1. If large amount of capital were available
at low interest rates,
what would manufacturing industry spend it for?
Telesis

2. Likely candidates


Computer systems for sending shop floor
data to planners and cost accountants
Process Automation





CNC machines
Bigger, faster models of current machines
Robots
Automated storage and retrieval systems
Automated inspection equipment
Telesis

3. Assembly Plant Characteristics
(Averages for plants in each region)
J/J
Productivity (hrs/veh)
Quality (defects / 100 veh)
Space (sq ft / veh / yr)
Repair Area (% of assly area)
Inventory (days)
Job Rotation
(0=none, 4=frequent)
Suggestions (# / employee)
# of Job Classes
Training of new workers (hrs)
J/NA
16.8
60.0
5.7
21.2
65.0
9.1
25.1
82.3
7.8
36.2
95.0
7.8
4.1
0.2
3.0
61.6
11.9
380
4.9
1.6
2.7
1.4
8.7
370
12.9
2.9
0.9
0.4
67.1
46
14.4
2.0
1.9
0.4
14.8
173
Telesis
US/NA Europe

4. Questions Raised



Whether automation is the secret?
Does manufacturability of the product make
the difference?
Is product variety and “under the skin”
complexity the reason? Are the more
productive plants focussed on single / few
standardised products?
Telesis

5. Automation v/s Productivity
Productivity (hrs / veh)
80
70
60
50
40
30
20
10
0
0
10
20
30
40
Automation (% of automated assly steps)
J/J
J / NA
US / NA
Telesis
NIC
EUROPE
50

6. Automation v/s Productivity
Productivity (hrs / veh)
80
70
60
50
40
30
20
10
0
0
10
20
30
40
Automation (% of automated assly steps)
J/J
J / NA
US / NA
Telesis
NIC
EUROPE
50

7. Automation v/s Productivity

The hi-tech plants


End up adding many indirect technical and service
workers
Have a hard time maintaining high yield because
breakdowns in complex machinery reduce the
fraction of the total operating time that a plant
actually produces vehicles
Telesis

8. Engine Plant
Chrysler
Trenton
Plant Size (sq. ft.)
2,200,000
Employment
2,250
Throughput (per day)
3,200
Inventory (days)
Avg. 4
Robots
6
Telesis

9. Comparison of Engine Plants
Chrysler
Trenton
Toyota Kamigo
#9
2,200,000
310,000
Employment
2,250
180
Throughput (per day)
3,200
1,500
Inventory (days)
Avg. 4
Avg. 0.25
Plant Size (sq. ft.)
Robots
6
Telesis

10. Toyota Kamigo # 9





Equipped with 20 year-old machines
Retrofitted
Preventive Maintenance 8 – 4 – 8 – 4
Set-ups in two mts.
Work Stations close to each other
Telesis

11. IBM
HV LC – IBM
3178 logic unit
Models
One
# of suppliers
Small
Part count
Small
WIP reduction
24 to 5 days
Space reduction
Sixfold
Labour reduction
Thirteenfold
Robots
Several
Telesis

12. IBM / HP
HV LC – IBM
LV LC – HP
3178 logic unit
PC touch screen
Models
One
Mixed
# of suppliers
Small
2,000 to 200
Part count
Small
20,000 to 450
WIP reduction
24 to 5 days
21 to 3 days
Space reduction
Sixfold
Fourfold
Labour reduction
Thirteenfold
Fourfold
Robots
Several
Telesis

13. General Principle

Do not put equipment simply to displace
labour


Equipment cannot think
or solve problems;
humans can
Equipment can be a problem;
labour can be an opportunity
Telesis

14. Economies of Scale

The economy-of-scale “law” is:


Bigger store, bigger restaurant, bigger
factory, bigger machine yields lower cost per unit
The six-tenths rule, viz. one large capacity line is
better than two or more small capacity lines in the
ratio six : ten
Telesis

15. Economies of Scale



A firm has a smash product – sales are on a
fast incline
The company is hiring; overtime, extra shifts
and weekend work are becoming normal; and
delivery lead times are stretching out
Looming on the horizon are lost sales
Telesis

16. Economies of Scale
700
600
500
400
300
200
100
0
2007
2008
2009
2010
2011
2012
Demand
Telesis
2013
2014
Capacity
2015
2016
2017
2018

17. Economies of Scale

Marketing projects growth in demand
Telesis

18. Economies of Scale
700
600
500
400
300
200
100
0
2007
2008
2009
2010
2011
Demand
2012
2013
Proj. Demand
Telesis
2014
2015
Capacity
2016
2017
2018

19. Economies of Scale



Decision is made to add capacity
Engineering searches OEM’s catalogs; selects
latest large machines / lines – enough
capacity for five years of projected demand
growth
Machines are installed and debugged, which
takes several months owing to the large
machines’ complexities and needs for special
utility hookups
Telesis

20. Economies of Scale
700
600
500
400
300
200
100
0
2007
2008
2009
2010
Demand
2011
2012
Proj. Demand
Telesis
2013
2014
Capacity
2015
2016
New Capacity
2017
2018

21. Economies of Scale


With the installation of new
capacity, backlogs and lead times melt
So does the demand
Telesis

22. Economies of Scale
700
600
500
400
300
200
100
0
2007
2008
Demand
2009
2010
2011
Proj. Demand
2012
2013
Capacity
Telesis
2014
2015
New Capacity
2016
2017
2018
Actual Demand

23. Economies of Scale



The new capacity utilisation rate takes a
nosedive
Everyone is nervous
Marketing is under pressure




Launch advertising campaign
Cut prices
Design and sell something that will keep the
capacity busy
The machine has become the
master, dictating policy
Telesis

24. Economies of Scale
700
600
500
400
300
200
100
0
2007
Demand
2008
2009
2010
Proj. Demand
2011
2012
Capacity
Telesis
2013
2014
New Capacity
2015
2016
Act Demand
2017
2018
Decision

25. General Principle


More than one team, cell, line or machine is
better than one
Add fixed capacity in small increments as
demand grows
Telesis