Jason Terry
Microeconomics 2010
Professor Wilson
PRODUCT MANUFACTURING
Manufacturing plays a huge role in in the United States, influencing
employment, GDP and economic freedom directly. There are thousands of different
manufacturing plants around the country and each is manufacturing and producing
different products, anything from chocolate candies to ships and missiles. Each
production plant is faced with decisions of what to produce and how much to
produce. Each business or corporation is producing these goods because they are
looking to make economic profits.
Most successful manufacturers and corporations today started as something
small, an idea or creation by individuals who are looking to make a profit. When the
satisfaction of the specific product is greater than the cost to the consumer, then
demand for the product will rise. The profits and incentives to produce more due to
the increase in demand are what created these worldwide corporations.
“KFC was founded by Harland Sanders, a colorful figure who began selling fried
chicken from his roadside restaurant in Corbin, Kentucky, during the Great
Depression.” (wikipedia) Even at a time when unemployment was at a record high,
people were still willing to come purchase fried chicken at his roadside restaurant.
Now you can find KFC all over the country and around the world. There were a lot of
factors that took the small town chicken to worldwide fame, demand and consumer
preferences are at the top of that list. You could have the best entrepreneur in the
world, but it won’t get you anywhere if you have a product that people are not
willing to pay for.
Mars, Incorporated is another great example of this, started by a 19-year old
boy who learned to hand dip candy from his mother. It is now the third largest
privately held company in the United States. Even today they are expanding
tremendously. “A river of chocolate will begin flowing soon from a new Mars
Chocolate plant in Topeka, 30,000 gallons of daily deliciousness on the prairie. When
that sweet torrent finishes “enrobing” little bars of chewy nougat and roasted Georgia
peanuts, the huge plant each day will produce 14 million individually wrapped miniand “fun-size” Snickers and 31 million peanut M&Ms.” (mars)
When this article was written, the facility was not even built yet. How do they
already know the exact numbers of each product they will be producing? They are
adjusting products, quantities, land, labor, and entrepreneurial skills to the point
where the marginal cost equals the marginal benefit. The Total Revenue will be at its
peak, and the company can avoid wasted labor, or other resources that it does not
need. Factors may change, such as consumer preference and income, and this can
play a huge role in the quantity demanded and what the plant will then produce.
“L-3 Communications Holdings, Inc. is an American company that supplies
command and control, communications, intelligence, surveillance and reconnaissance
(C3ISR) systems and products, avionics, ocean products, training devices and services,
instrumentation, space, and navigation products.” (L3)
L-3 Communications could be considered a monopolistic competition market
model, competing with other government defense companies such as Lockheed
Martin and Boeing in differentiated products. I have worked for L-3
Communications-CS West for 3 years and I got to be a part of the company
transitioning from low volume, (huge complex builds) to a high volume production
facility. I am in operations as the Lead Production Planner on the highest volume
product that L3 has ever built.
When I first started at L3 as a production planner, my product would be
moving between 2 different buildings and several different labs. One area would kit
all the parts needed for each build, the next area would assemble, a separate
building would test, then it would come back for inspection, and assembly of the
next “operation”. It was a complete waste of time because the product would sit on
an outrack waiting to be moved to the next operation and then when it made it there
it would have to wait in line as the workers would only work off of a dispatch list,
first in-first out.
The jobs all had a time standard but as the jobs sat on shelves, the expected
completion date would come and go as product waited on the floor. This would
result in myself and other planners “pushing product” by talking to teamleads and
managers to get jobs pushed to the front of the line, competing with other programs
and product within the company.
L3 then received a government contract for over 1,000 of these units,
followed immediately by another 1,100. We had to figure out a better way if we
expected to complete them all contractually on time. That is when L3 decided to
build a Volume Production Facility, a giant lab where we could centrally locate every
department that takes part in the build. Assembly, Test, Inspection, Quality,
Manufacturing Engineering, Production Control, and right across the hallway from
Shipping and Final Acceptance.
At first the change resulted in no time wasted on outracks, as the person
would move it directly to the next “operation” when they were complete. But
everyone was still working off a dispatch and jobs were still sitting on racks waiting
to be worked, because they were completing operations at different times. The
different departments were very close now, but still not really working together.
Work would come into the lab as soon as the parts had come in from the vendors
and there were no shortages. Some days they would get 5 jobs, other days they
would get 40. We had work that was piling up in specific areas and workers sitting
idle in others.
Over time, they removed desks and installed assembly lines with touch
screen computers above a “track system” that the jobs would just go from one
operation to the next on wheels. The inspector would sit right next to the assembler,
who sat right next to another assembler, who did the next portion of the build. Then
the assembly line would end in test. The simple change in production, used the same
amount of labor but jobs were completing 10% faster, then 25% faster. Pretty soon
builds that took upwards of 4 weeks were completing in 2 days. Then they started to
limit what came into the lab by creating a capacity schedule of which assembly line
would be doing what product. My job was to choose quantities that we would be
able to build looking at material and shipment schedules, and when we would be
able to start those builds. The lab manager would then create a schedule for his
people and as soon as the jobs were ready at 9am Monday morning, there was an
entire crew to build the product.
We went from building less than 100 to our record goal of over 400 units
shipped in one month. Our AVC was decreasing as we used these simple techniques,
and the profit therefore was increasing for every unit. Just this last month we have
converted over to SAP, and using other new improvements such as Grouping,
Pegging, and Distribution. Instead of every program ordering the part they need
separately, they group them in to one large order, which brings the total cost down
dramatically. The parts are then assigned and once received they are distributed to
the different programs. This new change will eventually lower our AVC dramatically.
They are now working on a set of cameras that visually inspects each product, as
well as recording serial numbers and identification tags.
There are always ways to improve in manufacturing, and as technological
advances hit the manufacturing industry we will see many changes to the way
things are produced. But basic economic principles will still be used to find
equilibrium, where supply and demand meet, where marginal benefits equals
marginal costs, and profit is maximized.
Works Cited
(wikipedia) “KFC.” Wikipedia. July 29, 2013. Accessed August 3, 2013.
http://en.wikipedia.org/wiki/KFC
(mars) Collison, Kevin. “Topeka’s New Mars Chocolate Plant Will Produce Millions of
Snickers, M&Ms daily.” The Kansas City Star. July 4, 2013. Accessed on August 3,
2013. http://www.kansascity.com/2013/07/04/4330487/a-sweet-deal-in-topekanew-mars.html
(L3) “L-3 Communications.” Wikipedia. April 5, 2013. Accessed August 3, 2013.
http://en.wikipedia.org/wiki/L-3_Communications