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?
CW says
This trend of offshoring and outsourcing is a common thread in the services side of the business as well at manufacturing companies. I was involved in the hiring process at our company of a few individuals in the service area over in India. During the interviews I continually repeated that I felt the individuals lacked real experience leading projects and had only worked on small segments of the process. My boss insisted there was a direct 1:1 correlation between them and our team. I happen to have a PhD in my profession and he had less than one year experience working in our field.
He hired 3 individuals in India. A year later one of our part-time individuals in the US went on maternity, returned, and was still able to produce more product than all 3 combined during that year. The rationale for going overseas was that we could get the same results for a third of the price and that our operation could be 24/7 since there is a 12 hour difference in time zones. This turned out not to be true since one person working part time was able to produce more than all 3 in India combined. The interesting thing is that the successful US employee had to move and wanted to work remotely from her home office in another part of the US. The manager told her no, so they let her go. Apparently it was more productive to have someone working from India than working from their home office. This was a major blow to the operation.
After a year all three of the India employees used our big company name to land higher paying jobs in India and we started over again hiring 3 new individuals. The second time to ensure success a manager in India was also hired. They named the India group the “Center for Excellence” in hopes that it would become so. The US employees assumed that meant we were the “Center for Mediocricy” and it was a demotivating blunder by the management. A year later we finally laid off all the folks in India and gave up. The time difference and the cultural differences turned out to be a major barrier to working with their US customers. Amazingly, most customers don’t want to take meetings at 5:00 am or 11:00 pm.
jon w says
kevin thanks for the research that pieces together the real story of incompetence behind this. i didn’t know about the sao paulo angle. you have a unique gift for injecting humor to help make it glaringly obvious. i will admit i do go to Bob Evans a couple times a month. not recommended for the waistline.
Mark Graban says
I think the correct term is “lower labor cost” countries more so than “lower cost” countries.
Matt says
Yet again a race to the bottom.
NCR was – clearly – left with NO OPTIONS but to lay off all of those people… (I’m being sarcastic, of course).
I predict that over the next couple of years what used to be a great company will be sold off piece by piece.
NCR’s “return to profitability” – the miraculous turn-around under previous CEO Mark Hurd (and Langos, his axe-man) – was a result of cutting and making long term sacrifices to deliver short term results.
Even divided into two companies (NCR and Teradata), the future is not bright with the present “leadership”.
none says
the costs that were apparent in my visit during the transition were the weather which rusted the machines within a day or less, the fact that the employees were seeing the opportunity as a stepping-stone and the problems with shipping due to import/export time delays. To say my dept. (formerly Waterloo-based) was going to be cheaper only because wages for a day here would pay for a month there, was going to be a huge saving, I question the validity of that assumption.
The time difference will cause numerous delays in communication, which it did, and will contribute to many issues not being dealt with quickly.
As well as pissing off the Bank of America, their biggest customer, which was the focus of a war-room effort Nov/06, of which i was involved, the module being produced now in India has to be shipped halfway around the world to satisfy the demands of the expansion of that customer’s market. I see and have seen that there will be more disappointment in the quality and timeliness of delivery and service of that part of the ATM.
I have to say the Indian people try very hard, due to many factors, and don’t have the luxuries we enjoy here, but can’t see how that can overcome the problems presented by the move.
My experience in Atlanta led me to believe the company was letting down it’s bread and butter more due to incompetence than to waste or costs.
I am currently somewhat well employed after the layoff, but would entertain consideration of talking to anyone interested in wanting to know more about what I have to offer.
How is my email here available to bloggers?
I have not signed up.
neutroroberts says
A few comments from an ex-insider. Having worked in NCR for a few years, the only thing I can say is that they do not have a clue what the term “long-term strategy” means and they are not capable of retaining skilled/trained employees.
1.Lean management – don’t make me laugh – there are so many team leaders, managers, controllers and monitoring staff – there is 1 person actually working and at least 3 or 4 controlling that he does his work!! If this is lean management, then they probably copied it from the Soviet Union economic model, and we all know how that film ended.
2.the company’s Indian call centre….the most unhelpful crowd. Half of the times they don’t understand you and don’t understand the problem. The ridiculous thing is that we had an IT person on site, but he could not come and help you out, you had to “log a ticket” and call the Indians and then, they would pass this on to him if they thought it was necessary… the time and cost involved in this is a comedy!
3.the plant in Hungary – ALL of the new atms produced at this plant are of bad quality and are not working properly. They arrive (supposedly brand new and ready to be installed) and they either have parts missing or faulty ones. An installation which should take max 6 hours will take anything up to 2 working days…
4.the broken parts are sent to the Hungarian plant to be repaired, but when the engineers order spare parts – these either haven’t even been repaired or have been repaired so badly that they have to send them back – and the engineer’s complaints are not even heard, they have to fill out endless reports, but these probably go to the bin. And of course, what happens is that you miss your Service Level Agreements, because you should have repaired it in say 6 hours, but having to order and reorder parts, you miss the SLA and have to pay penalties to the client. Yiiipiiiii lean management. (and I will not even go into the DHL spare part delivery story, which is another farce)
5.internal job offers are a farce, where “you scratch my back I scratch yours” works, and the managers try to drift from one position to the other in this way, and do not care about the people who are really the moneymakers – the atm designers, the engineers who fit and fix them.
6.The internal company blogs/discussion pages give a very sad image of the company. People are disillusioned, don’t care any longer about their workplace and this can be seen by the monitoring “regime” which is now in place. People are being monitored even how many times they go to the rest room. I have worked in many other places, and since NCR have found more “relaxed” environments, which is a blessing, and I do indeed work much better and more efficiently.
One of the managers told me “if you pay peanuts, you get monkeys” … and that’s a manager’s point of view, not mine.