2 management - School of International Business and ...

Hans H. Steinbeck
5 INTEGRATED PRODUCTION
In the past the focus was very high to improve manufacturing efficiency, logistic and quality. So
major improvements were coming out of production for many years. Since over 60% of the total
spending is done there, it was the right focus area. Today there are still improvements possible,
but most companies have done their homework to compete in the global market, and only slight
improvements of 5-10% are possible anymore. So in this chapter some key elements of production
will be covered, even if they are standard today, or are not as important as they were 30 years ago.
Figure 6 shows the changes in production over 100 years, comparing the production of electric mo-
tors at AEG in 1900 with plenty of manual labor vs the semiconductor manufacturing line at IBM to-
day, which is run fully automatic by computers, with most of the labor focused only on maintenance.
From the past, manufacturing is focusing only on three KPIs:
Figure 6 | Electric Motor production at AEG in Berlin around 1900 vs
Semiconductor Manufacturing at IBM in Fishkill around 2005
1. Cost: Traditionally the key competitive figure resulting in unit cost: total manufacturing
cost (TMC) divided by the total volume.
2. Quality: Increasing focus in 1980s. External quality as seen by the customer >SPQL