Core Operations Management: Materials and Machinery

Commentary: This is the third post in a series on operations management. The series takes an operational view of environmental conditions into account and focuses on sustainability through adaptability. We are currently reviewing core operations management with the focus on the 4M's; methods, manpower, materials and machinery, and money. In this post we are looking at materials and machinery.

Operations Management Basics: Materials and Machinery

Business operations come down to manpower, methods, materials/machinery, and money also known as the 4M's.  I have grouped materials and machines together since they have many commonalities; capital expenses, carrying costs, depreciation, and other like qualities. Materials and machines are at the center of an operation. Materials are generally worked into finished goods by machinery that can be operated by code and ultimately human manpower. The sophistication of the code is increasing as emergent technologies make certain kinds of intelligent code methods possible.  Hollywood movies have taken the notion of intelligent code and machines to extremes. In the movie A.I. Artifical Intelligence, human misconduct led to their extinction leaving intelligent and sentient machines that evolved. These machines discover David, a prototype machine that knew humans, and viewed him as unique for his experiences. David wished to become human but could not. Star Trek: The Next Generation had an android, Data, who also wished to become human and through experience evolved closer to becoming human. Ultimately, Data sacrificed himself for humanity in the movie Star Trek: Nemesis. Finally, in the movie Bicentennial Man, a robot, Andrew, becomes sentient then desired to be declared human. After evolving and inventing organic systems that made him closer to being human, Andrew acquired the uniquely human experience of death. Upon Andrew's death he was declared human. Much of this entertainment arose from a ground breaking book by Ray Kurzweil, The Age of Spiritual Machines and projects such as human centric computing or H21.

Intelligent and sentient machines may be possible on the horizon as biological computing, robotic, human sensory,  genetic engineering, and other technologies converge. One frightening exploitation of this technological convergence is Transhumanism in which humans and machines are capable of exchanging the human essence or soul.. Back to being grounded in the meantime, technological convergences will have implication today and in the future for business operations since machines work and rework materials at best with human supervised intelligence currently. Long standing methods will remain in place and, most likely, will be enhanced as the technological wrapper around the process improves. We will look at some of the material management methods and the machinery today. However, I would like to keep live the futurist notions of artificial intelligent systems to be discussed in later posts as a means of adaptability.

Materials

There are three general categories of materials; consumables, repairables, and controllables. Consumables are generally low cost materials that once used become waste or a loss, consumed. Although, attempts have been made to make items such as the automobile consumables. The original intent of the Saturn car concept was a disposable vehicle which was never achieved due to a shift in focus. Operations should never be halted due to the unavailability of a consumable. Repairables are generally expensive assemblies having many components and parts. By replacing parts or machining components, the higher order assembly becomes reusable or repaired. Another attempt at vehicle design componentized the automobile into three major interchangeable components; the chasis, power plant, and body.  Consumers could, based on the chasis in use, swap out power plants and body designs if failed, damaged, or for upgrades. Repairs to the components were to be made without affecting the consumer's use of the vehicle as the defective component (a carcass) was swapped out with a ready for issue (RFI) component. In effect, the consumer would lease the three major components. This design concept never emerged for various reasons but a good idea. Controllables can be repairable or consumable parts, components, or assemblies that are  highly pilferable, costly components susceptible to catastrophic damage while in inventory or transport, or proprietary in nature. Thus, the need to manage access and usage closely. In some cases, controllables will have a custody trail maintained. Given these three categories there arose a need to manage materials more closely due to availability, cost, and control requirements.

Material management was a priority focus before the 1970's since they were the most costly aspects of most operations. Many people speculate as to the cause of the flip when labor became more expensive. Some of the contributing events included the advent of minimum wage; increases in labor regulation and heightened focus on socio-political programs that demanded costly management programs and legal support. Anyhow, prior to this flip material management was the focus.  During this time efforts were undertaken to improve management of materials and equipment that have persisted due to their success. Material management methodologies that work include:

1. Just-in-Time (JIT). Henry Ford detailed the Just-in-time philosophy in his book My Life and Work circa 1922. However, in the 1950's Toyota perfected the concept and tagged named the method as Just-in-Time. The essential point is that materials sitting around cost money. The concept is to minimize the amount of material sitting around in order to free up capital for other purposes by reducing inventory carrying cost, spoilage, and theft. This is accomplished by accelerating the flow of inventory having production buffers sized to expected delays due to unscheduled maintenance and events. The concept has been taken beyond classic JIT to the point of leaning production cells, a U shaped cell, in a way that optimizes the movement of unfinished goods with input and output points that are managed. Thus, an operation, any operation, can be designed in a way that views the operational tempo in terms of a velocity such as dollars earned or spent per unit of time. I'll return to this concept in future posts. 
2. Lean Manufacturing: This is a group of methodologies and techniques that contribute towards reducing costs by optimizing flow and preserving value with less work. Techniques may be as simple as reducing the number of times material or unfinished goods are handled.  Methods could be as complex as Six Sigma that wraps up comprehensive OM tooling sets such as statistical process controls (SPC), total quality managment (TQM), and other tooling involving the labor force in a continuous improvement efforts.
3. Material Resource Planning (MRP). Joseph Orlicky, during the 1960's, studied Toyota's system and originated the MRP process that has led towards more expansive management systems of MRP II, Enterprise Resource Planning (ERP) and Distribution Resource Planning (DRP). The concept is to identify when materials will be needed, predict when shortfalls may occur, and to determine the 'critical path' back to the starting point. MRP is based on a Bill of Materials in which materials are time phased into time buckets. ERP attemps to bring the entire organization into a single focus and even couples suppliers and distributors to the production process. I'll also return to the ERP concept later.

Machinery

Machinery cost have increased since 1970 as robotics and computerization began to take hold with the objective of a labor multiplier effect. Companies often conduct cost-benefit analysis to determine to best use of their capital when considering machinery resulting in either a operating lease or a capital lease. Operating leases are expensed 100% off the books and are leveraged when purchasing the machine does not make sense. In effect, the machine is 'rented' for a specified term then returned to its owner. Capital leases result in ownership of the machine and may have significant tax implications. Thus, operations and project managers alike carefully weigh these decisions to buy or rent machines.

Since the 1970's, numeric control machines quickly became computer numeric control machines (CNC). Manufacturing began to move into the realm of Computer Integrated Manufacturing  (CIM) systems that link innovation, design, process planning, manufacturing, distribution, and demand seamlessly. These systems range from desktop manufacturing to large scale mass production plants. For example, one of the most advanced auto manufacturing plant is Ford's Brazil facility. These facilities required higher skilled artisans who not only perform the work but also program, load, and maintain the computer controlled machines.  The attraction of CIM facilities is flexible or adaptive manufacturing, higher quality of work conditions, and improved quality and flow.  In CIM's ideal implementation, a customer could request specific details that are immediately applied to work-in-process. Eddie Bauer has approached this using the digital profit model. Customers order a blue shirt online for example. In the next batch run a white shirt of the proper design is picked then routed to the blue dye tanks, dried, wrapped, then loaded in awaiting mail trucks immediately. The process is so rapid that customers have been known to recieve damp warm shirts in the mail!  Anheuser-Busch also has an automated brewing and bottling process. Computers load and steep the urns of beer in a continuous brewing method which is then drawn off bottled, palletized, and loaded into semi-truck vans fully automated. Even the delivery of the product is automated as the van sidewalls release the grip on the product and a conveyor belt on the bed moves the cargo to the door then out onto the dock.

In time, the manufacturing processes will become increasingly automated with intelligent machines administering the work. Even the common kitchen is moving in that direction. Food preparation processes have become standardized resulting in both commercial and retail grade appliances that prepare and sense the food's preparation state. For example, retail appliances such as bread machines have emerged that perform a variety of processes such as mixing, needing, rising, baking, and cooling. The ready made bread mix products are available for numerous bread types.  The breadmakers have sensors and programs that determine the ideal conditions and adjust for perfect loafs of bread. While these machines are still supervised, intelligent machines that converse with the baker are on the horizon. Speculating on their use, I suspect the baker will verbally state the desired preferences, recipes will be retrieved over the Internet,  and work-in-progress status will be a conversation with the baker yielding to a new style of Ratatouille. Instead of a mouse and man combination this will result in a machine and man combination.  Manufacturing systems may head in this same direction advising of worn tooling, maintenance, or quality issues. Instructions may be given orally to correct the situation by the manufacturing supervisor. Machines will fix machines.

Even maritime, aviation, and automobile machines are being affected by technological advances. Ships handling has advanced dramatically from as many as 12 sailors on the bridge to 1 ship's pilot as the bridge has transformed to be somewhat like the cockpit of an aircraft. Information is sent throughout the ship where sensors and computers manage ballast, stability, engine performance, fuel economy, and deploy stabilizers when necessary. Aircraft controls are becoming increasingly intelligent as newer air traffic control systems communicate among airframes and airfields determining the best approaches, altitudes, fuel economies, and collision avoidance. Intelligent traffic systems are using water flow models to control the flow of automobile traffic. All massive machines and complex systems are evolving to become more life like in their character.  The loading and unloading the vehicles and their movements impact logistical networks involving suppliers, producers, and customers.  This results in a systems-of-systems perspective of machines and operations.

Thoughts and Conclusions

Business operations have been looked at in terms of materials and machinery in order to improve process flows reducing cost and time-to-market while improving and/or stabilizing quality. Manufacturers have been seeking flexible or adaptable manufacturing strategies in order to respond to market changes given thier large captial investments in machinery. By focusing of process and adaptable code, the CIM environment may offer a solution.  Many of the manufacturing approaches to managing the operations have cross bled into other industries and there may be a solution similiar ti CIM for other than manufacturing operations. For example, agile software develop has taken on a manufacturing styled approach with the business metrics and continuous improvement methods employed in order to produce 'widgets', web parts or other coded objects. I want to return to a CIM-like concept in later posts.  

Material and machine management focus is perhaps returning to be just as critical to manage as manpower has become in recent decades. Traditional thinking remarks that manpower is willing to work if properly nutured. In the emerging era of operations management, machines may be looked at similar to the manpower approach - with care and feeding.

References:

Kurzweil, R. (1999). The age of spiritual machines. Pengiun Books. NY.