PRODUCTION AND

OPERATIONS
MANAGEMENT
1

OBJECTIVES
Introduction to Production Function and
Operations Management
Mass Production Approach
Toyota Production System (TPS)
Approach
Supply Chain Management

PRODUCTION
versus

MANUFACTURING
Production is a Broader Term that Spans

both Manufacturing and Services

Functions
Production is the Application of

Resources, People and Machinery, to

Convert Inputs into Finished Goods and
Services
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MASS PRODUCTION
Mass Production: Makes Outputs
available in Large Quantities at Lower Unit
Costs than Individually- Crafted Items
Characteristics of Mass Production
Labor Specialization
Mechanization
Standardization
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ASSEMBLY LINES
Assembly Line first Introduced by Eli
Whitney (Cotton Gin Inventor) to build
Muskets for the US Government In 1799
Used Ideas of Specialized Labor and
Engineering Standards (Tolerances) to
produce Assemblies from Parts in
Repeatable Manner
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HENRY FORD
Introduced Moving Assembly Line:
Dramatically Reduced Manufacturing Costs
While Delivering Consistent, Low-Priced
Product
Factory based on Chicago Meat Cutting
Plants

FORD MODEL T
First Produced:
October 1908
By 1927,
15,000,000
Produced
Any Color so long
as its Black
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ASSEMBLY LINE BENEFITS

Initially, took 14 hours to Assemble

Model T - Mass Production reduced
Time to 1 Hour and 33 Minutes
Model Ts Price dropped from $1,000
in 1908 to $360 in 1916
Result was Ford becoming
Dominant Automobile Manufacturer
and Assembly Line Method as
Dominant Production Approach

FORD ASSEMBLY LINES

Assembly Line pulled by Ropes

Magneto Assembly
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MASS PRODUCTION
MODEL T Machine that Changed the
World

1914: Ford produced 308,162 cars, more than

all 299 other auto manufacturers combined
1927: Automobile Produced every 24 seconds
Higher volumes Lower cost Lower Prices
Increased Sales Higher Volumes
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MASS PRODUCTION
PUSH Strategy Driven by Inputs and
Objectives
Control of Raw Materials and Labor plus Profit
Goals = Production Rate separate from
Customer Demands and Preferences
Performance measured by Budget Variances and
Quantitative Results (Defects or Unit Costs per
Day, Week or Month), not Quality Standards
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MASS PRODUCTION
Low Product Variety; Small Orders Not Feasible
Specialized Machinery and Centralized Manufacturing
Economies of Scale High-Speed Sequential
Production
Development Costs Spread Over Large Volume:
Low Cost per Unit Produced
Low-Skill/Low-Wage Work Force
Large Advertising and Marketing Budgets
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FORD WORKING CONDITIONS

Monotony of Assembly Line Work: 300% Turnover
$2 per Day and a 9-Hour Shift
Fords Response to Working Conditions Dilemma
Increase Pay to $5 per Day and
Reduce Shifts from 9 Hours to 8 Hours
The Chain System you have is a Slave Driver. My God,
Mr. Ford! My Husband has come Home and
Thrown Himself Down and wont Eat his Supper,
Hes so done out. Cant it be Remedied? That $5-aday is a Blessing; a Bigger One than you Know.
But, Oh, They Earn It!
- Wife of Ford Assembly Line Worker
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MASS PRODUCTION
Flaws of Mass Production Approach

Production Levels cannot Stop or Slow:

Defects resolved outside Production (Added
Costs of Rework)
Long Changeover Times limits Product Variety
Erratic Finished Products Inventory Levels
Incentives and 0% Financing
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MASS PRODUCTION
Market Orientation Flaw

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TOYOTAS ORIGINS
Toyoda Automated Loom Works
1902 Modification: Loom
Stopped Automatically if
Thread Broke or Spool
Empty - Signal for
Attention
Result: No Waste from
Defective Work and Lower
Production Costs
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TOYOTAS ORIGINS
During WWII, Toyoda became Toyota and
manufactured Motorcycles and Delivery Trucks

After WWII, Japanese Industry needed to re-build

17

TOYOTAS ORIGINS

1956 Taiichi Ohno went to US

to study Fords Manufacturing
Facilities
Found Mass Production Principles not Applicable:
Scale of Japanese Markets
Desire for Product Variety
Unable to Afford Resources and Inventories
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TOYOTAS ORIGINS
Before returning to
Japan, Ohno went to an
American Grocery Store
Discovered Production and Operation Methods that
Were Linked to Customer Actions: Inventories Replenished by Sales (PULL
Strategy)
Delivered Product Variety and Scale
Minimized Waste
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TOYOTAS ORIGINS
Toyota Exports its
First Car: The
Forgettable
Crown
Under-powered
and Unstable at
Freeway speeds,
Production is
stopped in 1959
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TOYOTA PRODUCTION
SYSTEM

In 1961, Toyota adopts Systems Perspective

KAIZEN Continuous Improvement Attitude that
Minimizes Waste and Emphasizes High Quality
Processes are analyzed to eliminate flaws rather
than fixing defective products
WASTE Comprehensive View that includes Time,

Resources and Materials

Over-Production
Time Spent Waiting
Unnecessary Movements of Items

21

TOYOTA PRODUCTION
SYSTEM

Waste is anything other than the

minimum amount of equipment,
materials, parts, space, and workers
time which are absolutely
essential
to add value to the product.
- Shoichiro Toyoda
President, Toyota Motor
Co.
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TOYOTA PRODUCTION
SYSTEM
KANBAN - Downstream Demand
drives Upstream Activity (Pull
Strategy)
Orders flow Up System, not
from Top-down
Only what is Needed is Ordered
and Produced

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TOYOTA PRODUCTION
SYSTEM
ANDON Work Stops when Problem
Encountered
Counter-measures taken to Cure
Cause, Not re-work Defective Result.
Authority delegated to Production
Team
Production and Problem-solving Functions
combined. No Special Trouble-shooting
Teams
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TOYOTA PRODUCTION
SYSTEM
Result of TPS is Just-in-Time Inventory System
Comes from Systems Operation, Not a
Requirement of It: Element of Waste
Management Philosophy
JIT relies on Supplier Relationships that
Integrate Inventory Arrivals and Production Needs
JIT depends on Mutual Commitment of Toyota
Loyalty and Supplier Performance
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TOYOTA PRODUCTION
SYSTEM

Why Hasnt TPS Been Universally Adopted?

Equipment Transition Costs:

Short
Turnover Times (High Variety)
combined with High Quality
Different Management Paradigm:
Empower Assembly Line Workers to
Stop Production and Order Processcorrecting Counter-measures
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 Worlds Second Largest Manufacturer of

Automobiles

About 240,000 Employees

Produces a Vehicle about every Six
Seconds
Consistently Profitable GM: $1.1 Billion
Quarter Loss

27

SUPPLY CHAIN
MANAGEMENT
A supply chain is a system through which
organizations deliver their products and
services to their customers."
(Poirier and Reiter, 1996)

"A supply chain is an integrated process

wherein raw materials are manufactured into
final products, then delivered to customers
(via distribution, retail, or both)."
(Benita, 1999)
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SUPPLY CHAIN
MANAGEMENT
Supplier
Supplier
Supplier

Supplier
Supplier

Supplier

Supplier

Customer

Supplier
Supplier
Supplier
Supplier
Supplier

Supplier
Supplier

Supplier

Corporation

Supplier

Supplier
Supplier
Supplier
Supplier

Customer

Customer

Supplier
Supplier

Supplier

Supplier
Supply Chain

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SUPPLY CHAIN
MANAGEMENT

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