Overstated role of capital

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Overstated role of capital

  1. 1. If large amount of capital were available at low interest rates, what would manufacturing industry spend it for? Telesis
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 17. Economies of Scale  Marketing projects growth in demand Telesis
  18. 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. 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. 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. 21. Economies of Scale   With the installation of new capacity, backlogs and lead times melt So does the demand Telesis
  22. 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. 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. 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. 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

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