Conditions for survival in the manufacturing industry in VUCA era
Satoru Murakami
CEO Goal-System consultants Inc.,
Three manufacturing giants,Henry Ford, Taiichi Ohno, and Eliyahu Goldratt.-2 The three giants who built the manufacturing system
Last week, I looked back on the history of manufacturing management. From this week, we will consider the three giants, Henry Ford I, Taiichi Ohno, and Eliyahu Goldratt, who created the management of manufacturing. The manufacturing industry is not aim to be built to fill a warehouse. Nor is it the purpose of everyone to work busy, nor is it the purpose of squeezing money from customers.
In order for a company to increase cash, it is essential to increase the amount of money that comes in and reduce the amount of money that goes out, that is, to increase sales and reduce costs. We have two directions in our efforts to keep the company alive and prosperous.
Henry Ford's synchronous production system for Ford, Taiichi Ohno's Toyota Production System (TPS), and Goldrat's TOC, each of the three methods is characterized by a paradigm that emphasizes the “flow” of cash, which is to shorten lead times and accelerate return on investment.
In contrast, GM has created a mass production paradigm that emphasizes "quantity" in order to reduce costs and reduces accounting (apparent) costs.
"Incoming money" and "outgoing money" based on cash flow are not synonymous with "accounting sales" and "cost". It is indispensable to carefully identify the mechanism and consider which one to choose. Toyota and TOC valued the "real cash flow" of incoming and outgoing money.
The other hand, American companies in the 1920s, represented by GM, built a management system that thoroughly increased sales, reduced costs, and increased accounting profits. The conflict between volume and flow policies has had a major impact on industry for over 100 years. How should this policy change in today's VUCA environment?
Mr. Taiichi Ohno, who has created the Toyota Production System, has left these words from the perspective of the passage of time value. "All of doing us is looking at the time between the customer's order and the time we collect the price, and shorten that time.
(Toyota Production System, preface).
This saying came from the fact that when the recession of 1950 threatened bankruptcy, instead of getting a loan from a bank, the manufacturing department was forced to build a mechanism to produce as many units as it sold. At Toyota, shortening this time is called "getting waste".
At the other end of the spectrum, there is a plan to sell (can) as much as possible, as represented by the mass production and mass consumption paradigms. It is a style that GM (General Motors) built in the 1920s.
In order to realize low cost, we increase the operating rate of machines and manufacture a large number of products. In order to reduce the calculation cost of management accounting (time / person for each product), we have created a system in which each division of labor is regarded as one independent unit and each unit makes as many products as possible. This is the so-called mass production paradigm, and each department makes a lot without considering the horizontal flow and cooperation. That way, even if it doesn't actually sell, the apparent cost goes down and it looks like it's cheaper, which is a "quantity" -oriented way of thinking.
What GM spread in the 1920s was
(1) If you make a lot, it will be cheaper, and in that sense, "inventory" is good.
(2) In the sense that everyone's busy work leads to the minimization of costs, "comfort" is evil.
Certainly, in the half-century of the 1920s and 1970s, the world continued to grow, despite the twists and turns, and it was a time when what was made was definitely sold. In that sense, the mass production method has functioned as a magical method that significantly reduces costs. However, there is no guarantee that what you make will definitely sell today, and this idea is the cause of various problems in today's era of change.
