Category Archives: Manufacturing

Manufacturing Outlook and History In the USA and Globally

I write primarily about management improvement on this blog – which makes sense given the title. In the very early days I had more on investing, economic data, science, engineering and travel. Then I created three new blogs (Curious Cat Investment and Economics Blog, Curious Cat Science and Engineering Blog, Curious Cat Travel Photos blog) and that made this blog more focused.

Even so the lines of what fits where can be a bit fuzzy and I continue to write about manufacturing, and health care, with a focus on economic data, occasionally. And that is what I am doing today while touching on management related to manufacturing a bit.

As I have written before the story of manufacturing in the USA, and globally, is greatly increased quality of processes and output as well as greatly improved productivity over the last few decades. Manufacturing output also increased, including in the USA, as I have written consistently for a decade now. For example: (Top 10 Countries for Manufacturing Production from 1980 to 2010.

Still many people have the notion that USA manufacturing has been declining, which hasn’t been true, and certainly isn’t true now (the last couple of years have been especially strong and even the general public seems to realize the idea of the USA losing manufacturing is a myth).

Chart of Manufacturing Output fro 1992 to 2012 - USA, China, Japan and Germany

Based on data from the UN. See my blog post on my economics for more details on the data (to be posted next week).

The chart is impressive and illustrates the point I have been hammering home for years. The USA manufacturing base is growing and far from crumbling (job losses are deceiving as they are global and not an indication of a USA manufacturing decline). China’s manufacturing growth is incredible. China and the USA are far away the top 2 manufacturing countries. Japan and Germany make out the top 4 before a large gap which then is followed by a group of countries that are very close (Korea is 5th with less than half the production of Germany).

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George Box

I would most likely not exist if it were not for George Box. My father took a course from George while my father was a student at Princeton. George agreed to start the Statistics Department at the University of Wisconsin – Madison, and my father followed him to Madison, to be the first PhD student. Dad graduated, and the next year was a professor there, where he and George remained for the rest of their careers.

George died today, he was born in 1919. He recently completed An Accidental Statistician: The Life and Memories of George E. P. Box which is an excellent book that captures his great ability to tell stories. It is a wonderful read for anyone interested in statistics and management improvement or just great stories of an interesting life.

photo of George EP Box

George Box by Brent Nicastro.

George Box was a fantastic statistician. I am not the person to judge, but from what I have read one of the handful of most important applied statisticians of the last 100 years. His contributions are enormous. Several well know statistical methods are known by his name, including:

George was elected a member of the American Academy of Arts and Sciences in 1974 and a Fellow of the Royal Society in 1979. He also served as president of the American Statistics Association in 1978. George is also an honorary member of ASQ.

George was a very kind, caring and fun person. He was a gifted storyteller and writer. He had the ability to present ideas so they were easy to comprehend and appreciate. While his writing was great, seeing him in person added so much more. Growing up I was able to enjoy his stories often, at our house or his. The last time I was in Madison, my brother and I visited with him and again listened to his marvelous stories about Carl Pearson, Ronald Fisher and so much more. He was one those special people that made you very happy whenever you were near him.

George Box, Stuart Hunter and Bill Hunter (my father) wrote what has become a classic text for experimenters in scientific and business circles, Statistics for Experimenters. I am biased but I think this is acknowledged as one of (if not the) most important books on design of experiments.

George also wrote other classic books: Time series analysis: Forecasting and control (1979, with Gwilym Jenkins) and Bayesian inference in statistical analysis. (1973, with George C. Tiao).

George Box and Bill Hunter co-founded the Center for Quality and Productivity Improvement at the University of Wisconsin-Madison in 1984. The Center develops, advances and communicates quality improvement methods and ideas.

The Box Medal for Outstanding Contributions to Industrial Statistics recognizes development and the application of statistical methods in European business and industry in his honor.

All models are wrong but some are useful” is likely his most famous quote. More quotes By George Box

A few selected articles and reports by George Box

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Special Cause Signal Isn’t Proof A Special Cause Exists

One of my pet peeves is when people say that a point outside the control limits is a special cause. It is not. It is an indication that it likely a special cause exists, and that special cause thinking is the correct strategy to use to seek improvement. But that doesn’t mean there definitely was a special cause – it could be a false signal.

This post relies on an understand of control charts and common and special causes (review these links if you need some additional context).

Similarly, a result that doesn’t signal a special cause (inside the control limits without raising some other flag, say a run of continually increasing points) does not mean a special cause is not present.

The reason control charts are useful is to help us maximize our effectiveness. We are biased toward using special cause thinking when it is not the most effective approach. So the control chart is a good way to keep us focused on common cause thinking for improvement. It is also very useful in flagging when it is time to immediately start using special cause thinking (since timing is key to effective special cause thinking).

However, if there is result that is close to the control limit (but inside – so no special cause is indicated) and the person that works on the process everyday thinks, I noticed x (some special cause) earlier, they should not just ignore that. It very well could be a special cause that, because of other common cause variation, resulted in a data point that didn’t quite reach the special cause signal. Where the dot happened to land (just above or just below the control limit – does not determine if a special cause existed).

The signal is just to help us systemically make the best choice of common cause or special cause thinking. The signal does not define whether a special cause (an assignable cause) exists of not. The control chart tool helps guide us to use the correct type of improvement strategy (common cause or special cause). But it is just a signaling device, it isn’t some arbiter of whether a special cause actually exists.

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Leading Manufacturing Countries from 2000 to 2010: China, USA…

chart showing leading manufacturing countries output from 2000-2010

Chart of manufacturing production by the top 10 manufacturing countries (2000 to 2010). The chart was created by the Curious Cat Economics Blog. You may use the chart with attribution. All data is shown in 2010 USD (United States Dollar).

Over the years I have been posting data on the manufacturing output of leading countries. In 2010 China finally overtook the USA to becoming the leading manufacturer (long after you would have thought listening to many news sources and political leaders). In a previous post on the Curious Cat Economics Blog I looked at the output of the top 10 manufacturing countries with a focus on 1980 to 2010.

In 1995 the USA was actually very close to losing the lead to Japan (though you wouldn’t think it looking at the recent data). I believe China will be different, I believe China is going to build on their lead. There has been some talk for several years of manufacturing moving out of China seeking lower cost countries. The data doesn’t support any decline in Chinese manufacturing (or significant moves away from China toward other South-East Asian countries). Indonesia has grown quickly (and is the largest SE Asian manufacturing country), but their total manufacturing output is less than China grew by per year for the last 5 years.

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Marketplace Looks at the Apple Economy

Marketplace looks at the Apple economy in China. Marketplace is an excellent source of actual journalism; rare in the post Bill Moyers days, sadly.

A look inside a Foxconn factory

The first misconception I had about Foxconn’s Longhua facility in the city of Shenzhen was that I’ve always called it a ‘factory’ — technically, it is. But after you enter the gates and walk around, you quickly realize that it’s also a city — 240,000 people work here. Nearly 50,000 of them live on campus in shared dorm rooms. There’s a main drag lined on both sides with fast-food restaurants, banks, cafes, grocery stores, a wedding photo shop, and an automated library. There are basketball courts, tennis courts, a gym, two enormous swimming pools, and a bright green astroturf soccer stadium smack-dab in the middle of campus. There’s a radio station — Voice of Foxconn — and a television news station. Longhua even has its own fire department, located right on main street. This is not what comes to mind when you think “Chinese factory.”

Yet it is: as you walk beyond the civic center of Longhua, the buildings begin to change.

From a management perspective there is a great deal to be desired in Apple’s manufacturing practices. The economic perspective however, for me, provides a much different picture than those in rich countries (USA, Europe, Singapore, Japan…) often feel.

The jobs provide workers a chance to earn what for them is a great deal of money. Yes the conditions are harsh – I wouldn’t want to have to work there. But I am pretty sure I would not be happier, if I lived in China, and everything else remained the same in China except now all the Apple products were made in Singapore, USA and Spain.

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Looking at Auto Manaufacturing in the USA

America’s Dirty War Against Manufacturing

Bob Lutz, the former head of GM, says it was neither uncompetitive wages nor unions that drove the Big Three into decline. It was a management with its eye focused on the bottom line and the short term.

That sentiment should be familiar to students of Deming (it is one of Deming’s 7 deadly diseases). It is sad that this bad management practices, short-term thinking, continues to do harm several decades later. Hopefully we can do better in the next few decades.

retiree health care and pensions — burdens that are borne by society, not manufacturing plants, in every other advanced country. That disparity, the result of policy decisions made in Washington rather than wages negotiated by the United Auto Workers, was the source of most of the labor-cost advantage enjoyed by foreign companies.

The excessive health care costs in the USA, another of Deming’s 7 deadly diseases, has continued to get worse every year since he classified it as one. The damage that the failed health care system in the USA does to the USA is enormous.

Related: Manufacturing Skills Gap or Management Skills Gap?Manufacturing in the USA, and Why Organizations Often Don’tBig Failed Three, Meet the Enlightened Eight

Manufacturing Skills Gap or Management Skills Gap?

I stumble across articles discussing the problem of manufacturers having difficulty finding workers with the skills they need (in the USA largely, but elsewhere too) somewhat regularly. While it is true that companies have this problem, I think looking at the problem in that way might not be the most insightful view. Is the problem just that potential workers don’t having the right skills or the result of a long term management skills gap?

To me, the current manufacturing skills gap results directly from short term thinking and disrespect for workers practiced by those with management skills shortages over the last few decades. Those leading the manufacturing firms have shown they will flee the USA with the latest change in the wind, chasing short term bonuses and faulty spreadsheet thinking. Expecting people to spend lots of time and money to develop skills that would be valuable for the long term at manufacturing firms given this management skills shortage feels like putting the blame in the wrong place to me.

Why should workers tie their futures to short term thinking managers practicing disrespect for people? Especially when those managers seem to just find ways to blame everyone else for their problems. As once again they do in blaming potential workers for their hiring problem. The actions taken based on the collective management skill shortage in the manufacturing industry over the last few decades has contributed greatly to the current state.

If managers had all been managing like Toyota managers for the last 30 years I don’t think the manufacturing skill gap would be significant. The management skill gap is more important than the manufacturing skill gap in my opinion. To some extent the manufacturing skill gap could still exist, market are in a constant state of flux, so gaps appear. But if their wasn’t such a large management skill gap it would be a minor issue, I believe.

That still leaves companies today having to deal with the current marketplace to try and find skilled workers. But I think instead of seeing the problem as solely a supplier issue (our suppliers can’t provide us what we need) manufacturing firms would be better served to look at their past, and current, management skills gap and fix that problem. They have control over that problem. And fixing that will provide a much more solid long term management base to cope and prosper in the marketplace.

Another management issue may well be the hiring process itself. As I have written about many times, the recruitment process is highly inefficient and ineffective. When you see workers as long term partners the exact skills they have today are much less significant than their ability to meet the organizations needs over the long term. In general, information technology recruiting has the worst case of focusing on silly skills that are really not important to hiring the right people, but this also can affect manufacturing hiring.

Related: IT Talent Shortage, or Management Failure?Dee Hock on HiringManufacturing Jobs Increasing for First Time Since 1998 in the USA (Sept 2010)Building a Great Workforcemanufacturing jobs have been declining globally (including China) for 2 decadesImproving the Recruitment Process

6 New Kiva Loan to Manafacturing Entrepreneurs

I have been a big fan of Kiva for quite some time, and have written about it previously: Kiva – Giving Entrepreneurs an Opportunity to Succeed, Thanksgiving: Micro-financing Entrepreneurs. I made 6 new loans today to manufacturing entrepreneurs in the USA (and Mexico); Tajikistan; Nicaragua; Armenia; and 2 in El Salvador. The webcast above shows Armen Tsaghikyan in Armenia. It does seem like his process maybe could use a benefit from a bit of application of lean manufacturing ideas.

It is great to be able to help out people whether it is providing useful information (like I hope my web site and blog do) or a small loan of capital that allows some capital improvements. Many of the loans through Kiva amount to providing a loan to get additional supplies (often they have very limited capital). But my favorite loans are those that allow for purchases of new equipment that will make them more efficient.

It is easy to help out yourself; you can loan as a little as $25. The 10 members of the Curious Cat team have made 292 loans for a total of $12,000. Comment with the link to your Kiva page and I will add a link on Curious Cat Kivans.

Related: Kiva Fellows Blog: Nepalese Entrepreneur SuccessMore Kiva Entrepreneur Loans: Kenya, Honduras, Armenia…100th Entrepreneur Loan

Touring Factories on Vacation When I Was Young

Growing up, occasionally, a family vacation would include a factory tour related to my Dad’s work. He was providing some management or engineering consulting and took the opportunity to check in on progress and visit the gemba. Here is a photo from one of those tours (in Nigeria, I think). My brother and Mom are visible in the photo.

The tours (which were not a very common occurrence) were quite enjoyable and interesting. Though I really didn’t like how noisy the factories were. Seeing all the machines and vast scale of the systems was quite a change of pace and added some excitement to the vacations (that often were already pretty exciting). I remember we also visited some factories in Kenya (in between seeing the game parks).

photo of factory tour with my family when I was a kid

Factory in Nigeria (I think) that my family toured


On this tour we found a bit of visual management showing which side of a crate should be on the top.
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Factorial Designed Experiment Aim

Multivariate experiments are a very powerful management tool to learn and improve performance. Experiments in general, and designed factorial experiments in particular, are dramatically underused by managers. A question on LinkedIn asks?

When doing a DOE we select factors with levels to induce purposely changes in the response variable. Do we want the response variable to move within the specs of the customers? Or it doesn’t matter since we are learning about the process?

The aim needs to consider what you are trying to learn, costs and potential rewards. Weighing the various factors will determine if you want to aim to keep results within specification or can try options that are likely to return results that are outside of specs.

If the effort was looking for breakthrough improvement and costs of running experiments that might produce results outside of spec were low then specs wouldn’t matter much. If the costs of running experiments are very high (compared with expectations of results) then you may well want to try designed experiment values that you anticipate will still produce results within specs.

There are various ways costs come into play. Here I am mainly looking at the costs as (costs – revenue). For example the case where if the results are withing spec and can be used the costs (net costs, including revenue) of the experiment run are substantially lower.
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Manufacturing Jobs Increasing for First Time Since 1998 in the USA

Surprise! Blue collar jobs are coming back

Manufacturing employment began its decline long before the recession, losing jobs every year since 1998. But since the start of this year, there’s been a 1.6% gain in manufacturing jobs — about twice the pace of growth in other private sector jobs.

The unemployment rate for manufacturing workers has also shown much greater improvement than for workers overall, dropping to 9.5% in August from 13% in December. That compares to a far more modest improvement to 9.6% from 10% for the overall labor force.

Gains so far have been concentrated in four industries — automotive, fabricated metals, primary metals and machinery

This is good news for the economy. I believe it is partially due to more companies rethinking off-shoring practices which are flawed and adopting lean manufacturing ideas. As I have written for years USA manufacturing output has continued to increase and still remains by far the largest manufacturer. China is making huge gains by growing their output dramatically (not by the USA’s output decreasing). Manufacturing employment in the USA (and everywhere else – including China) has been decreasing for 20 years. The main stories are not jobs moving but jobs being eliminated by productivity improvement and China growing manufacturing output not a decline in manufacturing output in the USA.

Related: Worldwide Manufacturing Employment Data – 1979 to 2007Manufacturing in the USA, and Why Organizations Often Don’tTop Manufacturing Countries in 2005

Manufacturing in the USA, and Why Organizations Often Don’t

Manufacturing in the USA continues to do well. But it could do better. There are reasons manufacturing that could be located in the USA is not. And addressing those can increase USA manufacturing. Some reasons are sensible, based on the existing economics and realities of comparative advantage. Some reasons are just flawed thinking, such as the “spreadsheet management” taught at many business schools that Deming and lean thinkers can understand the flawed thinking that leads to outsourcing.

Typical wall street thinking (also driven by “spreadsheet management think” rather than an actual understanding of value stream of a potential investment) also hampers raising investment capital for USA manufacturing. The broken USA health care system also is a big problem driving up costs of doing business in the USA enormously.

Fighting for ‘made in the USA’

Safer and longer-lasting than conventional lithium-ion car batteries, the 52-year old MIT professor’s invention packs 600 cells into a case the size of an airplane carry-on bag. His technology has transformed the batteries used in many cordless power tools. So why are Chiang and his company, A123 Systems, having trouble moving to full-scale commercial production and creating thousands of new American jobs with his better mousetrap?

Despite the promise of Chiang’s batteries, many on Wall Street and in Silicon Valley were incredulous when he and other leaders at A123 asked for capital to build factories in America — Asia, yes, but Michigan, why would you want to?

Even more daunting, nearly all of the world’s battery manufacturing industry is in Asia, where plants can be built faster and supplies and equipment are much easier to get than in the United States. These days, it’s hard to find Americans who even know how to build a battery factory.

That’s why A123 had to give in and build its first plants in China, where the company could move into production quickly to show auto industry customers that it could deliver on future contracts.

“Without question, we would rather have done it all in the U.S.,” said Chiang, who left Taiwan as a 6-year-old with his family, earned degrees at MIT and has been a materials science professor there since the mid-1980s. “I’m an American citizen. We’re an American company. It’s an American-born technology.”

Despite the obstacles, A123 and a few other advanced battery producers are building plants in Michigan and other states, thanks to massive government support that has offset Wall Street’s skepticism and should help domestic producers narrow cost disadvantages with Asian rivals.

A123 is getting $250 million in aid from the Obama administration’s stimulus program as well as tax incentives from Michigan. Its first U.S. plant opens in June in an abandoned brick building near Detroit that once made VHS tapes for Disney.

A123 has five plants in China, coincidentally located in Chiang’s father’s hometown of Changzhou, about two hours’ drive west of Shanghai. Bart Riley, an A123 co-founder and chief technology officer, figured it took about nine months to get a Chinese factory up and running, one-third the time typical for the U.S.

The quicker launch helped A123 make a name for itself through Black & Decker, which in early 2006 began putting A123 batteries in its DeWalt power tools.

Since then, A123 has been supplying batteries and battery systems for New York City buses built by Daimler, among other customers, and the company has agreements to develop products for Chrysler, Navistar and American green-car maker Fisker Automotive.

By the end of next year, A123 expects to have two plants in Michigan employing 400 people, with plans to go up to 2,000 workers able to produce about 30,000 battery systems a year. The company’s sales reached $91 million last year, and it has about 1,700 employees, two-thirds in Asia.

The success of science and engineering university based research is still a huge advantage to the USA. Though other countries have seen the value in this and have invested in building their own capacity. The economic value of such is increased many fold by manufacturing the innovations created in your country.

Related: Manufacturing and the EconomyEconomic Strength Through Technology LeadershipRhode Island ManufacturingBig Failed Three, Meet the Successful EightToyota in the US Economy

The Toyota Way – Two Pillars

Toyota is receiving plenty of criticism now, much of it for good reason. There is also a large amount of psychology involved. From what I have seen, the insurance companies still see better claims history (fewer and lower cost claims) against Toyota than other manufacturers. And there is another strain that seems to enjoy criticizing what has been praised. Toyota does need to improve. But that is improvement of the existing management system, not a need to radically change the management of the company.

I think Toyota, even with the problems, is a fantastic example of a very well managed company. Yet even with all the study of lean manufacturing even basic ideas are overlooked. For example, the two main pillars of the Toyota way are “continuous improvement” and “respect for people.” For all of us, it is valuable to refocusing on core principles. We are too often looking for the next new idea.

This is one way of looking at the pillars of the Toyota Production System, from the Toyota Technical Center – Austrailia

Image of Toyota's pillars of management: respect for people and continuous improvement

Continuous Improvement means that we never perceive current success as our final achievement. We are never satisfied with where we are and always improve our business by putting forth our best ideas and efforts: we are keen to create better alternatives, question our accomplishments and investigate future definitions of success.

There are three building blocks shaping our commitment to Continuous Improvement:

1. Challenge – we form a long term vision, meeting challenges with courage and creativity to realize our dreams;
2. Kaizen – we improve our business operations continuously, always driving for innovation and evolution
3. Genchi Genbutsu – we go to the source to find the facts to make correct decisions, build consensus and achieve goals.

Respect For People refers to our own staff as well as the communities and stakeholder groups that surround us and we are part of. We respect our people and believe the success of our business is created by individual efforts and good teamwork.

Respect For People is translated in:

1. Respect – we respect others, make every effort to understand each other, take responsibility and do our best to build mutual trust
2. Teamwork – we stimulate personal and professional growth, share the opportunities of development and maximize individual and team performance.

These elements combined define our corporate DNA, provide a way of operating that is recognised by each and every Toyota-member around the globe and enables us to sustain our success in the future.

Back to Basics for Toyota by Akio Toyoda

When my grandfather brought Toyota into the auto business in 1937, he created a set of principles that has always guided how we operate. We call it the Toyota Way, and its pillars are “respect for people” and “continuous improvement.” I believe in these core principles. And I am convinced that the only way for Toyota to emerge stronger from this experience is to adhere more closely to them.

While recent events show Toyota obviously needs to improve, that has been true all along (it is just more obvious lately). Some may see this as an indication that these lean manufacturing ideas based on Toyota’s practices are no better than other management practices. I don’t believe this. I feel just as strongly about the value of lean management as ever. I think that the recent events show you that no matter how well an organization in managed there is plenty of room to improve. Toyota never was close to perfection. They have much to improve, but they are still one of the best managed companies in the world.

My comments in 2005:

I think the instances of such failures are just a sign that even Toyota still has quite a bit to improve. I think this announcement likely is a result of common cause variation (it is the natural result of the current system). The natural result (of the system) is not that they have this particular failure, but that this recall is consistent with the % of vehicles that required a recall of this general character. I believe they are getting better over time but they still have a long way to go. With a result based on common cause you want to look at the entire system when designing an improvement plan not at the root cause of the seat belt issue. See Responding to Variation online and the book, Forth Generation Management, by Brian Joiner.

Related: Toyota Stops Lines – Lots of LinesAkio Toyoda’s Message Shows Real LeadershipDeming CompaniesRespect for People Does Not Mean No Criticism

And my comments in 2007:

I don’t agree that they need to rethink their purpose in life (I have a feeling that is taken out of context). They need to maintain and maybe even increase their commitment to their purpose in life.

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Improving Education with Deming’s Ideas

This interview (link broken, so removed) with David Langford discusses how to improve education using ideas from Deming. Along with Alfie Kohn, David have long been the learning and management experts I find most valuable.

I have long remembered is his idea that he was the CEO of his classroom. On hearing Deming discuss how critical it was to have the CEO active in a management improvement effort to achieve success he tried to get those above him in the organization chart to change. Which didn’t work very well. Seeing that method was not successful he took a new look and decided to view the problem in a different way.

He looked for what he was in charge of and decided he could decide how to run his classroom. I think this is a very valuable idea for anyone looking to improve their organization. What is your sphere of control? Focus on how you can improve there. Don’t just try to change others. See how you can change and improve what you can.

The interview provides a good insight into the great ideas David has.

  • “Make changes that let all kids get good grades.”
  • That comes from the theory (incorrect theory) grades motivate students.
  • There is no level of education sub-quality that is acceptable. Success or need to work more, which category are you in. B, C, D does not make sense.
  • People keep trying things we have proven over and over again don’t work, like pay for performance schemes for individual teachers.

Anyone interested in improving education should listen to this interview and search out more ideas from David Langford and Alfie Kohn. I really like David’s capacity matrix.

Related: Orchestrating Learning With Quality by David P. Langford and Barbara A. Cleary – K-12 Educational ReformDeming on being Destroyed by Best Efforts

Toyota Stops Lines – Lots of Lines

The practice of stopping (either the machine automatically detecting a problem and stopping or a person stopping) the line when a problem is detected is part of Jidoka. Jidoka is also highlighting and making problems visible. Jidoka and Just in Time are the two pillars of the Toyota Production System. Today Toyota practiced Jidoka on a large scale: Toyota Halts Sales of Eight Models After Recall

Toyota Motor, still struggling to resolve a problem with accelerator pedals, said Tuesday it would temporarily stop selling and building eight models in the American market, including the popular Camry and Corolla sedans

“This action is necessary until a remedy is finalized,” Robert S. Carter, a Toyota group vice president, said in a statement. “We’re making every effort to address this situation for our customers as quickly as possible.”

Toyota said it would immediately stop selling the Camry, Corolla and Avalon sedans, Matrix wagon, RAV4 crossover, Tundra pickup, and Highlander and Sequoia sport utility vehicles. It will also stop building those models the week of Feb. 1. All of the vehicles are assembled in the United States or Canada, at a total of five plants.

The models affected accounted for more than a million sales in 2009, 57 percent of Toyota’s American total for the year.

The most recent recalls follow what Toyota insisted was a companywide effort to improve quality that was started by Katsuaki Watanabe, who served as its president before he was replaced last year by Akio Toyoda, grandson of the company’s founder.

My guess is there are quite a few people in Toyota that are getting a frustrated that they continue to have problems that they have been unable to successfully address. This strikes is as the kind of action initiated near the top of the organization chart to remind the organization that problems must be addressed immediately. It is not ok to continue business as usually when problems have not been addressed in the Toyota Production System. Toyota is capable of failing to live up to the principles of lean manufacturing. But they also seem to understand this risk and continue to strive to improve. To succeed though they need to improve results – intentions alone are not enough.

Related: Cease Mass Inspection for QualityRecalls at Toyota and SonyReacting to Product ProblemsWorkplace Management by Taiichi Ohno

Prophet Unheard: Dr. W. Edwards Deming – 1992

[embedded webcast links removed because they have been removed from YouTube. To see video with W. Edwards Deming see the Deming Institute YouTube channel.]

This is an interesting video on Deming and American management (by the BBC in 1992): Prophet Unheard. It includes some nice old footage of Deming in Japan. The importance of respect for people is clear and the video also touches on the idea the danger of relying on data (when you do not understand variation and that many important matters and unmeasurable). The video features many snippets of Dr. Deming speaking and includes Don Peterson, Ford CEO; Clare Crawford Mason, If Japan Can, Why Can’t We producer; and Myron Tribus.

Related: Dr. Deming Webcast on the 5 Deadly DiseasesRed Bead Experiment WebcastPerformance without Appraisalmanagement webcasts

Part two of the documentary explores the Deming Prize, understanding data and the PDSA cycle: [removed]

Part 3 explores the efforts at Florida Power and Light, the first USA Deming Prize winner: [removed]

The Biggest Manufacturing Countries in 2008 with Historical Data

Once again the USA was the leading country in manufacturing for 2008. And once again China grew their manufacturing output amazingly. In a change with recent trends Japan grew output significantly. Of course, the 2009 data is going to show the impact of a very severe worldwide recession.

Chart showing percent of output by top manufacturing countries from 1990 to 2008Chart showing the percentage output of top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The first chart shows the USA’s share of the manufacturing output, of the countries that manufactured over $185 billion in 2008, at 28.1% in 1990, 27.7% in 1995, 32% in 2000, 28% in 2005, 28% in 2006, 26% in 2007 and 24% in 2008. China’s share has grown from 4% in 1990, 6% in 1995, 10% in 2000, 13% in 2005, 14% in 2006, 16% in 2007 to 18% in 2008. Japan’s share has fallen from 22% in 1990 to 14% in 2008. The USA has about 4.5% of the world population, China about 20%. See Curious Cat Investment blog post” Data on the Largest Manufacturing Countries in 2008.

Even with just this data, it is obvious the belief in a decades long steep decline in USA manufacturing is not in evidence. And, in fact the USA’s output has grown substantially over this period. It has just grown more slowly than that of China (as has every other country), and so while output in the USA has grown the percentage with China has shrunk. The percentage of manufacturing output by the USA (excluding output from China) was 29.3% in 1990 and 29.6% in 2008. The second chart shows manufacturing output over time.

charts showing the top manufacturing countries output from 1990-2008Chart showing the output of the top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The 2008 China data is not provided for manufacturing alone (the latest UN Data, for global manufacturing, in billions of current USA dollars). The percentage of manufacturing (to manufacturing, mining and utilities) was 78% for 2005-2007 (I used 78% of the manufacturing, mining and utilities figure provided in the 2008 data). There is a good chance this overstates China manufacturing output in 2008 (due to very high commodity prices in 2008).

Hopefully these charts provide some evidence of what is really going on with global manufacturing and counteracts the hype, to some extent. Global economic data is not perfect. These figures are an attempt to capture the economic reality in the world but they are not a perfect proxy. This data is shown in 2008 USA dollars which is good in the sense that it shows all countries in the same light and we can compare the 1995 USA figure to 2005 without worrying about inflation. However foreign exchange fluctuations over time can show a country, for example, having a decline in manufacturing output in some year when in fact the output increased (just the decline against the USA dollar that year results in the data showing a decrease – which is accurate when measured in terms of USA dollars).

If the dollar declines substantially between when the 2008 data was calculated and the 2009 data is calculated that will give result in the data showing a substantial increase in those countries that had a currency strengthen against the USA dollar. At this time the Chinese Renminbi has not strengthened while most other currencies have – the Chinese government is retaining a peg to a specific exchange rate.

Korea (1.8% in 1990, 3% in 2008), Mexico (1.7% to 2.6%) and India (1.4% to 2.5%) were the only countries to increase their percentage of manufacturing output (other than China, of course, which grew from 3.9% to 18.5%).

Related: posts on manufacturingGlobal Manufacturing Data 2007Global Manufacturing Employment Data – 1979 to 2007Top 10 Manufacturing Countries 2006Top 10 Manufacturing Countries 2005lean manufacturing resources

Lean Inventories Do Not Excuse Failing to Deliver

Low inventory levels do not mean failing to have products available for customers. Now, if you manufacturing in huge batches and can’t respond to customer feedback then it might mean failure to predict customer demand does mean failure to deliver. But lean thinking has shown how to avoid this problem. People need to adopt lean manufacturing practices and gain the benefits of low inventory levels without the costs of failing to deliver what customers want.

Sorry Santa, We’re Out of Stock

The “it” gifts this year could swiftly vanish from store shelves, as retailers, with nightmares of Christmas 2008 markdowns dancing in their heads, have slashed inventories to some of the leanest levels in recent memory.

Retailers themselves are battle-scarred by last year’s fourth-quarter fiasco. Following the financial meltdown of September 2008 and amid the most severe economic crisis since The Great Depression, consumers retrenched.

That’s when stores hit the markdown panic button, slashing prices upwards of 75 percent. The result was the worst holiday selling season since 1970, according to The International Council of Shopping Centers.

But although leaner inventory levels should drive profit margin gains this holiday, “retailers might not have enough inventory to fully satisfy demand,” said Citigroup retail analyst Deborah Weinswig, in a research note. It is a risk they are willing to take.

“They would rather lose a sale than take the markdowns they had last year,” said Goldman Sachs analyst Adrianne Shapira.

The retailers need to design their systems with lean thinking in mind (not lean – as in cut expenses without thought). And they need to work with suppliers using lean manufacturing principles.

Related: Be Thankful for Lean ThinkingGuess What? Manufacturing in the USA is a Good IdeaTesco: Lean ProvisionZara Thrives by Ignoring Conventional WisdomOperational Excellencelean manufacturing articles

Akio Toyoda’s Message Shows Real Leadership

Speech by Akio Toyoda

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.”

“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”

Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles

Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.

Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.

At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or gemba.” I believe that the essence of management lies in the gemba, and Toyota employees play a vital role there.

Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.

Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.

via: Toyoda on Toyota: A New Regime, A New Future

Related: New Toyota CEO’s Views (2005)Interview with Toyota President (2006)Deming Companies“2007 has been a difficult year for Toyota”No Excessive Senior Executive Pay at ToyotaWebcast on the Toyota Development Process

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Penske to Buy Saturn from GM

Penske to Buy Saturn from GM

“When Saturn launched in the 1980s, it was the new, new thing, with the best dealer service and no-haggle pricing that put customers at ease,” said independent marketing consultant Dennis Keene. “But in recent years, it has just been another GM division, operating the same as Chevy or Pontiac, with nothing to differentiate it and a marketing message that keeps changing, so that people haven’t been able to get a handle on what the brand is supposed to be.”

First off, he won’t own any manufacturing plants. Saturn will continue to buy today’s vehicles from GM for at least two years. Penske will talk to other auto manufacturers in Europe and Asia about supplying new products after that. “We are going to be a sales, service, and marketing company, not an OEM [original equipment manufacturer],” he said. Eventually, Penske explained, he wants at least some Saturn vehicles to once again be manufactured in the U.S., though that may not be the case in the short run after the agreement with GM runs out.

I thought Saturn was the worst management failure at GM, among many (NUMMI, and GM’s Failure to Manage Effectively, for example). They really did some great things early on with rethinking the system of manufacturing and selling cars. But GM failed to take care of the innovative division. I hoped that Saturn would gain a new, better, management that build Saturn toward the potential it has. Contracting out manufacturing however, is a horrible idea, I believe. Unfortunately I think this ends the hope for a great Saturn.

Saturn still have the potential to do ok, given how bad the dealership experience is for most other companies. The dealer experience, even for Toyota and Lexus is still not at all congruous with the customer focus principles of lean (for example, motivating sales people to make as bad a deal for customers as they can – paying them more the more they get for the dealership at the expense of the customer). And other car companies have quite a bit to learn from the sales practices of Saturn and Car Max.

Related: Big Failed Three, Meet the Successful EightHonda has Never had Layoffs and has been Profitable Every YearPeople: Team Members or CostsInvest in New Management Methods Not a Failing Company, 1986