More years ago than I care to admit, I was first trying to get my arms around what Toyota was doing – we knew it as JIT back in those murky days before Jim Womack et al coined the term 'Lean' – and an invaluable mentor who helped me enormously was a fellow by the name of Cash Powell. He taught me a lot, listened patiently to my first hair-brained concepts of what was behind Toyota's success, and he orchestrated my first speaking engagements through the Dayton, Ohio APICS chapter. Cash is still at it and I am sure that a long list of young manufacturing and supply chain people in and around Dayton are reaping the benefits of Cash's wisdom and generosity, much the same as I did.
He offered a comment to my recent post Lean Is Not As Simple As ABC that deserves much more prominence than the comments section of last week's post. He wrote:
"Bill, The lean experts know this already but Wall Street hasn't caught up yet. I knew there was a reason I kept this WSJ article, July 21, 2005, "GM Reports Net Loss of $286 Million." GM offered an employee discount in June at retail level of 224,000 vehicles thereby reducing inventories by about 18 %. However,the article goes on to say " GM books revenue on production, not retails sales. Its second-quarter North American production was down by 142,000 vehicles, or about 10%. GM moved inventory at the expense, [repeat expense] of moving vehicles directly off the assembly line. If we had kept inventories at the high level, we would have been break even for the quarter." This occurred about three years after a 100 year old, publicly owned, well respected machine tool builder in Ohio was purposely building inventories, at the direction of the CEO, in the spring of 2002 so the profit figures would look good for Wall Street by June 30. They, too, went Chapter 11 and are sold. In the wake of the past few years, has the FASB caught up with lean accounting? Until they do and Wall Street does, and the universities, the public companies will be where they have always been."
I do not believe that anyone has ever made a fundamental point about lean any better or any clearer than Cash did.
GM has done as much or more Lean stuff in their factories as anyone, and you all know the results. Without a fundamental change in accounting, along with the management processes accounting drives such as performance metrics and the organizational structure, no company can be truly lean. That is, no company is going to get long term Toyota-like results.
This is why I am a nay-sayer when it comes to what has recently been called Lean-Lite on these pages. GM was way beyond Lean-Lite.
This is why I continually advocate changing management processes first, then all of the factory stuff will naturally follow.
This is why I challenged the lean community's praise of GM and Delphi years ago when others were awarding them Shingo Prizes and declaring them to be lean.
This is why the demise of GM was so easy for Norm Bodek and I to predict years ago when we wrote Rebirth of American Industry.
All of the JIT deliveries, kanbans, U Shaped cells and 5S in the world is not going to make a company into a world class performer as long as it defines profits with accounting systems that drive management to do this sort of nonsense.
And this is why I decided years ago to only work with privately held companies. Publicly traded companies area waste of a lean advocate's time.
And this is why no publicly traded company in the United States has really become lean, other than a few like Danaher with rather unique circumstances, for the exact reason Cash described.
Thank you Cash — again.
Mark Welch says
How true this is. I worked at a publicly held manufacturer that was taking a tools approach to Lean but in the end, nothing mattered more that meeting the quarterly earnings per share target – accounting ruled! Until the past few years I had considered working for another publicly held manufacturer who still claims to be developing a Lean culture, but I asked my brother-in-law, who has been in upper management at the company for 29 years, about their Lean initiative, and found his response to be, “I haven’t heard anything about Lean at our company.”
This made my decision to not pursue employment with that company a no-brainer.