Tuesday, December 2, 2014

Industrial Engineering Strategy

Industrial engineering is profit engineering. If a company is not employing industrial engineering it is unnecessarily foregoing profits inherent in the products that it developed and designed to the performance satisfaction of good number of users. Profit conscious managers and owners have to understand and employ industrial engineering to achieve the full potential of their products.

What are your strategic decisions related to industrial engineering function?

1. What is your productivity/Efficiency Improvement - Cost Reduction goal?

2. Are you planning to realize experience curve effect benefits?

3. How much of the cost reduction - productivity improvement should come from specialist industrial engineers and other engineers and managers?

4. What will be the ratio of industrial engineers to other engineers and managers?

5. What bottlenecks or limiting factors have you identified in you facilities?

6. What techniques are going to receive special emphasis?

7. What is your training plan for specialist industrial engineers and other engineers and managers?

8. What is the top management attention to industrial engineering - productivity improvement - cost reduction activity?

9. What is the research and development budget for IE activity?



1. What is your productivity/Efficiency Improvement - Cost Reduction goal?

Total productivity management promoted by Japan Management Association, covered as a chapter in the Maynard Handbook (5th Edition) advocates setting up targets for cost reduction and productivity improvement. Similarly, Yamashina talks of manufacturing cost reduction deployment as a strategic decision in his world class manufacturing implementation. Total industrial engineering is one of the pillars of WCM promoted by Yamashina.

2. Are you planning to realize experience curve effect benefits?

Experience or learning curve effect is identified as one of the strategic cost drivers by strategic management literature in implementing cost leadership strategy (Creating and Executing Strategy: The Quest for Competitive Advantage, 14 Edition, Arthur Thompson Jr., A.J. Strickland, John E. Gamble and Arun K Jain, Tata McGraw Hill, 2006  p.119). Companies have to determine the slope of their learning curve and assess whether it is in line with the industry and have to take actions to improve learning in organization. Hence they have to plan to realize the experience curve effect.

3. How much of the cost reduction - productivity improvement should come from specialist industrial engineers and other engineers and managers?

F.W. Taylor (1911)  identified that production work was being carried out without the support adequate science. Taylor developed science of machine working as well as manual working in certain activities and developed his scientific management thought and promoted industrial engineering as a subject and as a full discipline in engineering institutions.  He recommended specially educated and trained industrial engineers to take up the work of developing science in various production activities and improvement of production processes using the science. According to Taylor, foreman at that time was already overloaded and similar is the case with senior production managers also as they were working without the support of staff specialists.

By 1930s, the situation changed. Alan Mogensen identified that processes redesigned by industrial engineering using the recent discovered science can further be improved by the involving operators and supervisors as they observe many minor improvement opportunities in the doing the work day after day. He came out with work simplification program to involve operators, supervisors and engineers in operation/process improvement. According to Allen Mogensen, Work Simplification is the organized use of
common sense — on the part of everyone Involved — to find easier  and better ways of doing work.

Toyota Motors made exemplary use of utilizing the knowledge of every body in the production system to improve processes and operations. Now companies have a policy choice to make. What proportion of planned cost reduction will come from science/analysis based projects from industrial engineers and what proportion will come from line organization. The targets have to be included in the budgets of the various departments accordingly.



4. What will be the ratio of industrial engineers to other engineers and managers?

This decision is contingent of the decision above. The company has to employ some industrial engineers to promote total industrial engineering. Above that the number of IEs to be employed and their engineering background, and functional experience depends on the company's policy decisions regarding the planned cost reduction and responsibility given to IE and line departments.


5. What bottlenecks or limiting factors have you identified in you facilities?

Manufacturing cost reduction deployment is a topic in project appraisal chapter of financial management books as well as engineering economics and managerial economics books. They recognize that certain project proposals contain cost reduction a the benefit of the project. Yamashina in his WCM explicits recognizes cost reduction projects as a major input into the budgeting process and comes out with a mathematical model to select a cost reduction project portfolio for the coming period. In this context, company has to identify its limiting factors or bottlenecks whose productivity has to be improved by employing industrial engineering techniques. Based on this identification, the company personnel may come up with productivity improvement projects that make a significant improvement in the operation of the bottleneck facilities.


6. What techniques are going to receive special emphasis?

IE techniques are continuously refined and new techniques are being developed. The company has to opportunity of taking decisions on the intensive use of some techniques during the coming periods. For example many companies in India are now focusing on six sigma and industrial engineering techniques named as lean manufacturing or Toyota Production System to realize cost reduction and productivity improvement.



7. What is your training plan for specialist industrial engineers and other engineers and managers?

Based on the strategic decisions in the area of industrial engineering, the company has to conduct training programs to sensitize the employees on the need to use specified techniques and provide skills to those employees who presently do not have them. There is always a need to share recent success stories within the company as well as from other companies.


8. What is the top management attention to industrial engineering - productivity improvement - cost reduction activity?

If productivity is a strategic issue (it is for many companies as world's top companies declare their productivity improvement and cost reduction targets - Volkswagen and Coca Cola in 2014), top management has to participated in planning, organizing, resourcing, directing and controlling productivity improvement. They need to allocate time and participate in various activities related to productivity. Long time back, when Birla group was introducing WCM, in the first work shop of defect or waste identification, it was said that K.K. Birla, the chairman of the group himself participated to observe the work place and identify waste. Motilal Oswal, Motilal Oswal Securities Limited was another CEO, who participates in many training programmes organized by the company with enthusiasm.


9. What is the research and development budget for IE activity?

If companies have to use industrial engineering and enjoy the increased profits, they have to contribute to its theoretical development and first time application of the theory in company systems. Theoretical development is referred to as research and first time application is referred to as development. While, the big companies have a major responsibility to fund big projects, even smaller companies can contribute through their industry associations, industrial engineering professional organizations. In the context, it is important to note that the 2014 National Conference on Industrial Engineering by NITIE, was sponsored by BHEL, RCF, Neyveli Lignite Corporation and  Adani Gas Ltd.

4 comments:

  1. we should haye the techniques ,such as minimum efficiecy,efficient use of energy and minimum time waseage-ashok

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  2. Ashokji, Presently industrial engineering has techniques for improving efficiency, for efficient use of energy, and for eliminating waste of operator time and machine time. Now it also has techniques to reduce delay and thus reduce cycle time and inventory time. No doubt, there is always scope for creative minds to make improvement in tools and techniques or methods.

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  3. Thank you very much sir for thoughtful insights.I would like to share my view points,ofcourse we can add up more with brainstorming.'Strategy' as we understand is long term action plan for achieving organisational goals under series of uncertainties.In the context of IE strategy,consideration of cost should be accompanied with other manufacturing priorities like Quality,Delivery,Flexibility,Innovativeness and Performance.Many Researches have proved that firms from developing world focuses more on cost,quality as a immediate source of 'competitive advantage',which is obvious up to certain extent.But when we consider more about sustainable competitive advantage,Cost and Quality will be considered as Market Qualifying criteria but Performance,Innovativeness,delivery will be order winning criteria.Of course,researches is field of IE strategy has well thought this issue,But still there seems prevalent gaps in the approaches of IE practitioners who need to think beyond cost,efficiency.

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    Replies
    1. Dear Sourabh Kulkarni,
      Thank your your comment. Strategies of an organization are many and each function has a strategy. We need to distinguish the function of industrial engineering first and then try to develop an explanation of industrial engineering strategy. The problem seems to be definition of industrial engineering. Definition of IE as efficiency improvement, productivity improvement, waste elimination or cost reduction is a focused definition. Innovation has to be there in application of IE. It should not be confused with product innovation and process innovation that enables production of new features or improved features. As you said more discussion and brainstorming are necessary to arrive at an explanation acceptable to more number people. Thank you once again for initiating the discussion.

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