by BILL WADDELL
Both Ford and Boeing strike me as companies that have an intellectual understanding of lean, but have yet to really internalize the principles and make a commitment. Kind of like the recovering alcoholic who knows he shouldn't drink, but sometimes cannot control the urge to run back to the local tavern when under pressure.
A reader by the name of Emmer in commenting on yesterday's post pointed out an article in the Detroit News about Ford's next generation Whiz Kids. For those who don't know, the Whiz Kids were a group of guys who came to work for Ford after World War II with a mission to whip the company into an orderly, logical operation – the epitome of managing by the numbers. Ford is still trying to undo the damage they did to the management culture. The king of the Whiz Kids – Robert McNamara – went on to run the US military in Viet Nam by the numbers, and the whole world is still trying to undo the damage done.
Ford's new Whizzard In Chief is the holder of a Chinese PhD named Rose Peng. She leads a posse of 19 PhD holders who are rising in the Ford organization as experts in, apparently, just about everything. The big claim to fame for this Ford Geek Squad is that they mastered rental car fleet theory. It seems that the auto makers sell big fleets to the rental car companies with a guarantee to buy them back. Then they have to resell the used rental cars. Rose and her gang brilliantly deduced that, instead of just trying to make money on the first sale, they oughtta think about the second time the cars would be sold, and make sure they had the best set of options and features to get the best price both times. Amazing, but it took 20 PhD's to think of that.
That was such a big success, Ford has now unleashed them on the rest of the business. "Soon, Ford executives were asking what other insights the GLAD team could provide. Peng and her colleagues soon began developing models for production planning, marketing spending and vehicle pricing."
Now to put her in the proper perspective, you might want to read the synopsis of the paper Rose presented at the University of Michigan a few years back called "An Automotive Competitive Response Model". "This model," wrote the brilliant Ms Pen, "can be used by the product development division to assess cost and benefit of investment in vehicle freshening and quality improvement." In other words, Rose reinvented Cost of Quality/Acceptable Quality Level Theory. She came up with a way to determine how much to spend on quality based on the return on investment from making things well. I can almost hear the guffaws at Toyota and Honda when they saw that Ford was spending good money on relearning and reinstituting a theory that was tossed on the scrap heap of manufacturing thinking twenty years ago.
From time to time – usually after a few beers – I tell a story about two guys hiking through the forest. They enter a big clearing and from the other side they see a bear come charging across the clearing to attack them. One guy drops to his knees, opens up his backpack and proceeds to change from his hiking boots to a pair of running shoes. His friend says, "What are you doing? You can never outrun that bear." The guy changing the shoes calmly replies, "I don't have to outrun the bear. I only have to outrun you." I tell that story for laughs – Rose would apparently see it as a deep insight, most likely handed down from some Zen master. The gist of her thinking is that quality and price don't have to be perfect – or especially good in the eyes of a customer – they just have to be better than GM and the others. That, along with Acceptable Quality Level thinking is what set Ford and GM up for the slaughter when the Japanese arrived.
So now Ford is going to cut the eggheads loose on "production planning". What do you suppose they will think of next – EOQ theory perhaps? Or maybe how to apply regression analysis to determine cost behavior? Just when it looked like they might be turning the corner, Ford reverts to form and goes back to listening to "19 Ph.D.s from the fields of mathematics, physics, statistics, economics and engineering." And not a one with a lick of knowledge about cars or what it takes to make them.