They Got It All Figured Out In Iowa

The Fortune list of the 100 best companies to work for includes Pella, a company I have mentioned as being pretty lean a few times over the last few months.  Information on just how lean they are is a little hard to come by.  For one, they are a privately owned company, so their results are not splashed all over the Internet.  For another, they seem to be very focused on continuing to get better and don’t waste much time bragging about their accomplishments. 

Some information has leaked out, however.  Pella’s inventory turns have increased by better than 400% over the last ten years.  The lead time for custom built products has dropped from eight weeks to less than one.  They keep no more than three or four hours of WIP throughout their plants.  The company has expanded from two plants to ten – all ten in the United States even though Pella sales are brisk in Japan, China and elsewhere around the world.  During the same period, while the number of plants was increasing by a factor of five, sales per square foot of manufacturing space doubled.  Profit figures are a well kept secret, but the amount the company has given away through its various philanthropy programs is amazing. Mel Haught, the head honcho at Pella says in the understating manner in which Pella seems to always discuss itself, "To Pella, ‘lean’ is more than just a process. It’s a part of our culture and has been a key to our success since 1993.”  I guess so, Mel.

The value of lean at Pella does not stop with the company, however.  Mary Andringa is the CEO and daughter of the founder of Vermeer Manufacturing, down the road from Pella. (And glaring proof of the error in everything I ever wrote about the Estate Tax)  She is also committed to lean manufacturing, saying,"Without a doubt, Lean methodology is key to our success as a manufacturer."  She believes that, "Without Lean, it would be difficult to survive."  So she has apparently shanghaied a couple of Pella people, including a fellow by the name of Mark Zystra, a Vermeer plant manager who said, "If you’re not doing lean manufacturing, someone’s gonna put you out of business."  Mark also focuses on driving inventory and cycle time down at dizzying rates.

Seems plain to me that there is more manufacturing acumen in Pella, Iowa (population 10,182) than there is at Harvard, MIT, Washington DC and on Wall Street combined.

In one of the most ridiculous business articles I have ever read, a Forbes writer by the name of Matthew Swibel says that the manufacturing success of Pella and Vermeer has a downside for the good folks of Pella, Iowa where they both hold forth.  They are growing so fast and they are so successful – almost 75% of the employable adult population of the town works for one company or the other – the local mayor is having a hard time attracting economic development.  Nobody wants to build there because there are no unemployed folks to work for a new employer.  Mr. Swibel failed to ask the obvious question; Why is he worried about further economic development when everyone in town is working – many for one of the "Best Companies To Work For"?  Seems as though he ought to be worried getting new swing sets in the city park or buying new uniforms for the local dog catcher.  Regardless, Swibel and the mayor somehow see a dark lining around the silver clouds over Pella, Iowa.

The real sore spot of the Forbes article is not the mayor’s pessimism, however.  It is the readiness with which the writer trivializes lean manufacturing.  He stumbled on a potential gold mine of a story – and missed the opportunity entirely.  "Efficiency can carry you only so far. In another company town 30 miles to the north a more famous manufacturer put itself through similar cycles of self-improvement. The results at Maytag–300 layoffs in the past 18 months and warnings last month that the flagship laundry machine factory is in deep trouble–have sent town leaders on a desperate scramble to secure a new economic lifeline."  The gist of the article could have been – should have been – why lean manufacturing has propelled Pella into the business stratosphere, with Vermeer tagging along behind them, but was a dismal failure at Maytag."

He missed the story, of course, because his knowledge of manufacturing, on a scale of one to ten is, well, one.  This much is apparent.  Says Sibel: "Factory owners have been doing such things for survival ever since Frederick W. Taylor invented time-and-motion studies more than a century ago."  Frederick Taylor is the anti-Shingo.  There could not be industrial engineering principles more opposed than those of Taylor and Shingo.  He may have been right about Taylor at Maytag, though.  Taylor’s principles directly support the Sloan/ROI economic model that Maytag and all of the big old line publicly owned manufacturers follow, while Shingo’s ideas make perfect sense to privately owned, cash driven companies like Pella and Vermeer.

The pattern of lean success at privately held companies, and the pattern of almost across the board failure at the old publicly held companies, is becoming so painfully obvious that even the most obtuse business ‘experts’ have to notice it soon.  Mr. Sibel; the fellow I blogged about yesterday who is jet skiing around his tank in Washington proclaiming lean manufacturing to be "sooo last century", Jim Womack and his proclamation that lean is not enough and American manufacturers must also go to China; and the senior managers in Detroit who are working overtime to decide which of the failed solutions from their past should they blow the dust off and try again – they are all so steeped in how manufacturing has always been managed, they are unable to see that the basic concepts they learned in business school are fundamentally flawed.  All of them must come to the realization that lean results from an entirely different approach to finance, accounting and management.  Until they do, we can expect more of the same in the press, from the investment community and from academia.