Manufacturing in Small Batches

PLANT manager Bob Madden stands atop a catwalk overlooking General Electric Company's "factory of the future."Most of the "managing," however, is done by an antenna nearby. Radio signals traverse the air in this football-field-size plant, coordinating the movement of robotic vehicles that roam the floor, delivering parts to the lathe machines that will shape them. Unlike an assembly line, where these lathes might make the same cuts over and over, this is flexible automation. A computer tells each machine which of 45 metal parts it will make at a given moment. Within hours, the parts are shipped on to other GE plants that make jet engines for military (Apache helicopters) and commercial (Boeing 737) aircraft. "There's a customer waiting for every piece of hardware that we schedule here," Mr. Madden says. A growing number of manufacturers like GE are investing in "flexible manufacturing systems" (FMS), which allow them to: 1. Respond more quickly to market demand - both by adjusting the output of existing products and introducing new products faster. 2. Make more efficient use of plant and equipment - fewer machines working longer hours. (The GE plant runs 24-hours a day, seven days a week.) To some, the ultimate aim is to offer customized products at close to the price of mass-production. For example, when Tokyo's Waseda University brought Japanese executives and academics together to consider the future of manufacturing, the experts looked toward a "three-day car." The buyer, with help from a salesman or computer, chooses not only the car's color, but also styling of the body panels, positioning of instruments, and other features. The plant orders the parts one day, assembles the car the next, and on the third ships the vehicle to the customer. To achieve this dream, manufacturers would need to develop much more sophisticated communication networks - linking the sales force with the factory floor. And in the factory, engineers must develop systems to meet custom orders without adding too high a premium on the final cost. A key to success is shortening the change-over times for machines as they are switched from one task to another. Today, even with the spread of "just-in-time" processing of materials, volume does make a difference. More is cheaper. Or, as Henry Ford put it, a customer can buy any color car, "so long as it is black." Still, experts say manufacturing companies will increasingly turn flexibility into a competitive advantage, just as Ford did with his mass production system for Model T cars. Currently, the price of FMS is off-putting for many companies. GE's "factory of the future" was a $52 million investment in 1985. To make this investment pay off, the plant will have to keep the $800,000 lathes working 78 percent of the time - compared with a current level of 70 percent - Madden says. A flexible system need not be as highly automated as the GE plant, but the term FMS typically refers to automated systems. "The real issue is how much flexibility do you buy," says Steven Eppinger, a manufacturing specialist at the Massachusetts Institute of Technology's Sloan School of Management. "Hard automation is always cheaper," he says, referring to systems designed to produce one product. Ford Motor Company is gaining flexibility by going back to square one: product design. By designing its engines in "families," Ford will be able to make many versions of the same engine in plants in Romeo, Mich., (for V-8 engines) and Cleveland (for V-6 engines). For each engine family, many of the parts will be the same or similar. The flexibility will allow the plants to keep busier, with less chance of being idled because of slack demand for one product. Also, if a new engine is added into the product ion mix, "the machinery in the plant can be changed over in a period of months instead of years," says Ford spokesman David Caplan. The Romeo plant currently makes just one engine, with production of a second to begin next year. The Cleveland plant is not producing yet. To date, manufacturers have invested more than $15 billion in FMS worldwide, according to Frost & Sullivan International in New York. The market-research firm estimates FMS sales at $266 million in 1990, and predicts sales of $559 million in 1995, in constant 1990 dollars. The firm includes in its study systems that have several machines for cutting or assembling parts, controlled by computer and fed by an automated materials-handling system. Because of the high cost of FMS, corporate accountants are trying to develop more sophisticated ways of deciding whether the investment will pay off. Benefits may include improved delivery times on orders, quicker introduction of new products, reduced inventory, and the use of less floor-space and fewer machines. Costs - in addition to the equipment and software of the FMS - may include the need for more white-collar workers, such as engineers.