Before Alfred Sloan came along (you know who he is – Bill Gates said that if you are only going to read one book about business, read Sloan’s – the guy the Sloan business school is named after – Sloan of the ‘Sloan Management Review’ – Sloan who put together the vaunted management scheme that powered GM to the top of the world – the same management scheme that seems incapable of competing with global, lean manufacturers) anyway, before he came along, there were manufacturing companies in the United States. Sloan was so wise, however, that he realized that any stumble bum could manufacture, and the real key to making money was finance and marketing. So he turned GM into a great big bank with a billion dollar advertising budget and let the factories run themselves.
It turned out so well for GM, everyone else did it too, so the old manufacturing companies all became banks with slick marketing departments. Ford Credit, GMAC, GE Finance, and so forth became the real money making divisions in the big companies. Of course, the business schools saw the beauty of Sloan’s genius, and they started pouring out MBAs who couldn’t even find the entrance to the factories, but could put together very clever financing deals. All of the publicly held manufacturers operate this way, most of them kind of like General Motors ‘Mini-Me’s’. The fact that GM is careening toward oblivion at breakneck speed has not given them a moment’s pause for reflection. Manufacturing is still the work of the sloped head, greasy finger nail rubes who could not make it into Wharton or Harvard.
A great example of this is the Oneida company – the silverware people. Losing money hand over fist, the great financial and marketing minds sat around the table and decided that the company should become a lean manufacturer. It took them eighteen months to completely convert from 100 years of traditional manufacturing to a company that was completely lean. You may find that amazing, but you need to keep in mind that you are simple minded manufacturing people, so it probably takes you five or ten years to accomplish what a group of folks with MBAs and CPAs and years of financial experience can do in a year and a half. A Mr. Terry G. Westbrook is the big kahuna at Oneida and he brings years of investment banking and senior financial management experience to the table. He is ably backed by a staff of similarly qualified financial experts, along with a crew of marketing and brand management wizards, and they took on the lean challenge unhindered by the slow minds of manufacturing experts, which probably explains how they were able to accomplish in 18 months what took Toyota twenty years.
Things went extremely well. Lean kicked in and they were able to start laying people off, chopping the headcount and saving money – after all, lean is a cost cutting scheme, isn’t it? Once they were finished, however, they surveyed the landscape and, woe is me, they found they had the same problem as Delphi. So the plant had to be closed and the work outsourced. This incredibly sad story of masterful, rapid lean conversion with the disappointing result that it was not enough can be found on the Oenida website. For instance, you can read…
Q. WHEN DID THE LEAN MANUFACTURING CONVERSION BEGIN? WHY DIDN’T LEAN MANUFACTURING WORK?
A. The conversion to lean manufacturing began about eighteen months ago, and was completed during the past summer. [based on that stunning accomplishment alone, I really think we should rename the Shingo Prize the Westbrook Prize – Shingo was at Toyota for over 25 years and they still needed to continually improve after he left. Why would we honor a slacker like that when we have the boys at Oneida as role models?] As the conversion proceeded, the company found the basic expenses which were needed to operate the factory production lines could not be reduced to the extent necessary to offset operating losses. Ultimately, even significant cost savings from the lean system [I think this might be important – most manufacturing people think of lean as a business model and a complete cultural overhaul, but these guys see it as a ‘system’ – kinda like MRP, I guess – and that probably has a lot to do with how they were able to cut years off of the effort] as well as recent improvement in some product orders could not come close to offsetting the factory’s operating losses.
At any rate, the lean ‘system’ proved inadequate, the plant was closed, a century of manufacturing went down the drain and a little over 500 people were told, "thanks for getting us lean – too bad things didn’t pan out – good luck finding a new job – we gave your old job to some very short people on the other side of the world who speak a funny language".
The story does not end there, however. It gets even more amazing. Two manufacturing guys from Oneida – Matthew Roberts and Gregory Owens (I am not clear which one has the sloped forehead and which has the greasy fingernails) – were not bright enough to realize that lean manufacturing had failed and that there was simply no way to make money making silverware north of the Rio Grande and east of the Pacific Ocean. They blatantly ignored Bill Gates’ advice and did not make Sloan’s book the only business book on their shelf. They created a company called Sherrill Manufacturing, bought the old factory from Oneida, hired back 135 or so of the 500 people, and signed a contract to sell silverware to Oneida as cheap as the MBAs and CPAs could get it from other countries. As amazing as it seems, they are not only making money at it, they are hiring the old Oneida folks back ahead of their most optimistic schedule. They are even making stuff for other customers now, as well.
Finally, the most incredible, unbelievable part of the whole story is that they are making money even though they did not solve the problem of the overly high "basic expenses which were needed to operate the factory production lines". They solved the cost problem in the office. They do not have ‘lean management’ – these guys have what can only be termed ‘Spartan Management’. They operate without the cost of MBAs and CPAs, wheelbarrows full of strategic and financial analysis reports, and entourages of staff people to ride herd on the factories. Pretty much the only people working for Sherrill Manufacturing are ones that add value.
Since I have both a sloped forehead and greasy fingernails, and I have to stop and think what the initials M-B-A even stand for, I cannot possibly understand all of this. Alfred Sloan said that the key to GM’s success was not the 220,000 or so production people working for the company at the time, but the 10,000 managers who ran the place. Oneida kept the managers and canned the workers, like Sloan says they should – and failed. Roberts and Owens did the opposite – the sacked the managers and kept the workers – and they are making money! Could Sloan have been wrong? Could Bill Gates have steered us to the wrong book? Maybe the next issue of the Sloan Management Review will explain all of this to me…