by BILL WADDELL

Once there was a manufacturing executive who was concerned about the inaccurate financial information he was getting, so he moved his desk up to the accounting department so he could figure out what was going on.  Soon he found out that about 80% of the way through month end close the accountants calculators’ batteries were dying so any numbers bigger than they could count on their fingers and toes were wrong, so he bought them all rechargeable calculators and the problem was solved.

Now that isn’t a true story, but it is the equivalent of the supposedly true story recounted in CFO Magazine.  The story goes that the company had manufacturing problems so the CFO moved his desk to the factory floor.

“A key problem for the company was a high return rate for some products.  For example, part of the process for making one product involved cutting 20 foot bars into smaller pieces and punching regularly spaced holes in them.  But when the bar was down to the last piece, it tended to move slightly as the hole puncher tried to do its work.  Lots of pieces were created with holes that were off by the 1/16th inch of tolerance called for in the engineering specs.  ‘You could be an inch and a half off, and no one realized that or tested it,’ Litowotz [the CFO] says.

The simple remedy was creating a jig: a template for metal products similar to a stencil for painting on a wall.  In order to make a hole in a bar, it was necessary to punch through a corresponding hole in the jig.  The number of returns dropped immediately and dramatically.”

If that’s true the root of the problem was not a lack of jigs, rather an HR process that hired morons.  If the people in production were routinely an inch and half out of a +/- 1/16″ spec and didn’t realize it they have much bigger problems than fixtures can resolve.

Don’t get me wrong – the idea of a CFO (or any other senior manager) moving his desk to the shop floor is a great one, but not so he can quickly see the stupid mistakes of the production people and fix them.  It isn’t so he can fix and preach – it is so he can learn.

There is certainly value in having an outsider’s perspective – someone to ask the dumb, obvious questions – to point out the 800 pound gorilla in the living room who has been there for so long we ignore and work around it.  But 999 times out of a thousand there is a very good reason for the gorilla to be there.  Everyone knows it and it is still there because lots of good people have burned lots of brain cells trying to get it out of the living room and came up empty.  The likelihood of anyone – especially an exec with little or no technical knowledge – going out to the floor and quickly solving the big problems through his superior powers of observation, logic and intellect are virtually non-existant.

The lack of respect and humility the CFO article exudes is stunning, but sadly, not all that uncommon.  It is the top down mentality driven by an unshakable conviction that the people in management are simply smarter than the people doing the work; and problems are best solved by having those smarter people go out and straighten things out … then write a policy to make sure the dummies don’t screw things up again.

A far more likely scenario is fo the CFO to go out into the factory and find out that everyone on the floor knows the cause and the cure for the defect, but they cannot get past the budget restrictions and the financial justification hurdles necessary to get the jig made.  The lack of common sense is not on the factory floor so much as it is in the management processes.

When senior people go to the gemba – the factory floor – any quick fixes they can contribute are most apt to be to learn how management can improve in order to enable the people doing the work to be more successful.

The title of the article:  What Holds CFO’s Back From Operational Roles?  The answer more often than not: Ignorance, arrogance, a lack of respect for the deep knowledge held by people on the cutting edge of the value adding effort.  Managers must go to the gemba, but they have to go there with the mindset of a freshman walking into his first day of engineering school – excited but struck with a profound sense of how much he has to learn.

 

Original: http://www.idatix.com/manufacturing-leadership/executives-to-the-rescue/

by BILL WADDELL

An interesting article over at Industry Week:

Lean’s High Tech Makeover – Toyota matches its Toyota Production System with advanced automation tools to create a high tech ballet of lean manufacturing

This is the article I mentioned for which I was interviewed a while back. 

 

New Lean Management Article

If you are so inclined, you can read my latest article on the fundamentals and importance of management in the lean journey over on my web site.

Managing the Lean Enterprise

 

Two cents worth of coffee

Kevin wrote a piece the other day likening the Keurig single cup system to lean.  Lots of good comments.  Seems to me many of those suggesting that making less than full pots with old style drip coffee makers and the French press advocates (including the author of the lengthy email Kevin and I received argiung in favor of EOQ and forecasting to solve the problem of coffee waste) ignored the part of Kevin’s post that mentioned “the varying demands of a crowd“. 

Making a partial pot in a drip maker is efficient enough so long as there is only one kind of coffee needed.  Introduce two products, however – she drinks regular and he drinks decaf, for instance – and the math changes.  Brewing a partial pot of one, then cleaning out the pot and reloading it for the other type wastes a lot of time.  The Keuring beats that approach hands down. Having more than one product is the norm in production and Kevin’s analogy of the Keuring system to one piece flow in the factory is right on point -IMHO, of course.

 

The Unlean Education System

One reason the cost of a college education is totally out of whack relative to the value it provides is the propensity for academia to create bureaucracy.  This article about “The Troubling Dean to Professor Ratio” over at Business Week should leave you shaking your head.

 

Original: http://www.idatix.com/manufacturing-leadership/random-notes/

by BILL WADDELL

The good folks at McKinsey have put out a massive report called “Manufacturing the Future: The Next Era of Global Growth and Innovation“.  The pdf version runs to 184 pages and everyone serious about manufacturing should read it.  The trick is to absorb and consider the data and ignore their interpretations of that data.  You have to think for yourself – draw your own conclusions.

The problem with the report is that McKinsey sees themselves as big thinkers of big ideas that are useful to big companies, and their business model is to do big projects for those big companies and send them big bills for their services.  They are hardly alone in this slant.  If you read most of what comes from academia they have the same big bias, as do the politicians -typically experts at little other than their own re-election and enrichment, let alone manufacturing.  So the report does a good job of describing the world and it’s implications for manufacturing; but all of its recommendations revolve around what the mega-multi-nationals ought to do about it.

For instance, the report says, “In recent years, some companies have started to embrace a ‘granularity of growth’ approach [“granularity”, by the way is big in the report – must be the cool buzzword these days] to markets.  This involves looking for niches and underserved sources of demand that can be more profitable than broader markets where more competitors are present.  However, few companies have mastered the crossfunctional routines to consistently translate granular market understanding into granular operations strategies. In the next era of manufacturing, getting to this micro view of manufacturing strategy will be a key difference.”

The idea that markets are comprised of niches – there is no ‘mass’ and the mass marketers underserve those niches – is fundamental to lean thinking.   In fact, lots of companies have “mastered the crossfunctional routines” to serve them – they have done so in the form of organizational structures made up of customer facing value streams.  It is just the big guys who haven’t mastered value streams.  Financially obsessed control freaks who dominate big company headquarters are constitutionally incapable for empowering local value streams to serve unique niches.  By nature they will always pull the organization into a one-size-fits-all mode.  (Everyone in the company is fully empowered to do whatever best serves the customers …. provided they all meet the same short term functional financial goals and don’t violate any of the policies in the thousands of pages of company policy manuals governing every aspect of the job).

The McKinsey folks cite a study in which they have identified 22 unique markets within China; a one-size-fits-all-Chinese-people approach won’t work.  So how to design a strategy that works for each of the 22 niches?  Big Data according to McKinsey.

Big data is basically gathering enormous amounts of information from point of sale, Facebook, or wherever you can find it, then get your hands on a mega-computer and develop staggeringly complex algorithms to sort through all of that data and figure out what the folks in each of those 22 Chinese niches wants.  A good example is Walmart, which uses big data-type applications to figure out what its customers want.  The alternative, of course, would be for each store to decide what its customers want.  A store manager doesn’t need big data and big computers.  He or she just has to talk to the customers.  In fact, he or she already talks to customers and already knows.  But Walmart is fundamentally incapable of letting those folks call the shots to any significant degree – what would there be for all of the intellectual horsepower in Bentonville to do if the people closest to the customers were empowered?  Big data is the crutch for those who cannot or will not empower people.

Too many leaders of too many small and medium companies become star struck with this big cmopany nonsense.  Right now there are 22 small Chinese companies fully capable of providing exactly what is needed in their local market … or a handful of medium sized companies that can organize into a handful of value streams that can be empowered to serve those markets very well.  They don’t need to follow any of the McKinsey strategies to succeed. 

The economy of scale die-hards would argue that those small firms can’t leverage a central product development effort – a high powered team that can develop core products and customize them for each market.  The cost of development will have to be spread among too few customers.  True enough … but those smaller companies won’t have to pay for a monolithic headquarters and millions of dollars worth of big data hardware and software – and they will come up with better solutions for customers by personal interaction with them than anyone sifting through big data ever will.

The moral of the McKinsey report story is that globalization is leading to market fragmentation – niches of one – and the big challenge for big manufacturers is to figure out how to operate like a collection of small manufacturers.  The last thing small manufacturers should do is to use McKinsey type recommendations to figure out how to behave like big manufacturers.   

Original: http://www.idatix.com/manufacturing-leadership/think-for-yourself/

by BILL WADDELL

It seems rather curious that Hostess Brands CEO Gregory Rayburn would have so much time to talk to the business press over the last week or so as his company was racing toward liquidation, but he did and the message was consistent.  The unwillingness of the baker’s union to take some 30% in compensation reductions was the cause of the demise of the Twinkie.

Don’t get me wrong, unions in general and the bakers at Twinkie in particular are a useless relic of the past.  Paying people $48,000 a year, along with a solid health plan and retirement benefits takes a lot of productivity to justify and unions are productivity killers.  Regardless, the union didn’t kill Hostess.  That much is clear from a basic look at their business.

They are a private company so their financials aren’t out there in the open, but looking over the numbers from the last few years when they were publicly traded, as well as the figures from their bankruptcy filings, the cost structure look something like this:

 Now 15% for factory labor is on the high side for any product, especially bakery products, but when better than half the cost of a Twinkie has nothing to do with the value of a Twinkie it is pretty plain that Hostess’ inability to make a profit has everything to do with management – or, more appropriately, mismanagement.  It was something of an understatement when Food Industry expert David Pauker said, Hostess’ brand name and recipes will “most likely will be purchased by a competitor that will bolt the additional  sales to a more efficient delivery system.”  My guess is that pretty well describes just about everyone in their industry.  Throw in the costs and profits of the grocery and convenience stores and, at best, 25 cents out of every dollar spent on Twinkies actually went into making the Twinkie – the rest went for something else.

 Even the value adding chunk of the Hostess cost structure is overblown.  Unprocessed sugar goes for about 19 cents a pound on the global market these days, but thanks to sugar tariffs that have been on the books since the Depression US companies pay nearly double that.  At 19 grams of sugar per Twinkie X a half a billion Twinkies a year, Twinkie eaters have been paying better than $4 million a year just to prop up US sugar growers … add in the sugar it takes to make Ho Ho’s, Ding Dongs, snack cakes and the rest of the Hostess line-up and you are talking real money.

 The liquidation of Hostess was written in the stars long before last week.  Gergory Rayburn does thai sort of thing for a living.  You can read some of his career highlights here, but the one thing glaringly missing from his resume is actually running anything profitably.  He is a ‘restructuring expert’, which basically means  he doesn’t worry about running the business – just getting whatever he can out of it for the stockholders, regardless of where that leaves employees, customers, suppliers and much of anyone else connected with the business. 

The details of the script for Hostess end were left up to him, but ending it was decided upon when he was brought in eight months ago.  What we saw last week was little more than a clumsily executed stage play to blame the unions for a decade of mismanagement.

 Everyone is predicting that Twinkies will live on, provided by someone else.  I hope so.  With such powerful forces aligned against me in my campaign to defend the American tradition of obesity I need all the Hostess products I can get, but Twinkies will only survive in the hands of someone who can make them with a much better value proposition.  And make no mistake, like so many other ‘brands’ Hostess died of a pathetic value adding ratio, and that is 100% on the management of the company.

Original: http://www.idatix.com/manufacturing-leadership/the-anatomy-of-a-twinkie/

by BILL WADDELL

I have two two clients that are both lean and successful, but with very different cultures.  Both have female dominated factory floors – I don’t know the numbers but easily 2/3 of the front line folks are women.  One of them has a female COO and when the top management group gets together better than half of them are of the fairer sex.  The other has two women out of a top management group of 35-40 people. Both companies are led by men who are compassionate, fair and do not have a discriminatory bone in their body.  So why the difference?

The one with fewer women at the top does not do anything wrong.  They don’t go out of their way to only hire and promote men.  Their approach is generally to promote and hire the best person who falls into their lap when management openings arise.  In short, they follow the letter of the law and, beyond that, are genuinely willing to hire and promote qualified women, but few qualified women maneuver their way into the candidate pool.

The one with more women than men doesn’t exclusively look for women when they hire – they don’t reverse discriminate.  Rather, they do a couple of subtle things:  For one, they are more aware of the qualifications and capabilities of all of their employees.  Most companies have a lot of people in the front lines, at the bottom of the organizational totem pole, who are punching well below their weight.  These people have a few years of college but left without a degree, or they have unique experience elsewhere, or they are simply very, very smart but for one reason or another never applied those smarts to their advanced education or their early career.  For a whole lot of reasons, women tend to fall in one of those categories quite often.  This company simply finds and takes advantage of their diamonds in the rough very, very well.  Since most of their shop floor diamonds are women, they mine more women than men for advancement.

The other thing they do is to hire more through networking than through unrelated third parties.  They don’t look to recruiters or ads in Monster or the like except as a last resort.  Their first move is always to talk to their employees and aggressively urge them to identify friends, neighbors or relatives who might be qualified and interested.  Not too surprising that, when they look to a predominantly female work force for such recommendations, they get a lot of women – old friends, classmates and the like – referred to them.

The importance of the resulting gender diversity at the top was brought home to me in a recent conversation with a friend – a female – who works for a Fortune 500 manufacturer.  She works in a relatively low level accounting position in a clerical-type office dominated by women in similar clerical-type roles.  I had always thought of her as kind, but not terribly sympathetic to those claiming to be victims of discrimination … the sort of person whose inclination is to believe that people generally make their own luck and that most ‘victims’ of discrimination actually did something to cause the perceived slight.  Her employer recently announced a major senior management reorganization and, based on her generally self-reliant world view I was surprised when her reaction to the reorganization was to rather derisively point out that 18 of the 20 new executive appointments were men.  Until then I didn’t think she was the sort of person who cared … or noticed – but, of course, she does.

When I think about it, the level of shop floor engagement and the overall honesty – often harsh honesty – at the company with a strong female management presence is much higher than at the testosterone heavy company.

Good people don’t care whether the boss is male or female, black or white, Anglo or Hispanic.  But when people look at the leadership team – the folks with the power and bigger paychecks – and see few or no people that look like themselves it sends a message, whether that message reflects management’s honest views or not.  When all of those women on the shop floor see women in the low paying ranks and men at the top, how could they fail to notice and personalize it?

In fact, the approach of the company that looks to its workforce for talent, regardless of resume highlights, reflects both superior respect for its employees and simply better management that more effectively utilizes the talent it has.

There are lots of generally valid explanations for the generally lower earnings of women – women don’t major in engineering and science to the extent men do, women take more time off for child bearing and raising, etc… – but generally valid truths are irrelevant to specific situations.  That woman – the one running that machine over there – is not some philosophical, universal entity.  She is (as is everyone in the company) a unique entity with unique skills, motivations and capabilities and what may be generally true of women has nothing to do with the truth about her.  Maybe she deserves a shot at greater responsibility and maybe she doesn’t.  But when the company is like my client that rarely has capable women falling into their candidate pool, or the company my friend works for with a 90% male senior staff, it seems pretty clear that the company is being driven by generalities rather than one-on-one respect and appreciation for individuals and, as a result, leaving a lot of talent on the table and sending an unintended, demotivating message to a lot of good employees.

 

Original: http://www.idatix.com/manufacturing-leadership/do-you-have-binders-full-of-women/

by BILL WADDELL

It seems more and more apparent that the real world of legitimate manufacturing is completely unknown and unappreciated by just about everyone outside of it.  Terry Gau – chairman of Foxconn – says “he did not believe President Obama could succeed in moving production lines back to the US because Americans have outsourced those jobs for too long. But he hoped Americans could learn how factories are operated so they can return home to set up facilities with automated equipment. Mr Gou said he was already in discussion with the Massachusetts Institute of Technology about establishing an exchange programme.”  Foxconn is going to teach American manufacturers how it’s done – and MIT says thanks, we’ll help you do it?  Are you kidding me?

There is no avoiding the fact that Foxconn is a manufacturing train wreck.  They are currently unable to meet demand for the latest iPhone; and a few months ago they had a fist fight in the plant blow up into a full scale riot.  The fight was between workers and quality inspectors over the impossibility of meeting quality standards.  That sort of problem is manufacturing 101 stuff – the kind of thing even a passing concern for manufacturability in the design process precludes.  Fix the design or fix the process, but only fools think disciplining workers is a solution.

Terry Gau is a sweatshop operator, pure and simple.  Apple zealots can argue otherwise all day long, but he exists only when the trinity of incredibly innovative product design, raw short term greed and wholesale ignorance of manufacturing converge – such as at Apple.  Year after year stories of worker abuse – the stuff of Upton Sinclair and Charles Dickens novels – come from Foxconn, and year after year the Apple folks are shocked to hear such things go on, and year after year Foxconn promises to fix the problems.  Foxconn knows manufacturing like the average straw boss at the Homestead steel mill did in 1892, and just as the Carnegie Steel boys dealt with problem by having Pinkerton guys shoot disgruntled workers, Terry Gau solves problems with an abusive security force.  And this is the guy MIT wants to bring in to teach America how to manufacturing is done?

Just to be clear about how much Terry Gau can teach us about automation, that has been a topic of interest to Foxconn for a year or less.  Robotics and automated assembly are the solution they have pursued to uppity employees who wanted a modicum of tolerable working conditions and a little more than a couple hundred bucks a month.  It has long been little more than a grand scale manual assembly operation thriving on dirt cheap labor.  Just about every mid-level manufacturing engineer in the United States can tap dance around their knowledge of automation … a fact apparently unknown to the folks at MIT.

And just to be clear about Apple, knowing full well that the hard core of Apple enthusiasts will raise a cry of outrage at such an assertion, they have passed their peak and are on their inevitable way out.  They were a one dimensional – one trick – pony, albeit it one heck of a trick.  Long a decreasing player in the phone market, they have dropped below half of the pad market.  While they won their patent suit with Samsung on their home turf in the California courts, they lost on the neutral court in Europe.  Exposed for operating a global tax avoidance scheme, their loyalty to anyone or anything other than short term profit is evident.  Not only are the people who make their products and the communities in which they operate of little or no concern, their own long term health is ignored.  Turnabout is fair play, and Apple is seeing their fair-weather friends on Wall Street bail on them, with their stock price dropping by some 20% over the last few months.

That Terry Gau suffers from the delusion that he has great manufacturing prowess is, perhaps, understandable; and that Wall Street had a love affair with Apple is also easy to understand.  But Apple has never been anything more than the product of Steve Jobs’ product genius and with his passing history will record them as little more than another spectacular meteor in an age of continually rising and falling contributors to incredible technical revolution. 

Foxconn will boom and thrive so long as the mainstream business press and the academic world chooses to see the exploitation of cheap labor as economic emergence of third world economies, rather than the replay of the shameful early era of the industrial revolution that enlightened countries have put long behind them.

If MIT wants to learn the right way to manufacture things they don’t need to go to China.  There are plenty of far better teachers in their own Boston backyard.

Original: http://www.idatix.com/manufacturing-leadership/real-manufacturers-are-from-mars-everyone-else-is-from-venus/