Evolving Excellence

Throwing In The Towel

2009-11-10T20:45:16-08:00

Just to prove I have not always been anti-intellectual I want to start by acknowledging a debt of gratitude to a guy named Bob Hayes, a Harvard professor, who has been fighting the good fight for manufacturing for a long, long time. He and a couple of other guys wrote a book called Dynamic Manufacturing over twenty years ago that had a huge impact on my thinking - still does for that matter. The book covered a lot of ground but their chapter on management infrastructure was profound.

To poorly paraphrase, the gist of it is that the organizational structure, accounting and financial systems, quality system, production and inventory control system, performance measurements and capital investment criteria all make up the management infrastructure of the company. On the other hand, the structure of the business is the physical part - the 'bricks and mortar'. The structure - including stuff like machines, buildings, material handling and so forth - can all be bought. No one can get a competitive advantage over the other guy with structure - whatever machine you can buy they can buy too, whatever factory you can build they can build too. No, the difference between companies is the infrastructure. It is the 'management system' that the company is run by.

The management infrastructure is like a fingerprint. No two companies are alike because the way all of those systems and processes are put together reflects the combined knowledge, experience and values of management. Because no one can ever outdo the other guy with the physical, structural stuff, competitive advantage can be realized only through a superior infrastructure. In other words, the company with the best management wins.

Remember those were the days before the word 'lean' was invented. Hayes and his cronies correctly perceived way back then that Toyota was successful because they were better managed - not because of kanbans and the physical element of their factories. They saw Motorola's huge successes back in those days when they spawned Six Sigma as the result of a better management system. And that was in the midst of Roger Smith's 30 billion dollar+ investment in robots at GM, which these guys accurately predicted could not succeed. He tried to buy better manufacturing than Toyota. But Toyota won because they had a superior management system than GM, and no machines could overcome that.

The idea that a company could devise a management infrastructure of its own making - that everyone didn't have to manage their business by the same old rules - opened my mind to ideas like lean accounting and value stream structures and tossing MRP overboard. Hayes pointed out that it was not only OK to manage by different rules, it was the key to success.

Dynamic Manufacturing came out a few years after another Harvard professor - Wickham Skinner - wrote a book called Manufacturing - The Formidable Competitive Weapon. You gotta like Wickham Skinner for the title of his book alone. Skinner was the real driver behind focused factories, which were in many ways the fore-runners of value streams, and I had the honor of learning an awful lot about manufacturing working for the Copeland Corporation, which was one of Skinner's focused factory showcases while he served on Copeland's board. Copeland was run by a guy named Dean Ruwe - who holds a PhD from Iowa State and was obsessed with ideas concerning manufacturing management. That particular PhD taught me an enormous amount that has shaped my lean thinking.

In those days, the academic brainpower at places like Harvard was working in overdrive on ideas to improve manufacturing. Most of their ideas weren't any good because that's the way ideas go; but they kept refining the theory and taking another run at it. In 1990 Peter Drucker wrote an article for the Harvard Business Review called The Emerging Theory of Manufacturing that was nothing short of brilliant. The point is that there was a generation of academic leadership that was bound and determined to figure out how manufacturing could be run better, and they came up with many of the ideas that evolved into the lean body of knowledge.

And then the next wave of academics came along and quit. They don't give a moment's thought to how to manufacture better. You see, that is the real disappointment of the current academic thought process. It is not as though they are advocating a better theory of manufacturing - they are not studying and advocating some great Chinese approach. They are advocates for China simply because China is cheap. They really don't seem to care about how manufacturing is done, or waste a single brain cell contemplating a better way. When China is no longer cheap they will urge the business world to go to Viet Nam, or somewhere in Africa - wherever it is cheap because to this generation manufacturing is a commodity that can be done anywhere by just about anyone.

The speed with which the thinking of guys like Bob Hayes and Wickham Skinner was tossed overboard was breathtaking - and disappointing - and very puzzling. That generation just twenty years ago was in the thick of things, and pushing the body of knowledge two steps forward and one back, but moving manufacturing thinking in the right direction. The possibilities and the 'what might have beens' are incredible had the modern day business thinkers been up to the task of building on what guys like Hayes and Skinner handed them.

We'll never know, however, and now Bob Hayes has given up the fight. He is probably right - he usually is. In an article over on the Harvard blog, Hayes wrote, "I am losing confidence that the solution lies in American companies overhauling, unaided, their management practices. A whole generation of managers has been imbued, over a period of more than 20 years, with the supposed virtues of global outsourcing, and has profited handsomely from its apparent success. They are unlikely to lead us out of our dilemma, and it will probably take the better part of another generation to replace them."

His academic peers are roundly slapped in the face when Hayes suggests, "So perhaps we should turn for leadership to the kind of foreign companies (such as Toyota, Honda, and Novartis) that understand the need to build and support the local industrial infrastructures wherever they locate. That is, rather than trying to keep our failing giants alive with continual transfusions and subsidies, why not seek ways to make the U.S. a more attractive place for such foreign-based internationals and their major suppliers to locate?"

After more than thirty years of battling for a better way to manage American manufacturing he has come to the conclusion that we are better off looking to other countries for management leadership than we are to the products of the current management school of thought in this country.

Sadly, like he has been with his other theories on manufacturing, he is probably right on this one as well.

I have not always been anti-intellectual, as my critics describe me. Just anti the ones wasting trees to create the pages of the Harvard Business Review today.

Why should your customers care?

2009-11-09T00:31:00-08:00

by Jamie Flinchbaugh, Lean Learning Center

Many companies love to taut their lean programs. Sometimes I respond cynically with a "who cares?" "Well, we do it for our customers." That may be true, but your customers don't care. They care that you deliver value at the right price. They don't care how you get there.

So when should your customers care about your lean journey? I am sure there are more reasons, but there are three reasons I've experienced.

1. Your processes are intertwined. One of our clients had a graphic design processes that went back and forth between the client and them at least 5 times throughout the process. In order for them to improve their work flow, they need to improve in collaboration with the client. This particularly involved the connections in the process. This might be an extreme example, but when your process depends on your clients processes, then collaborating on lean process improvement is a great idea.

2. You change how you deliver value. Because of capability improvements, sometimes what people are used to working with changes and so they have to change their approach as well. One company was buying all the switches and sensors for large equipment builds in a batch buy. In the end they would end up short because they didn't keep track internally. When their vendor improved their processes so that small orders were just as inexpensive as large batches, they could order the switches and sensors just in time, improving their accuracy and reducing their double handling substantially.

3. They can start to rely on a steady trend of cost, quality, or delivery improvement. Especially for non-commodities where a company might have to make a longer-term commitment, there is always a fear that they aren't getting the best deal. If they can see and understand your improvement path, they can rely on your continuous progress. If if you don't win on price today, if they understand how you'll get there, they may rely on it in the future.

Remember that lean isn't the goal. Lean is just a means to help you achieve your real goals.

You can also find Jamie at www.jamieflinchbaugh.com

New at Superfactory - November 2009

2009-11-08T00:05:00-08:00

Each month new articles, book reviews, and other content are added to the Superfactory website. The new content is featured in the monthly e-newsletter which goes out to 50,000 subscribers worldwide, and we will also post a monthly heads-up on this blog.

New content in November includes:

The featured article is from regular contributor Bob Emiliani and is titled Free Money, Free Love. The following is a brief excerpt, and you can read the entire article here.

Every Lean advocate is very enthusiastic about their work. But individual enthusiasm without extensive, high-level coordinated group activities to promote Lean management in policy circles will relegate Lean to a niche practice. We can do better than that.

What’s in a name?

In October 2007, the Lean Enterprise Institute held a celebration in Cambridge, Massachusetts, to commemorate its 10th anniversary. Jim Womack spoke at the beginning of the event and offered a wonderful retrospective of LEI’s beginnings, accomplishments, and future direction, which was to move beyond Lean tools and start to focus on Lean management (finally!). He also shared his regrets over the name “Lean,” saying that it was not a good name in hindsight but it is the name we have and should make the best of it. To me, he sounded nearly apologetic.
While Jim’s honesty was admirable, he should not have expressed any regret over the name “Lean.” Why? The long-view of history tells us that no matter what you call progressive management, executives will resist it or misinterpret and misapply it.

The featured book this month is Compression by Robert "Doc" Hall. The following is a brief summary, click here for more information.

Strategic leaders of private and public organizations in the 21st century are faced with unprecedented challenges. The principles and practices that helped them compete and grow in the past, no longer work. Many of the problems are beyond complicated. They are problems generated by interlinked systems that prevent us from clearly defining the root cause. Their resolution requires reflection on the assumptions of the past and counter intuitive thinking.

Today, with Compression, Doc gives us a new perspective on the challenges of the 21st century. He gives strategic leaders a way to put their arms around the complex issues facing their companies, markets, and communities.

Gemba Academy has added a Quick Changeover (SMED) course to their Lean Package. Take a look at how Gemba Academy is revolutionizing online training, on demand, in High Definition HD quality.

We continually update the other major sections of the website, including:

PowerPoint Presentations: Over 50 downloadable PowerPoint presentations on lean manufacturing, quality, enterprise, and safety concepts.
Factory Toolbox: Almost 300 downloadable forms, procedure templates, assessments, and tools to help you not reinvent the wheel.
Events Calendar: a listing of lean excellence seminars, workshops, training, and conferences worldwide
Topic Information: Summaries and resources on over 40 enterprise excellence topics.
Virtual Factory Tours: Web and streaming video tours of over 100 factories.

For all you LinkedIn junkies, we have created a LinkedIn group for Superfactory, which now has over 3,500 members. Join the group to network with other Superfactory enthusiasts and to show our logo on your profile. If you haven't explored LinkedIn, check it out to see why over 17 million professionals use it for networking.

We are always looking for new articles and other content. Contact us via the Superfactory website if you would like to contribute to our knowledge base.

A Tale of Two Leans

2009-11-05T05:43:16-08:00

by BILL WADDELL

There was about as good an article on lean in USA Today the other day as you will ever find in the popular media, describing a lot of good things happening on the factory floors at Sealy, Marlin Steel Wire, Dana, Carlisle Tire and ConMed. The folks there are racking up all of the typical lean improvements - labor costs down, floor space saved, quality improved - all the things the lean community has been promising for a long time.

The gist of the article is that these companies have been dabbling with lean for a while, but when the economy cratered they got serious. "While a growing number of companies have adopted the practices through the years, the number of converts has grown substantially during the economic downturn," said a guy from Manufacturer's Alliance. I have to wonder whether much of it is going to sustain once the economy comes back if the commitment to lean was driven by the need to immediately put out fire that was burning out of control, rather than a genuine understanding that lean is a better way to manage the business.

You never know who these folks really are and whether they really speak with authority, but the article said, "Driving the lean movement is an urgent need to pare inventory, executives say. With revenue down and tight-fisted banks reluctant to lend, the makers no longer can afford to tie up hundreds of millions of dollars in raw materials that languish in factories for weeks or months." If that's the case the likelihood of any of these companies becoming sustaining lean enterprises is pretty slim. 'The banks won't finance our waste any more so I guess we have to do this lean stuff' is hardly the sort of leadership required for excellence.

You never know, however. It sounds like Marlin Steel Wire is the real deal. They are a privately held company which ratchets up the probability of their management making sane decisions by orders of magnitude. Their focus is on teamwork, quality, flexibility and hammering down lead times - all the right objectives. See is they take the next step and structure themselves into true value streams, take on lean accounting and really become a lean enterprise and not just a lean manufacturer. That will tell the tale of sustainability.

Lantech seems to be an excellent case in point. They have done all of the factory stuff and the fluffy,cultural side of lean, but have a sustainability challenge. They have all the characteristics of a company that is committed to lean, but has yet to realize that lean is first and foremost about management - not factory floor practices or culture. With their passion for lean, however, odds are they will take the next big step.

Some of the others mentioned, such as Dana and Carlisle Tire, don't really have much hope. They are tied to the automotive industry which begs the question, What took you so long? Their copies of The Machine That Changed The World must have got lost in the mail twenty years ago. Their lean effort seems to be aimed squarely at headcount reduction, which means that, now that their copy of the lean book arrived, they didn't understand it.

Sealy - the star of the story - is going to face some challenges. They started their lean journey as a privately held company, then went public and they now have to answer to Wall Street. It will be interesting to see how they weather the insatiable, anti-lean pressure.

I suppose stories like this one help the lean cause more than they hurt. The publicity is generally favorable, but when companies like Dana and Carlisle fail - and the odds are overwhelming that they will - it will feed ammunition to the the manufacturing naysayers.

The moral of the story is that there is lean ... and there is lean. The same old story applies. Some companies look lean and a few others truly are lean. Of course the writer for USA Today cannot be faulted for not knowing the difference, but it is very important for manufacturing management to know the difference between what is going on at places like Marlin and Lantech, and what is passing for lean at Dana.

Once Upon A Time In Manufacturing

2009-11-04T00:36:00-08:00

by BILL WADDELL

There are a lot of perks that come with being famous and powerful, one of them is that you can write a fairy tale with yourself as the hero and someone will publish it Don Sessions from Calzone Case shared one such yarn with me. This one spun by Steven Rattner describes how, once upon a time a prince named Steven Rattner rode his white horse to Washington where he rounded up a troop of gallant knights on their white horses, then they all rode to Detroit to valiantly save two damsels in distress. General Motors and Chrysler. Then Alexander Hamilton smiled down on them and everyone lived happily ever after.

True stories like - Once upon a time Joe and Vin Calzone set out "to build the highest quality custom case in the world, at a fair price with on-time delivery"; So they did it, building three factories, taking over the market, employing a lot of people, pumping a lot of good into three communities and making customers very happy along the way - don't get published in big time forums like Fortune Magazine bacause guys like Joe and Vin don't really have the right pedigree or the right connections. Calzone Case mainly makes cases for musical instruments and Joe Calzone is a musician at heart - as are a lot of people who work for him. How good they are is a matter of judgment. You can listen yourself to the company band (Fancy that - a company manufacturing products for the music market run by musicians who have a company band) called Trainwreck.

The fairy tale, on the other hand was written by the guy who "saved" the auto industry. While the Calzone boys built a business based on the notion that their knowledge of and passion for music gave them some ideas about how to make products that would have a lot of value for musicians, the Prince who saved Detroit came from a little thinner background. Brown University , reporter for the New York Times (losing money and struggling to survive), Lehman Brothers (bankrupt), Morgan Stanley(well, what can we say about Morgan Stanely that hasn't been said before), Lazard Freres (lawsuits, investigations, sleaze...), and then founder of the Quandrangle Group (under investigation by the New York Attorney general). Nothing in there about cars, manufacturing, or delivering an honest product for an honest price.

With this rather odd curricula vitae for a prince on a white horse to save the automobile industry, Mr Rattner describes how he first leaped into action by hiring a guy named Harry Wilson - a natural to get things going since Harry's mother had been ill treated in her manufacturing career, but Harry rose above it to get a degree from Harvard and made it big in the banking business. So Harry was put in charge of hiring a gang of bankers and lawyers - a "mini investment bank" and a "mini law firm" - to get GM and Chrysler back on track. Nobody who knew the first thing about the products or manufacturing was solicited - just a lot of people like our white knight - a 180 from the Calzone Case theory of business.

"The question for us was whether GM would be better off with Fritz [Fritz Henderson - GM CFO at the time and now the guy in charge] or with an outsider, as Ford (F, Fortune 500) had done in bringing in Boeing executive Alan Mulally. While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil."

Heaven forbid the GM cultural boat get rocked; so rather than bring in anyone who knew something about cars or manufacturing, our white knight opted for the shrewd move of putting the current GM financial guy in charge. Can't go wrong with a money guy at the helm, I suppose, especialy since the Prince and his fellow knights determined that GM's problem was purely a cost problem. (There's a real surprise - a bunch of finace people got together and came to the stunning conculsion that GM's problems were financia!)

All of this is a long-winded exercise in preaching to the choir. With all of the investment bankers, economists, regular bankers, McKinsey wizards and the assorted collection of America's best and brightest running GM into the ground, then bailing it out, and now scheming and planning absurd moves like buying back bankrupt Chinese manufacturer Delphi - all with billions of dollars in taxpayer money - they demonstrated an amazing ignorance of the obvious.

GM failed because their cars do not provide value to the people who buy cars - regular people. So did Chrysler. Toyota, Honda, Ford, Hyundai and others did not need bailouts and salvation by the likes of our financial experts because they make better products.

Click on this link and see the only data necessary to understand why GM went bankrupt, and why the government financial restructuring cannot possibly succeed.

It is hardly a coincidence that, if you were to list the car companies in order of best finacial performance to worst over recent years, the list would be in about the same order as the reliability rankings. It does not take great genius to know what Joe Calzone knows - you make money selling products that represent a good value to the customer - you lose money when you don't. Even a wisp of that idea is nowhere to be found in the narration of the GM/Chrysler bailout project. It is as if the product never crossed their minds.

The saddest part of all is that people like Rattner take well deserved, hard earned money from guys like the members of Trainwreck and put it in the hands of their financial community cronies - most of whom wouldn't know an honest dollar if they ever came across one. He then has the gall to seek the blessing of Alexander Hamilton. Hamilton, author of the Report on Manufactures pointing out the critical nature of manufacturing to American success, and a driving influence to create the financial systems on Wall Street to provide capital for manufacturing would not "have been proud of you", Mr Rattner, your self-serving version of events notwithstanding.

I suspect he just might have enjoyed tapping his toe to Trainwreck, however.