Ford and lean manufacturing, Open Forum ..

I had the good opportunity to present a session in the Open Forum from Alliance School of Business, on 7 October, organised by the Operations stream on the topic Henry Ford, Mass Manufacturing and Lean Manufacturing. It was attended by 5 faculty from the Operations stream. 

Presenting before a faculty group is always beneficial as the presenter has to go to a higher professional level than what is delivered to the students. Also the preparation time for the talk was almost the whole holidays of Dussehra. I was also simultaneously reading Homer's Iliad, as that was the topic originally planned for a future week.

Without doubt we can say that Ford was in a major part one of the greatest industrialists the world has ever had. 

• Industry 1.0 focused on Mechanisation, cotton loom, printing press, steam engine etc.
  
• Industry 2.0 focused on  invention of electricity and mass manufacturing. 
• Industry 3.0 focused on the Digital Revolution sparked by the invention of the microprocessors and digital computer starting with the cutting edge work from Claude Shannon of MIT. 

We are now at the threshold of Industry 4.0 which is going to be the one of Artificial Intelligence, Machine Learning, Internet of Things, Blockchains, 3D Printing etc.

Yesterday's talk was specifically on the contribution of Henry Ford to Industry 2.0 or Mass Manufacturing.

Ford introduced Model T car for the world in 1908. It was initially offered at $850 and by 1925, it was offered at $260. Henry Ford's three pronged focus was on 

1. cost reduction (affordability), 
2. simple to operate (simplicity) and 
3. working for a long time (durability).

Ford is said to have been asked repeatedly why Model T came only in black colour, it was because black colour was cheap, dried faster and it was possible to make a car in just 90 minutes with the black paint.
Ford hated waste. He wanted lot of value addition and focused all his efforts on it. He created the concept of mass mobility, revolutionised mass production, helped create the American middle class and helped Americans to move from the cities to the towns, started the suburban sprawl. 

On first December 1913 was the day Henry Ford installed the first moving assembly line for the mass production of an entire automobile. His innovation reduced the time it took to build a car from more than 12 hours to one hour and 33 minutes

It kick started the MASS PRODUCTION REVOLUTION WORLD OVER.

The use of the moving assembly line allowed for the work to be taken to workers rather than the worker moving to and around the vehicle.

Ford also shocked the world by doubling workers pay to $5 per day. He wanted to give respect to the working class, and was sure this act would help him retain the best skilled workers in Ford.

Going through his autobiography, we understand he was more happy giving dividends to the working shareholder than the non-working shareholder.

Doubling the average wage helped

• ensure a stable workforce (no quitting) and
• boosted sales (the workers could now afford to buy the cars they were making)
• laid the foundation for an economy driven by consumer demand.

Ford for the first time brought these LEAN concepts to the world.

• Flow: started with raw materials and ended when the customer left with his car.
• Standardisation: standardization of product models, associated parts and also production tasks
• Reduction of wastes: in particular operator movements by minimizing the number of tasks to be performed
• Just in time: Ford worked on its Supply Chain to get the right amount of materials and parts according to demand

(all these lean concepts were developed 12 years before Sakichi Toyoda proposed looms stopping when fibre got cut (autonomation) for looms)

Why then did Ford fail ?

Ford did not focus on organisational improvement, solely on product quality. Product was more important than the organisation. Family run organisations after two generations need to be transferred to professionals to manage, as complacency sets in the family and it is difficult after two generations to find grandchildren with the same fire in the belly as their grandfather. 

Of 100 businesses that are started, it is found from a Harvard study that only 40 enter the second generation and of the first 100, only three enter the third generation. Click here to read my blog on this phenomenon. It was the reason why the 160 year old Tata Sons from India had to slowly move to professionals to run the organisation as smart leaders were not coming from the family.

Though Model T started at $850 around 1912, through mass manufacturing he brought it down to $260 in 1925, making it the car of the masses by reducing waste, ie. inventory pileup . Ford ruled the world of automobiles the first 40 years till 1940 when we find General Motors under a great leader Alfred P Sloan overtook Ford. MIT named its business school after this doyen of the manufacturing world. Japanese entered the market with low quality products, but kept continuously improving their products, conquering global markets.

The discipline, practical application dedication saw the company Toyota, born in 1939, 36 years after Ford in 1903, take over the world automobile scene presently.

The 2021 automobile sales global is given below. (statista.com)

1. Toyota            9.56 m
2. VW                 8.88 m
3. Hyundai-Kia` 6.67 m
4. GM                 6.29 m
5. Stellantis       6.14 m
6. Honda            4.46 m
7. Nissan           4.06 m
8. Ford              3.94 m
9. Renault         2.69 m
10. BMW             2.52 m

Top 10 sales 55.21 million vehicles and global sales are 66.7 million vehicles.

For a company that ruled the automobile world for the first fifty years of the last century, in the face of increased competition and better manufacturing methods, can it or will it revive and survive in global market ?

George.