Hiroyuki Hirano, the leading lean industrial engineering guru in Japan these days, says the world is moving to an economy of "linearization". The theory is that immediately after WW II, we were in an economy controlled by manufacturing. Whatever was made was sold. Then, in the 1970’s and 1980’s we entered into an economy controlled by sales. Great discount retailers emerged, such as Walmart and Kmart, and grocery stores became Supermarkets. Retailers who could command volume could offer low prices, and every weekend people would, according to Hirano, drive a big car to a big store and spend all day shopping for good deals and take it home to a big house and a big refrigerator.
This third economy, the linearization one, is driven by customers. The idea is that we have certain lines upon which we travel to live our lives – from home to work – to places of recreation and so forth. Consumers will increasingly demand that the products they want to buy be offered along those lines. Drive-through service for everything, so to speak. People will not be willing to travel out of their way, or waste an entire day to get good prices. They expect good prices with much more convenience.
Hirano’s evidence is the rapid growth of online shopping, the proliferation of drive-throughs and home delivery businesses, and that in Japan, convenience stores are rapidly taking the total food market away from the conventional grocery stores.
The implications of the linearization economy are significant as they relate to manufacturing. In a linear economy there is even more pressure for small quantities, faster service, greater diversity of products – in short, more pressure on all manufacturers to become leaner. To some extent, he says, Toyota has caused this. After people learned they could have a car made to order in a matter of days, they refuse to accept delay or lack of choice in products far simpler than cars.
Walmart recently posted disappointing second quarter results. Their projection for the third quarter is also gloomy. They blame it on gas prices – people are not willing to drive to Walmart to shop, they say. Yet other retailers seem to be quite unaffected by gas prices so it seems there may be something deeper going on. If Hirano is right – and he tends to be right pretty darn often – we may be on the verge of his new economy, and the crack in Walmart may be a warning to all of us in manufacturing to pick up the pace of becoming much leaner.