There must be something in the water in the midwest U.S.; something that keeps certain automaker execs in Detroit from embracing a very obvious road to success and something that led Whirlpool execs in Benton Harbor to lay off a thousand folks with tens of years of knowledge so they could save a few bucks to replace them with a thousand new workers with a couple weeks experience.
Of course midwesterners think us Californians are a little too obsessed with the nuts and flakes in our granola and we spend most of the day exercising or getting plastic surgery. I happen to like granola and enjoy an evening run on the beach (yes, in January – eat your heart out!) and can’t believe people can actually eat that gravy stuff at Bob Evans. Maybe there’s something in the food at Bob Evans that somehow blinds people to the benefits of lean. Come to think of it, "lean" and "Bob Evans" are pretty much mutually exclusive anyway.
Now we have NCR, out of Dayton, Ohio, which earlier this week announced they were laying off 1,200 people at various plants around the world. Most impacted are Dundee, Scotland and Waterloo, Canada, with a few at Dallas and Sao Paulo. Basically the ATM production at those plants is being moved to lower cost facilities in China, Hungary, and India. Some of those lower cost facilities are run by other companies, which continues NCR’s trend. In 1997 they sold three large factories to Solectron.
It’s the same old story of incompetent managers focusing on traditional accounting-based direct costs instead of total long-term organizational impact and value creation. But it bears repeating, so here we go. Let’s start with some very telling quotes from various news articles and press releases.
The firm has made a number of attempts to cust costs at Dundee. "This includes, where possible, deploying lean manufacturing techniques in Dundee." – NCR spokeswoman
Yes, that sounds like a strong executive commitment to lean, doesn’t it. Half-assed at best is probably more like it. Implementing lean is hard, and it takes very serious commitment. There’s no "where possible" about it. You’re either doing it, and everyone fully understands you are, or you’re not.
The difficult decision to close volume production in Dundee had been taken because competitor had done so. – Allan Valentine, NCR manufacturing director
If the competitors are doing it, then it must be right! There’s a reason we call most outsourcers "lemmings"… they can’t think for themselves. I know of many companies that are leaders who decided to do to some benchmarking… and eventually brought themselves down to the level of their competitors due to a lack of confidence that they really were leaders.
“We were told in Dundee a year ago not to worry about the Hungary plant, that it was to support Dundee, but it appears that was a lie." – factory worker in Dundee
So much for being able to trust management. So was it a lack of commitment or a lack of trust that caused lean to fail? Probably a basic lack of understanding and knowledge by management, who then didn’t realize that even a pathetic attempt at lean requires complete honesty and trust between management and the shop floor folks.
NCR will initially employ between 75 and 100 staff at the [Sao Paulo] facilities, but it is anticipated that this number will increase as the market continues to grow. – Press release in 2004 announcing the opening of the Sao Paulo factory
So they open a new plant in 2004, then less than three years later they wack it. A rather fundamental failure of strategic planning, or perhaps politics and egos got in the way of rational decisionmaking. I wonder how much that fiasco cost.
At NCR Waterloo… a wide-range of career opportunity awaits the individual who thrive in an innovative atmosphere. – NCR Waterloo careers webpage
Yep… an opportunity to find a new career outside of NCR Waterloo when you get laid off.
"We need our cost erosion to outrun our price erosion. By realigning our manufacturing operations, we can create a level playing field that enables us to become more competitive by freeing up resources to invest in more product innovation and revenue-generating activities, strengthening our competitive position.” – Bruce Langos, Senior VP of Global Operations
So let’s see… they’re killed any remaining trust with the few Dundee employees left, which will be creating their new products. They’re lengthening supply chains by getting further away from their customers. They opened a new Sao Paulo factory and then basically killed it less than three years later. They’ve traded tens of thousands of years of knowledge and experience in Dundee, Sao Paulo, and Waterloo for about a thousand weeks of experience in Hungary, China, and India. They decided that their competitors must be right so they’re following them into mediocrity.
And Mr. Langos is concerned about "cost erosion" not keeping up with price erosion?
Does he really believe that the labor cost differential between Scotland and Hungary comes anywhere close to the cost of those management blunders? Does he have no clue about the cost and risk of longer supply chains and the value of knowledge and experience? If it wasn’t for the fact that the outright incompetence of Mr. Langos and presumably other execs at NCR has destroyed so many families, I’d be laughing hysterically. He apparently has the same management acumen as those ski bums who think outsourcing to China their annual volume of a containerload of skis is a good idea… and he probably gets paid a half million bucks more.
What exactly is in that Bob Evans gravy, and is there an antidote?