Before the week is out, we will all be inundated with whatever destruction Ford plans to wreak on manufacturing when their restructuring plans are rolled out later this morning, and Jon Miller over at Gemba Panta Rei has already said enough about Chrysler and their inane ‘layoff to get lean’ ideas. The monster companies abusing lean manufacturing in their ludicrous efforts to hold on to their old ways of doing business are providing plenty of blog fodder this week. I believe that our week will be off to a much better start by taking a good look at DeCardy Diecasting in Chicago. What they are doing is far more important than anything Detroit is up to.
DeCardy is a pretty small outfit, with annual sales lower than the vaunted business wizard and automotive turnaround genius Bob ‘Merlin’ Lutz’ annual salary. Sales are not the important measure, however. DeCardy’s profits are several billion dollars higher than General Motors – which means they actually have a profit, which is something GM can only dream of these days. Bill Vogel is the head man at DeCardy – owner, boss, probably sweeps out the place at night too. He has about twenty employees, most of whom are in a union. The company web site boasts that it made components for the original American Flyer wagons in 1907.
DeCardy is about as lean as a manufacturer can get. There does not seem to be much they have left to learn from Toyota – in fact, Toyota in India can learn from them judging by the comment a Mr. Kirithivasan made to my post "News From India, Detroit and Other Exotic Places" this morning. Vogel pushes the people aspect of lean especially hard. He has pushed training of all sorts, trying to get everyone to be able to make just about anything, commenting, "Line operators have got to have input into solving a given problem for a customer." and "The age of the assembly line worker who focused on only one step in the process is gone. Now anybody that touches the part understands something about the part. Their heads as well as their hands are into it." Production orders are assigned to cells, and the product will be made from start to finish within the cell.
All of that is great – very lean of course, but something that we have seen often among the lean and would-be lean companies. What is exceptional about DeCardy is their integration of lean manufacturing with a different marketing and business model. "We have to know what the customer’s requirements are. Then we can say, `Given what we understand about your situation, here’s how we think we can fit into the problems you have and keep costs down," Vogel says. Just about everything is customized, quantities are as small as the customer needs. Vogel has figured out that very well trained people working under lean principles can be as flexible as they need to be to give customers exactly what they want.
Its working pretty good. While the big old dinosaur manufacturers are closing plants here and sourcing all they can from China, DeCardy is making parts for Harmon Music in Salt Lake City. No big deal about that – except that Harmon is actually buying assemblies from Vtech in Hong Kong (where things are supposed to be cheaper) – but Vtech is buying components from DeCardy in Chicago and having them shipped to China before they assemble and ship the product back to the US to Harmon.
Bill Vogel’s genius is in understanding that lean manufacturing enables flexibility, customization and the capability to give customers exactly what they want in quantities as small as customers want. By tangling lean manufacturing with lean marketing, DeCardy is making a very nice profit. The big old companies, and many of the smaller ones too, fail in their lean efforts because they think lean is a factory issue only. They still try to drive their business by the old mass production, economy of scale model. Lean in the factory does not really do much to help achieve those objectives.
When the accounting folks are off doing things the way they have since the days of Sloan, and the marketing people are out trying to negotiate volume discounts, trying to land the big order, lean efforts in the plants yield Delphi results – looks good but doesn’t amount to much. When the accounting and marketing folks are as involved and committed as the factory, you get DeCardy.
As the big boys at GM and elsewhere in the mahogany boardrooms of failing public manufacturers philosophize, strategize and rationalize to Wall Street, guys like Bill Vogel at little places like DeCardy prove that the overpaid leaders of the big companies really do not understand the global manufacturing business at all.