Modern production management methodologies

Introduction

Our team is engaged in the automation of several plants and, of course, new machines and information systems strongly influence the work of people and their interaction. In this article, I decided to understand the basic methodologies of production management in factories. The review of methodologies is made with an emphasis on concepts that I have had to deal with personally.

In the twentieth century, the production management methodology dominated by the name of "Fordism", named after its founder, Henry Ford. Fordism is a model of mass production of standardized goods on assembly lines using low-skilled workers engaged in simple operations and united in large factories. Such production has the “effect of scale” and is distinguished by the low unit cost of production available to the mass consumer. One of the main tenets of Fordism: “It is more profitable to produce large quantities of products than small ones”, firmly rooted in the heads of the managers of the 20th century.

In my opinion, now is the time when only giants can produce large batches of products, and the bulk of small and medium-sized factories must be flexible, producing small batches of products to the demands of their customers.
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The birth of new methodologies

From the second half of the 20th century (after the Second World War), many attempts were made to modify the Fordist model. In particular, in the factories “Toyota” in the 50s began to set up experiments, adapting the American concepts of mass production to the realities of the post-war industry in Japan. Then the press tool fixing system was redone to make its replacement faster. Then there were other innovative solutions and discoveries that eventually developed into a new methodology - Lean Manufacturing (LM) - Lean Manufacturing.

In the 80s and 90s, a whole zoo of production management methodologies and paradigms appeared, among which I’ll dwell on two: Quick Response Manufacturing (QRM) - Quickly responding production and Agile Manufacturing (AM) - Active production. Modern, more flexible than fordism methodologies are often combined with the term "post-fordism".

The most important differences between Fordism and Postfordism are that Fordism is based on product and large production volumes, new methodologies are customer-oriented and the possibility of producing small batches due to flexible equipment changeover.

In postfor- dism, labor power acts as a carrier of competence and a source of development, works as a team, in contrast to fordism, where people are hired in separate places. In Fordism, a certain level of marriage is allowed, while new concepts imply absolute quality. And in order to achieve it, innovations can be made not only by specialists, but also by all workers in production.

Below is a table of the main differences in fordistka and postfordistkoy concepts of industrial production [1].

Sign of	Fordism	Postforism
Basic orientation	Product	Customer
Reduced unit cost	Due to the volume	Due to quick equipment changeover
Worker	Labor Force (Narrow, low-skilled workers)	The competence carrier (development vector, multifunctional specialists)
Organizational form	Separate jobs	Teamwork
Relationship to marriage	Acceptable level	Absolute quality
Innovations are made	By specialists	All staff

Now more about each of the considered new methodologies.

Lean Manufacturing (Lean Manufacturing, LM)

The goal of the LM is to produce products with a constant decrease in the efforts of people, with a smaller volume of application of equipment, as quickly as possible, in a minimal space and at the same time do what the customer expects to buy. This concept was born in post-war Japan, then the country's industry was lacking in everything: in resources, materials, equipment, personnel, and could not count on government assistance. Japan mobilized its forces and began to rationally use any resources, while being in the process of searching, identifying and eliminating losses of any scale.
Marriage was one of the biggest losses, and therefore a lot of effort was spent on preventing it. In the "Toyota" appeared a rule - marriage is not allowed in principle. Taichi Ono (1912–1990), one of the creators of Toyota’s production system, identified 7 types of losses:

• losses due to overproduction ;;
• loss of time due to waiting;
• losses due to unnecessary transportation;
• losses due to unnecessary processing steps;
• losses due to excess inventory;
• losses due to unnecessary movements;
• losses due to the release of defective products.

Later to the types of losses were added:

• unrealized creativity of employees.
• overloading of workers, employees or facilities when working with increased intensity.

In LM, loss elimination and optimization of production processes are not carried out on a case-by-case basis, but become a permanent affair. The improvement is carried out by all employees, not just highly qualified specialists. Directly connected with LM is the discovery that reducing equipment changeover times and increasing production flexibility allow you to quickly create small batches of goods and compete with large-scale production of similar products.

Subsequently, within the framework of the concept of lean production, many elements were identified, each of which represents a specific method: the Stream of single products , Kanban , Universal care for equipment , the 5S System , quick changeover (SMED), Kaizen , Foolproof .
Some methods themselves claim the status of an independent production methodology.

Today, the concept of LM is used in thousands of companies engaged in production, and even, in organizations that are not related to industry in general. Here is a rather impressive list of companies using LM in Russia (Figure 1)


It must be said that Lean Manufacturing is associated with many methodologies that emerged at the end of the 20th century, in particular with

• Six Sigma (Six Sigma), aimed at reducing the variability of processes and the stabilization of product characteristics.
• Total Quality Management (TQM) is a corporate method of continuous improvement in the quality of all organizational processes. TQM was popular in the late 80s and early 90s, but later succumbed to ISO 9000, Lean Manufacturing and Six Sigma.
  

These three methodologies contain many similar tools and methods, as well as a similar philosophy.

Quick Response Manufacturing (Quick Response Manufacturing, QRM)

The origin of lean production is associated with the company Toyota, a feature of which is the constant large volumes of products. However, over the past few years there has been a rapid increase in the number of functions offered by manufacturers to their customers, this is particularly due to:

• The development of CAD / CAM (computer-aided design and production), allowing companies to develop "for the client", and then produce products without incurring high additional costs.
• The development of the Internet, which allows the buyer / customer to easily evaluate a huge number of functions and make their choice.

These development trends suggest that in the 21st century the demand for small in size and extremely diverse products with such functions that customers / buyers themselves will wish to grow. The QRM methodology, which was formed by the American mathematician Rajan Suri and described in detail in his monograph published in 1998, appeared on this basis.
So, fast-response production (QRM) is a strategy used by companies to reduce the lead time, which covers the entire enterprise. The purpose of QRM is to reduce the lead time due to all the company's operations, both internal and external.
Why the speed of order fulfillment is the fundamental concept of QRM is perfectly illustrated by a simple example (Figure 2). The data on the graph are taken from the actual performance of the company Midwest. The blue color shows the real time of the order (when someone does the work), white is the total time of the order.


A regular order lasts 5 days in the order-taking department before it is sent to production, then it takes 12 days to make components, 9 days to assemble and 8 days to pack an order that has already been completed and send it to the customer. As a result, it takes 34 days to complete the order (white color). If you fold the gray areas, you get 19.5 hours, that is, less than 3 days with an eight-hour working day. The rest of the time is when nobody is engaged in this work. According to Suri, this ratio is not accidental; in many production projects, the real time of operation is less than 5% of the order execution time.

Lean manufacturing and other similar cost-based methodologies aimed at reducing real-time work, QRM is focused on reducing the total lead time.

Reducing the total order execution time potentially has a much greater effect, since it is the downtime between the actual work on the order that takes up most of the time. Reducing the lead time, as a rule, lowers the cost of the product, improves its quality and makes the whole company more competitively capable [2].

The common denominator of QRM is called the critical production path (PPC, Manufacturing Critical-path Time) - the calendar time, which begins when the customer places an order that passes through a critical path and ends when the first product of this order has been delivered to the customer. The key idea of ​​the PPC is to compare the amount of “gray time” that goes into real operations with the overall PPC indicator.
The phrase “passing through a critical path” means that when calculating checkpoints you have to make an assumption that all activities are carried out from scratch, there are no pre-created blanks, there are queues, expectations and delays in operations.
Throughout the book [2], Suri shows the huge losses of the enterprise as a result of the long checkpoint, and also describes the tools for reducing the checkpoint.
Basic QRM concepts:

• A business built for work “for warehouse” (when, in order to fulfill orders faster, the main product range is produced in advance and put in stock), due to planning errors and demand variability leads to an increase in PPC, and as a result, the company cannot respond quickly to customer needs. If you greatly simplify - it is better to invest in machine tools and the standard fast implementation of orders than in warehouses.
• Transition from functional workshops to QRM cells. A cell is a set of independent (separated from the rest of the company) combined with multifunctional resources (people and machines). A QRM cell is aimed at performing all types of work around a specific market segment (for example, a specific type of product). In the philosophy of a QRM cell, some analogy with the Scrum team can be traced.
• Have a power reserve of up to 20% for the most frequently used equipment. This is necessary to prevent traffic jams, reduces the PPC and makes the enterprise more prepared for the variability of demand.
• Search for non-productive time from shop level to enterprise management, marketing and logistics services. As practice shows, the most time is wasted in offices, not in production.
• The orientation of employees of all departments on a single goal - reducing time costs. It is important that not only the time for certain procedures, but also the total time from the order to its shipment to the client is taken into account. The single goal to which the workers strive, and hence the uniform parameters of work evaluation for its achievement, unite the team of workers.

Unfortunately, I did not find any normal examples of QRM implementation in Russia, there is information about the use at the Chelyabinsk Compressor Plant and several other enterprises, but in general there are very few data on Russia. I think that the time of QRM in Russia will come.
Everyone knows that time is money, but in reality time is much more money than most managers believe! (Chuck Gates, president of the company).

Active production (Agile Manufacturing, AM)

In 2012, my company went bankrupt, the company employed only ten people, we made information systems on order. There were periods when orders were not enough to have work for all programmers, nevertheless, everyone had to pay a salary. Then I was interested in the idea of ​​a new company management methodology, which allows for easy expansion and contraction depending on the number of orders, and in the more general case quickly reconfiguring labor and material resources.

Later we built a new company (after I repaid all the debts!), And the principles that formed the basis of the company's work turned out to be very close to Agile Manufacturing (hereinafter AM). AM is at the stage of formation, while it is not a methodology, but a set of principles, literature and information on the Internet is not enough, however, I think that AM ideas will be interesting and useful for the audience of Habr.

Today, one of the main problems for industrial companies is the problem of uncertainty and rapid changes in the business environment. AM is a company management strategy that aims to make a production company more resilient to crises, changes in demand and other unpredictable changes. The president of Honda Corporation, in an interview with Business Week magazine, commented on this: “We must become very flexible in order to quickly respond to an unpredictable future. The century of agility (active production) has already begun. ”

For companies operating on AM, the ability to quickly reconfigure labor and material resources is peculiar in order not to lose opportunities to make money and avoid trouble. The main advantage of the AM concept is the ability to quickly adapt to a changing situation and work in conditions of uncertainty in the market. AM is suitable for industries where there is a high level of uncertainty (for example, IT, consumer electronics).

• Constant readiness for changes and response to them with the help of scenario strategies.
  Scenario

  The scenario is a rational method of presenting probable future options in which decisions made by the organization can be realized. The scenario is not a forecast, that is, a description of the relatively predictable development of the events of the present. Nor is it a vision — a desirable future. The scenario is a carefully thought-out answer to the question: “What is supposed to happen?” Or: “What happens if ...?”. The scenario is different from both forecast and vision, which tend to hide risks. The scenario, by contrast, makes it possible to manage risk. The existence of scenarios of actions developed for the most likely situations in which a company may end up and the mechanisms for their implementation that have been developed allow companies to quickly and cost-effectively react to changes in the business environment. Read more about scenario strategies here.
  
  
• As much as possible intellectual resources and as little material as possible.
• Permanent core group of cross-functional specialists. A group of specialists on projects on a contractual basis, as well as the removal of non-core works to outsource. The state does not swell, and the people that make up the core of the company are burning business.
  
• The following are the principles on which AM focuses on helping companies stay afloat with market volatility:
• An extensive network of partner organizations (with overlapping and complementary competencies) and suppliers.
• Organization of work: project-team, hierarchy is minimal.

Thus, special attention in companies of the AM type is paid to minimizing losses from possible, unexpected negative changes, such as the loss of contracts or the market for the product being manufactured. Simultaneously, multidisciplinary, rapidly expanding, team and extensive partner network
create prerequisites for responding quickly to unexpected opportunities.

Comparison of methodologies and conclusion
The three reviewed methodologies differ primarily in their strategic orientation. LM aims to create more with minimal resources. In other words, the LM constantly detects the losses of any plan and eliminates them. QRM is aimed at a single goal - reducing the production cycle time from the receipt of the application to delivery of the product to the customer. In AM, the main goal is to improve opportunities for work in conditions of uncertainty and market volatility.

The choice of a particular methodology depends on the volume of production, as well as on the industry in which the company operates. If the production is serial, then the main task as a rule is to minimize costs, i.e., LM. Companies that create small batches of a product should be able to execute orders quickly, so it’s more interesting to focus on QRM. Those who work with individual orders - can choose AM.

If we talk about innovation, then AM is much easier for companies, and LM is the hardest. After all, the main advantage of AM production is the ability to work in an ever-changing field, dealing with individual problems. QRM occupies a middle position.

Below is a table of the main differences LM, QRM, AM [2].

Factor	Lean Manufacturing (Lean Manufacturing, LM)	Quick Response Manufacturing (Quick Response Manufacturing, QRM)	Active production (Agile Manufacturing, AM)
Strategic orientation	Cost reduction	Order execution speed	Effective actions in conditions of high uncertainty
Type of production	Large serial and mass	Medium and small series	Small and individualized
Level of customization of products and services	Low - Medium	Medium - high	Tall
Resource utilization rate	100%	80%	> 100% (use of many third-party resources)
Innovation potential	Low - Medium	Medium - high	Tall

Automation of plants is now in demand, and we regularly visit various types of plants, discussing cooperation with customers. If you look at Russian production companies through the prism of the above described methodologies, I can distinguish 4 types of plants:

• Factories operating in the old manner. The machines are old, the wages are meager, people do the same type of work as robots, because the bosses do not want or can not invest in new equipment. So to say echoes of Fordism, such companies, as a rule, have a very narrow range of simple products (for example, containers for eggs). However, since these companies have been on the market for a long time without state assistance, they are profitable.
• Small and medium modern manufacturing companies. Such companies are equipped with modern equipment, regularly engaged in improving processes, produce a lot of the same type of products (for example, barrels or bread). Among such plants there are both branches of Western and domestic enterprises. Their methodology is often LM or part thereof.
• Small innovative manufacturing enterprises. They work with piece orders or in small batches, releasing often highly specialized technological things (for example, cabins for cranes). Without knowing it, these companies are close in their principles to AM.
• Plants with the state order. Well, here you understand, there can be anything in any combination.

By the way, I am very surprised that at those factories I visited, people practically do not use or do not know at all about the existence of project and task management services. Instead, plan in Excel, on paper and in emails. When you show ordinary task trackers, often people start to rejoice, and at small manufacturing companies they start to lead their projects using services (for example, Bitrix24 or Zoho Projects).

Bibliography

1. Management in Russia and abroad №6 '2013. Luzin AE, Babanova Yu.V. Postfordism - the three key production paradigms of the new century.
   This article served as a starting point for my analysis of production methodologies.
   
2. Rajan Suri. Time is money. The competitive advantage of fast-response production.
   An excellent, very deep book on QRM, I recommend to everyone who is involved in production or organizes work in large companies.
3. Edwards Deming. Out of the crisis. A new paradigm of managing people, systems and processes.
   Foundational book on TQM
4. Vomek, James P., Jones, Daniel T. Lean Manufacturing. How to get rid of losses and achieve prosperity of your company, 2011.
   Foundational book on LM