Part 1

Getting to Know Manufacturing

DOI:10.4324/9781351110310-1
 About Manufacturing

1 About Manufacturing

M
ANUFACTURING TAKES PLACE in factories. A factory is the adventurous setting in the famous
novel Charlie and the Chocolate Factory, where Roald Dahl (1964) wrote, “I, Willy Wonka,
have decided to allow five children – just five, mind you, and no more – to visit my factory
this year.” But, “The Factory” is also the name of a location in the TV series Colony (2016). Little is
known about “The Factory” in Colony, except that it is the last place you want to be, it is a slave labor
facility located on the Moon, and nobody has ever returned from it… Outsiders depict factories as both
the source of “good manufacturing jobs” and “the world’s most hated workplace.” We offer a more
factual view of manufacturing in the 21st century than Willy Wonka’s enchanting chocolate factory and
the spine-chilling sweatshop in Colony.

For the hundreds of millions of people who work in factories all over the world, making every physical
object we use and consume, it is often the best economic opportunity available. Production work can be
tedious, but workers still experience pride in workmanship, particularly when the products have a repu-
tation for high quality. In addition, the factory is a place of intense teamwork that fosters a camaraderie
among coworkers that is uncommon in other workplaces. The work of designing and operating factories
requires a combination of technical and managerial skills that is best grounded in a fascination with how
things are made. It is often a calling, not a pursuit based on economic necessity or incentives.

Manufacturing contributes to society, not only through its output, but also through the impact of fac-
tories on their social and physical environment. Whether or not they measure up, it is the responsibility
of owners and managers to make manufacturing jobs foster economic growth, provide career opportu-
nities, and ensure that factories do not pollute or harm people. This chapter provides you the necessary
background knowledge to understand what manufacturing is about.

Learning objectives
After working through this chapter, you will be able to do the following:
1 Tell manufacturing apart from other business activities.
2 Quantify the importance of manufacturing in the economy.
3 Map a manufacturing activity as a system of processes.
4 Explain the concepts of efectiveness and efciency and their relation.
5 Use the MANUFACTURES mnemonic to describe components of manufacturing.
6 Design an organizational structure for a typical factory.
7 Explain the role of operators, support staf, and managers.
8 Explain how manufacturing developed through history.

DOI:10.4324/9781351110310-2
Getting to Know Manufacturing

1.1. What is manufacturing?

Many operations can be described as turning some inputs into outputs, but not all do so by manufactur-
ing. The physical nature of the goods is essential to manufacturing. It drives the technical, human and
economic organization of the work. The emphasis on physical materials and goods does not imply that
digital and analog information or service processes are of less relevance. It just means that, unless the
goods are physical, it’s not manufacturing.

Here are some examples and counterexamples of what manufacturing is and is not:
• Extracting metals or rare earths from ores is manufacturing, and so is building mining equipment.
Yet mining itself, on the other hand, is not manufacturing. It’s about getting materials out of the
ground, wherever they happen to be, which is not the same as transforming them. Mining has
been around longer than manufacturing and has contributed many ideas used in manufacturing.
For example, the concept that a manager’s job is to plan, organize, lead, and control was developed
by mining executive Henri Fayol.
• Making 6 million memory chips in a factory per month is manufacturing, but making a prototype
of a new chip in the factory lab is not.
• Cooking, packaging, and freezing meals for sale to supermarkets is manufacturing, but operating a
restaurant is not. In restaurants, the business is food service, not production. Cooking a meal at
home is not manufacturing because family members do not usually pay.
• Printing and binding textbooks for distribution through bookstores is manufacturing. Preparing
and selling e-books is not, because it does not involve any materials. Producing the e-book readers
is manufacturing.
• Replicating software on CDs, packaging and shrink-wrapping them is manufacturing, but selling
software through downloads or as a service is not because no materials are transformed.
• Sculptors and painters produce physical goods, but their art is not manufacturing because each
piece is unique and intended to be irreproducible. Manufacturing is usually repetitive, but it does
not have to be. For example, shipbuilders or specialized machinery manufacturers may produce
only one-of-a-kind products. In these examples, however, processes are repeatable. A manufac-
turer may be able to make a fully custom product, but can replicate it exactly if the need arises.
On the other hand, copies or reproductions of works of art are never exact and usually do not
have the same value as originals.

Defnition:
Manufacturing is the transformation of physical materials into
physical goods using repeatable processes.

Manufacturing takes place in factories or plants, which are buildings or complexes of buildings
equipped with machines, tools, and information that people use to transform materials or assemble parts
into products. Even the most advanced factories are not unattended automatic systems, but systems that
function based on interactions between humans and machines. Factories can be found in many shapes
and locations around the world. Figure 1.1 shows one in Brooklyn, New York.

4
 About Manufacturing

Figure 1.1 Manufacturing takes place in factories, like this one in Brooklyn, New York

Manufacturing is most commonly done with the goal of directly generating profits from the sale of
goods to customers. The relationship of manufacturing to profits is, however, often indirect. For exam-
ple, firm-internal production does not directly result in sales to external customers. This includes mak-
ing components used for assembly elsewhere in the company or making tools that the company uses in
performing services. Furthermore, some defense goods are made in government armories with no profit
motive. Such factories are “cost centers,” to which the company allocates a budget to make the prod-
ucts and the factories are measured on their ability to meet it.

People are at the center of manufacturing. Over time, the number and the roles of people in a factory
change, but they remain essential. For example, Nippon Steel’s Yawata Steel Works, in Kitakyushu,
Japan, produces as much steel today with less than 3,000 employees as it did in 1964 with more than
40,000. The work these 3,000 people do today is obviously different from the work the 40,000 did five
decades before. Improvements in work methods, processes, control systems, and information technology
have all contributed to this transition. In the end, however, the steel works remain a human–machine
system. As we will see in later chapters, while technological advancement changes what people do, it
does not eliminate the need for them.

1.1.1. Input-process-output model

On first encounter, the work of a factory may appear dauntingly complex. See, for example, the petro-
chemical industrial zone shown in Figure 1.2. What it boils down to, however, is that manufacturing is
about processing input materials into outputs – effectively and efficiently. This insight is valid for each
process in a factory. Hence, even the most complex manufacturing task can be broken down into pro-
cesses and subprocesses.

5
Getting to Know Manufacturing

Box 1.1 Taxonomy of manufacturing by the United Nations

Several governmental and non-governmental institutions offer standard definitions and tax-
onomies of what constitutes manufacturing and what not. All of them have their strengths
and limitations. One of the most accepted classification schemes is the International Stan-
dard Industrial Classification (ISIC) of All Economic Activities by the United Nations.1 In the
version from 2008, ISIC defines manufacturing by the ISIC Section C divisions 10–33 listed
here.
Section C Manufacturing
Division 10 Food products
Division 11 Beverages
Division 12 Tobacco products
Division 13 Textiles
Division 14 Wearing apparel
Division 15 Leather and related products
Division 16 Wood and products of wood and cork, except furniture;
articles of straw and plaiting materials
Division 17 Paper and paper products
Division 18 Printing and reproduction of recorded media
Division 19 Coke and refined petroleum products
Division 20 Chemicals and chemical products
Division 21 Pharmaceuticals, medicinal chemical and botanical products
Division 22 Rubber and plastics products
Division 23 Other non-metallic mineral products
Division 24 Basic metals
Division 25 Fabricated metal products, except machinery and equipment
Division 26 Computers, electronic and optical products
Division 27 Electrical equipment
Division 28 Machinery and equipment not elsewhere classified
Division 29 Motor vehicles, trailers and semi-trailers
Division 30 Other transport equipment
Division 31 Furniture
Division 32 Other manufacturing (jewelry, musical instruments, sports goods,
games and toys, medical and dental instruments, other manufacturing not
elsewhere classified)
Division 33 Repair and installation of machinery and equipment
1

1 United Nations. (1990). Standard industrial classification of all economic activities, Revision 3, Series M, No. 4, Rev. 4.
URL: https://unstats. un.org/unsd/publication/seriesm/seriesm_4rev4e.pdf

6
 About Manufacturing

Figure 1.2 Apparent complexity in a petrochemical industrial zone

There are many processes in a factory and many levels of processes. To understand how factories oper-
ate, it is useful to map processes at different levels using the input-process-output (IPO) model (Figure
1.3), where the output of a process is the input to one or more subsequent processes. The IPO model
can be used to map and understand operations on all levels. On a factory level, we can use it to describe
how a steel mill uses labor, ovens, machines, and energy to turn iron ore into steel products in a smelt-
ing and cooling process. The process can be broken down and detailed as we move from the factory to
the shop floor level. For example, the overall factory process can be broken into several sub-processes:
purchasing and logistics, iron making, steel making, casting, and rolling, dependent on the actual steel
mill. Each of these processes have their own inputs and outputs, and each process can be further broken
down into more sub-processes.

INPUT PROCESS OUTPUT

Figure 1.3 Input-process-output model

The IPO model implies a sequence, and the process breaks down into operations such that the output of
each is the input to the next one. IPO models are used to map information flows as well as material
flows, with one vital difference in the meaning of flow arrows. Information outputs are read by the next
process. It is a replication operation, after which the information is still available for other uses in
unlimited quantities. Materials, on the other hand, move to the next process and are no longer available,
meaning that quantities must be accounted for.

Stop and Think 1.1

Can you use the IPO model to describe how you make tea or cofee? Is there
any process you can think of where the IPO model does not apply?

7
Getting to Know Manufacturing

Strictly speaking, not all processes in manufacturing take an input and process it into a physical output.
Some processes affect a state change in a system rather than convert an input to an output. For example,
repair operations in maintenance respond to an alert about a machine going into a “down” state, and the
result of the repair is the return to “ready” status. Other examples are the processes of managing techni-
cal data or starting up a machine. The same distinction exists in control theory, classical control theory
involves feedback where the process is a black box known only by the relationship of output to input. In
modern control theory, the model is enriched with state variables.

Manufacturers often send old machines to overhaul or refurbishment factories that take them apart,
replace worn or broken components, reassemble, and test them. The input-process-output model is a
natural fit for the refurbishment factory because you actually have a flow of old machines coming in,
being processed and being shipped out. The same model is a force-fit when you apply it to in-house
maintenance, where machines don’t move and teams of technicians are dispatched to them with all their
equipment. You can apply the input-process-output model to work order information flows but not
always to service work itself.

1.1.2. The two EFFs: Efectiveness and efciency

A fundamental concept in manufacturing is the two “EFFs:” Effectiveness is about the “what” and effi-
ciency about the “how.” Being effective means getting the right things done. An effective process pro-
duces the intended outcome. Hence, it is measured during the output stage of the IPO model.

Regarding effectiveness, it doesn’t really matter how the product was produced, as long as it fulfills the
requirement of the customer or next process down the line. For example, if you order one standard pen-
cil and a factory uses 1,000 trees to make just one pencil, it would be effective but not efficient. A per-
fectly efficient factory would use no more wood and carbon than actually goes into your pencil.

Defnition:
Efectiveness means doing the right things, efciency doing things right.

Efficiency is measured during the process stage of the IPO model. It is a ratio. For example, if all the
heat provided to a steam engine were converted to mechanical energy, its efficiency would be 100%; if
none of it were, it would be 0%. There is no way efficiency could be outside of this range. Likewise, if
all the resources provided to a manufacturing process went directly into the sold products, its efficiency
would be 100%. The manufacturing equivalent of friction and heat losses in the engine is overproduc-
tion, waiting, handling, moving, storing and retrieving, and making defective goods.

A perfectly effective and efficient factory is a vision. We can imagine it but real factories are always
approximations. “Optimal” factories do not exist. The operations of real factories can always be
improved, until disruption from new technology resets the improvement process at a higher level. Note
that effectiveness should always take priority over efficiency. Being efficient at doing the wrong things
is perhaps the biggest waste and not worth pursuing.

8
 About Manufacturing

1.1.3. The four Ms

Another basic concept for process understanding is the four Ms. At a tactical level, problem-solving
teams have been taught for decades to look for root causes under the four headings of “Man, Machine,
Methods, and Materials.” While it has been a useful guideline, we must adjust the wording today,
because women should not be subsumed under the “Man” label. The four Ms now stand for “huMan,
Machine, Methods, and Materials.”

All the four Ms must be present at the same time for manufacturing to happen. Consider a welding pro-
cess in a factory making exhaust pipes (Figure 1.4). With any of the following inputs missing, there will
be no production:
• Human: Welder or human controlling or programming a welding robot
• Machine: Welding tool, protective equipment
• Materials: Steel pipes, welding electrodes, energy
• Method: Welding instructions or know-how, production plan.

Figure 1.4 The four Ms are needed for any process to run (Credit: kasto/123RF.com)

Even in fully automated processes, where workers apparently are not physically present, some humans
will be indirectly involved, as programmers or troubleshooters. The method can be installed in machine
programs or described in job instructions that are codified knowledge, or embedded in people’s skills
and know-how – that is, tacit knowledge.

While the four Ms concept may seem trivial, it is not. In a factory, every single process taking place at
any time needs the four Ms simultaneously present to function. That quickly amounts to thousands of
flows that must be coordinated.

Stop and Think 1.2

What are the 4Ms when you cook dinner and brush your teeth? Can you cook
dinner or brush your teeth with one of the 4Ms missing?

9
Getting to Know Manufacturing

1.1.4. The MANUFACTURES list

Lists are useful as memory joggers. However, short lists are often incomplete and long lists are difficult
to remember. In practice, lists are a one-way filter. If you omit an item from the list, you know that
your work is incomplete. On the other hand, checking off every item does not guarantee that it is com-
plete. The following list uses MANUFACTURES as a mnemonic, where each letter stands for a topic
that must be considered when designing or running manufacturing operations. The order of the topics is
meant to fit the acronym and is not otherwise meaningful.

MANUFACTURES is short for Management, Agents, Nature, Users, Funds, Approach, Context,
Technology, Utilities, Raw materials, Economics, and Suppliers. The following list explains each point
in more detail.
• MANAGEMENT: The tasks of management in general are to plan, organize, lead, and control.
This applies to manufacturing, in specific ways, not only to the physical flows of production but
also to the required support activities like maintenance, purchasing, warehouse operations, quality
assurance, human resources, accounting, etc.
• AGENTS: Agents are all individual stakeholders. A factory provides livelihoods to operators, tech-
nicians, engineers, and managers, and profits to its owners. It also affects the community of people
who are dependent on the products or the employees as family members or service providers, or
affected by its activities through noise, traffic, or other nuisances.
• NATURE: Regardless of management ambition, vision, or desire, the laws of physics, chemistry, or
biology never cease to apply on the shop floor. Understanding these laws is vital to the production
of a consistent product from materials with characteristics that vary, because they are extracted
from the ground, are agricultural crops, are recycled, or simply come from multiple sources. Fur-
thermore, manufacturing should not harm the environment.
• USERS: This includes the organizations or individuals who buy the products and the end-users.
They are not always the same. Household appliances are usually bought by the people who use
them, but from a retailer, not the manufacturer. Consequently, information about the products’
popularity and quality is aggregated and delayed in the distribution network before reaching the
manufacturer.
• FUNDS: This includes the investment in factories and production lines, operational expenses, and
revenues from sales. The language of money is spoken at the boundary between the factory and its
business environment. Activities inside the plant, on the other hand, are described in the language
of things, like pallets, pieces, tons, or information, like plans, lead times, or yields. A challenge is to
make local operational decisions in the language of things and information that translate into the
language of money. This is the job of accounting and it is not easy.
• APPROACH: The approach describes the principles behind the design and methods used in opera-
tions. Mass production, as developed in the 1910s at Ford and refined at GM in the 1920s is one
approach. The Toyota Production System (TPS), or lean manufacturing, is another. In broad
strokes, they appear similar; in detail, they are not. It can be helpful to think of the approach as a
recipe for preparing food or typical assembly instructions included in furniture or toys products.
But note that written descriptions of the approach will never be complete descriptions of the pro-
cess. For example, a typical recipe for making lasagna does not tell you where to cook, nor does it
tell you where to find a spoon or how to move your arms when mixing ingredients for the sauce.
The approach should be derived from the type of manufacturing processes.
• CONTEXT: The context describes the political, economic, and social environment in which man-
ufacturing takes place. Local governments routinely offer tax exemptions, or free facilities,
improve the road network, and provide other benefits to companies in exchange for locating a

10
 About Manufacturing

factory in their community, creating jobs, and expanding the tax base. Conversely, the closure of a
factory can be detrimental for a local economy.
• TECHNOLOGY: Technology covers the processes and equipment used in manufacturing. Any
company with money can buy equipment, but it doesn’t make it into a manufacturer any more
than the possession of a musical instrument makes you a musician. In addition to the equipment, a
manufacturer possesses the skills to use it to produce a specific result.
• UTILITIES: Utilities include availability and cost for the energy needed to run facilities and equip-
ment, water that may be consumed in the processes, and waste disposal. Different manufacturing
processes have different requirements. For example, access to affordable and reliable energy is a
decision criterion for metal smelting plants.
• RAW MATERIALS: “Raw materials” here refer to all the materials that end up in the product,
regardless of whether they are themselves the output of an upstream manufacturing process. The
challenge is to ensure that the right materials are available at the right time in the right quantities.
The materials must also be delivered at the right locations inside the factory and be presented for
easy picking by operators or loading into machines.
• ECONOMICS: A factory must provide economic value to the company, but that can take many
forms. The most straightforward motive is to profit from the sales of the goods but it is by no
means the only one. Sometimes, the company prefers to make components in-house, even if it is
more expensive than outsourcing, in order to have exclusive access to the plant’s capacity and pre-
vent know-how from leaking to competitors. Other companies set up a factory in the heart of an
industry concentration, where they can grow their know-how by tapping into the local talent
pool. Moreover, in a given factory, the objectives for generating economic returns change over
time.
• SUPPLIERS: Suppliers are other companies that provide inputs to the manufacturing process.
A manufacturer buys from them but does not have formal authority over them. As a customer,
the manufacturer can influence its suppliers, but it is an order of magnitude more difficult than
working with internal departments.

Please note that any attempt to summarize complex socio-technical concepts as simple rules to remem-
ber will have flaws. The idea with MANUFACTURES is not to present a complete theory of manufac-
turing, but to provide a rule of thumb that offers practical utility.

Stop and Think 1.3

Consider the example of a strawberry jam manufacturer. Can you give a few
examples for each of the factors in MANUFACTURES?

1.1.5. Systems thinking

Although we try to simplify with IPO models and the MANUFACTURES mnemonic, to help us
understand and manage manufacturing operations, a factory is in reality a complex system with inter-
linked social-, economic-, and technical components. It is the workplace of many people, it exists to
generate a return to its investors, and it hosts a range of different technologies. Without an overall sys-
tems perspective, sub-optimization and misguided beliefs are sure to exist. The ancient parable from
India about the elephant and six blind men provides a useful analogy (Figure 1.5).

11
Getting to Know Manufacturing

Figure 1.5 An elephant according to six blind men

Six blind men encounter an elephant for the first time and each one tries to describe the elephant based
on a small piece of information from different perspectives. As shown in Figure 1.5, one touches the tail
and thinks it feels like a rope. Another one touches a leg and suggests it is a tree stem. A third blind man
hits the side of the elephant and experiences it as a wall. A fourth one touches the trunk and suggests it
is a snake. One touches an ear and says it has to be a fan. The sixth blind man touches a tusk and
describes it as a spear. Individually, all of them are far from a good description of an elephant. Together,
they start to get close.

The lesson from this anecdote is that factories must be understood as systems, which successful manu-
facturers have known for a long time. At MIT in the 1950s and 1960s, Jay W. Forrester undertook to
develop mathematical models of manufacturing activities and analyze them through computer simula-
tions. He called it “Industrial Dynamics.”2 Today known as “systems thinking,” it helps us explain how
independent yet interlinked objects affect the processes and performance of a system. In manufacturing,
W. Edwards Deming argued that the job of a manager is to work to improve the whole, not the parts.3
Figure 1.6 shows how the Dragon capsule is lifted to be placed atop its cargo ring inside a processing
hangar at Cape Canaveral Air Force Station in Florida, USA.

Figure 1.6 NASA uses systems thinking (Credit: NASA/Kim Shifett, 2011)

2 Forrester, J. W. (1961). Industrial dynamics. M.I.T. Press.

3 Deming, W. E. (1986). Out of the crisis: Quality, productivity and competitive position. Cambridge University Press.

12
 About Manufacturing

All elements of a space rocket are carefully planned with a view to the total system. A system is a set of
elements that stand in relationship with each other and interact. Further, a system is defined by its
boundaries that separate it from the environment.

A factory is a system that consists of humans, machines, materials, and so on, that all stand in various
relationships to each other. These elements can be separated into soft — humans and information — and
hard — machines and products. As we cannot fully predict the influences of one change in the element
to all other elements, a factory system can be defined as being complex. With a complex system, the
outcome of a change is not a priori predictable because of the dynamic relationships between the differ-
ent elements that result in unexpected effects.

What does systems thinking mean in practice? Consider the example of increasing the output of a pro-
duction line for computers. There are a few things you can do at the actual line; for example, installing
new assembly robots, rebalancing the line, speeding up the line, etc. What if the shorter throughput
time is lost in the packaging line? What if assembly workers feel more stressed and make mistakes? Are
we sure that incoming logistics is able to match the new pace? When we design, manage, and improve
manufacturing operations we must think of the factory and its supply chain as a system.

1.2. Factory organization

A factory is, among other things, a community of people who must be organized. People must take dif-
ferent roles and jobs to fulfill the objective of the factory, which is to make money by making products
for a market. Different departments grow different cultures – even within the same factory. Communi-
cation barriers and silo-thinking curtail manufacturing performance. Hence, organizing the factory
employees well can be a considerable advantage.

1.2.1. Organization charts

Organizations are often presented through an organization chart, also known as an organigram. An orga-
nization chart is a visual representation of the organizational structure. There is no standard on how to
draw the organization chart other than placing departments in the order of their rank and show report-
ing relationships with lines, and indirect relationships with dotted lines. It is unusual to find the exact
same organization chart in two different factories.

A limitation with an organization chart is that they put the focus exclusively on management reporting
relationships. In particular, such charts fail to show the routine exchanges of information across the
organization – even when adding dotted lines between departments with formal reporting structures.
Moreover, it does not reveal the dynamics of manufacturing, where different parts of the organization
are working in temporary structures like project teams. The operations of a factory do no always match
its official organization chart, as individuals, through the power of expertise or charisma, exert more
influence than their position on the chart would suggest. Moreover, organization charts do not cover
important power structures like worker councils and union representation. However, organization
charts are useful analytical tools for understanding functions, relations, and department sizes. It is often
one of the first things that are presented in factory tour introductions.

13
Getting to Know Manufacturing

Figure 1.7 shows a typical kind of organization chart that could be found in a factory employing 1,000
people or more. As is common, it misses the key information of the number of employees in each box.

Plant
Manager

Support/
Projects

Sales & Human Finance

Marketing Purchasing Operations IT R&D
Ressources (Accounting)

Planning Production Materials Engineering Quality Maintenance Warehouse

Handling

Area/Line

Team/
Operators

Figure 1.7 A typical organization chart in a large factory

The organization chart in Figure 1.7 includes a department called Operations and a series of other
departments reporting directly to the Plant Manager. Depending on the tasks of the factory, not all
these departments are always represented. For example, the Sales & Marketing, R&D, Purchasing, and IT
departments can be located with the firm’s headquarters in another city. Human Resources and Accounting
or Finance can to a large extent be conducted outside of the factory organization, but they almost always
need local representation and are therefore usually represented as departments, even if it is only one or a
few people doing the task. Factories usually house support departments for administrative work, running
investment and improvement projects, or following up Health, Safety, and Environment (HSE) regula-
tions and tasks.

Some factories also have a separate Warehouse department that stores and manages finished goods and
packs and ships products to customers. In smaller factories, this function can be co-located and co-man-
aged with raw material inventories and covered by Materials Handling, sometimes under the name ofLo-
gistics. In other factories again, the warehouse is located apart from the factory and not under the
control of the factory management, but by a Supply Chain department in regional headquarters. The
Supply Chain department also covers tasks such as external logistics and international shipping.

Stop and Think 1.4

Why is Planning often not organized under Production?

14
 About Manufacturing

1.2.2. The Operations department

Exactly what is covered by the Operations department varies from factory to factory. In the example of
Figure 1.7, the following functions are part of Operations:
• Planning prepares production plans based on forecasts and orders received from Sales.
• Production produces the parts or products according to the plans. It converts materials into goods.
• Materials Handling makes sure that Production has the materials it needs at all times. It is in
charge of dock-to-dock in-plant logistics.
• Engineering is responsible for designing, building, and updating the factory’s layout, machines,
lines, and information systems.
• Quality is responsible for the methods used to ensure that products meet customer expectations.
• Maintenance is responsible for keeping machinery and tools in working condition and for repairs
beyond what the operators can do themselves.
• Warehouse is responsible for storing and shipping finished products.

Figure 1.8 If Production is the race car driver, then Materials Handling is the pit crew

However a factory decides to organize, there will always be tensions among different interests. New
plant and middle managers often come with new ideas for how to organize “better,” so reorganizations
are usual in factories. For example, in many plants, the Materials Handling function reports directly to
the plant manager and is more remote from Production than in Figure 1.7. In these cases, the Materials
Manager commonly pursues performance objectives for the department that may be counterproductive
for the plant as a whole, like keeping material handlers busy. Instead, it should be making sure that Pro-
duction has the materials it needs. This is the motivation to put it under the Operations Manager.

Within Engineering, there are roles that are definitely not part of Operations. Product development, for
example, is often not even done on a manufacturing site. Production line design and new product intro-
duction are usually done at the plant but not as part of Operations. Operations Managers, however, like
to have control over engineers to tweak existing processes, improve task sequencing, vet improvement

15
Getting to Know Manufacturing

ideas, or solve problems. If the engineers who do this work do not report to Operations, the Operations
Manager needs to negotiate their availability every time he or she needs them, and commonly finds this
structure cumbersome and unresponsive. The engineers, on the other hand, may find it frustrating to
work in a line organization that does not understand the technical challenges they face, their need to
keep up with new developments in the their field, and their career perspectives. This is the kind of
dilemmas that matrix organizations attempt to solve by having engineers working for Operations report
“dotted line” to a different Engineering Manager.

Box 1.2 Centralized versus distributed support functions in Operations

In almost every support function in Operations, the same tension exists between forms of
organization. Should this particular form of support be provided by a department of special-
ists for the whole organization, or should it be distributed and put under the responsibility
of line managers? You have the same dilemma in Quality, Engineering, Maintenance, Plan-
ning, IT, etc., and there is no single, universal answer.

The department of specialists is criticized as being bureaucratic, out of touch with the
needs of the production foor, and managed in pursuit of goals that may not be in line with
those of the business as a whole. But when you break it up and assign its members to pro-
duction lines, you may make it impossible to assemble the critical mass of support needed
to solve a particular problem, and you have these specialists report to bosses who do not
understand their specialty, causing retention problems. There are also benefts of keeping
specialists together: they can more easily have professional discussions and develop a com-
munity of experts. It is also difcult to balance the workload among distributed specialists.
As a result, most factories end up having specialists organized in their own departments.

There are other ways than changing the organizational structures to ensure specialists are
serving production. For example, locating the departments close to the shop foor and
involving all departments in daily layered meeting structures.

1.2.3. The Production department

Within a factory, the Production department is special, as the only one that makes the products. Note
that the greatest influence on a factory’s performance is at the bottom of the chart in Figure 1.7, where
operators and team leaders interact with first-line managers. That is where the products are made that
customers buy.

First-line managers go by a variety of titles in different companies, which change over time. The “fore-
man” of the early 20th century had become the gender-neutral “Supervisor” by the 1980s, and then the
less directive “Area Coordinator” or “Group Coordinator.” The through-line of all these names is that
it is the first rung of the management ladder – often populated by a mix of college graduates on their
first job and senior operators promoted into this position.

The middle-level structure of Production is determined by the manufacturing processes and physical
layout of the factory. If the process involves machining and assembly, with all the machine tools in one
hall and all the assembly lines in another, then there will be a General Supervisor for Machining and one

16
 About Manufacturing

for Assembly. If, on the other hand, they are organized by products, then there will be a General Super-
visor per product or product family. And, if there are resources that cannot be dedicated by family, they
usually go into a Shared Services department with its own manager – examples include expensive test-
ing equipment, paint booths, or autoclaves. The point is to make clear interfaces with unambiguous
areas of responsibility.

Box 1.3 First-line manager to operator ratio in Toyota

With between 40 and 100 operators to oversee, most plants’ frst-line managers have no
time to do anything that is not directly related to their production numbers. While it is a
widely held belief that having a low ratio of frst-line managers to operators is “lean,” it is
not the way Toyota operates.

In Toyota car plants, these frst-line managers

have 4 to 6 teams of 4 to 6 operators each,
or a minimum of 16 and a maximum of 36
operators, with an average that is just under
18. Operators are organized into teams of 4
to 6 people with a team leader.

The team leaders are operators with produc-

tion tasks occupying 40% to 60% of the time
available per unit at each operation, known
Figure 1.9 Operators fnishing the four-millionth Yaris as the takt time. In the rest of the time, they
to roll of the production line in Toyota’s factory in keep the pace, assist, or train the other oper-
Onnaing, France, 2020 (Credit: S. Dhote / Toyota) ators, make sure materials and tools are
available, keep records, coordinate change-
overs, and call for help as needed. In addition to meeting production targets, frst-line man-
agers are expected to devote part of their time to leading improvement projects and
organizing the professional development of their subordinates, which includes certifying
their qualifcations, helping them get additional training, and reviewing their progress twice
a year.

Often, a factory can do better if the frst-line managers have fewer operators reporting to
them, for example 15 to 25, and their responsibilities would not be limited to meeting pro-
duction targets. In addition, they would lead improvement projects and coach the profes-
sional development of their operators. They should be seen as part of management and be
in daily, routine contact with production operators.

1.2.4. Operators
Although the operators populate the most important job in manufacturing, the gap between operators
and management is marked in a variety of ways. For example, depending on industry and geographic
location, it is not uncommon that different employee categories wear different work clothing. For
example, shop floor employees can wear blue, the team leader perhaps light blue or gray, area manage-
ment white, and technicians red. Higher-level managers and office workers usually wear their own

17
Getting to Know Manufacturing

clothing. This choice is partly due to the need for different clothing in different jobs. In factories that
require high levels of cleanliness, like the semiconductor industry, fine electronics, pharmaceutical
industries or food processing, it is usual to wear white coveralls. Other factories are dusty or warm and
require more robust protective coveralls. However, the use of colors to differentiate job categories is a
strategic choice. In Japan and in many factories in the US, it is usually not possible to tell employees’
positions from what they are wearing.

Another difference between shop floor operators

and many office workers, is that it is common that
operators are paid by the hour – clocking in and out
– and receive overtime pay if asked to stay beyond
their shifts. The higher-level managers and staff are
“exempts,” meaning that they receive a salary and
do not measure their work time. Moreover, manag-
ers have many promotion opportunities in the com-
pany, while operators have few or none – unless
they become managers.

It is important to recognize that not all operators are

Figure 1.10 Shop foor workers clocking in and out
hired on the same type of contract. Some operators
are permanent; others, temporary. Any manufacturing activity that is seasonal or cyclical has labor
requirements that can vary by a factor of 3 or more over time. For example, fruit and vegetable process-
ing is done during the harvest season, and project-based manufacturing is dependent on the scope and
scale of projects. A rapid demand increase driven by market trends or external events – like a pandemic
– may lead to the temporary need of more operators. Reliance on temporary staff, however, not only
compounds the difficulty of hiring, but prevents skills growth in the workforce. Demand seasonality is
an external cause. The problem is not created by factory management but it can cripple performance
improvement. It will not be solved unless management pursues a different approach to human resource
management, aimed at developing a smaller, permanent force of skilled workers, focused on meeting
the demand during the high season and on improvements/skills development during the low season.

When we realize that operators, not managers, make what customers buy, we should find a way to cre-
ate good operator jobs. A sustainable approach is to take full advantage of the characteristics of humans
that make them special as production resources:
• The ability to learn.
• The ability to respond to unforeseen events.
• The intelligence to solve problems.
• The creativity to find new uses for existing devices and invent new ones.
• The ability to care for other humans and help create a good work environment.
• Physical strength, dexterity, and endurance.
• Ethics that enable them to act in the best interest of a group.

Releasing these human abilities fully, each employee has to act as if the survival of the company depends
on his or her individual behavior. There is no sure recipe to make employees feel this way but there are
many ways to make sure they don’t. Treating operators with disrespect, making them work in unsafe
environments, or not paying a fair salary for their work effectively hinder the operators’ human abilities
to be put to good use.

18
 About Manufacturing

In many factories, work is designed by specialists and time studies are used to set standards intended to
keep operators from colluding to slow down. Such factories can be both effective and efficient, but they
will never turn into centers of excellence, nor are they particularly good places to work. There is, how-
ever, another tradition in industrial engineering. Companies like Volvo in Sweden and Toyota in Japan
study work design with the purpose of improving it, in collaboration with those who do it.

Teruyuki Minoura, previous CEO of Toyota Motor Manufacturing North America, Inc., quoted Eiji
Toyoda elaborating on Benjamin Franklin’s point that “time is the stuff life is made of,”4 in an address
to the World Class Manufacturing Forum in 2002:

Mr. Eiji Toyoda tells the following story of a Buddhist monk: “The monk said,‘The human life-
time is made up of an accumulation of time. So one hour is a part of that person’s lifetime; in other
words, it is his or her life itself.’ So, when we hire our employees to work for our company, we pur-
chase their life for the duration of the time they spend with us. The employees are offering a very
important part of their life to us. If we don’t use their time effectively, we are wasting their lives.”

Taking this perspective is not philanthropy. Specialists can improve one operation out of hundreds per-
formed in a factory. Attending to the required level of detail on all operations is beyond the capacity of
any reasonably sized engineering department. The design of operator jobs for the whole factory can only
be done by engaging the line organization, from the operators who do the jobs to their first-line managers.

Figure 1.11 Operators are the most important people in manufacturing

4 Franklin, B., Franklin, W. T., & Duane, W. (1834). Memoirs of Benjamin Franklin. M’Carty & Davis.

19
Getting to Know Manufacturing

Box 1.4 Building T-type specialists in support roles through job-rotation

Some companies intentionally develop T-type specialists and leaders. This means having a
deep expertise in one functional area (e.g., Engineering, Purchasing, or Sales), and a broad
expertise in at least two other functional areas.

The people in support roles should render services production needs for today or tomorrow.
Most companies staf departments with specialists who have not necessarily worked in pro-
duction. It is in fact common for people to move from one support department in one com-
pany to the same department in another (e.g., Engineering, Accounting, or Logistics),
allowing individuals to spend their entire careers in the same support function.

While this is expected to result in a higher level of specialized expertise, it does not pro-
mote mutual understanding and cooperation across departments. Among the many possible
countermeasures is the systematic rotation of some employees between departments every
few years. It is common in Japan. The person you encounter in Production Control may have
been a Design Engineer for 5 years and, as a result, understands engineering issues. Work-
ing in the Quality department does not have to be a lifetime commitment. You can come
from Production, spend a few years in Quality, and go on to Maintenance. People who
rotate in this fashion may have less depth in specialized knowledge but more on how the
organization works. Incidentally, this practice makes them both more valuable to their cur-
rent employer and less to others.

Of course, nothing works perfectly and everywhere. Rotating high-potential individuals in

this fashion is done with varying degrees of efectiveness worldwide. In some companies,
the “tours of duty” are too short for the individuals to be committed, and they are rewarded
for not making waves. In such cases, the rotation policy may perpetuate dysfunction.

In larger organizations, the policy of rotating some of the professionals between depart-
ments is one approach. A matrix structure is another. In it, you have each professional
reporting “solid-line” to an operational manager and “dotted-line” to a functional manager of
the same specialty, who can provide guidance in career development and skills mainte-
nance. For example, an engineer supporting a production line reports to the line manager,
but also stays connected with an engineering manager to stay current with technology,
attend conferences, receive continuing education, and plan a career.

On a case-by-case basis, you have to consider the nature of the support needed. How deep
is the required specialized knowledge? You would not rotate people between open-heart
surgery, rocket science, and baseball, but maybe you can between Production Control and
Quality. These departments serve each other and communicate with each other, so under-
standing the other side is invaluable.

20
 About Manufacturing

1.3. The history of manufacturing

The history of manufacturing teaches us lessons that are applicable today. It deserves many volumes on
its own, and the point here is only to show some milestone examples as a starting point to dig further.

The following development phases can be separated in the history of manufacturing:

1 Pre-industrial production
2 Craft production
3 The Industrial Revolution
4 The American System of Manufacture
5 Mass production
6 The Toyota Production System and lean manufacturing

In addition, the evolution and diffusion of Information Technology (IT) and Operations Technology
(OT) since the invention of the computer in the 1940s has opened up many opportunities. While some
argue that this adds up to a “4th Industrial Revolution,” also known as “Industry 4.0,” it is not a consen-
sus view. These phases have been enabled by progress in technology and/or concepts for organizing
manufacturing.

Note that the advent of a new phase does not replace previous phases but add to them. Instead, they
coexist, often in an interconnected web of manufacturing activities. The history of manufacturing is not
as well known as the history of governments, wars, or inventions. We know the history of technology
better than the history of manufacturing. Regarding, for example, microscopes, schoolchildren may
hear about the 17th century Dutchman, Antonie van Leeuwenhoek, who made his own microscopes,
and whose life is well documented. But who, in the aftermath, set up factories to make microscopes for
others to use? And how did they organize production? This is not widely known and is not easy to find.
When studying history you need to approach all sources of information with a critical mind.

1.3.1. Production in the pre-industrial area

We know very little about how things were manufactured before the mid-1700s. Archeology tells us that
the oldest objects made by working copper date back to 6500 BCE in Çatalhöyük in what is today Tur-
key, and that the extraction of metal from ore was first done in 5000 BCE but it doesn’t tell us how. In
Poiesis,5 Peter Acton tells us about manufacturing in Athens in the 5th century BCE. We know that the
Vikings in Scandinavia manufactured wooden ships around 1000 CE that could travel more than a thou-
sand nautical miles in rough seas, but we do not know how the manufacturing processes were organized.
The Venetian Arsenal outside Venice in Italy employed about 16,000 people in the mid-1500s, who
together were able to produce nearly one ship a day in its peak years. However, we do not know exactly
how they did it. A few noteworthy books on metallurgy provide detailed insight into mining and manu-
facturing processes of metals in the pre-industrial era. Three examples are Ein nützlich Bergbüchlein6 (The
useful little mining book) in 1500, De la Pirotechnia7 published in Italian in 1540, and De re metallica.8

5 Acton, P. H. & Acton, P. (2014). Poiesis: Manufacturing in Classical Athens. Oxford University Press.
6 Rülein von Calw, U. (1955). Ulrich Rülein von Calw und sein Bergbüchlein (Pieper, W., Ed.). Akademie-Verlag. (Orig. work published 1505)
7 Biringuccio, V. (1990). The pirotechnia of Vannoccio Biringuccio. Dover Publications.
8 Agricola, G. (2013). De re metallica. Dover Publications.

21
Getting to Know Manufacturing

Between 1751 and 1772, the Grande Encyclopédie9 came out in France, with more than 2,000 drawings
showing the manufacturing processes used at the time, Figure 1.12 shows an example..

Figure 1.12 An illustration of manufacturing of musical instruments in the Grande Encyclopédie

Box 1.5 The ceramics of Jingdezhen and early industrialization in China

Jingdezhen is a region of China that has been

known as a center of fne ceramics manufacturing
for 1700 years, which raises the question of how
such a feat could be possible through four
imperial dynasties and a 20th century of
revolutions and wars. From the mid-14th century,
Jingdezhen become one of the world’s frst
industrial towns when beginning volume
production of underglaze blue porcelain, as
shown in Figure 1.13.

One possible explanation proposed for this

extraordinary longevity is an industry structure in
which each step of the process, from clay
extraction to fring, has been performed by
diferent businesses, and that these businesses
were able to expand and contract independently,
Figure 1.13 China has produced where a vertically integrated organization would
porcelain for millennia most likely not have survived.

9 Diderot, D. (1993). A Diderot pictorial encyclopedia of trades and industry. Dover Publications.

22
 About Manufacturing

1.3.2. Craft production

We know that the dominant mode of manufacturing before the Industrial Revolution was craft pro-
duction. Craft production is the process of manufacturing by hand, usually with the help of simple
tools. The craftspersons usually works in small workshops. Examples are a black smith forging swords, a
jeweler making jewelry, a wood smith making paddle boats, and a tailor making clothes.

The Middle Ages in Europe gave us the guild system, which provided for the training of apprentices in
a variety of trades. Apprentices or companions traveled between cities to learn traits from various mas-
ters. They would then make and defend their “masterpieces” before a jury of masters in order to
become masters themselves. This system, however, had a dark side: It restricted the diffusion of know-
how and forbade innovation in order to protect the positions of established master craftsmen. This sys-
tem has not completely disappeared in the 21st century. Guilds still exists in Germany and France,
operating schools and granting degrees. The guild mentality pervades other professions where know-
how cannot be protected by patents, like sushi chefs or martial arts instructors.

Although its dominant position in the manufacturing sector is long gone, craft production is still alive.
Crafted products are sought-after for their uniqueness and character and sometimes for their quality.
To build a successful business on craft production, you need a sort of talent or skill that sets you apart
from the competition. This skill is what makes you a craftsperson, or artisan. See Figure 1.14 for four
examples of modern craft production.

Figure 1.14 Modern craft production: a carpenter, a potter, a glass blower, and a fashion designer.

Craft production is characterized by the following:

• Skilled, often guild-certified artisans carrying out all critical production steps.
• Skill often learned through years of apprenticeship with a guild master.
• Artisans are usually in direct contact with customers, employers, if any, and suppliers.
• No economies of scale and very low production volumes.

23
Getting to Know Manufacturing

• No, or few, industry standards.

• Use of general-purpose tools.

1.3.3. The Industrial Revolution

The Industrial Revolution started in the textile and iron industry in the Northern parts of England in
the latter half of the 18th century. This history is well documented in many articles and books, and is
taught at the primary-school level in many countries. The most important developments during the
Industrial Revolution should be common knowledge for factory engineers and managers. The illustra-
tion shown in Figure 1.15, published by Samuel Griffiths in 1873, gives an impression of the early days
of industrialization in England.

Figure 1.15 The Industrial Revolution in the Black Country west of Birmingham, England

James Hargreaves’ development of the Spinning Jenny in 1764 has become a symbol for the start of the
Industrial Revolution (Figure 1.16). The further development of the spinning machine and related tech-
nologies by many others was central in the establishment of some of the world’s first textile factories
using mechanized spinning in the 1780s. In 1768, Richard Arkwright patented the first water-pow-
ered spinning frame (Figure 1.16). The water frame was installed in Arkwright’s cotton mill at Crom-
ford in Derbyshire, which was one of the first factories purposely constructed for machinery rather than
manual work. Arkwright also introduced a new manufacturing management practices that is still valid:
People were employed instead of contracted and the working day was determined by the clock rather
than daylight hours.

Note that concurrent developments in the systems of transportation, communication technology, and
banking were also central factors that enabled industrialization to take place. For example, James Watt
perfected the steam engine and made use of one in a cotton mill in 1785, and, by that, the replacement
of human, animal, and water power was complete.

24
 About Manufacturing

Coal was cheap and factories could now be placed almost anywhere. Unlike water power, steam power
was also available year round, which made it possible for work in factories to become a permanent
occupation, as opposed to a seasonal activity supplementing farming.

Figure 1.16 Mechanized spinning technology from the 1760s: Spinning Jenny and Water frame.

Mechanized textile production spread to continental Europe and the United States in the early 1800s.
During this period, the predominantly agrarian and rural societies in Europe and America developed
into industrial and urban societies

Industrialization led to a shift away from simple hand tools in small workshops to powered and spe-
cial-purpose machinery in factories. The introduction of factories made it easier to divide work tasks
between employees. Whereas craft production is characterized by the craftsperson carrying out all the
critical production processes, a division of labor among several workers characterizes industrial produc-
tion. One advantage of this system is that cheap, unskilled workers could be employed to carry out spe-
cialized and repetitive tasks.

The introduction of factories with the division of labor principle radically improved productivity (see
Box 1.6 for the famous pin factory example of economist Adam Smith) but not the quality of life of the
production workforce. They were subject to brutal discipline and lost the connection with the end prod-
ucts, which had been a characteristic of craft production. Karl Marx later called this “alienation.”

Industrialized production is characterized by the following:

• Production takes place in factories.
• Separation of sales and manufacturing.
• Use of machines with external power sources.
• Factory owners employ a mix of skilled and unskilled labor.
• Division of labor.
• Economies of scale are achieved with high production volumes.

Stop and Think 1.5

With the objective to stop the Industrial Revolution in England, the “Lud-
dites” used violence against factories and machinery. Two hundred years
later, an American mathematician named Ted Kaczynski became notorious as
the “Unabomber” for sending bombs by mail to protest against “industrial
society.” Why do you think someone would want to stop technological
progress?

25
Getting to Know Manufacturing

Box 1.6 Division of labor: The pin factory example of Adam Smith

To learn about the magnitude of improvement made possible by the Industrial Revolution,
consider the below excerpt of the famous pin factory example from the frst chapter of
Adam Smith’s book Wealth of Nations (1776).10

“To take an example, therefore, from a very trifing manufacture; but one in which
the division of labor has been very often taken notice of, the trade of the pin-maker;
a workman not educated to this business (which the division of labor has rendered a
distinct trade), nor acquainted with the use of the machinery employed in it (to the
invention of which the same division of labor has probably given occasion), could
scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could
not make twenty. But in the way in which this business is now carried on, not only
the whole work is a peculiar trade, but it is divided into a number of branches, of
which the greater part are likewise peculiar trades.

One man draws out the wire, another straights it, a third cuts it, a fourth points it, a
ffth grinds it at the top for receiving, the head; to make the head requires two or
three distinct operations; to put it on is a peculiar business, to whiten the pins is
another; it is even a trade by itself to put them into the paper; and the important busi-
ness of making a pin is, in this manner, divided into about eighteen distinct operations,
which, in some manufactories, are all performed by distinct hands, though in others
the same man will sometimes perform two or three of them. I have seen a small manu-
factory of this kind where ten men only were employed, and where some of them con-
sequently performed two or three distinct operations.

But though they were very poor, and therefore but indiferently accommodated with
the necessary machinery, they could, when they exerted themselves, make among
them about twelve pounds of pins in a day. There are in a pound upwards of four
thousand pins of a middling size. Those ten persons, therefore, could make among
them upwards of forty-eight thousand pins in a day. Each person, therefore, making
a tenth part of forty-eight thousand pins, might be considered as making four thou-
sand eight hundred pins in a day. But if they had all wrought separately and inde-
pendently, and without any of them having been educated to this peculiar business,
they certainly could not each of them have made twenty, perhaps not one pin in a
day; that is, certainly, not the two hundred and fortieth, perhaps not the four thou-
sand eight hundredth part of what they are at present capable of performing, in
consequence of a proper division and combination of their diferent operations.”

10

10 Smith, A. (1904). The wealth of nations (Cannan, E., Ed.). Methuen & Co. (Original work published in 1776)

26
 About Manufacturing

1.3.4. The American System of Manufacture

For the first hundred years of the Industrial Revolution, parts in an assembled product were usually not
interchangeable. In the Smithsonian museum in Washington D.C., visitors can see Singer sewing
machines built until the 1870s with the serial number of the end-product engraved on every part, indi-
cating that the parts were not expected to fit on any other machine. These numbers do not appear on
later machines.

The early factories had neither gauges nor standard processes and did not have the concept of critical
dimension or tolerance. As a result, dimensions varied so much from part to part that they were not
interchangeable. This problem was most apparent for dysfunctional weapons on the battlefield.

Already in 1765, the French general de Gribeauval envisioned a “uniformity system” where firearms
could be repaired in the field with perfectly interchangeable spare parts. Gribeauval’s work was focused
on cannons, and he is now primarily remembered as the designer of the artillery system used 40 years
later in the Napoleonic wars. A decade later, gunsmith Honoré Blanc took up the challenge of making
muskets with interchangeable parts. In 1785, he demonstrated his results to American ambassador
Thomas Jefferson. Later, as US president, Jefferson launched the development effort that was eventually
successful.

In the 2020s, sensors can capture just about every parameter imaginable. In the late 1700s, on the other
hand, thermometers to measure the appropriate temperature for forging iron had yet to be invented,
and instructions called for the metal to be “cherry red.” In such a context, interchangeable parts were an
almost insurmountable technical challenge. In 1807, the French government terminated this program
for social rather than technical reasons. The gunsmiths of Saint-Etienne, France, had learned to forge a
musket barrel from a slab of iron with hand tools. To preserve their positions, they organized to prevent
the implementation of Blanc’s system of proto-machine tools. While not formally a medieval guild,
they opposed innovation as the guilds had and were eventually successful in stopping further develop-
ments in France.

Interchangeable parts technology was developed in the US, and returned to France half a century later
as the “American System of Manufacture.” It was enabled by engineering drawings with critical dimen-
sions, tolerances and allowances, the invention of machine tools, fixtures and jigs, and overall progress in
basic metallurgy, metalworking, and metrology.

This development took place from 1800 to the mid-1850s, primarily in government armories at Spring-
field, MA, and Harpers Ferry, VA. The American weapons industry then implemented it. For example,
Colt’s revolver factory produced over 200,000 Model 1860 revolvers from 1860 to 1873 following the
American System of Manufacture, and it gradually found its way into other industries. Figure 1.17
shows a metallic cartridge rifle manufactured by Springfield Armory in Boston, MA. The metal parts
are interchangeable. The rifle shown has no serial number. The armory produced 341 units of this
model.

Interchangeable parts technology is so thoroughly assimilated in manufacturing today that it is no lon-

ger a topic in its own right and that it is difficult to understand why it ever was controversial and dis-
ruptive. Without this foundation, however, developments like mass production or the Toyota
Production System would not have been possible. In 1908, Sakichi Toyoda hired American professor
Charles A. Francis to teach the methods in his loom factory.

27
Getting to Know Manufacturing

Figure 1.17 The Springfeld Model 1870 used interchangeable parts so they could be repaired

In the 20th century, the focus shifted to process capability – that is, the ability of processes to hold the
required tolerances reliably. It led to the development of Statistical Process Control (SPC) in the 1920s,
the application of statistical Design of Experiments (DoE) in manufacturing in the 1950s, and other
methods since.

1.3.5. Mass production

“Mass production” is a generic term coined at Ford for the company’s revolutionary production system
developed for the Model T (Figure 1.18). Ford’s Samuel Crowther provided the following description
in the Encyclopedia Britannica Supplement of 1926:

“Mass production is not merely quantity production, for this may be had with none of the requi-
sites of mass production. Nor is it merely machine production, which also may exist without any
resemblance to mass production. Mass production is the focusing on a manufacturing project of
the principles of power, accuracy, economy, system, continuity, and speed.”

The main point is that mass production is a systems approach.

The key innovation at Ford was the assembly line. Ford’s assem-
bly line may not have been the first in history, but it was the first
in the car industry and became the most influential worldwide in
all manufacturing sectors.

According to historians, Ford engineer William ‘Pa’ Klann

picked up the idea of the assembly line during his visit to a
slaughterhouse in Chicago. Since 1867, it had been a usual prac-
tice to use hanging conveyors as a “disassembly line” for cutting
Figure 1.18 Ford Model T carcasses in the Chicago meat packing industry.

Henry Ford wanted to manufacture a car cheap enough for his own factory workers to buy, and moving
the parts rather than the human worker seemed to be an effective idea. The assembly line brought the
car to the workers instead of workers moving around to the cars. The moving assembly line was intro-
duced in the Highland Park Ford Plant in 1913. It cut the throughput time from 728 minutes to 93
minutes, which was less than the paint of that era needed to dry. By continuously lowering production
costs, while maintaining quality, Ford created the market for his cars. Figure 1.18 shows the Ford Model
T, also known as T-Ford and Tin Lizzie. It was the first car produced on assembly lines. Ford continued
its production until 1927 by which time 15 million Model Ts had been made. This record, for a single
model, was later beaten by the Volkswagen Beetle, with 21 million units made between 1950 and 2003.

28
 About Manufacturing

Mass production was not without problems. It was repeatedly under attack from workers and observers
for providing repetitive, hard, and dull jobs on the assembly line. In Modern Times (1936), Charlie
Chaplin criticized the working conditions on many assembly lines. During this time, the understanding
of human work increased substantially.

In addition to the characteristics of industrial production and the American System of Manufacture
mass production was characterized by the following:
• A focus on flow, through the moving assembly line.
• Use of time and motion studies.
• Limited training needed for repetitive and standardized assembly jobs.
• Make-to-stock production serving a rapidly growing market.
• Dedication to a single product, the Model T, a competitive advantage in the 1910s but a handicap
in the 1920s when the Model T became obsolete.
• Vertical integration. The River Rouge plant turned ores, sand, and other materials mined from the
earth into finished cars. The plant still exists but all the processes upstream from final assembly are
now owned and operated by suppliers. The Volkswagen main factory in Wolfsburg, Germany,
was inspired by the Rouge.
• One-man rule by Henry Ford. A sustainable management structure was not put in place until his
grandson, Henry Ford II, took over after World War II and brought in a group of executives who
came to be known as “the Whiz Kids.” Best known among the Whiz Kids is Robert McNamara,
Ford President in 1960, U.S. Secretary of Defense for Presidents Kennedy and Johnson, and Presi-
dent of the World Bank.

As implemented, mass production decoupled assembly from sub-assembly production through inven-
tory. High-volume, dedicated lines are still used today for products with sufficient demand. Unlike
mass production lines, they are synchronized with feeder lines and the supply chain to avoid the accu-
mulation of work-in-process (WIP).

Alfred P. Sloan,11 who led General Motors to surpass Ford and any other company in the world by the
1930s, added another idea to the mass production system. Sloan differentiated GM from Ford by offer-
ing a broad selection of cars tailored for the changing tastes and fortunes of consumers and by adding
the latest technology and annual styling changes to the car models. The five GM models at that time
were Chevrolet, Pontiac, Oldsmobile, Buick, and Cadillac, and they represented a “ladder of success”
that families would climb as their financial situation improved. The yearly model changes “brought the
laws of Paris dressmakers to the car business.” GM invented “planned obsolescence” and was able to
keep customers for a lifetime.

Sloan also set up a decentralized, meritocratic management structure that, for decades, was studied as a
model to follow as, for example, in Peter Drucker’s Concept of the Corporation.12 By the 1980s, however,
this system had lost its vitality and effectiveness.

11 Sloan, A. (2015). My years with General Motors. Currency.

12 Drucker, P. (1993). Concept of the corporation. Transaction Publishers.

29
Getting to Know Manufacturing

Box 1.7 Frederick W. Taylor and Scientifc Management

Frederick Winslow Taylor’s work on “Scientifc Management” around the turn of the 20th cen-
tury is inevitable material in any management textbook. His work predates the Ford assem-
bly line, and its designers do not acknowledge his infuence. His theories are based in part
on the work he did for Bethlehem Steel Works in Pennsylvania (Figure 1.19).

His approach posits that work processes

must be studied and measured system-
atically to prevent workers from collud-
ing to curtail output. Taylor – the world’s
frst consultant – and his associates
studied how work was done, and how it
afected worker productivity. Taylor
observed that the work methods used in
factories were efectively controlled by
production workers, and undertook to
put an end to this by what he called
“Scientifc Management.”

Scientifc Management divides work

between the “heads” and “hands” of pro-
Figure 1.19 Bethlehem steel works, Bethlehem, duction; the heads (management)
Pennsylvania, 1881 (Credit: Watercolor by Joseph Pennell) should plan and control the production
carried out by the hands (operators).

Scientifc Management rests upon the following four core principles (Taylor, 1911, p. 27).13
• Develop a science for each element of a worker’s job, which replaces the old rule-of-
thumb method.
• Scientifcally select and then train, teach, and develop the worker, whereas in the past
he or she chose how to do the work and trained as best as possible.
• Heartily cooperate with workers to ensure that all the work is done in accordance
with the principles of the science that has been developed.
• Divide work and responsibility equally between the management and the worker. Man-
agers take over all work for which they are better ftted than the workers, while in the
past almost all of the work and the greater part of the responsibility were thrown
upon the workers.

Taylor is mostly known for time studies, but he also invented high-speed machining and cat-
egorized the functions that are now organized as support departments in manufacturing
frms.

T Taylor, 1911, p. 2713

13 Taylor, F. W. (1911). The principles of Scientific Management. Harper & Brothers.

30
 About Manufacturing

.
Box 1.8 Frank and Lillian Gilbreth

While less known than Frederick Taylor, Frank and Lillian Gilbreth have actually had a more
positive and long-lasting infuence over job design. Instead of attempting to police and
pressure workers to work harder, Frank and Lillian Gilbreth were focused on making their
jobs easier.

They pioneered the use of motion pictures to analyze operations, designed the way hospital
operating rooms have been working for the past 100 years, and invented predetermined
time standards. Lillian Gilbreth, on her own after Frank died in 1924, designed the modern
American kitchen (Figure 1.20) and invented industrial psychology. She was the only pioneer
of Industrial Engineering with a PhD, which she earned in applied psychology from Brown
University in 1915.

Figure 1.20 Lillian Gilbreth standardized work heights and appliance locations

1.3.6. The Toyota Production System and lean manufacturing

The Toyota Production System (TPS) first became known to the outside world when Toyota started
training suppliers in it in the late 1970s. Since, by definition, it is the way Toyota produces, it is still a
work in progress, and learning it is a never-ending process as the content keeps changing. As described
by Takahiro Fujimoto,14 it was not the result of a grand design but instead emerged over time as Toyota
people devised countermeasures and solutions to a succession of crises.

Toyota’s rise from a startup near bankruptcy in 1950 to a world leader making almost 10 million cars
per year is largely credited to TPS. This raises the question of what specifically makes this system so

14 Fujimoto, T. (1999). The evolution of a manufacturing system at Toyota. Oxford University Press.

31
Getting to Know Manufacturing

different from mass production? TPS is covered in detail later and various elements of it appear
throughout the book. Here it is sufficient to summarize a short list of key TPS strategies:
• JUST-IN-TIME. Delivering the right items in the right quantities at the right time without relying
on inventory to do it.
• JIDOKA. Making production machinery progressively easier for operators to use through incre-
mental automation and making it stop automatically when it malfunctions.
• GEMBA. Focusing on the actual place where the work is done. In a factory, it is the production
shop floor.
• FLOW. Removing interruptions in the movements of materials and information from the sup-
plier, through the plant, and to the customer.
• KAIZEN. Working every day to make operations better.

JUST-IN-TIME. Just-in-time (JIT) implies short lead times from suppliers to the factory, between oper-
ations inside the factory, and between the factory and customers. It is as much about quality as about
inventory holding costs. With JIT, defects are promptly discovered, corrected, and reported to the
source to prevent recurrence, in short cycles of learning.

JIDOKA. Jidoka, written 自動化, means “automation” in everyday Japanese, but Toyota writes the sec-
ond kanji differently, as 自働化, adding the radical 人, for human. As it does not change the pronuncia-
tion, it is an untranslatable pun but Toyota’s jidoka is often translated as “automation with a human
touch.”

While the original approach to manufacturing automation is machine-centered with people as an after-
thought, the Toyota approach is human-centered and incremental. Regardless on the amounts invested
in machinery, its effectiveness hinges on the ability of people to use it. In the English-language litera-
ture, Toyota’s jidoka is often reduced to one of its features: Machines’ ability to stop automatically
when they malfunction. It does not do justice to this much richer concept.

GEMBA. Gemba is a Japanese word meaning “the actual place.” In manufacturing, it is the factory
floor. Market prices for products and the costs of materials, energy, and outside services are largely out-
side the control of manufacturers. The TPS approach is to pursue profitability by improving work on
the production shop floor, as opposed to raising prices, pressuring suppliers for concessions, or buying
new technology.

FLOW. Materials should ideally flow along paths like water in a river, at a steady pace, with each unit at
each operation followed by another. In a river, the flow is broken by dams and locks; in a factory and its
supply chain, by batching for processing or transportation and by all sorts of disruptions.

In production, flow is accomplished by, wherever possible, using machines that process one piece at a
time, laying out machines and workstations so that the output of one feeds directly into the next one,
and locating operator interfaces so close to one another that an operator can easily attend to a sequence of
machines or workstations. Between production lines inside the factory and in the supply chain outside
of it, flow can be supported by pull signals that prevent the accumulation of unnecessary stocks.

This not only reduces lead times, but also accelerates the detection of quality problems. Note that facto-
ries reap more benefits from improving what they do all the time than what they do rarely and ran-
domly. Rather than having a one-size-fits-all approach to making products, regardless of the demand

32
 About Manufacturing

structure, different policies for different volume categories should be applied. The same logic applies to
in-plant logistics, supply chain logistics, or maintenance.

IMPROVEMENT (KAIZEN). Kaizen (改善) is a Japanese word meaning “change for the better” – that
is, improvement. In the lean literature it is usually called continuous improvement, indicating that it is
incremental and must be constantly pursued, with no end.

Mass producers believe their factories to be, if not optimal, at least Pareto optimal, meaning that perfor-
mance in one dimension could only be improved by making others worse. For example, they see trade-
offs in quality: It could be enhanced, but by increasing costs and delaying deliveries. A key postulate of
TPS is that, on the contrary, there is no such trade-off, and that you can always pursue simultaneous
improvement in all dimensions of performance, which is what eliminating waste actually means.

Note that improvement and optimization are different mindsets. Once you have optimized a process it can
no longer be improved. On the other hand, once you have improved it, the next step is to improve it
again. The improvement mindset is that there is no such thing as an optimal factory. All real factories
can be improved, and improving them is an integral part of their employees’ jobs.

It is a matter of consensus that TPS is still the best way to manufacture cars. Also in many other assem-
bly processes, TPS remains the best-known way to organize manufacturing operations. It has been suc-
cessfully adapted in industries ranging from commercial aircraft to furniture, medical devices and
surgical robots. Yet few other companies proudly proclaim that they are applying TPS.

There are several reasons for this:

• Car manufacturers do not want to advertise that they are using a competitor’s system.
• Outside the car industry, it is not obvious that TPS is the best way. By experience, managers and
engineers can be quick to dismiss TPS if they are making frozen lasagna, airplanes, or any other
products but cars.
• Toyota does not have a monopoly on good ideas. Quick Response Quality Control (QRQC), for
example, is an approach to quality management from Nissan that has been widely adopted but it
would be inaccurate to describe it as part of TPS.

As consultants helping companies implement the TPS approach have multiplied since 1980, their need
for branding has led to a profusion of different names, including “World Class Manufacturing,” “Syn-
chronous Manufacturing,” “Operational Excellence,” and, since 1990, a variety of expressions starting
with “lean.” The term “lean production” was introduced by John Krafcik in 198815 and popularized
through the book The Machine that Changed the World by James Womack, Daniel Jones, and Daniel
Roos in 1990.16 It then became “lean manufacturing,” “lean thinking,” the “lean enterprise,” “lean
management,” “lean six sigma,” “lean 4.0,” or just “lean.”

While Krafcik used “lean production” as a generic label for TPS, the approaches sold under the various
lean labels diverged over time from TPS. Many “lean implementations” today are centered on tools that
are unknown at Toyota, like kaizen events, have been rejected by Toyota, like six sigma, or play a minor

15 Krafcik, J. F. (1988). Triumph of the lean production system. Sloan Management Review, 30(1), 41-51.
16 Womack, J. P., Jones, D. T., & Roos, D. (1990). The machine that changed the world. Rawson Associates.

33
Getting to Know Manufacturing

role in TPS, like Value Stream Mapping. All these methods and tools can at best bring some local benefits,
but not the systematic change and continuous improvement culture that Toyota has become known for.

Rather than using generic labels, many global companies have chosen to follow Toyota’s lead in a dif-
ferent way, by naming and building their own company-specific production systems. Examples are the
Bosch Production System, the Nissan Production Way (NPW), the Volvo Production System (VPS),
or the AGCO Production System (APS).

1.3.7. Information Technology and Operations Technology

Today, no manufacturer in the industrialized world operates without computers. But computers didn’t
exist as commercial products until the 1950s. Until then, business transactions and bookkeeping were
done manually with pen and paper, aided with calculators or perhaps the typewriter since the late-
1800s. Production planning, scheduling, and control was done on paper spreadsheets, or followed simple
rules like reorder point. Engineering drawings were handmade and engineering calculations done with
slide rules and books of tables by humans whose job title was “computer.”

The computer was invented in the late 1940s and has been the most consequential innovation since the
printing press. It has changed the way we earn and pay money, play games, read books, get daily news,
drive cars, write, take pictures, make and watch movies, design products, etc., and, along the way, it has
also found its way into manufacturing, as exemplified in Figure 1.21.

Figure 1.21 Computers used to control machines

Why is the computer so important for manufacturing? Because, as Information Technology (IT), it can
do tasks related to production planning, scheduling, and control that people are not able to do, not will-
ing to do, or could not get right. The use of computers enable management to handle a much larger
complexity than they could with manual processes. As Operations Technology (OT), computers can
automate and track physical work.

34
 About Manufacturing

In particular, IT supports manufacturing with the following tasks:

1 Plan and schedule production.
2 Maintain master data like bills of materials, work instructions, process programs,
or the roster of employees.
3 Keep historical records for analysis and traceability. In the domains that are closest to production,
computers have been a great success. For example, Computer-Aided Design (CAD) for products,
programmable controllers for machines, or Warehouse Management Systems (WMS).

OT refers to functions that are closer to production equipment and processes:

1 Execute production, including automation of tasks.
2 Track status of production.

Success has been more elusive in the high-level management functions that have seen a succession of
generations of systems since the 1960s: Materials Requirements Planning (MRP), closed-loop MRP,
Manufacturing Resource Planning (MRPII), Enterprise Resource Planning (ERP), and cloud-based
ERP. They have grown into a multi-billion-dollar industry. Despite all the available IT, a majority of
manufacturers still rely on Excel spreadsheets to work around the limitations of their IT systems.

People often think of computers as machines like any other but the reality is that they are qualitatively
different, and that programmability allows them to outperform dedicated tools. Their hardware config-
urations make them smartphones, game systems, laptops, or industrial controllers, and only the imagi-
nation and talent of programmers limit the range of services they can render well. What makes the
computer different is that it is a universal machine.

Box 1.9 General Motors’ lights-out strategy in the 1980s

A radical alternative to the Toyota Production System suggested in the 1980s was comput-
er-integrated manufacturing (CIM), which promised to use computers to control the entire
production process. At that time, Roger Smith was the Chairman and CEO of General
Motors Corporation (tenure from 1981 to 1990). When he left, he received the distinction of
“Worst American CEO of All Time” from CNBC. Why?

Facing competition from foreign automakers such as Toyota, one of the prominent strategic
decisions of Smith was to modernize GM using advanced technology. The vision was “lights-
out” factories where the only employees were those supervising the robots and computers.
Through the 1980s, GM spent more than $90 billion to reinvent itself. In its search for auto-
mation robots that could be installed in the factories, GM made a joint venture with the
Japanese robot manufacturer Fujitsu-Fanuc. With that, GM became the largest industrial
robot manufacturer in the world. The vision did not materialize. There are reports of robots
welding doors shut and robots painting each other instead of the cars.

During Roger B. Smith’s tenure, GM market share in the US went from 46% to 35%. The fac-
tories in Detroit went from among the lowest cost factories to the highest cost factories.
The amount of money spent on automation would have been sufcient to buy several of the
toughest competitors such as Toyota, Nissan, and others. In early 1992, after Smith had left,
GM was close to bankruptcy. The lesson is that technology is not a panacea.

35
Getting to Know Manufacturing

.
Box 1.10 A note on digitization

The latest hype in manufacturing is “digitization,” “digitalization,” or “digital transformation.”

Digitization, strictly speaking, is the process of converting analog data into digital form.
Digitalization is broadly used for the adoption of information technology in organizations. If
the transformation currently underway is not just “digitization,” then what is it?

Materials are concrete objects: heaps of ores, ingots, slabs, machined parts, motors, etc.
Data, on the other hand, is just the frst level in a world of abstractions built on top of one
another, as follows (the DIKW pyramid):
• Level 1: Data is whatever is read or written.
• Level 2: Information is what a human or a machine learns from reading data.
• Level 3: Knowledge is a collection of information that matches reality.
• Level 4: Wisdom is the resourcefulness due to the cumulative
assimilation of knowledge.

Computer scientist Don Knuth defned data as “the stuf that’s input or output.” Our change
in vocabulary to “read or written” is to distinguish data from materials, which are also input
and output in manufacturing. The above take on information is consistent with mathemati-
cian Claude Shannon’s, to whom it is, more formally, the reduction in randomness due to
reading data. For example, before a fnal test in an assembly line, you thought a product
unit had a 99% probability of being ft for use and passing the fnal test increases this prob-
ability to 99.9999%. If the information is right, you have knowledge about the product
state. At the highest abstraction level, wisdom is the ability to use accumulated knowledge
to make decisions.

It is clear that digitization alone (that is, making processes create more data) will not do
much for manufacturing unless the higher DIKW levels are addressed. The challenge is to
transform data to information, knowledge, and ultimately wisdom that can be used to make
better decisions.

When we look for a generic term to cover all the applications of computers in manufactur-
ing, IT and OT emerge as the most descriptive and accurate terms.

1.4. Role of manufacturing today

Manufacturing is part of the second of three major sectors of the economy. The first sector is agricul-
ture. The third sector is services, which is sometimes further split into classic services such as restaurants,
transportation, and policing, and a quaternary sector covering knowledge-based services such as IT ser-
vices, R&D, consulting, or education. The second sector is misleadingly called “industry.” According to
the World Bank, industry comprises value added in manufacturing, mining, construction, electricity,
water, and gas. The World Bank’s definition is congruent with the one we use in this textbook.

36
 About Manufacturing

The available data on manufacturing employment and output in the world is incomplete, but we can
draw the following conclusions:
• Manufacturing matters for the prosperity of nations.
• The share of manufacturing in the Gross Domestic Product (GDP) of advanced economies is
holding steady, and the value extracted from it is increasing in absolute numbers.
• Manufacturing’s share of the labor force in advanced economies is slowly declining, but not in
absolute numbers.

1.4.1. Manufacturing matters

Figure 1.22 plots the contribution of manufacturing versus other sectors of the economy for the 171
countries or economic areas the World Bank provides data for in 2019.17 To keep small and large econ-
omies comparable, the figures are per capita. Manufacturing has a large multiplier effect; an approxi-
mate number is that for every $1 spent in manufacturing, another $2 is typically added to the economy
in the form of services.

Figure 1.22 In most economies, manufacturing is positively correlated with other sectors

As we can see from Figure 1.22, the size of the manufacturing sector in an economy correlates positively
to the sizes of the other sectors. The correlation coefficient is 0.97, indicating that strength in

17 World Bank (2018). World Bank national accounts data, and OECD National Accounts data files. URL: https://data.worldbank.org/

37
Getting to Know Manufacturing

manufacturing and other sectors tend to go together. The outliers with a high per capita GDP and an
undersized manufacturing sector both have populations of about 600,000. They are Macao, with reve-
nues centered on gambling, and Luxembourg, a tax haven. The outliers with an oversized manufactur-
ing sector and a low GDP are Ireland and Puerto Rico, respectively, with populations of 5 million and
3.3 million.

Stop and Think 1.6

Why do manufacturing activities usually generate 2–3 times as many jobs as
the direct jobs involved in manufacturing? What are examples of indirectly
created jobs?

1.4.2. Contribution of manufacturing to GDP is holding steady

In 2020, manufacturing accounted for about 16% of global GDP and employs nearly one quarter of the
global workforce. According to World Bank data, manufacturing typically accounts for around 10–25%
of a country’s GDP. For most countries, this ratio has been reasonably stable in recent decades (see Fig-
ure 1.23). For example, except for a dip during the financial crisis, the share of manufacturing in the
GDPs of Japan and Germany has been steady around 22% since 2002. For Germany, 2020 shows a dip
due to COVID-19. This share is lower for the UK, France, and the US, at between 9% and 13%, and
shows no decline since 2008. It has started to decline in China but is still substantially higher than for
the other countries in the group, reflecting the fact that China is still an emerging economy.

35.0%

30.0%

China
25.0%

20.0% Japan
a
Germany
15.0%
India
United States
10.0% France
Unite
Unit ed Kingdo
i om
o
5.0%
1990 1995 2000 2005 2010 2015 2020 2025 2030
Year

Figure 1.23 Manufacturing’s share of GDP is holding steady in the largest economies

Due to the general growth in all the economies in Figure 1.23, the total value derived from manufac-
turing activities has increased in absolute terms from 1995 to 2020, except for the UK. By this measure
at least, most countries have seen no hollowing of their manufacturing sectors. If you go further back in
time to the 1990s, you see a decline in manufacturing’s share of GDP in Japan, Germany, the US,

38
 About Manufacturing

France, and the UK, but not in the past 20 years for Japan and Germany, and not in the past 10 years for
the US, France, and the UK.

1.4.3. The relative share of manufacturing jobs is declining

Manufacturing’s share of the labor force, however, has been declining steadily in almost all advanced
countries. The decline in manufacturing workforce has at least two different causes:
1 Productivity increases reduce the need for labor. Whenever technology becomes available that
is more productive than people and is economically justified, managers will buy and use it. For
example, steel works today require 15 times fewer employees today than 50 years ago for the
same output.
2 Increasing labor costs leads to offshoring or outsourcing of labor-intensive manufacturing
activities. Due to its higher labor costs, manufacturing in advanced economies has migrated
towards products in which labor is a small part of the cost. In making tractors, labor is a small
fraction of the cost, making expensive but highly skilled workers competitive in the world
market. It is not the case, on the other hand, in sewing mass-market garments and this sector has
almost entirely vanished from advanced economies.

For example, Faber-Castell, a German manufacturer of

pens and pencils, has invested in automation but still
only kept R&D and the manufacturing of high-end
writing instruments in its headquarters in Stein, Ger-
many, and offshored the production of other pens and
pencils to its 14 factories in other parts of the world.

In absolute numbers of people employed, the shift is

less dramatic than in the share of the labor force,
because of growth in both population and demand,
Consider for example the United States. Overall, the
US labor force more than doubled between 1960 and
Figure 1.24 The production of pencils by German 2016. According to the U.S. Bureau of Labor Statis-
company Faber Castell is ofshored tics (2018),18 manufacturing employment was 15.4 mil-
lion in 1960 and 12.4 million in 2016. The most
dramatic reduction happened in the first decade of the 21st century, when manufacturing employment
fell from 17.2 million employees in 2000 to 11.5 million employees in 2010. Since 2010, manufacturing
employment has been steadily growing in absolute numbers in the US. Its relative share of direct jobs
however is just 8.6% in 2016.

As relative employment continues to decline in manufacturing, a challenge in advanced economies is to

manage the gradual transition away from manufacturing jobs for most of the population, and the evolu-
tion of manufacturing jobs towards higher levels of skills and education. For example, instead of con-
trolling one machine on the manufacturing floor, an employee writes the programs that run three
machines automatically. At the company level, managing this transition well is a matter of human-
resource policies for competence development.

18 U.S. Bureau of Labor Statistics (2018). All employees, Manufacturing (MANEMP) [Data set]. Retrieved from FRED, Federal Reserve Bank of
St. Louis. URL: https://fred.stlouisfed.org/series/MANEMP

39
Getting to Know Manufacturing

.
Box 1.11 China as “the factory of the world”

One country stands out in Figure 1.23 on page 38. Over the last half century, China has
risen to become the world’s second largest economy behind the USA. Ranked by the manu-
facturing sector’s contribution to the Gross Domestic Product, China is number one since
2011. According to data published by the United Nations Statistics Division, China
accounted for 28% of global manufacturing output in 2018. One-third of China’s total indus-
trial output comes from the coastal provinces of Jiangsu, Shanghai, and Zhejiang around the
Yangtze River Delta, and Guangdong around the Pearl River Delta. The latest data cited by
the U.S. Bureau of Labor Statistics for manufacturing in China is of 99 million employees in
2009, exceeding all the fve other top GDP countries combined. It is not just the massive
workforce that makes China a top destination for manufacturing; 168,400 new industrial
robots were installed in China in 2020, or 43% of the world’s total installations according to
the International Federation of Robotics.

China has many advantages for manufacturing. First, its home market size is by far the larg-
est one in the world. Second, China has a political system that provides incentives for
investments in manufacturing jobs. Third, an increasingly sophisticated Chinese research
and development (R&D) sector has made Chinese companies savvy in IT and new technolo-
gies. However, as for any country that is making the transition from a developing to a devel-
oped country, China also experiences rising labor costs and skills shortages. As Chinese
companies accumulate some of their own intellectual property, they develop a sensitivity to
this topic and a respect for the intellectual property of others. Initially, they had nothing to
lose; now, they do. Eventually, the Chinese manufacturers started to source from ofshore
production to other locations. Companies have started to move production to Vietnam,
Thailand, Cambodia, India, the Philippines and Indonesia, among other places.

Figure 1.25 More than one-fourth of the world’s manufacturing output comes from China

40
 About Manufacturing

Summary
The most essential points covered in this chapter were as follows:
1 Manufacturing is defned as the transformation of physical materials into physical
goods using repeatable processes.
2 Manufacturing takes place in factories and consists of processes, which can be
mapped with the input-process-output model.
3 Efectiveness should take priority over efciency, but both are important for
competitiveness.
4 The four Ms are needed simultaneously for a process to run.
5 A systems perspective is needed in manufacturing.
6 Manufacturing is a social activity, organized in departments.
7 Operators are the most essential part of a factory and must be treated accordingly.
8 Manufacturing has continuously developed throughout history. Particular develop-
ments in the history of manufacturing were:
• Craft production
• Industrialized production
• The American System of Manufacture
• Mass production
• The Toyota Production System and lean manufacturing
• The introduction of IT and OT in manufacturing
9 Manufacturing is an essential business activity for most economies and contrib-
utes a signifcant share to their GDP (10–30%).
10 Although relative employment in manufacturing is declining in many countries, its
share to GDP remains stable with essential spillover efects on other industrial
sectors.

Test yourself
1 What is manufacturing?
2 Sketch an input-process-output model for assembling a pen.
3 Why should efectiveness take priority over efciency?
4 What factors are needed for manufacturing to take place?
(The MANUFACTURES mnemonic can be helpful.)
5 What is a system, and what does it have to do with manufacturing?
6 Draw a typical organizational chart for a manufacturing factory.
7 How does industrialized production difer from craft production?
8 What was the most striking feature of the American System of Manufacture?
9 What is meant by digitization and digitalization of manufacturing?

41
Getting to Know Manufacturing

10 Use a web search to fgure out how much employment and GDP manufacturing
contributes within your country. What are the most important manufacturing
sectors?

Further reading
Alder, K. (2010). Engineering the revolution. University of Chicago Press.
Badiru, A. B. (Ed.). (2013). Handbook of Industrial and Systems Engineering. CRC Press.
Chandler, A. (1993). The visible hand. Harvard University Press.
Freeman, J. B. (2018). Behemoth: A history of the factory and the making of the modern
world. W. W. Norton & Company.
Holweg, M., Schmenner, R., Lawson, B., De Meyer, A. & Davies, J. (2018). Process theory:
The principles of operations management. Oxford University Press.
Hounshell, D. (1984). From the American system to mass production, 1800-1932. Johns
Hopkins University Press.
Marsh, A. (2018). The factory: A social history of work and technology. Greenwood.
Nye, D. E. (2013). America’s assembly line. MIT Press.
Roser, C. (2016). Faster, better, cheaper in the history of manufacturing: From the Stone
Age to lean manufacturing and beyond. CRC Press.

42