Letter #21: Ford Motor Company (1929)

Shortening the Production Cycle

Hi there! I go by KG, and I love studying the history of business and investing. I’ll be sharing some notes from one Investor/Shareholder letter per weekday (mostly from my compilations) here.

Today’s notes are on a section of the 1929 Ford Industries booklet discussing Ford’s Shortening of the Production Cycle.

All Americans learn about Henry Ford, his Model T, and his assembly line. However, few know just how effective it really was.

Notes

One of the most noteworthy accomplishments in keeping the prices of Ford products low is the gradual shortening of the production cycle. The elapsed time between the receipt of raw material and its appearance as finished merchandise in the hands of the dealer bears strongly on the retail prices. The longer an article is in the process of manufacture and the more it is moved about, the greater is its ultimate cost.

During the period of business depression in 1920, the Ford production cycle was cut from 21 to 14 days. Today the Ford production cycle has been further reduced as here illustrated.

  • As Steve Jurvetson noted, a recession is the best time to start a company. Great companies take advantage of depressions to consolidate and streamline their operations — Ford cut their production cycle by 33%!!

1) Monday 8:00 AM

After a trip of approximately 45 hours from Marquette the ore boat docks at the Rouge plant. Hulett unloaders start removing the cargo which is transferred to the High Line and from there to the skip car which charges the blast furnaces. By continuous process this takes 10 minutes.

  • Did Ford own the mines in Marquette? Or did they purchase the raw materials from someone? If so, who?

2) Tuesday 12:10 AM

In sixteen hours the ore has been reduced to foundry iron, which is carried in a molten state to the foundry. In less than an hour it has been mixed with the proper proportion of scrap and poured into moulds.

  • 16 hours of downtime

  • 1 hour of actual production time

3) Tuesday 1:10 AM

As the conveyor brings the molds past the pouring station the hot metal is cast into cylinder blocks. These go to the shake out station and are taken away to be cooled and cleaned. The cooling and cleaning process requires an average time of five hours.

  • 5 hours of downtime

4) Tuesday 6:10 AM

The casting now goes to its first machining operation. It takes two hours and forty minutes to machine the casting. This machining is performed in the foundry building in line with the Ford practice of continuous operation. It arrives at the motor room at

  • Continuous operation — don’t waste any time

  • Optimize, optimize, optimize

5) Tuesday 9:25 AM

It requires two hours to assemble and block test the Model A engine. Except for “running in” to loosen it up, everything is done on the move until it reaches the testing block.

  • So are the engine parts created in parallel to the assembling process? (Assuming yes given continuous operation)

  • What’s the process of creating one of these engines?

6) Tuesday 11:25 AM

The finished and inspected motor comes out on a conveyor and is loaded into a freight car and shipped to an assembly plant. It takes about 10 minutes to convey and load in the car.

  • Would be interested in the calculations/thought process that went into splitting up the process rather doing it at a one-stop-shop

7) Wednesday 7:35 AM

By this time the motor should have reached an assembly point 300 miles distant. It takes approximately 35 minutes to unload the car and carry the motor to the assembly line.

  • Men literally carried/pushed the motor to the assembly line — Tesla has robots for that!!

8) Wednesday 7:35 AM

It takes one hour to assemble the complete car, so by 7:35 AM the car is ready for the dealer.

  • Wait — is there an individual plant for just for assembling cars to be sent to dealers?

Wednesday Noon

Long before noon the dealer will have taken delivery of the car and paid cash for it. Here is a conversion of raw materials into cash in approximately 50 hours. Of this 50 hours, 24 are consumed in shipping and handling. Even this record-breaking cycle is often shortened.

  • Raw materials to cash in 50 hours — woah. Talk about an efficient process.

Some Thoughts

In the 9 years from 1920 to 1929, Ford cut the Production Cycle from 14 days to 2 days (including shipping and waiting). Raw material to cash in 50 hours — that’s crazy.

Bottlenecks mostly plant size and equipment (as constrained by material cooling/molding time/shipping&handling time)

[Redacted]

Question:

  • Is this simply car assembly? Is the engine made during this process as well? Or is that a separate process?

  • Has anybody been on a Tesla factory tour? Would love to know how that compares — both process and time wise (other than more robots)

  • Would love to hear from anybody who has worked in a car manufacturer somewhat recently — how much has the process changed? If at all? Both process and time wise.

Wrap-up

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