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Since the invention of double-entry bookkeeping, managers have judged a company's worth by sales and profits. Now Richard Schonberger exposes the fallacies of this timeless practice. Schonberger's pathbreaking new research reveals that, from 1950 to 1995, while "financials" dipped and soared repeatedly, industrial decline and ascendancy correlated perfectly with inventory turnover -- one of two key nonfinancial indicators and a bedrock measure, along with customer satisfaction, of a company's power, strength, and value. In this immensely readable book, he captures these new metrics -- the true predictions of future success -- in 16 customer-focused principles created from self-scored reports supplied by over 100 pioneering manufacturers in nine countries. Armed with new world-class benchmark data, Schonberger redefines excellence in terms of competence, capability, and customer-focused, employee-driven, data-based performance.
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Faster, Higher, Stronger
In the 1950s through the 1970s, running manufacturing companies became gentlemen's work. Decisions and policies were made by people twice and thrice removed from the manufacturing arena. Authority was in the hands of staff people who sifted data from other staff people. Venturing out into the plant was, well, venturing. It was prudent to stick around offices and conference rooms and make sure your backside was covered. Excitement in industry was confined to high-tech R&D. Manufacturing was stagnant.
How quickly things change. While the changes have scarcely touched small companies, the well-known manufacturers are caught up in revival, renewal, recovery, and renaissance. A popular term among those caught up is world-class manufacturing or a term like it. World-class manufacturing may sound like Madison Avenue hyperbole, but it is not. The term nicely captures the breadth and the essence of fundamental changes taking place in larger industrial enterprises. A full range of elements of production are affected: management of quality, job classifications, labor relations, training, staff support, sourcing, supplier and customer relations, product design, plant organization, scheduling, inventory management, transport, handling, equipment selection, equipment maintenance, the product line, the accounting system, the role of the computer, automation, and others.
The Goal and the Path
World-class manufacturing (WCM) has an overriding goal and an underlying mind set for achieving it. The overriding goal may be summarized by a slogan suggested to me by a manager at the Steelcraft division of American Standard, where I was presenting a seminar. During the afternoon break, the fellow told me that he had digested all that had been said, and he concluded that the whole thing was like the motto of the Olympic Games: citius, altius, fortius. From the Latin the English translation is "faster, higher, stronger." The WCM equivalent is continual and rapid improvement.
A few years ago we didn't even know the factors of manufacturing that ought to improve. There was little agreement on what excellence in manufacturing is, because we thought in terms of tradeoffs. Plant managers or their corporate overseers picked one set of high-priority targets one year (for example, defect rates and warranty costs) and another, seemingly conflicting, set to work on the next (perhaps overhead costs and customer service rates). The high priorities were where problems seemed most severe. Lacking manufacturing principles, we tackled the problem with trade-off analysis.
Today there is wide agreement among the WCM "revisionists" that continual improvement in quality, cost, lead time, and customer service is possible, realistic, and necessary. There is now good reason to believe that those goals may be pursued in concert, that they are not in opposition. One more primary goal, improved flexibility, is also a part of the package. While some of our leading manufacturers have trouble avoiding pitfalls that lead to inflexibility (pitfalls that are avoidable), the goal itself is not an issue. With agreement on the goals, the management challenge is reduced to speeding up the pace of improvement.
The improvement journey follows a surprisingly well-defined path. The journey requires clearing away obstacles so that production can be simplified. A fast-growing body of writings (including my own 1982 book, Japanese Manufacturing Techniques: Nine Hidden Lessons in Simplicity) offers lists of obstacles to remove and ways to simplify: fewer suppliers, reduced part counts, focused factories (focused on a narrow line of products or technologies), scheduling to a rate instead of scheduling by lots, fewer racks, more frequent deliveries, smaller plants, shorter distances, less reporting, fewer inspectors, less buffer stock, fewer job classifications.
Beyond the Basics
In the pre-WCM era we thought that production could be managed "by the numbers." The numbers would show what to make, what to buy, whom to blame. If, for example, the latest cost report shows a negative cost variance in welding, the onus is on the welding supervisor to cut costs. But how? There are no data on the causes of the cost overage. The supervisor may crack the whip to get more output for the same labor cost. Alternatively, ask industrial engineering or quality engineering to "do a study."
The numbers failed to show causes. Mostly they did not even show symptoms of real problems.
Numbers do serve the world-class manufacturer -- when they show how good the product and service are, how much improvement is occurring, what problems to attack next, and what the likely causes are. WCM mandates simplification and direct action: Do it, judge it, measure it, diagnose it, fix it, manage it on the factory floor. Don't wait to find out about it by reading a report later.
Some of that may sound like "back to basics." Basics they are, but going back we are not. It is true that some of the emergent WCM techniques were in use in an earlier era -- and then forgotten. In the main, however, the good old days in manufacturing never were all that good. Quality concepts were primitive by today's standards. While some plants had an ethic of continual improvement (applied very selectively), the norm was to transform simplicity into complexity, which sowed the seeds of decline.
There is reseeding going on, and there seems to be a single year that could be called the turning point: the year 1980. In that year a few North American companies (and perhaps some in Europe) began overhauling their manufacturing apparatus. Those first WCM thrusts followed two parallel paths. One was the quality path, and the other was the just-in-time (JIT) production path.
One of the first to try just-in-time in North America was General Electric, which started up two JIT projects in 1980. Kawasaki in Nebraska and Toyota truck in Long Beach, California, began shifting from standard to JIT production in the same year.
The first North American companies to take the quality path, also in 1980 (give or take a few months) were Nashua Corp. in New Hampshire, Tennant Co. in Minneapolis, and IBM. (A bit earlier Matsushita in Franklin Park, Illinois; Sanyo in Forrest City, Arkansas; and Sony in San Diego began their U. S. operations with a quality focus. These may be thought of as imports from Japan rather than as turning points in existing North American companies.) Nashua got its start by bringing in W. Edwards Deming, the American who, along with Joseph Juran, was instrumental in getting Japan's quality movement going in the 1950s. Tennant and IBM hired Philip Crosby, who was known to a few people as the author of a fine little 1979 book, Quality Is Free. Tennant provided early support for Crosby to form a quality college in Florida.
Those stirrings in a few companies in 1980 may someday be chronicled as the third major event in the history of manufacturing management. The first two: (1) coordinating the factory through use of standard methods and times, Frederick W. Taylor, Frank Gilbreth, et al., circa 1900; and (2) showing that motivation comes in no small measure from recognition, the Hawthorne Studies at Western Electric, circa 1930.
World-class manufacturing could not become the third major event if it were to peter out. The signs that it will not, that WCM is much more than a fad, are persuasive. The list of companies that have already made order-of-magnitude improvements in quality and manufacturing lead time is getting long. For example, I have compiled (and continue to update) a list of the "5-10-20s," which refers to companies, factories, or parts of factories where fivefold, tenfold, or twentyfold reductions in manufacturing lead time have been achieved. The list, with explanatory comments in some cases, is provided as an appendix at the end of this book. Stories about some of the 5-10-20 plants will be told in later chapters.
My 5-10-20 list does not do justice to WCM developments outside of North America, nor is it at all complete for North America. I have conducted seminars and provided consultancy at manufacturing plants in a number of European and Pacific Basin (besides Japan) countries and have found the WCM fever to be globe-spanning.
With so short a history, WCM has not had a chance to mature in all of its natural habitats. What surprises many is the progressive unearthing of more and more natural habitats. I refer not to different continents and countries but to different industries and types of production. That is, what makes a world-class manufacturer in one industry also seems to work in many other industries. Let us see why that should not be surprising.
Consider how a restaurant fills a customer's order: The cook puts meat from the grill onto the platter, goes to the range to scoop some vegetables, opens the oven to get a baked potato, heads for the salad bar to extract a salad, and so forth. It goes fast, because a kitchen is small and the cook puts only one serving of each food item on the platter.
A machine shop, a sheet metal shop, a printed-circuit-board shop -- any shop or factory that makes to order -- is just the same. As long as the shop or factory is small, production is usually quite fast. But who wants to stay small? We have plants -- for final goods and component parts alike -- with thousands of employees and hundreds of thousands of square feet of space. Now the work goes through the plant at a snail's pace. Plant management has its hands full trying to prevent gridlock.
If a restaurant kitchen grew the way our factories do, the platter would go to the grill area for a piece of meat and then move by slow conveyor to the vegetable area. The meat would get cold -- and might even fall to the floor once or twice on the way. At the vegetable area, the massive cookers might be tied up making vegetables other than the kind ordered for the platter, which means waiting until the next batch is cooked.
Growth is not the problem. The problem is the more-of-the-same approach to growth. A restaurant is a little job shop, to use the manufacturing term. It will not work if it becomes a big job shop -- where a job (platter) has to traverse vast distances from one shop to another, waiting for one thing or another at most of the shops. Growth must be accompanied by a transformation to preserve speed, to avoid stopand-go production.
Over the years we came to believe that stop-and-go production was the fate of the job shop. We also believed that job shops were the fate of industry, because customers are fickle; they want the variety that job shops can provide. Job shop people looked enviously at the flow shops, where work just flows down a production line or through pipes continuously (as patrons flow down a cafeteria line).
That view is out of style, because we have learned how to streamline our job shops, to make them behave more like flow shops. Some go so far as to simplify products and regularize schedules, and thereby transform themselves into flow shops. Many others -- those that stick with customers who demand variety -- will not become flow shops, but they can come close. The chameleon cannot ever be a leaf, but it can look like one. So it is in manufacturing.
What tools and techniques make job shop transformations possible? At the top of the list are the set known as just-in-time production techniques. They were perfected by Toyota in Japan in the 1960s and 1970s. Toyota's techniques caused work to move through parts fabrication processes fast and get to final assembly just in time for use.
JIT was shaped in the flow shop mold. Continuous-flow industries -- the "pure" flow shops -- have been around for a hundred or two hundred years. Examples are bottling, tableting, and canning; extruding and weaving; milling and refining. Some of the processes are tightly coupled. The work leaves one process and flows, perhaps through a pipe, to arrive just in time for the next. In that sense, JIT was around long before the people at Toyota thought of it.
In reality the flows are usually not all that continuous. The grain mills, the food processors, the medicine makers, the cloth producers, and the rest are stop-and-go producers, too. They go for a time on one size, style, model, or chemical formulation, then shut down for a complete changeover in order to run another. Shutdowns for changeover are one concern. The massive quantities that build between changes -- the raw and semiprocessed material, and especially the finished goods pushed out well in advance of customer needs -- are a greater concern. All are forms of costly waste.
There are dominant WCM precepts for treating the ailment. One is a JIT principle: The smaller the lot size, the better. World-class manufacturers of cars, tractors, and motorcycles have some lot sizes down to one unit by becoming adept at changeovers between models. This permits making some of every model every day, almost like continuous-flow processing. With that capability, they outdo the flow processors they started out trying to copy.
A second precept is the total quality control (TQC) principle: Do it right the first time. In the flow industries this means setting up for a new run so that the first yard of cloth, linear foot of sheet steel, length of hose, can, bottle, or tablet is good.
A third set of precepts is called "total" preventive maintenance (TPM). Maintain the equipment so often and so thoroughly that it hardly ever breaks down, jams, or misperforms during a production run. There is nothing like an equipment failure to turn a continuous processor into its opposite number.
Mass Production -- Just in Time
While the JIT concept (if not the application) is natural in the flow industries, it took Henry Ford and his lieutenants to get JIT worked out in discrete goods manufacturing. Ford has been called the father of mass production. His Highland Park and, later, River Rouge plants mass-produced the parts just in time for assembly, and his assembly lines pulled work forward to next assembly stations just in time, too.
By 1914 the Highland Park facility was unloading a hundred freight cars of materials each day, and the materials flowed through fabrication, subassembly, and final assembly back onto freight cars. The product was the Model T, and the production cycle was twenty-one days. At River Rouge, about 1921, the cycle was only four days, and that included processing ore into steel in the steel mill that Ford built at River Rouge.
That roughly equals the best Japanese JIT auto manufacturing plants today. But it was much easier for Henry Ford, because his plants followed his now famous dictum, "They can have it any color they want, so long as it's black."
Isn't it easy to look like a continuous-flow producer, with very short manufacturing lead times, when every unit is the same as every other? Ford's Tin Lizzies almost could have flowed through a huge p...
In his best-selling book Japanese Manufacturing Techniques, Richard J. Schonberger revolutionized American manufacturing theory and, more important, practice. In that breakthrough book, he revealed that Japanese manufacturing excellence was not culturally bound. Offering the first demystified explanation of the simple techniques that fueled Japan's industrial success, he demonstrated how the same methods could be put to work as effectively in U.S. plants.
Now, in World Class Manufacturing, Schonberger returns to tell the success stories of nearly 100 American corporations -- including Hewlett-Packard, Harley-Davidson, General Motors, Honeywell, and Uniroyal -- that have adopted the famed just-in-time production and "total quality control" strategies. Based on his firsthand experience as a major consultant to American industry, he examines how they did it -- and illustrates how the same concrete, specific steps used by these top companies can be implemented in any factory today. What's more, Schonberger shows that his bold concepts and reforms apply equally to all industries, whether the product is computers, pasta, or trucks, and to all divisions -- from manufacturing and engineering to accounting and marketing.
According to Schonberger, world-class manufacturing depends on blended management -- rather than domination by a separate group of managers -- which marshalls resources for continual rapid improvement. To achieve world-class status, companies must change procedures and concepts, which in turn leads to recasting relations among suppliers, purchasers, producers, and customers. Acknowledging the difficulty inherent in such changes, Schonberger stresses that employee involvement and interaction, both on the shop floor and in the decision-making/problem-solving process, is key. Wary of those who view improvement in terms of modernizing equipment, he points out that making maximum use of people and current machinery is a company's first priority; automation, if necessary, should come much later.
World Class Manufacturing also includes Schonberger's 17-point action agenda to guide innovators toward manufacturing excellence, from getting to know the customer to cutting the number of suppliers, reducing error in production, and deciding when and how to automate.
Indispensable for all manufacturing innovators who aim to keep ahead of the competition, this inspiring, groundbreaking volume does much more than just recommend or theorize about the new manufacturing approach. Plainly, realistically, and logically, it explains how it's done.
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