The Evolution of Manufacturing Processes
By Edward Rodden, CIO, SugarCreek
Interestingly, it was not so different from a business perspective on how we ran and managed the business. It was just all done, for the most part, manually.
As a manufacturer, we utilized a fully absorbed activity-based standard cost system for inventory valuation. This extended to generating credits (labor and overhead) for manufacturing activity, through to calculating variances at the departmental level for exception-based management.
Sounds familiar? It should, as this is still the fundamental approach most high-volume manufacturers’ use today.
In today’s world, data collection, budgeting, cost calculations including burden rates, ledger postings and so on, are typically highly automated utilizing sophisticated software and hardware devices along with various means of “Identity” such as bar codes, RFID tags, etc.
In the “old” world, everything was driven with pencil, paper, and calculators (yes, calculators). Every movement of material, be it issues for usage or production from a line, was recorded on an individual transaction slip. This required users to write down the item number, the number of cases, the quantity per case, and the lot number as well as any production order references.
In today’s world, data collection, budgeting, cost calculations including burden rates, ledger postings and so on, is typically highly automated utilizing sophisticated software and hardware devices
At every opportunity, all of these transactions were validated by a second person, generally through staging areas, where a transaction would place the item in the staging area, and a second person would transact them to the next location or activity. This had to be done as the system validations we build into our systems today, obviously did not exist.
We were able to achieve inventory and transactional accuracy comparable to today, but it was entirely process-based from a physical perspective.
Budgeting was a herculean task. If you have ever constructed a budget for an activity-based standard cost system, imagine doing so, strictly with pencil and paper.
Ironically, from my perspective, a significant point of difference with a manual environment was that people inevitably gained a deep understanding of how all these things worked and “fit” together when it came to managing the business. You could not do the calculations manually without a true understanding of the concepts behind them.
This is the environment from which I learned all of these concepts and principles, and I am actually grateful that I learned them in a “manual” world. Today, this type of learning is elusive with the dependence on systems to handle the concepts and intricate calculations behind them.
What has also changed is speed, in particular the speed that decisions are made.
In the days when communication was by phone, letters and telex machines (Google “telex” or “twx” millennials,) the pace of decision making was much slower and far more contemplative.
Today, decisions are expected at the pace of email traffic, while email itself, in many environments, has become a quagmire of what are often useless opinions and debates expressed in impersonal ways.
I am a proponent of Technology, obviously. Nevertheless, I will also venture the opinion that companies who assess and understand the impact of technology on learning, collaboration, and personal relationships (as well as and as much as process) will be the better for it.