ASSIGNMENT-1

Lean Supply Chain Management

“The Machine That Changed the World”

Sidharth Joshi

MBA (LSCM) 2017-2019

Roll No. R600217054

A Brief Write-up

This is a book written by James P. Womack, Daniel T. Jones and Daniel Roos which explains the
evolution of lean manufacturing practices in the automobile industry. The authors have told that
the automobile industry has come a long way since the days of craft production. The craft
producers used highly skilled workers to meet the demand of the customers but were only able to
make one product at a time and the goods produced by the craft workers were quite expensive
and almost unaffordable by normal middle class people. So, there was need of mass production
and it was developed as an alternative in the beginning of the 20th century. The mass producers
started using narrowly skilled professionals to design the products made by unskilled or semi-
skilled workers and simple but flexible tools to make exactly what the consumers wanted at a
single point of time. This resulted in standardized products in high volumes. To ensure smooth
production extra supplies, workers and space was added by the mass-producers.

In today’s era lean production system as emerged as the best solution and it is led by the global
leaders Toyota. Lean Production system combines the advantages of both craft system and mass
production. Lean producers employ a team of multi-skilled workers at all levels of the
organization and use highly flexible, increasingly automated machines to produce large no. of
products in enormous variety. This article is sub-divided into main important highlights which
will be explained order-wise.

Henry Ford and the rise of Mass Production

Craft production had following characteristics:-

 A workforce that was highly skilled in design, machine operations and fitting.
 Organizations those were extremely decentralized, although concentrated within a single
city.
 The use of general-purpose machine tools to perform drilling, grinding and other
operations on metal wood.
 A very low production volume- 1000 or fewer automobiles a year, only a few of which
were built to the same design.
Henry Ford understood the drawbacks of craft production and introduced his model T Ford with
two objectives:-

 He had a car that could be easily manufactured and was user- friendly.
 Almost anyone could drive or repair the car without a chauffeur or mechanic.

Just before the moving assembly line was introduced by Ford, the task cycle for the average Ford
assembler had been reduced from 514 minutes to 2.3 minutes. In 1913, Ford introduced the
moving assembly line, which brought the car part to the stationary worker and it helped to reduce
further the cycle time from 2.3 minutes to 1.19 minutes.

Ford wanted to produce the car at one place and sell it to the whole world but the shipping
systems were not very well equipped to transport huge consignments economically with the
guarantee of damage free deliveries. So Ford decided to design, engineer and produce his parts
centrally in Detroit.

Sloan’s Approach

At General Motors Alfred Sloan standardized many mechanical items such as pumps and
generators, across the company’s product range and also introduced various external variations
in the car to delight the customers such as Radio Systems, Automatic Transmission and AC,s etc.

Three giant enterprises- Ford, GM and Chrysler accounted for bulk of all sales and six models
accounted for almost 80% of all cars sold.

The decline of US car makers

Due to mass production becoming a common place across various countries the three giant car
manufacturers were losing their competitive advantage. By the late 1950’s companies like
Volkswagen, Renault and Fiat produced volumes comparable to the volumes produced by major
facilities at Detroit and secondly many craft producers were also shifting towards mass
production.

The rise of Lean Production

Japanese set out to change the rules of the game. Taiichi Ohno introduced his technique of quick
die changes. He had reduced the time required for changing the dies from 1 day to just 3 minutes.
He also eliminated the need for die changing specialists. By making small batches he was
successful in cutting costs. Ohno needed a team of skilled and dedicated workers. When Ohno
visited Detroit he realized that Ford’s system was full of Muda (wastes). Ohno changed the entire
organizational and working system and also introduced Kanban technique. The dealer became
the part of the production system as Toyota stopped producing cars in advance for the unknown
customers and shifted to a built- to- order technique.
Lean product development

All large automobile manufacturers face the same problem in manufacturing new cars. Different
functional departments must collaborate intensively over an extended period of time to develop
the new car successfully.

This part of the article highlights about the SHUSHA system. The shusha is the leader of the
team which designs and engineers the new product and gets it fully into production. The shusha
assembles a small team, which is then assigned to develop a project for its life. All the
employees of the shusha team come from different functional departments which gives expertise
of different areas.

Lean Supply Chain

This part talks all about the Lean Supply Chain like the lean producers assign the whole
component to their first-tier suppliers and these first-tier suppliers further have a team of second-
tier suppliers and so on. The nature of lean supply chain arrangements means that the assembler
may know little about parts or systems. Secondly, a feature of lean supply is continually
declining prices over the life of a model. The third feature of a lean producer is that they have no
reserve stock.

Customer Relationship Management

Mass Production does not focus on Customer’s needs and expectations. The scenario of West is
that the salesperson is also not interested in customer’s wants and desires, they only want to get
the contracts signed and that’s it, no further communication with the customers. Whereas the
Japanese producers focus on lean selling systems where the focus is on maintaining long-term
relationships with the customers and yield profits by maintaining relationships with them.

The Global Challenge

Lean production system is still not fully appreciated worldwide. According to the authors, the
management challenge for the big players in car manufacturing industry is introduce a form of
enterprise that runs smoothly on a multiregional basis and gains the advantage of close contact
with local markets and the presence as an insider in each of the major regions. At the same time,
it must benefit from access to systems for global production, supply, product development,
technology acquisition, finance and distribution.