1. IENG 451 History of Lean

2. Craft Production 1800-1900, workforce consisted of quasi- independent skilled tradesmen Characteristics – Decentralized organization, small machine shops – General purpose machines – Low production volume, high price Only the rich could afford the product Craft production continues to exist – Lamborghini, Ferrarri, Kellogg Furniture

3. Mass Production Taylor’s Scientific Management – Standardized work – Reduce cycle time – Time and motion studies – Measurement and analysis – Often confused as dehumanizing mind numbing work

4. Mass Production Henry Ford (1908) – Key to mass production was NOT the assembly line – Key is interchangeability of parts – Pre-hardened parts reduced warping and allowed for standardization – Reduced # of parts (single cast engine) – Move parts to assembly which evolved to moving assembly line – Cut real cost to customer by 2/3

5. Mass Production Sloan (1908) – Decentralized General Motors into 5 automobile divisions – Each profit center used standard accounting practices – Unintended consequences Gap between management and labor widened Accounting encouraged building inventory rather than customer demand Intechangeability of labor, promoted unions

6. Mass Dysfunction Workers hated mass production Quality took a back seat to production Machines became specialized – Cost accounting emphasized unit cost rather than overall efficiency – Batch production encouraged WIP buildup (inventory considered an assett) – Defects replicated throughout the batch

7. Mass Dysfunction Engineering became specialized leading to design problems for complex parts

8. Birth of Lean 1950 Toyoda visits Ford’s Rouge Plant and concluded mass production would not work in Japan Japan in a depression with limited capital, domestic market too small Toyota’s Historic Bargain – ¼ workforce terminated – Kiichiro Toyoda resigned – Remaining employees guaranteed lifetime employment and bonuses tied to profitability

9. Toyota Historic Bargain Workers now a fixed cost, much like other capital Investment in human capital leads to worker skill Experience wage gap leads to less knowledge loss Workers have incentive to help improve system Company and workers had become partners

10. Virtue of Necessity Specialized stamping machines not possible – Smaller batches – Quick die changeovers – Leads to substantial cost savings, improved quality 1969 Ohno begins working with suppliers, begins birth of supply chain management