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Total cost industrial engineering is determining cost reduction target at the total cost level of the organization and achieving the target by using industrial engineering methods and techniques in various departments of the organization. Total productivity management is the name under which it is promoted.
The illustration is based on Top-down Production Management: A Recent Trend in the Japanese Productivity-enhancement Movement by W. Mark Fruin and Masao Nakamura, published in
MANAGERIAL AND DECISION ECONOMICS, VOL. 18, 131–139 (1997)
TOTAL PRODUCTIVITY MANAGEMENT (TPM): A TOP-DOWN APPROACH TO MANAGING PRODUCTIVITY
Step 1. Corporate goal setting for cost reduction. Set company-wide numerical goals and targets.
Step 2. Top-down explosion process. Explode the corporate-level goals and targets systematically into actions by speciﬁc departments (or by speciﬁc product lines) and select numerical goals and targets for individual departments (or speciﬁc product lines). Repeat Step 2 until goals and targets are selected or assigned to all layers of relevant organizational units and individuals with the responsibility for cost reduction (industrial engineers in engineering departments).
Step 3. Implementation and assessment. Compare the corporate performance and departmental performances with the originally set goals. Take control actions in the current year. Incorporate changes in the planning system for the next year.
The strategic planning decided that it is necessary to achieve a 15% reduction in the unit estimated production cost taking into consideration the improvements in the product planned in order to give a 10% reduction in the existing price. This means that the current production cost (200000 yen) must be reduced by 35000 yen. The composition of the unit production cost is: labor 30% (60000 yen), raw materi als 60% (120000) and overhead 10% (20000).
After initial analysis by cost reduction - industrial engineering top level team, it was decided that the cost-reduction target, 35000 yen, will be allocated between labor and raw materials as labor 14000 yen, and raw materials 21000 yen.
Labor Cost Reduction - Further Assignment
The labor cost reduction target is to be assigned to ﬁve workshops: molding, machine, welding, assembly and inspection workshops. Discussions of the top level CR-IE team with the shop level CR-IE team lead to the following cost reduction targets at the shop level: molding 840 yen, machinery 4194 yen, molding 840 yen, welding 2285 yen, assembly 6000 yen, and inspection workshop 660 yen.
Assembly level cost reduction target further break up.
The assembly workshop has eight assembly lines A-H. Lines B, C and E employ large labor hours, consist of similar job tasks and an improvement in one can be implemented on the lines.
(f) The numerical target for cost reduction for the assembly workshop is 6000 yen. The cost target was converted into 1676 hours reduction target. Lines B, C and E are operational 95% of the time and hence our labor input reduction effort has to be from reduction of assembly time. The opportunity to get savings from downtime is limited.
Assembly Line Level Effort
22 jobs are done on these assembly line with six stations. Each station is given 0.15 minute. The total utilized labor time for all the stations is only 0.53 minutes. Hence effort was made to reduce the station time or cycle time to 0.09 minutes. The output from the lines have gone up by 40% due to this productivity improvement initiative and the assembly workshop met its cost reduction target.
The simplified description shows how a corporate level cost reduction target is converted into shop level and assembly line level or work centre level cost reduction targets. The top level CR-IE team, department level CR-IE team and shop level CR-IE team interact with fix shop level cost reduction targets. The industrial engineer, in engineering departments joins with engineering managers, supervisors and operators of the shop to engage in productivity improvement project. They get the needed help from higher level CR-IE team members to complete the project.
The implementation of a top-down TPM program requires substantial inputs of a bottom-up persons of the shop. Without cooperation from the shopﬂoor no meaningful numerical targets could be derived and hence an effective implementation of any target would not be possible.
The main characteristics of TPM is that it deals with corporatewide goals. Another is that it deals with speciﬁc numerical targets for cost reduction.
Bottom-up approaches to productivity improvement are important for continuous improvement but may only provide sub-optimal solutions from the ﬁrm’s perspective when a corporate-wide optimal solution is required. TPM has been found to be effective for overall optimization and hence for improving ﬁrms’ overall proﬁtability in a planned way over the typical sales and profit planning periods.
Industrial engineers have to improve the machine utilization economy. To do that we need principles of machine utilization economy, like principles of motion economy.
What principles can be proposed?
1. If it is a machine tool, we have to investigate cutting tools, coolants, cutting speeds, feeds, depth of cut and jig and fixtures to improve the utilization and productivity. Taylor himself did all these evaluations and suggested many improvements, which are still valid today.
2. For all machines, finding the load at which maximum efficiency is obtained is done. The load planning has to take into account the maximum efficiency load.
3. Six sigma provides a way to optimize the working of any machine. The factors that affect the working of the machine are to be identified, and the levels at which they can be operated are to be found. Then the combination of factors and levels at which the best output will come will be obtained and machine can be run at that combination or setting.
4. Calculate economic batches for various components to be made on the batch and use those batch quantities. JIT as an idea is welcome, but you can use it only when you implement SMED and drive down the setup time.
5. Look for opportunities to implement Pokayoke features on the machine so that defects are reduced to very low levels (zero defects).
6. Use the developments in maintenance management to have the most efficient and productive maintenance system.
Total Productivity Equipment Usage Management
Six major categories of inefficiencies and losses related to equipment - machines
affect the overall performance of the equipment namely:
1. Equipment failures/breakdown losses are the time losses and quantity losses caused by defective
2. Set-up and adjustment losses are defined as time losses resulting from downtime and defective
products that occur when production of one item ends and the equipment is adjusted to meet the
requirements of another item.
3. Idling and minor stop losses occur when the production is interrupted by a temporary malfunction
or when a machine is idling.
4. Reduced speed losses refer to the difference between equipment design speed and actual operating speed.
5. Reduced yield losses occur during the early stages of production from machine start up to stabilization.
6. Quality defects and reworks are losses in quality caused by malfunctioning of production equipment.
The principles of scientific management and the advocacy for staff specialists to help managers implement scientific management gave birth to the discipline of ‘Industrial Engineering'. Charles Buxton Going authored the first textbook on industrial engineering. Principles of Scientific Management: The operators have to be selected scientifically and then trained in standard methods. There has to be cooperation between men and managers so as to insure all of the work being done is in accordance with the principles of the science which has been developed. There has to be an almost equal division of the work and the responsibility between the management and the workmen. The management takes over all work for which they are better fitted than the workmen, while in the past almost all of the work and the greater part of the responsibility of operations were thrown upon the men. Article by Narayana Rao K.V.S.S. (Author of this blog) Principles of Industrial Engineering To be added. Updated 20 November 2016, 3 Feb 2012
Total productivity management (TP management) provides a system for coordinating all the various improvement activities occurring in a company so that they contribute to top management’s goals for the entire company. Starting with a corporate vision and broad goals, these activities are developed into supporting objectives, or targets, throughout the organization. The targets are specifically and quantitatively defined. The chapter describes how to introduce, develop, and expand a TP management program.
TP management is, in a sense, a top-down program because it always starts by identifying the goals of top management. The strategy and business plan of the company are the basis for developing the productivity policy, that specifies the productivity goals.
Saito and Yokota advocated that TPm employ the following concepts:
● Break away from conventional internally oriented, comparative productivity campaigns that seek incremental improvements, and instead focus on achieving ambitious new targets.
● Change from kaizen activities, which build up incremental improvements, to an approach
based on an image of the ideal—seek extreme results.
● Pursue the concept of the ideal total system.
● Apply management technology in a systematic and theoretically correct manner.
TP management also requires that each company develop and establish its own original management system. The concepts underlying TP management offer a new way of thinking about productivity.
What is evident is that TP management derives its targets from the overall plan and is working out in a top down approach to achieve them. The bottom up spontaneous improvement activities are to be encouraged but have to dovetailed into supporting the TP targets. TP management is a proven technique according to Saito and Yokota and they claim that their organization had 10 years of experience in providing management guidance to organizations in implementing TP management.
The focus of TP management is extended from company profits to customer satisfaction, employee satisfaction and even social satisfaction.
The improvements are classified into two external deliverables and internal structural improvements.
Productivity management is a primary focus area for IE departments and they have to adopt this TP management approach to serve their organization in a strategic manner.
The TP management program of a company is described by the author. The TP program seeks to achieve the following goals:
1. Clarify the objectives that the company (or business unit) as a whole should pursue, focus
and work simultaneously toward accomplishment of the objectives.
2. Create an organization that can take the general, company-wide objectives and systematically
develop them into specific targets, based on confirmation of which activities are most
important for accomplishing corporate goals (IE department needs to teak for this purpose).
3. Create and standardize a three-level process, in which (1) general objectives are developed
into (2) individual targets, which are then translated into (3) plans and activities. This
process ensures that each plan and activity advances individual objectives and targets that
are in accordance with management goals (These department wise targets assigned to operating departments as well as IEs working for those departments).
4. Take advantage of the strengths and capabilities of all employees in the organization and
challenge them to contribute and grow. Then, make it clear to them how their actions are contributing to the targets and objectives.This will increase their eagerness to participate in improvement activities.
5. Create a strategic management system that can adapt to changes in the business environment
and at the same time obtain dramatic improvements in business results based on management’s design.
Saito and Yokota have not specifically identified the role of IE department in this activity. As this is a part of IE Handbook, the editors must have asked the authors to customize it for application by IE departments.
The 2001 Total Productivity (TP) Management Conference was held by JMA on June 18-19 in Tokyo.
Total Productivity Management Prize (TP Prize), the TP Prize is one of the JMA commendations and was established in 1982, commemorating the 40th anniversary of JMA. It's objective is to publicly recognize companies and organizations that achieved excellence in productivity management.
In 2001, TP Prizes were awarded to Aizu Plant of Olympus Opto-Electronics Co. Ltd., Internet Systems Platform Division of Hitachi, Ltd; and Display Device Company & DDC Division of LG Electronics Inc.
Using TP management, Olympus Opto-Electronics quickly responded to a changing business environment to consistently achieve its stated business goals in endoscope production. Hitachi Ltd. employed TP management to materialize management reform in terms of speed to market in the increasingly competitive personal computer industry. LG Electronics Inc. likewise applied TP management to realize economic value added (EVA) cash flow management.
For year 2003, TP Prize was awarded to Topcon Corp., which also received a special award for TP Management Promotion, Hitachi Global Storage Technologies Philippines Corp., and The Kansai Coke and Chemicals Co., Ltd., Kakogawa Plant. http://www.jma.or.jp/jmanews/2003sep.html
The purpose of "Total Productivity Management" is to improve the competitiveness of products and services in price/cost and customer responsiveness, thereby increasing the profitability, market share, and return on investment in human, material, capital, and technology resources.
1. Mission Statement Development
2. Productivity Analysis
• Total Productivity and Break-Even Point of Total Productivity
• Human Productivity
• Materials Productivity
• Fixed Capital Productivity
• Working Capital Productivity
• Energy Productivity
• Other Expense Productivity
An analysis will be made of the impact of these productivities on profits.
3. Management Goals Development
4. Productivity Goal Development
5. Fishbone Analysis and Action Plans Development
Using the Fishbone Analysis, action plans will be developed for each of the management goals.
5. PQT Training
This training entails an 8-step approach for problem-solving to improve productivity, quality, and customer responsiveness. It also teaches skills in supervision, planning, organizing, motivating, delegating, controlling, and communicating.
6. Assessment of Productivity Goal Achievement
To assess the progress toward the achievement of the productivity goals. Personnel from accounting and management information systems will be taught how to use it.
To provide consistent motivation to achieve the corporate mission, the "Total Productivity Gainsharing" formula will be applied. The management will be guided to consider different options.
Suito, Kiyoshi. (1998). Total productivity management. Work Study, 47(4), 117-127.
Paper containing full example of the above model
Resource Use, Waste, and Total Productivity Management in Saudi Arabia Hotel Industry
Rami H. Alamoudi
Department of Industrial Engineering
King Abdulaziz University, Jeddah, Saudi Arabia
International Journal of Basic & Applied Sciences IJBAS Vol: 9 No: 10, Pp. 43-54
Paper: What Determines Productivity?
Journal of Economic Literature 2011, 49:2, 326–365
Can be accessed from Syverson's personal website
Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This finding has shaped research agendas in a number of fields, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production ractices—and therefore over which producers have some direct control, at least in theory—as well as from producers’ external operating environments. After evaluating the current state of knowledge, the papers lays out the major questions that research in the area should address going forward.
Research questions for further research
1 What Is the Importance of Demand?
2 What Is the Role of (or Hope for) Government Policies That Encourage Productivity Growth?
3 Which Productivity Drivers Matter Most?
4 What Factors Determine Whether Selection or Within-Producer Growth Is More Important in a Market/Sector/
5 What Is the Role of Misallocation as a Source of Variation in Emerging Economies?
6 What Is the Importance of Higher Variance in Productivity Outcomes?
7 Can We Predict Innovation Based on Market Conditions?
8 The Nature of Intangible Capital
9 Management Versus Managers
10 A Plea for Data
This research is further continued by other scholars
Productivity Management is an important component of industrial engineering
Industrial engineering department has the responsibility to manage productivity in the organization. It may undertake this responsibility as a staff department like accounting department. IE department measures productivity, identifies the reasons for low productivity and high costs, determines the processes and operations, products to be studied using IE methods to improve productivity of them and submits the recommendations to line managers. On the approval of line managers, IE participates in installation projects and training projects and then measures the new productivity. A well functioning IE department is responsible for continuous improvement in productivity. Competitors come into the market with more productivity methods and products and every existing company has to pay attention to productivity to remain in the market and protect its market share in the presence of new competitors. IEs help companies to maintain their competitive position.
IEs have to plan productivity improvement, organize for productivity improvement, acquire resources for undertaking productivity improvement projects, execute productivity improvement projects and control productivity improvement. They have to use all functions of management (process of management) to manage the productivity of a concern as staff assistants to managers at various levels.
Leadership and its Impact on Productivity
Singapore Productivity Association
Prime Minister Lee Hsien Loong, in his keynote address at SNEF 30th Anniversary CEO and Employers Summit in July 2010, highlighted that “a huge part of the responsibility for improving productivity falls on employers and business leaders”. He emphasised the point advocated by F.W. Taylor that leadership has to take interest, study existing processes and develop new processes to upgrade productivity for businesses.
While management is “getting things done through others”, leadership involves “getting others to want to do things”.
Leadership at Various Levels in Organisations
The first step is leading one’s self. Leaders who can lead themselves meaning who can convince themselves about the utility of a particular action for himself and the organisation, and possess the core leadership skills to lead others would enjoy a high degree of success in leading others in the long run. This calls for an understanding and awareness of strengths and weaknesses, clarity of personal vision, and ability to be creative and curious, understanding others that come in contact with him or have a stake in his activities and a sense of one’s personal brand of leadership.
Middle managers play a critical role in communicating and explaining the organizations programmes to members their teams. It is critical for middle managers to know how to influence others through communication, relationship building and management of tasks entrusted to them.
In the case of senior leaders, who are leading fulld departments, the perspective must be
to engage and generate passion in others. Creating a vision for success and aligning all members of the team to that vision is required. It requires an understanding of team leadership and organization dynamics. The senior leaders have to create an environment which maximises the abilities of all team members. Leading for success in the team environment requires a great deal of grace, patience, focus and finesse.
Leaders who operate at this level are responsible and therefore measured by tangible results, which they must produce at the business unit level. It demands leaders who could align efforts of various function with the unit-level business objectives. Leaders at this level must be able to measure performance, improve business processes, create an environment which fosters accountability. They also have to empower functional heads, so that they are proactive, focussed and successful.
Leaders operating at the organisation perspective are usually concerned with the strategic direction, enhancing value to the customer, increasing competitive advantage and developing competencies and capabilities for future, They require the skills and capacity to position themselves and their teams to maximise value today and in the future. These leaders have to monitor the changing marketplace and are react in time to ensure the long-term viability and effectiveness of the organisation and, business units.
"Industrial Engineering is human effort engineering and system efficiency engineering." (KVSSNRao)
This statement appeared in IIE magazine "Industrial Engineer" in March 2010 issue.
Total industrial engineering is a system of methods where the performance of labor is maximized by reducing Muri (overburdening/unnatural operation), Mura (irregular operation) and Muda (non-value added operation), and then separating labor from machinery through the use of sensor techniques. (Yamashina, H)
I once again got an opportunity to look into the topic of total industrial engineering (TIE). I have to moderate a panel discussion on 17 November 2016 on the topic Evolving Concepts of IE. Two of the speakers are from an organization associated with total industrial engineering.
TIE is part of WCM being promoted by Yamashina.
World Class Manufacturing model in production management
Management and Administration Institute, Organization and Management Faculty,
Silesian University of Technology, ul. Roosevelta 26-28, 41-800 Zabrze, Poland
Archives of Material Science and Engineering
December 2012 http://www.amse.acmsse.h2.pl/vol58_2/58221.pdf
Improving Operations Performance with World Class Manufacturing Technique: A Case in Automotive Industry
Book Chapter, 2015
Fabio De Felice, Antonella Petrillo and Stanislao Monfreda http://cdn.intechopen.com/pdfs-wm/43383.pdf
The following subjects or techniques form part of industrial engineering tool kit.
Human Effort Engineering
1. Principles of Motion Economy and Motion Study.
Therbligs, SIMO chart, Chronocycle graph
2. Work Measurement
Stop watch time study, worksampling, PMTS - MTM, MOST
4. Safe Work Practice Design
Personal protective devices
5. Wage Incentives and Job Evaluation
System Efficiency Engineering
1. Method Study and Methods Efficiency Design
Process analysis, operation analysis, work station design
2. Value Engineering
3. Statistics Based Techniques: Statistical Quality Control (SQC), Statistical Process Control (SPC), and Six Sigma Projects etc.
4. Mathematical Optimization, Operations Research and Quantitative Techniques
Linear programming models, Integer programming, Non-linear programming
5. Plant Layout Studies for reduction of material movement, operator movement and movement of salesmen etc.
6. Engineering Economics
Engineering Economic Appraisals of projects submitted by Engineering Departments