Actually 'chisan chishou" doesn't translate to "all logistics is waste". It means 'local production for local consumption' in Japanese. It is the idea of regional, if not local manufacturing. In other words it is the antithesis of flat-earth global theory. It says that you make stuff near the customers. But the fact remains, and one of the big reasons regional manufacturing makes sense is the fact that all logistics is waste – it doesn't add a nickel of value to the product. So the closer goods are manufactured to the point of consumption the better.
I am grateful to Paul Todd, a long time Evolving Excellence reader and a very smart lean guy who is helping a lot of Georgia companies get straightened out, for the article on Sharp's regional manufacturing strategy. It does a pretty good job of explaining the concept as far as it goes.
In addition to the cost advantage of eliminating the waste of transport, there is the huge advantage that is easy for lean folks to see but completely invisible to traditional folks of tightening the link between customers and manufacturers. At the very least, local manufacturing eliminates the room for shoddy quality that can result from gross ignorance of the product and its use on the part of the producer.
A few years back I was part of a turnaround effort at McCulloch – the chain saw inventors. At that time they had a maquiladora plant in Hermosillo, Mexico – smack in the middle of the Sonoran desert. The 600 people at the plant were great. I made some good friends there, met some great manufacturing minds – even found my wife in that plant. But look at this picture of the Sonoran desert.
The tall thing is a saguaro cactus. Chain saws and suguaros don't mix -you go to jail if you cut one down. There is nothing else that would require a chain saw, and certainly the people who lived in this desert and worked in the plant had never used a chain saw in their lives. As well intentioned as the workers were, there was no way they could envision the environment in which customers would put one to use. The quality and reliability of the products they made was understood in theory only. That same difficulty, by the way, is huge in Chinese plants. The only knowledge the people making the product have is on the job. They cannot personally relate to the product, which makes their participation in problem solving and improvement near nil.
But beyond even these significant arguments against the idea of making stuff wherever on the planet you can find cheap labor the greatest argument of all may be the environmental one. Tom Johnson is one of the smartest guys alive. He is the author of Relevance Lost: The Rise and Fall of Management Accounting, which directly led to activity based costing and ultimately to lean accounting. He is the winner of two Shingo Prizes and just about every significant business award you can think of. He is one of those guys who routinely thinks about three or four jumps ahead of the rest of us. That he came down from the mount to write the foreward to my book is one of the greatest honors I have been given.
Tom is challenging flat earth thinking on the basis of sustainability. Beyond the costs we currently pay for burning staggering quantities of fossil fuel to build millions of steel containers and the massive fleet of ships and keep them churning around the world's oceans, there are enormous hidden costs. Some of them are paid by taxes – the cost of the infrastructure it takes – ports and highways – that are spread out among all of us. Other costs are tougher to see, but will be enormous and will be paid by our grandchildren – the costs of running the world when all of the oil and coal are gone; and the cost of cleaning up the mess resulting from our burning the stuff up as quickly as we can dig it out of the ground.
Tom's premise is that if we knew the true, total, long range cost of making a toy in Shenzhen, China and hauling it all the way around the world to put under a Christmas tree in Topeka, Kansas there is no way in the world we would consider paying it. And he believes we cannot keep the practice up for long or we will run out of energy and destroy the earth. This global pursuit of cheap labor is not sustainable economically or environmentally.
Just thought I'd offer up a little more food for thought before the holiday weekend.
Rick Bohan says
This is why I keep coming back here in spite of the occasional rant about politics. With respect to all the points mentioned in the article, I can only add….”What he said”.
Paul Todd says
Thanks Bill. I had not considered the chainsaw example, but that makes a lot of sense. There is a lawn mower plant in Georgia that makes snow blowers in the off-season, and you can bet there aren’t many of us around here that have experience clearing snow.
Jason Morin says
Agreed on the chainsaw example. As for the snow blowers here in GA, I’d suggest sending a team of plant workers every winter, armed with various models of snow blowers, up to North Dakota for a week and let them clear out some driveways. I’m sure you’ll find plenty of homeowners who will let you do that for free. :-) Unfortunately I don’t think we get enough snow in North GA or TN to really test the products. Or you could always head over to Stone Mountain and try them on the artificial snow!
Note from Bill Waddell – Thanks. No need to go all the way to the Dakotas. Send all folks with snow blowers you can round up to Illinois any time between Thanksgiving and the end of March and I will be sure they get all the product experience they need.
I think this example extends beyond traditional manufacturing. I’ve seen this in the other great expanse of ‘do it somewhere cheaper’: engineering analysis. The notion being, of course, that the engineer running the software can be sitting anywhere in the world as long as you feed them the right information because the return product isn’t a physical product. Turns out, not surprisingly, that when you separate the analyst from the physical product they loose that connection and the understanding of how the part functions and what it interacts with. Thus losing that ability to translate written instructions into a representative analytical product. We’ve already had one good analyst overseas quit because he _felt_ too disconnected from the physical product. Unfortunately, those guys cost a fraction of those of us working in the ‘technical centers’ and slowly the analytical work is shifting away from where physical development is occuring. It is cheaper though…