INTRODUCTION TO VALUE CHAIN
Value chain is a chain of activities of a company operating in a particular industry. The business unit is the appropriate level for the construction of a value chain, not the level of division or company. Products pass through all chain activities in order, and every activity of the product gains some value. The chain of activities gives the products more added value to the sum of value added in all activities. It is important not to mix the concept of value chain costs that occur in all activities.
Value chain analysis can also be described as an analysis of critical input as it captures the appropriate integration and collaboration points internally and externally with suppliers and customers. The analysis is used to identify key value drivers and provide assessment of how to improve value chain competitiveness by enabling the following six success factors:
Operational excellence and continuous improvement - developing a view on the type of partners to speed up internal capability.
Extending hold with customers and suppliers.
Compressing the supply chain, aiming to have fewer physical assets using supplier and / or customer networks. This may require developing new business models and relationships with third - party suppliers.
Creating elasticity and quickness, using the pattern of the value chain to improve overall reaction, such as the creation of industry stocks.
Price optimization, using dynamic pricing to control demand and optimize flows and utilization across supply chains and
Defining where to compete. This many include the creation of new e-marketplaces with other industry bodies to maximize the value chain.
A value chain is the sequence of activities necessary for the manufacture of a product or a service. In this analysis, there may be many players. powerful actors are often called high-tech companies seeking to govern the chain. They establish or enforce the conditions under which others in the chain operate. A central concern of the analysis of the value chain is " unpack" the relations between the worlds leading companies and local producers - and the opportunities and constraints arising from the entry of such relationships.
The value chain is a basic instrument for diagnosing competitive advantage and finding ways to create and sustain it. The value chain provides a systematic way to divide a firm into its discrete activities, and thus can be used to examine how the activities in a firm are and could be grouped.
THEORY AND BACKGROUND
2.1 Porter's Generic Value Chain
For a better understanding of the activities by which a firm develops a competitive advantage and creates shareholder value, it is useful to separate economic system in a number of value-added activities called the value chain. Michael Porter in his book, Competitive Advantage, was introduced in 1985 a model of generic value chain consists of a sequence of activities found common to a wide range of businesses. He identified the primary and support activities as shown in the diagram below:
Porter's Generic Value Chain
Inbound
Logistics
>
Operations
>
Outbound
Logistics
>
Marketing
&
Sales
>
Service
>
M
A
R
G
I
N
Firm Infrastructure
HR Management
Technology Development
Procurement
Dig: 2.1Diagram by Michael Poter
(source: http://www.netmba.com/strategy/value-chain/)
The aim of these activities is to offer customers a level of value that exceeds the cost of activities, resulting in profit.
Primary activities of value chain:
Inbound logistics: receiving and storing raw materials and the distribution of production where they are needed.
Activities: processes of change inputs into finished products and services.
Outbound logistics: warehousing and distribution of finished products.
Marketing and sales: identifying customer needs and sales of production.
Service: To support its clients after the goods and services are sold to them.
These primary activities are supported by:
The infrastructure of the company: organizational structure, operating systems, the corporate culture, etc.
Human resources management: recruitment, hiring, training, development and compensation.
Technology development: technologies to support value-added activities.
Procurement: purchasing inputs such as materials, supplies and equipment.
Margins and benefits of companies are depend on their effectiveness in carrying out these activities effectively so that the amount that the client is willing to pay for goods is greater than the cost of activities in the value chain. These are activities that the company can generate more value. A competitive advantage can be achieved by reconfiguring the value chain to provide lower cost or better differentiation.
The value chain model is a useful analytical tool to define the core competencies of a business and actions in which he can generate a competitive benefit as below:
Cost advantage: by superior perceptive expenses and taking them out of the value-adding actions.
Differentiation: by concentrating on actions related to essential skills and opportunities to do better than its competitors.
Lean Manufacturing
Lean manufacturing or lean production, often simply, Lean is a practice of production, estimated expenditure of resources for any purpose other than creating value for the end customer to be unnecessary, and therefore a target for elimination. Working from the client that consumes a product or service has value, defined as any act or process that the customer would pay for. Basically, lean focuses on preserving the worth through a smaller amount work.
Lean Manufacturing is a variation on the effectiveness of optimizing the flow, is an example of modern-day feature of the history of mankind to increase efficiency, reducing waste and the use of empirical methods for deciding what counts rather that uncritically accept the ideas first. As such, it is a larger story, which includes ideas such as thrift wisdom, time and motion study, Taylor, the effectiveness of the movement, and Fordism. Lean manufacturing is often seen as a more accurate version of the earlier work, based on the effectiveness of the efforts of the leaders of the past like Ford and Taylor, and learn from their mistakes.
2.3 Lean Manufacturing In Ford
In the Ford organization, they have made cars in large quantities of standard models. They made the system very efficient, produce low cost products. Ford employees can be taught easily. Anyone can become a nuclear power plant of the Ford worker power in a short time. They had to make only a small part of the job as tightening a screw or a part of the oil. Moving the assembly line at Ford could manufacture wants to be the opposite. In other words, workers were forced to adapt to the speed of the conveyor belt. This removes the personal element of the production line. The whole system was the harmonization of the rate on the assembly line.
The same aspects bought effectiveness then the Ford started their downfall. Customers required vehicles to get together with their necessities, and not vice versa. So the most important condition of the system was standard product does not demand more. Therefore, systems had to change, but Ford refused to alter.
But in case of Toyota, the Toyota executives have studied the system of Ford has managed to identify the problems the system had. Specific necessities of Japanese market, which had to find ways to offer several products in a short period of time. This show the way for the exclusive Toyota Production System (TPS). In place of manufacture and market research, Toyota has developed a system to examine the market demand and offer what they want when they want. This was known as Just In Time production system. Toyota has created a unique manufacturing system instead of pulling the manufacture of thrust Ford became the basis of lean production.
3. EXPERIMENTAL METHODS
3.1 New Ford Plant And Implementation of Lean
When the innovative Dearborn Truck Plant (DTP) began working in 2004, this has become like a home with a new 2004 Ford F-150. It communicates the vision to expand the company's production and an important first step towards the realization of the legendary Ford Rouge Center, 21 Century industrial icon. Vehicle assembly and flexible principles of lean manufacturing, has reached a new milestone in Dearborn Truck Plant. The innovation takes place has created a new era in production, efficiency and work culture.
DTP flexible features consist of the capacity to:
• Rapidly change the production of the factory according to customer's request.
• Convert the new products with minimal investment and a shift to the loss.
• Easy to regroup and programmable robots and computers for a quick transition of the factory floor.
It is capable of producing up to nine different models from three vehicle platforms, which makes the Ford's plant most flexible assembly in North America. Ford's new flexible mounting system allows for changes of equipment once took months, now takes just days. The number of jobs in the assembly process has been reduced by nearly 40 percent. Storage space for components and vehicles reduced by 50 percent. DTP is no more than two hours playing online and equipment, and 10 hours off-line inventory of space components. The normal supply of inventory for most assembly plants are one to two days or more.
3.2 Synchronous Material Flow Aids Team-Based Production
The D T P has world-class lean manufacturing with Synchronous Material Flow (SMF) to support the team based on the standard production process. These processes are designed to provide exceptional quality and minimize waste in a safe working environment that focuses on empowering employees. The vehicles will be produced at lower cost in the shortest possible time. Quality is built into every workstation based on these standard methods of work and a clear understanding of customer prospect. .
Team-based organization of Ford sources of line components in the same proportion as the product flows and pledged to build a precise timetable. By using the solution of problems in a proactive and a key named in the process of control of the station, online operators have a responsibility to produce a quality product without any problems when you leave your work cell. The main change is the way people and machines how they are organized. Lean is about people and how they use technology.
3.3 Operators Advise Launch Team, Help Design Work Cells
The company uses its expertise to the plant operators at Dearborn Assembly Plant (DAP), which were transferred to the new DTP help design a new workstation, the final composition. Because they know better what it means to work on the track, operators of the DAP and skilled trades that have worked for the team to launch the desktop publishing to design and test tools and standardized work cells. Among its objectives is to improve quality, reduce costs and promote employee safety.
To generate a lean, first-class capability, which employees DTP and other Ford plants, is a constant influence on how work is done. Typically, the plant managers to control operators. Ford inverted pyramid scheme operators are working in groups of six to eight, and the leader of the team. Managers are consultants to support the production operators and their team leader. Operators to take responsibility and decision-making roles. Their motto is: zero defects. Zero Waste.
3.4 Employee safety and comfort Are Guiding Design Principles
One of the guiding principles for the design of the safety of new factory workers comfort. Final assembly building, mezzanine levels and overhead walkways to reduce the pedestrian traffic on the floor. The hallways are large (18 to 21 meters above the usual 12 feet) and bright parts or components. Trucks are not producing regions. Designing a building for the production of clean, quiet and well lit. Inside the air-tempering system, aided by modern SOD-covered roof, be kept indoors for at least 10 degrees cooler than the ambient temperature in summer and 10 degrees warmer in winter. Sunlight 10 monitors and 36 skylights, roof, flooding Final Assembly building, 1.7 million interior square feet.
The building also includes features easy to use people like general security gateways, team rooms and rest areas to meet. The plant is quieter because the noise of shaking conveyors and pneumatic tools whistle went. Instead of heavy equipment tires, noisy, PAO using power tools. Ford was a leader in ergonomics, and continues to play an important role in the design of new jobs and tools. The new tools mean less stress and tension in the arms and wrists of the operator. In fact, very few operators should work with their hands over their heads or stoop to do a job below the knees. tour operators stoves in their work. Stoves are individual platforms for each vehicle, and some are able to adapt to the size of each operator in activities and work as the cell-cell vehicle for work job.
The new Dearborn truck plant is a world class institution that is based on our heritage of manufacturing in the network, one of the enduring symbols of the industrial age.
3.5 More Assembly Plants Slated For Flexibility
Dearborn Truck Plant is a prime example of Ford's commitment to establish a system for the manufacture of next generation flexible assembly operations in North America. A mid-decade, about half the body shops, the seat of Ford and final assembly operations have become flexible. This number increased to 75 percent by the end of the decade. The system should save the company U.S. $ 1.5 to 2 billion dollars in the next decade. With increasing market segmentation, Ford's new flexible assembly system means the company can react more quickly to meet travel demand of customers. The company is able to produce a greater variety of vehicles, alter the composition of the products and options, and the volume change - quickly and at minimal cost.
RESULTS AND DISCUSSION
4.1 Rediscovering Lean Prodiction History
Ford's dive was so grand that Ford was in front of its point in time. So far, that although the public use some of his ideas, the more visible the continuous conveyor belt, information on various parts of Ford's manufacturing sector actually lost, at least in the U.S. and European producers. This seems impossible to believe, but true. It has never been an issue that Henry Ford made more contributions to the American auto industry than any other man or single woman, sooner or later. But few have learned the stakes for the industry for Ford and the others can move forward. Ford's vision was linked to the principles of lean, as the systematic elimination of waste. His trial and the pursuit of knowledge have been relentless, even though it has left many competitors in its dust.
4.2 Creative Tension
Visualize a huge rubber band together for two things: the vision of an ideal situation and a clear vision of current reality. great achievements in human affairs occur when the tension is higher. A vision can not have the best chance after being pursued with intense curiosity and openness to reality. Examination without the other is useless. A vision that the lack of understanding of current reality is not able to accomplish something. A vision of current reality, the lack of vision leads to frustration and cynicism. Vision, and realism are needed to achieve great things in lean manufacturing.
CONCLUSIONS AND SUGGESTIONS
Ford and Sorensen also created what we call a modular assembly process to assemble sub-assemblies before they are installed on the vehicle. Modularity at that point was just to put the hoses and attachments are cooler, but this simple innovation was another step towards the ultimate goal of Ford. Ford's vision for process is based on the continuous flow of material without waste of my whole way of iron ore to customers. Its vision is based on people will be able to labor, trained and motivated, which was coordinated and was also able to afford the products manufactured. A piece of that vision is incomplete in one was dynamite.
Ford's vision changed the landscape of industry. At the turn of the century, there were many small producers of automobiles all over the Midwest and Northeast. In Pennsylvania, for example, the town of York had established itself as a major player in the lean production industry. Fourteen different car companies were hard at work-including one employing the great uncle of the other author, who went on to design and build a few trucks of his own (including perhaps one of the first with four-wheel hydraulic brakes). One of York's more successful automakers was the Pullman Co. Pullman's motto was "Some cars cost more to buy; but no car costs more to build." This stands in striking distinction to Ford's vision of a low-cost, low-price, high-quality car. Henry Ford's vision took the industry in such a new direction that the automobile industry could not survive in York, PA, or in Auburn, IN, or anywhere else where people couldn't see the world the way Ford saw it.
Ironically, Ford's vision was not about money. Of course, he did not invest his wealth with no concern for getting it back. To Ford, profit was the by-product of the vision, not the fuel. Asking, "how can I make money fulfilling my vision?" is a very different question from "what vision will make me a lot of money?" The desire for profit alone never yields the sustaining greatness that Ford clearly attained. No; Ford wanted to change the world in a very particular way. Henry Ford's search for a clear understanding of current reality is perhaps most clearly exhibited by his own research. Ford Motor Co. had many of its own laboratories. So did Henry Ford himself, who spent his free time with others who sought insight, such as Thomas Edison and Harvey Firestone, who all studied together in winter laboratories in Fort Myers, FL.
Henry Ford's search for understanding was not just in science and industry, but took the same experimental approach when it came to business and people. He never assumed he had the answer. He did assume there was an answer and went in relentless search of it. A crystal-clear vision of what he could create combined with the endless curiosity of current reality created tension that allowed constant and multifaceted change, and a leap into the future.
Applying the concepts of lean should be straightforward. Depending on the goals of a corporation, different levels of implementation can be conducted. The minimum implementation involves only standardized work and process redesign. Form this starting point, virtually all aspects of corporate processes can be managed, including property management, quality control and financial accounting. The procedures that are presented allow any organization to begin the transition to the lean state. The hardest part is getting started and, as with most things, management support is critical. It is necessary to make sure that there is strong management support at the correct levels. As we discover your business processes, we will gain the knowledge needed to reengineer them, even complex processes. After all, the more complex the business process, the more effective the procedure is. The minimum we will get is a better understanding of our current processes. The maximum we will get is the creation of a lean corporation.
BIBLOGRAPHY
6.1 Book references
John Gattorna, Robert Ogulin and Mark W. Reynolds (2003). Gower handbook of supply chain management. Gower Publishing, Aldershot, England. Page No: 48
Hubert Schmitz (2005). Value chain analysis for policy-makers and practitioners. Publications of the International Labour Office, Geneva, Switzerland. Page No: 4
Michael E. Porter (1985). Competitive advantage: creating and sustaining superior performance : with a new introduction. The Free Press, New York, NY. Page No: 59
John R. Black (2008). Lean production: implementing a world-class system. Industrial Press, Inc. New York, NY. Page No: 6
Earll M. Murman (2002). Lean Enterprise Value: Insights from MIT's Lean Aerospace Initiative. Palgrave Publishers Ltd, New York, NY. Page No: 106
Keller (2005). Six Sigma Demystified. Tata McGraw-Hill Edition, New Delhi, India. Page No: 262, 265
Pascal Dennis, John Shook (2008).Lean Production Simplified: A Plain Language Guide To The World's Most Powerful Production System. Page No: 3-6
Donald E. Lighter (2009).Advanced performance improvement in health care: principles and methods. Jones and Bartlett Publishers, Sudbury, MA. Page No: 232
Terence T. Burton, Steven M. Boeder (2003)The Lean Extended Enterprise: Moving Beyond The Four Walls To Value Stream Excellence. J. Ross Publishing Inc, Boca Raton, Florida. Page No: 24
Thomas A. Kochan, Russell D. Lansbury, John Paul Macduffie (1997).After Lean Production: Evolving Employment Practices In The World Auto Industry. Cornell University Press, Ithaca, New York. Page No: 98
Anil Karanjkar (2008). Manufacturing and Operations Management. Nirali Prakashan, Pune, India. Chapter: 10
Jeffrey Morgan (2005) Creating Lean Corporations: Reengineering From The Bottom Up To Eliminate Waste. Productivity Press, New York, NY. Page No: 259
Lonnie Wilson (2009). How to Implement Lean Manufacturing. The McGraw-Hill Companies,Inc, United States of America.
6.2 Website references
Poter's Generic Value Chain. Available: http://www.netmba.com/strategy/value-chain/
New Ford Plant And Implementation of Lean. Available: http://www.sme.org/cgi-bin/get-newsletter.pl?LEAN&20021209&5
