AN AUTO PARTS MANUFACTURER in Northern Europe started to slip in profitability. For historical reasons, manufacturing was organized in a very disjointed way with facilities scattered over the countryside, each managed independently and concentrating on only a part of the full production process. Consolidation seemed advisable to regain profitability and the managing director pondered which of several organizing themes he might adopt to guide the unit’s retrenchment.
- A manufacturing manager with a midwestern specialty chemicals operation wondered how he could revitalize his company’s manufacturing function. The time seemed ripe: the flow of products out of R&D was slowing to a trickle, and the level of the company’s inventories was beginning to alarm top management. While the principles of “just-in-time” (JIT) manufacturing appealed to him, the manager was uncertain how to apply them to his operation, since the layout was inflexible and it wasn’t possible to use different equipment.
- A Swiss precision machine maker was eager to involve the workforce to improve production, but did not know how to draw on the knowledge and energy of teams that were already established. The workforce had seen program after program come and go and were understandably skeptical.
The technologies and characteristics of these three operations were different, but in each case the managers arrived at the same solution—the reduction of throughput time. Also called cycle time, lead time, and manufacturing interval, throughput time refers to the calendar time it takes to make a product, from the time materials arrive at the factory and are available to be worked on until the finished product is awaiting shipment to a customer. How can the concept of reducing throughput time be useful? Let’s return to our examples.
- The European auto parts manufacturer decided to continue to make its requirements rather than buy them from outside suppliers, but to do so at a central site and with an entirely revised management system. Production planning was revamped, the layout rearranged around manufacturing cells, and total manufacturing area and inventories slashed in half. Throughput times shrank from twelve weeks to three, and profitability returned despite level sales.
- The midwestern specialty chemicals manager challenged his group to identify the common features of the various process steps they oversaw so that families of products could be grouped together. Department-by-department supervision was abandoned.
1. R.W. Schmenner, “Comparative Factory Productivity” (Washington, DC: research report for the Research and Evaluation Division, Economic Development Administration, U.S. Department of Commerce, July 1986);
R.W. Schmenner, “An International Examination of Factory Productivity” (Lausanne, Switzerland: Summary findings for IMEDE, June 1987).
2. In some industries, particularly those using continuous flow processes, machine utilization figures may still make considerable sense.