Kevin Meyer

Life and leadership at the nexus of lean and zen.

Missing the Whole

by

by BILL WADDELL

I don't suffer from the illusion – the delusion – that anyone at Walmart or Amazon spends much time mapping value streams or "looking at the time line, from the moment the customer gives us an order to the point when we collect the cash and … reducing that time line by eliminating the non-value adding wastes."  But the result is the same as if Amazon were – maybe just blind sows finding the inevitable acorn, but more likely a collective blinding flash of the obvious.  Regardless, Walmart is finding that Amazon is starting to eat their figurative lunch.  The real competition is not the other bricks and mortar guys – Target, Sears, Kmart – but the guys who sell the same stuff without bricks and mortar at all.

We are a week shy of the six year anniversary of our pointing out the absurdity of the government productivity data that has served as the rationalization for looking the other way while American manufacturing slipped and slid steadily down the drain.  While the 'experts' still struggle with the harsh reality of narrowly defined manufacturing productivity, they (and many, many others) are missing the dawning of a huge productivity boom that is only apparent to those who can, as Dan Jones and Jim  Womack put it, "See the Whole".

Whether it is the Dollar Shave Club, the demise of Borders and Blockbuster,the disappearance of record and CD stores, it is all the same – a huge boon to productivity.  Same – often superior – customer value, but without busloads of material handlers, retail sales clerks, bosses to ride herd on the handlers and retail folks, and extend it further – people to build and take care of all of the brick and mortar shrines to non-value adding waste.  The rapidly dawning productivity explosion is not happening so much among the value adding people within the narrow confines of factories, but in the broader supply chains – but you have to "see the whole" to notice it.

To be sure, paper mills and CD facories are rapidly falling by the wayside, as well as packaging plants and people – but looming the sea change is much more in the service sector folks who pile cost onto factory output without increasing the value of it.

 For management this means putting down "Learning to See" and picking up "Seeing the Whole".  You can optimize the factory all day long, but if an Amazon or Dollar Shave Club comes along and renders the entire supply chain in which the factory operates obsolete you will find you have been improving value streams to nowhere.  On the positive side, it means fantastic opportunity for those wise enough to see logistics, marketing, retailing, warehousing and the rest for the non-value adding waste it is. 

If you are making and selling something for $5 while the final customer is paying $20 for it way down the chain, you need to get out of the rut of believing that whatever is so severely trashing the value propositon of your product is 'necessary' or somehow an inescapable reality in your business.  If you don't, someone else will.

Original: http://idatix.com/manufacturing-leadership/missing-the-whole-2/

Comments

  1. Bill,

    First time commentor, long time reader. While I agree with you here “logistics, marketing, retailing, warehousing and the rest for the non-value adding waste it is” where do you see job creation coming from? Do you still consider R & D a value-adding division?
    Again, I completely agree that there is way too much waste, but I fear all of the job loss (brick and mortar) will just continue to eat at the economy. I envision this strip of vacant buildings or a brick and mortar graveyard if you will. Just wondering your thoughts…

  2. Train,

    I don’t know whether R&D is universally value adding or not – depends on what they are Researching and Developing I suppose. If it is things that create value for customers they definitely are value adding; if it is gimmicky stuff to create the illusion of value they aren’t.

    As for job creation that needs to come in production or other value creating areas. The theory is that eliminating the waste in the products you buy and consume results in lower costs and lower prices, giving you more money to spend on other things. Because the cost of the book, movie, CD and razor blades are lower, for the same money it used to take to buy them, you can now buy all of them and have enough left over to buy yourself a new widget. The job creation is in making the widgets people can now afford to buy … that’s the theory anyway.

  3. Good local presence can add value: serendipity and being able to check out products without the hassles of returns. IIRC, B&N has a comment on internet versus retail book buyers: the internet buyers strongly tended to stick to the same authors.

    I know I only buy books from Amazon when I’ve decided I want something, but when I’m at a used book store, I have fun browsing, trying to discover something I might like that’s totally unknown to me.

    I also enjoying being to check out the look and feel of a lot of electronics at Fry’s. And I’m not ready to buy a car over the internet.

    Yes, the good internet retailers such as Newegg (much better than Amazon for computer stuff) add a great buying option. But I think there’s still room for smart retail that can add real value. Whether most retailers are smart or not is another matter…

  4. Amazon and Lean isn’t really an illusion/delusion, at least when Amazon is the seller. I’ve been told Amazon managed to grab a few guys in the Seattle area I consider really good to drive Lean within their organization and have built the likes of Amazon Mom and Amazon Fresh from the ground up with a strict lean focus. I think they’ve had their struggles, but we all know Lean is more about questions than answers.

    I know this isn’t about Amazon’s business operations per se, but it’s pretty easy to see Amazon Prime as a Lean mechanism.

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