A senior manufacturing manager was telling me the story of his company’s initial move down the lean path, and how it began at an annual company offsite at a hunting lodge in Wisconsin. It seems that all of the marketing and sales folks left the building for one reason or another, which presented an opportunity for manufacturing to discuss their ideas and concerns, which led to lean.
Something about that rubbed me wrong, and still does. In most of my experience in manufacturing, marketing and sales have been given a free pass, exempting them from involvement in manufacturing’s struggle to find ways to crank out quality stuff that is cost competitive with the Asians. They are typically tasked with selling as much as they can to whoever they can under whatever terms the customer demands, then manufacturing is expected to fulfill whatever deal was struck.
As a supply chain and manufacturing manager, I spent long hours trying to concoct ways of reducing manufacturing lead times and shorten planning horizons in order to meet sales commitments without having to carry inventory. I have been steeped in the principle that sales is my internal customer and that I should jump through whatever hoops I need to in order to give them whatever they want.
The problem with all of this is that it is based on the idea that sales and manufacturing are distinct entities, with a one way flow between them, rather than hopelessly intertwined elements of the same complicated business. It also strikes me as the sort of thinking that flowed from Alfred Sloan’s notion that manufacturing cars was a sort of pedestrian, commodity activity, and that business was really all about marketing and distribution.
An essential element of lean manufacturing is a level loading of demand – or at least reasonably level. Toyota uses pricing to accomplish this. Rather than locking in on some fixed price number that accounting has derived, which will theoretically result in attainment of a Return On Sales goal, Toyota continually tweaks prices up and down as a sort of regulating valve to control the flow of orders into the plants. Whatever they might lose in margin, they more than make up for in cost reduction as a result of stabilizing demand.
This manipulation of pricing to drive plant demand on a steady, constantly increasing line that pretty well tracks the rate of productivity improvement in manufacturing is what was mistakenly seen by their U.S. competitors as "buying market share". Actually it is little more than recognizing that sales and production are not independent of each other. In fact, there is a great deal of synergy between the two. As the sales function works to smooth demand, production costs go down, which enables greater margins, which makes it easier to manipulate prices, etc…
It is difficult, if not impossible, to see how a company can become lean when production is expected to routinely scale whatever peaks of demand marketing and sales puts in front of them, then hurtle down into whatever demand valley is behind the peak.
It is becoming more and more apparent that lean is a company wide issue and that giving any department or function an exemption leads to failure. I think my friend was a little too late in launching his lean adventure. They should have started the discussion before the marketing and sales folks left.