GENERAL ELECTIC - THERMOCOUPLE MANUFACTURING (A)

The case deals with the possibility of introducing a new system of production control, Toyotas Just-In-Time system at the thermocouple product division of General Electrics Aerospace Instruments and Electrical Systems Department. The inventory levels have been a perennial problem at the division and the division aimed at reducing the inventory levels through the introduction of JIT to $2.1million (from $6.2 million) in three years and to less than $1.4 million after five years. GE Impact Program The Impact Program was designed by GE with the aim of improving the quality and productivity of its operations. Every year around 25 executives attended a 14 day program the first 4 days were classroom sessions on manufacturing strategy, operating systems and a contrast of the US and Japanese manufacturing systems; the last 10 days were spent in Japan visiting 3 Japanese companies, analyzing their manufacturing and management practices and discussion on the findings. On the completion of the program, the executives were expected to identify areas of improvement within their own operations and propose projects. The group again met a week later to discuss projects and strategies so that each could then start working on their individual projects after the group disbanded. Just-In-Time system for the thermocouple division was proposed by Bill Draper after attending the Impact Program at GE in 1981. The Thermocouple Product Area Thermocouples were used to measure temperature when two dissimilar metals are joined at the ends and heat is applied, a current is generated which can be used to make accurate temperature measurements using a gauge. Thermocouples can provide accurate temperature measurements, so they are used in aircraft engines where accuracy is critical. Thermocouples (circular in shape) used in aircrafts consist of number of probes, made of swaged leads, joined to a main harness. Probes consist of rods containing two wires made of dissimilar metals separated by an insulator. Heat from the engine exhaust creates a current which is then accurately measured. The thermocouple product area: Ranked second at the Aerospace Instruments and Electrical systems departments in dollar volume with sales of $21.5million in 1981 Produced 30 major types and 90 different models of thermocouples

Production Process of J-79 J-79 is the simplest model among the thermocouples, easy to manufacture, sturdy leads and stable outlook so it was regarded a likely candidate for JIT implementation The manufacturing process required four subassemblies probes, segments, resistors and a connector. J-79 consisted of 5 segments, 6 probes, 12 resistors and 1 connector.

Subassembly 1: finished segments (Same as Subassembly 4) Swagged leads Cut to proper length Passed twice through Centerless Grinding Cleaning, Annealing, Forming (each in different shape) Sandblasting and Inspection

Subssembly 2: probe Grinding (Pass 1: ST=4-6 hrs, RT=22sec/piece, Lot Size >=1000) Grinding (Pass 2: Lengthy setup, brief run time) Cleaning, Inspection, Welding (flange to the lead) Sandblasting, Straightening, Inspection (of wires in leads) Inspection, Protective Casing, Resistor Holding Box

Subassembly 3: Resistor Wire and Cementlike substance combined in a mold Baked for several hours Inspection

Final Assembly Welding of all pieces Wires combined & twisted together Inspection

Work Force issues at J-79: Workers had autonomy in choosing which parts to make; this led to excess supplies of one & shortages of other parts The rate for reworking defective parts was higher, so the welders benefitted from building in their own defects No continuous supervision of the workers

Order entry, purchasing and production control: A distribution warehousing operation served as the interface between the customers & aerospace instruments and electrical systems department They dealt with both military & commercial customers, Commercial customers accounted for 50% of sales Commercial customers expect goods to be delivered on the due date Military customers accepted goods any time upto due date, which helped in flexibility in scheduling Manufacturing was done after receiving orders and also on forecasts Production was planned on monthly basis, but it led to more WIP inventory AEG as a customer has been responsible for the volatility in scheduling

Inventory Management: Inventory control package (ICP), a variant of MRP was used for determining the raw materials need. However the system was not fully integrated along with operations Material control was loose and there was no accounting after the products left the stockroom Production floor inventory accounts for 80-85% of the total inventory on hand for the production line Material losses totaled 6.3% of sales

Problems faced in implementing the JIT at Thermocouple division and the possible solutions:
What Incentives are to be provided to the workers for the improvements, when promotion at thermocouple division is based on seniority? Profit sharing system can be used. Also the leverage of moving the production line to another plant can be used if there is no improvement Workers think they will be laid off after productivity increases due to implementation of JIT. JIT will make the workers more versatile, JIT cannot be implemented without the help of the wokers, and it is the responsibility of the management to take the workers into belief. Also JIT is a continuous process, it is based on a long term relationship so the relationship with workers is also essential How can quality be improved when the suppliers are unreliable? JIT can be implemented with the collaboration of vendors, long-term relationships are to be developed with vendors for improving quality, they should be explained the concept & advantages of JIT Shutting down line in case of defective product from vendors JIT can be implemented with the collaboration of vendors, long-term relationships are to be developed with vendors for improving quality. For the first phase of JIT, meeting schedule is the primary goal The production schedule is very volatile, how can we implement JIT? The vendors need to be taken into confidence, they should be shown the advantages of JIT. JIT should be implemented inhouse first. Also, we can multiple sources for the same parts so that the volatility can be shared Multiple Changes to be made to production process for implementing JIT (reduce set-up times, reduce rejections) Idle process, steps are to be removed to make the process more efficient, in this way we can remove the in-process inventory & effectively implement JIT Management itself not sure of the implementation of JIT project Management commitment is a prerequisite for any organizational change. JIT will expose the manufacturing problems, managers must allocate the resources to solve these problems. Also JIT brings organizational changes, which are to be supported by managers for sustainment

GENERAL ELECTIC - THERMOCOUPLE MANUFACTURING (B)

Sarah Miles who reported directly to William (Bill) Draper had been given the responsibility of the JIT project for J-79 thermocouple manufacturing by Bill. The JIT project was started at Wilmington at the insistence of Bill Draper who was highly inspired by the Japanese approach to manufacturing. His objective was to help reduce the plants high level of inventory using the JIT technique. He however faced opposition from Managers at the plant who expressed strong misgivings about the project, which revolved around four areas: Acceptance by the workforce - Managers believed that workforce will take it as the way of getting more work out of them and thus would be violently opposed by Wilmington s union Vendor Relation - Wilmington had little leverage over its vendors and they will not take serious step to align themselves to JIT Reduction in the setup times - There was a lot of resistance to commit large amount of capital for the sole purpose of reducing setups Efficiency rating system - Labour utilization was used as the parameter to evaluate foremen, but JIT implementation will lead to labor being idle occasionally which can undercut foremen performance evaluation. Draper promised to take shutdown into account when reviewing foremens efficiency ratings.

So Sarah Miles decided to proceed with a more democratic approach.

First Steps: September-October 1982 This period was devoted to groundwork: Learning about JIT, working with a consultant from corporate headquarters, developing an action plan for implementing the program, and eventually selecting a product for the programs rollout. The J-79 thermocouple was eventually selected for the following reasons: Relatively stable demand Simple manufacturing plan Perception that it had few process and quality problems Greater flexibility in the timing of the orders Involves relatively few vendors and also consisted of only 20 parts Thermocouple business was physically self contained so other business would not be disrupted by the line shutdowns or other delays that might occur due to JIT introduction

Process Planning and Rationalization The Corporate consultant proposed that the team follow a four step approach: 1. 2. 3. 4. Becoming more familiar with the manufacturing of thermocouples Accumulating frequency information on the defects Reorganizing the manufacturing layout to smooth production Purchasing new tooling

A general cleanup was also recommended to make plant organized for better chance of success Initial efforts of the team comprising of Miles and two manufacturing engineers focused on four major areas: Process improvement Setup reduction Leveling the schedule Overcoming worker and management resistance

Process Improvement JIT project team developed a process flow diagram outlining the steps in the thermocouple manufacturing which helped team to Increase familiarity with the process, Highlighting areas where materials movement could be smoothed and nonproductive time eliminated, Rationalize the shop layout to reorganize thermocouple area, sequencing machine, Removal of unused machinery and purchasing required tools. Result 22% reduction in the average distance walked per operator Setup Reduction Three significant setups were involved in producing the J-79 thermocouple: The Centerless Grinder, The Turnback Machine and the Building Board (Die Cart). The JIT team eliminated the 1st two setups by introducing additional equipments and significantly reduced the 3rd by process redesign. Leveling the Schedule A level build schedule was regarded as critical to smoothing the flow of production and moving toward more sophisticated JIT techniques. So it was fixed at 12 thermocouples a day so that after completion of the number of orders in the contract, all workers on the project could be moved elsewhere. Result - JIT allowed management by sight i.e. Identification of problem areas just by looking at shop floor.

Overcoming Work Force and Management Resistance This was achieved through improved communications: Asking questions to the workers regarding the problems they faced System of requiring permission prior to utilisation of higher rate of welders Constant policing of foremen

The workers felt that JIT would lead to a cut in pay, and they didnt like the idea of increased supervision, but after involving them in regular decision making, their morale got high.

The Program Begins: November 1, 1982 Three small plastic cards were designed to regulate the rate of flow and production which relied on few simple rules: Do not work without a kanban Return kanbans at the beginning of an operation After completing an operation, move material to the subsequent stage in the process The use of Japanese terminology received objection from workers and the group decided to call them production control cards instead. Kanbans were soon expanded to activities other than probe assembly.

The Step Forward The JIT project had three options under consideration: 1) Continuing its present form 2) Extending to other product lines in the factory 3) Cancelling JIT and replacing it with an MRPII system Debates The J-79 consisted of about 20 parts, but JIT could not be implemented if an item had 100 varieties, each with 1000 different parts. Instead of JIT, an on-line MRP system could help figure out what and when we need something better. Personal involvement, presence of manager in shop floor and tight supervision was essential for JITs success. All these factors were always not feasible for a particular production process.