Scrappy? Not hardly!

by BILL WADDELL

Perhaps the most poorly titled article I have read – ever – is "The Scrappiest Car Manufacturer in America" that appeared in the June 6-12 issue of Bloomberg Business Week.  Don't get me wrong – the article itself is great – but the title is absurd.  It is about Subaru and 'scrappy' is the last word in the dictionary that applies to them.  Those people don't scrap anything.  In fact, back in 2002 they set out to become the first zero landfill car factory, and then made it happen.  Last year Subaru "saved approximately $5.3 million by obsessively reducing, recycling, composting, and incinerating."

 Subaru is, for my money, hands down the leanest company in the United States.  It would be easy to wax eloquently about their 22 year history in the United States in which they not only have never had a layoff, but have given everyone working for them a pay raise in every one of those 22 years.  They also "also enjoy premium-free health care, abundant overtime ($15,000 each, on average, in 2010), paid volunteer time, financial counseling, and the ability to earn a Purdue University degree on-site."  When they ran out of parts following the tsunami they paid their folks to do volunteer work around town.  These guys are so lean Toyota comes to them for help and since 2006 they have been making Camry's under contract with Toyota.

Along the way they have been growing their market share and making money.  In addition to missing the mark on the title, the article's author demonstrated a fair degree of ignorance with the line: "the truly astonishing thing is how it achieved all this: through a relentless focus on eliminating waste".  In fact, there is nothing truly astonishing about it at all.  Granted, some folks would be amazed and bewildered at the notion of relentlessly eliminating waste creating enormous business success, like the leaders at Bob Evans who (apparently having lived under a rock for the last 20 years) announced a "$2.8 million in restructuring charges related to lean manufacturing productivity initiatives".  Any time a company incurs restructuring charges in conjunction with lean, or describes lean as a 'productivity initiative', they leave little doubt that they don't have the vaguest idea what lean is all about.

The most significant aspect of the Subaru story is in the fact that the $5.3 million saved last year was plowed back into the plant and the wages of the people working in it.  Old school management that runs to third world places in pursuit of cheap labor with a myopic cost reduction focus would see this as an anathema, and lean Bozos like Bob Evans who see it as a labor cost reduction concept would be mystified by such an idea, and even most managers sincerely trying to wrap their heads (and factories) around lean would scratch their heads.

But I have said before and will say again and again, the goal of lean – the goal of business – is not cost reduction.  Attempting to compete with the likes of China in becoming the low cost producer is a fool's game – a race to the bottom you cannot win.  The goal is to become the best value producer – the one who devotes the greatest percentage of money spent on things that create value customers are willing to pay for.  Subaru – and the other truly lean companies – are not the cheapest, nor do they want to be.  rather, they provide the best value for the money.  Subaru is taking $5.3 million out of waste (that which customers will not pay for) and plowing into value adding plant operations and payrolls, which customers will pay for.

Subaru takes care of its customers and its employees first, and the bottom line takes care of itself.  Like Henry Ford said, "Profit is the inevitable conclusion of work well done."  And work at Subaru is very well done.