After seeing some of the recent posts on NWLean, and stumbling across a lean manufacturing forum for manufacturing engineers, it occurred to me that I ought to pass along a bit of advice I was given long ago that has served me well. The time was the 1970’s and the place was the University of Cincinnati. While I would have liked to have focused more on my academic pursuits, those were very stressful times. No, not because of the Viet Nam War. That was small potatoes compared to the other weighty issues in my life. One side benefit to the War was the logic that, if 18 year olds were mature enough to be drafted, then they certainly should be old enough to drink, carried the day, so beer flowed through campus and my life in torrents. Cars had eight cylinders and every young man knew that it was good for the car – part of being a responsible car owner, in fact – to drive them at top speed, often in order to ‘blow the carbon out’. There were sports to be played and most demanding of all, many of the young women had been convinced that they had a social responsibility to burn their bras. That, of course, placed a heavy burden on me. As you can imagine, with demands on my time and attention such as these, there was little left of me to devote to studies.
In an effort to put direction in my life – I was just sort of generally wandering through business school with no declared major – my father lined up a day for me to spend at a huge General Electric plant, meeting with top managers in each discipline in order to see what each area was all about. I met with production, quality, supply chain, HR, finance and other managers, and got the Reader’s Digest version of what doing each of those things for a living was all about. None of them, however, tried to sell me on their field; and their college major advice was unanimous. What every one of them told me was to major in Finance or Accounting, regardless of what I wanted to do for a living. Their argument: no matter what you do, manufacturing is all about money, and the more you know about money, the better you will be in any area of manufacturing. For lack of any reason to do otherwise, I took their advice. It was the best thing that could have happened to my career.
Now I read pleas for help from what sound like young folks struggling to push lean manufacturing in their plants, stymied by standard cost systems and flexible budgeting rules. They are beguiled by pressures to keep inventories in place. Even worse, I read a forum full of manufacturing engineers slamming the lean accounting body of knowledge as irrelevant and just another way for consultants to drain money from manufacturers for no practical purpose.
One of the lean manufacturing engineers posted, "A friend tried to convince me to attend a conference about "lean accounting" with her. What’s up with that? Why would I need to know anything about what the accounting geeks do?"
That question, in fact was asked and answered long ago. Eli Godratt explained it, and everyone should be very clear about the goal of manufacturing. Manufacturing’s goal is not to provide quality products, excellent customer service or stable employment. The goal of manufacturing is to make money. Quality, service, etc… are simply the best means to that end.
Lean manufacturing enables a company to make more money. It is an economically better theory of manufacturing than the traditional one. Lean is all about money.
The answer to the engineer’s question is that the ‘accounting geeks’ set the rules. They define "making money" for the company. A lean manufacturing proponent who does not understand and cannot communicate the benefits of lean in terms of dollars and cents to his or her company will not succeed. Anyone who cannot quantify the financial advantages of lean is merely advocating a philosophy, and factories are not receptive homes for philosophers.
It is a sad commentary on what management has come to in the United States, but the fact of the matter is that it is not incumbent on accountants to understand manufacturing. The burden is 100% on manufacturing to understand accounting. Accounting sets the rules and you will either play by them or lose. It is that simple.
So the answer to my naive engineering friend is that she had better know what the ‘accounting geeks’ do because they are the judges, juries and executioners in American manufacturing. Their word is the alpha and the omega of manufacturing decision making. If she cannot sell lean manufacturing to the organization in their terms, she will fail.
The advice those managers at GE gave me so long ago was not based on any business theory. Rather, it was sound wisdom from a bunch of guys who had been around the manufacturing barn many, many times. They knew then, and it is still true now, that manufacturing is played on accounting’s turf by accounting’s rules. Lean manufacturing is dependent on changing the company to a lean accounting model. No matter what your job title, you better know the accounting game if you hope to win.