiting for others to show the way. All manufacturers must embrace the doctrine that continuous improvement demands their immediate and unrelenting attention. U.S. manufacturers cannot allow their competitors to set the standards by which success will be achieved and to be the leaders in meeting those standards. In addition, the United States must establish as a national goal a strategy that encourages and supports the adoption of the foundations of world-class manufacturing systems.