The industrial revolution in the US took place in the late 1800’s. Product creation transformed from being built by artisans or craftsman to being built by manufacturing processes. In the early 1900’s Ford Motor Company started using assembly line techniques to build its cars. The rest of the world started to follow. Products could be built faster and less expensive.
After World War II the United States emerged as the mass production leader of the world. By building a high volume of product, manufacturers could maximize efficiencies and cost. Manufacturing plants tended to be large, building a narrow line of products. Cars, appliances, furniture and other products all looked the same. Consumer had very little choice in types of products. But since most consumers back in 1940’s were acquiring these products for the first time, choice didn’t matter.
Manufacturers spent a significant amount of resources in reducing the cost of manufacturing, and the primary focus was labor. Industrial Engineers focused on techniques to reduce labor cost and developed different analysis techniques to measure labor. Cost accounting systems applied cost to product based on how much labor was used to build it. The rest of the costs such as facility, salaried support, depreciation etc were applied based on labor. So labor costs had “burden” applied to it. From a costing standpoint while actual labor maybe only cost $8.00 per hour, after the other costs were applied, labor looked like it cost $100.00 per hour. This cost accounting system while valid for some purposes started to drive labor reduction activity that was actually counterproductive and wasteful.
In the 1970’s, while US manufacturing labor efficiency was second to none, it could be characterized by the following:
- Large run (or batch) sizes
- High levels of inventory
- Quality problems
- High Overhead
- Poor on-time delivery
- Long cycle times
Meanwhile, the Japanese had developed Just in Time Manufacturing (JIT). JIT manufacturing was characterized by:
- Smaller run sizes
- Lower inventory levels
- More operator flexibility
- Defect free manufacturing
- Near 100% on-time delivery
- Short cycle times
Japanese companies such as Toyota started to take some of the automotive market share from US manufacturers because the cars were less expensive and had virtually zero quality problems. US manufacturers realized that labor was not the only cost issue to focus on. Quality issues and high inventory was costing US manufacturing a fortune. Soon US manufacturing started to adapt Japanese manufacturing techniques.
Other manufacturing improvement techniques came along to supplement JIT. Instead of labor reduction, the focus was on zero defect manufacturing and lower cycle times. Other measurements sprung up that replaced or supplemented labor efficiency as the primary measurement:
- Parts per million defect rate
- Cycle time
- Inventory turns
- On time delivery
- Set up time
The basic principle for cost reduction was cycle time reduction. By reducing cycle times, fewer resources were consumed, quality issues were easier to address because there was less inventory hiding them. The element of time became much more important. Manufacturers were forced to become more agile and responsive to meet consumer demand and respond to competition.
In 1970’s, the primary definition of waste was idle labor. Over time what was considered waste has expanded dramatically to any activity or expenditure that does not directly add value to the product. The following are just a few examples of waste today:
- Time spent on inspecting for defects
- Time spent on reworking
- Excess inventory
- Process variability
- Set up
- Paper work
- Material handling
- Travel distance on the shop floor
- Time spent searching for material and tools
Perhaps the most inclusive program to address this issue is Lean Manufacturing or Lean Thinking. While the principles of lean have been around a long time, the formal process of lean was introduced in the 1990’s. James P Womack co-authored two books that help define the lean process. The books were “The Machine that Changed the World” and later, “Lean Thinking. Five principles of lean were developed:
- Specify the value from the customer standpoint
- Identify the value stream and challenge all the wasted steps
- Make the product flow continuously through the remaining value-added steps
- Introduce pull between all steps where continuous flow is possible
- Manage toward perfection so that the number of steps, time, and information needed continuously falls.
Lean manufacturing concepts continue today with other programs including Quick Response Manufacturing (QRM) which may complement lean manufacturing strategies, but is more appropriate for companies that manufacture a high mix of low volume products.
Today most manufacturing companies are using lean principles and other programs that help improve quality or drive out waste. Some of these programs include 6 Sigma, Kaizen, Design of Experience Theory of Constraints and a variety of other programs, some very specific to a single element, others more broad in scope. The key common element in these efforts is that manufacturing is taking a much broader view of cost reduction efforts. A few decades ago it was primarily labor, today it includes much more.
Packnet considers industrial packaging as a vital consideration for lean manufacturing efforts, as poorly designed packaging concepts can create waste due to excess labor, product damage and excess material costs. Contact Packnet to get a free packaging assessment and better realize how Packnet can improve your bottom line.