Lean Success Is Not Always Good News
The Cape News, from Capetown South Africa reported the great news yesterday that the SARS agency is experiencing extraordinary success with their lean strategy. SARS is about the only significant lean organization in South Africa, but a local professor hopes that it serves as an inspiration for other government agencies, and even more, for the private sector. The downside of SARS accomplishment : SARS is the South African version of the IRS – the tax collectors. Seems they raked in a $6-7 billion (depending on when you try to convert Rands to Dollars) over and above expectations, and they attribute that to their newly lean processes. While the South African SARS folks deserve a pat on the back, it seems as though things would work better in South Africa if the private sector got lean first, and made more money, then the tax man got better at grabbing it.
The Toyota of Milk – And Your Government at Work
A 64 year old Dutch immigrant from Yuma, Arizona provides milk to Sam’s Club and other places at prices a third or more below the big guys, but that won’t last long. Hein Hettinga has vertically integrated the whole process from cows to dairy cases, and has taken all of the waste out of the process. He has gotten a little too big for his britches, however, and the big dairy companies are starting to feel the heat. He got so big that his bovine empire drove milk prices in Southern California down by 20 cents a gallon or better. He provides over 10% of all the milk in Arizona.
Milk is very much regulated, with the government making sure that every dairy farmer in the region gets paid the same by the dairy companies. With every dairy paying the same for milk, there is not much competition, and the industry has been able to roll along profitably in spite of bloat and inefficiency since the golden day of Roosevelt’s New Deal when all of this was established.
There has always been an exemption from the rules for farmers who bottled their own milk, based on the assumption that these would be small time farmers selling milk to the neighborhood. Then along came Hein, making the milk process as lean as can be, growing his empire to fifteen farms and more cows than he can count.
Rest assured that the lobbyists are moving quickly to put an end to this Toyota of dairy products. Both farmers and dairies are uniting in their effort to maintain the status quo and shut Hein down, and all indications are that the USDA will cooperate with them. Funny, the Bush administration takes the position that GM and Ford need to learn to compete with the lean companies or die; but the dairies deserve government support when faced with lean competition.
Stock up on milk, L.A. – the prices are going back up.
A Port For Morons
The Ford ‘Way Forward" plan, like just about everything said or written by a public company these days, included their "Safe Harbor" statement. The Safe Harbor is the result of rules by the SEC that essentially say that management has an obligation to spell out the every potential risks in anything that looks into the future, lest an unsuspecting investor puts his money into something that is not a sure thing. Here is part of what what Ford said might keep their Way Forward plan from working out:
— Greater price competition resulting from industry overcapacity, currency fluctuations or other factors;
— A significant decline in industry sales, particularly in the United States or Europe, resulting from slowing economic growth, geo-political events or other factors;
— Lower-than-anticipated market acceptance of new or existing products;
— A market shift (or an increase in or acceleration of market shift) away from sales of trucks or sport utility vehicles, or from sales of other more profitable vehicles in the United States;
— Higher prices for or reduced availability of fuel;
— Work stoppages at Ford or supplier facilities or other interruptions of supplies;
The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns or increased warranty costs;
— Increased safety, emissions, fuel economy or other regulation resulting in higher costs and/or sales restrictions;
— Unusual or significant litigation or governmental investigations arising out of alleged defects in our products or otherwise;
— A change in our requirements for parts or materials where we have entered into long-term supply arrangements that commit us to purchase minimum or fixed quantities of certain parts or materials, or to pay a minimum amount
— Changes in interest rates;
If that didn’t cover it, they went on to add:
We cannot be certain that any expectation, forecast or assumption made by management in preparing these forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results.
PT Barnum is reputed to have said that he felt a moral obligation to take money from fools before they used it to hurt themselves. That philosophy applies in the stock market. Anyone who is so stupid – so dense – so unaware of the basics of business – that they need the government to step in and compel manufacturers to inform them that common bad stuff can hurt profits – should not be allowed to have money. What is worse, these same people who need to be told that a strike or a recall could cause Ford to make less money, own the company. The same morons who need Safe Harbor statements in order to buy stock control the board of directors, and these are the people Bill Ford and Rick Wagoner have to answer to.
Mark Graban, our friendly competitor over at the Lean Manufacturing blog, posted a piece about a show on NPR out of Boston on which the Director of Automotive Analysis at the University of Michigan, the Director of the Leaders for Manufacturing Fellows program at MIT, and a Senior Research Associate with the Institute of Labor and Industrial Relations at the University of Michigan were asked what the current state of manufacturing in America is, especially in light of the massive downsizing in Detroit.
In a mind numbing 45 minutes or more, what they said was roughly this:
Michigan Automotive guru – "I hope Ford and GM know what they’re doing"
MIT manufacturing wizard – "Do ya think its really that bad? Maybe the service sector will take up the slack."
Michigan labor genius – "`There’s no problem. It is just a myth"
The term ‘lean manufacturing’ was never spoken by any of the three or the commentator. I think Mark posted it knowing full well that the rest of his Lean Manufacturing blog readers would be too smart to waste time listening to academics spouting multi-syllabic drivel, and it was there for the sole purpose of luring me into 45 minutes of frustration. Of all people, I should have known that NPR and guys from a couple of elite schools were not going to contribute anything to manufacturing, but I fell for it. Just as Mark planned, I reacted emotionally, posting this and further cementing my reputation as the grumpiest of all lean bloggers, while Mark further cemented his claim to the lean high ground.