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.