Posts about economy

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).

Continue reading

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.

Continue reading

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

USA Spent $2.6 Trillion, $8,402 per person,17.9% of GDP on Medical Expenses in 2010

Total health expenditures in the USA in 2010 reached $2.6 trillion, $8,402 per person or 17.9% percent of GDP. All these are all time highs. Every year, for decades, health care costs have taken a larger and larger portion of the economic value created in the USA.

In 2009 the USA Spent Record $2.5 Trillion, $8,086 per person 17.6% of GDP on Medical Care.

USA health care spending grew 3.9% in 2010 following an increase of 3.8% in 2009. While those are the two slowest rates of growth in the 51 year history of the National Health Expenditure Accounts, they still outpaced both inflation and GDP growth. So yet again the health system expenses are taking a bigger portion of overall spending. This has been going on so long that the USA spends double what many other rich countries do on healthcare with no better results.

As a result of failing to address this issue for decades the problem is huge and will likely take decades to bring back just to a level where the burden on those in the USA, due to their broken health care system, is equal to the burden of other rich countries. Over 2 decades ago the failure in the health care system reached epidemic proportions but little has been done to deal with the systemic failures. Dr. Deming pointed to excessive health care cost, back then, as one of 7 deadly diseases facing American business. The fact that every year costs have increased more than GDP growth and outcome measures are no better than other rich countries shows the performance has been very poor. The disease is doing even more harm today.

Some good things have been done over the years, most notably by Don Berwick while at the Institute for Healthcare Improvement. He was effectively thrown out of office by the politicians recently. The same politicians that have through decades of such foolish acts contributed more than any other group to the broken health care system that burdens the USA today. In the last 10 years a significant amount of good work has also been done in “lean healthcare”: applying lean thinking to healthcare. But it is similar to the quote that a “bad system will beat a good person.” With all the bad systemic issues the efforts, good as they are, in lean healthcare are mainly improving around the edges. Of course, “around the edges” of a $2.6 Trillion dollar system can still be extremely valuable and important.

Related: USA Heath Care System Needs ReformUSA Spends Record $2.3 trillion ($7,681 Per Person) on Health Care in 2008Systemic Health Care Failure: Small Business CoverageMeasuring the Health of NationsHow to improve the health care system performanceManagement Improvement in HealthcareUSA Spent $2.2 Trillion, 16.2% of GDP, on Health Care in 2007

Continue reading

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

Net Neutrality, Policy, Economics and Intelligent Engineering

I believe net neutrality should be championed to prevent decay of the usability of the internet. It seems to me internet connectivity is a natural monopoly that economic theory says should be a regulated monopoly. Smart countries have invested in providing much better internet connectivity that the USA has at much lower prices. Now in the USA we have companies that seek to control internet connectivity and then use that monopolistic control to favor higher margin efforts. So force those that have resources available on the internet to pay or the ISP threatens to degrade the connectivity to their resources.

chart showing internet connectivity speed (USA 18th)

The investment in equipment and fiber that allows internet connectivity has to be paid for. If those regulated ISPs wanted to set bandwidth use pricing that is fine with me. If we decided it is best to have one low price say $30 a month for access at a similar perforance of 10 other countries (Japan, Germany, South Korea, Canada, United Kingdom…) and then charge extra for individuals those that use more than some amount fine. But I think it should not be tied to whether you use service that haven’t paid the ISP money to be favored. The USA is currently 18th and slowed down, while others continue to speed up.

The 2008 ITIF Broadband Rankings show the USA in 15th place, out of 30 OECD countries, for broadband adoption, speed and price. In 2001 the USA was in 4th place.

If ISPs don’t want to be in the business they should be in – providing internet connectivity. Fine, get out of that business and go into the business they want to be in. But don’t try to take control of a natural monopoly and then use that control to extort money from those that rely on the natural monopoly.

Google accused of YouTube ‘free ride’

Some of Europe’s leading telecoms groups are squaring up for a fight with Google over what they claim is the free ride enjoyed by the technology company’s YouTube video-sharing service. Telefónica, France Telecom and Deutsche Telekom all said Google should start paying them for carrying bandwidth-hungry content such as YouTube video over their networks.

I can understand why they would think that way. But isn’t it equally valid to say hey those that pay you for internet connectivity really want to use YouTube. If you need to make more investments in your infrastructure to support your customers use, then do so and raise the prices. I completely disagree with the ISP negotiating what content users can see. But if that were to happen why couldn’t Google instead of paying say, hey your customers really want YouTube – if you don’t pay us we won’t let you deliver it to your customers?

Net Neutrality: This is serious by Tim Berners-Lee

When I invented the Web, I didn’t have to ask anyone’s permission. Now, hundreds of millions of people are using it freely. I am worried that that is going end in the USA.

Yes, regulation to keep the Internet open is regulation. And mostly, the Internet thrives on lack of regulation. But some basic values have to be preserved. For example, the market system depends on the rule that you can’t photocopy money. Democracy depends on freedom of speech. Freedom of connection, with any application, to any party, is the fundamental social basis of the Internet, and, now, the society based on it.

Let’s see whether the United States is capable as acting according to its important values, or whether it is, as so many people are saying, run by the misguided short-term interested of large corporations.

I hope that Congress can protect net neutrality, so I can continue to innovate in the internet space. I want to see the explosion of innovations happening out there on the Web, so diverse and so exciting, continue unabated.

Google’s Traffic Is Giant, Which Is Why It Should be Your ISP
Continue reading

Loan Default Rates Continue to Increase

chart of loan default rates 1998 to 2009Chart showing loan default rates for real estate, consumer and agricultural loans for 1998 to 2009 by the Curious Cat Investing Economics Blog, Creative Commons Attribution, data from the Federal Reserve.

Default rates on commercial (up another 151 basis points) and residential (93 basis points) real estate continued to increase dramatically in the second quarter. Credit card default rates increased but only by 20 basis points.

Real estate default rates exploded in 2008, in the aftermath of the financial market meltdown. In the 4th quarter of 2007 residential default rates were 3.02% by the 4th quarter of 2008 they were 6.34% and in the 2nd quarter of this year they were 8.84% (582 basis points above the 4th quarter of 2007). Commercial real estate default rates were at 2.74% in the 4th quarter of 2007, 5.43% in the fourth quarter of 2008 and 7.91% in the 2nd quarter of 2009 (a 517 basis point increase).

Credit card default rates were much higher than real estate default rates for the last 10 years (the 4-5% range while real estate hovered above or below 2%). Now they are over 200 and 300 basis points bellow residential and commercial default rates respectively. From 4.8% in the 3rd quarter 2008 to 5.66% in the 4th and 6.5% in the 1st quarter of 2009.

Small steps to reduce the large consumer debt have been made recently: consumer debt declined a record $21.5 billion in July. Since April of 2008 consumer debt has been reduced by $70 billion in the USA. Unfortunately we still have $2.47 trillion or
$8,233 for every person (using 300 million as the total population).
Data from the Federal Reserve

Community Banks Asks Why They Must Pay for Wall Street Greed

Minnesota Bank Asks Why It Pays for Wall Street Greed

TCF is among more than 8,300 banks and lenders insured by the FDIC facing increased fees and a one-time “emergency” charge designed to raise $27 billion this year for the agency’s depleted coffers.

Community banks rely more on deposit funding, so they suffer a “much heavier burden” as a result of deposit insurance proportionate to size than peers such as New York-based Citigroup Inc. and Wells Fargo & Co., with its headquarters in San Francisco, Fine said.

Community lenders “are feeling like they are paying for the incompetence and greed of Wall Street,” Fine said this week in an interview.

FDIC assessments are set per $100 in deposits and not weighted by bank size. That’s a formula that could be modified to shift the cost burden to the largest banks “that caused this train wreck,” Fine said. TCF never “securitized anything, we never engaged in any of those unscrupulous activities,” said Cooper, 65.

I am not very surprised that politicians provide big favors to those that give them huge amounts of money (former investment banks, farming interests, private plane owners, Fortune 100 companies, owners of oceanfront mansions, private equity speculators…). I am a bit surprised how much money is being lavished on those huge donors now, with the bailouts. Especially with how lacking in even minor consequences those huge gifts to their donors are (normally if the payoffs to supports get too huge there are at least some cover provided by putting in consequences for this “need” to send taxpayer money to their contributors).

The FDIC is a great government program. But allowing huge banks to take enormous risks and then passing on the much of the costs, of a small portion of those risks (FDIC insured deposit accounts), to banks that do not act as irresponsibly as the risk takers is a bad idea. Insurance should have increasing costs based on increasingly risky behavior.
Continue reading

Some Firms Cut Costs Without Resorting to Layoffs

Some Firms Cut Costs Without Resorting to Layoffs

Hypertherm Inc. has never laid off a permanent employee in its 40-year history. A 20% downturn in sales in recent months led the closely held maker of metal-cutting equipment to eliminate overtime, cut temporary staff and delay a facility expansion, says Chief Executive Dick Couch.

Managers are transferring employees to busy segments from those with less work. The Hanover, N.H., company also may bring some outsourced manufacturing in-house to keep its 1,100 workers busy, Mr. Couch says.

Private companies, like Hypertherm, may feel less outside pressure to cut jobs and a deeper commitment to employees than publicly held firms, some experts say. Still, a few public companies — including Lincoln Electric Co. and steelmaker Nucor Corp. — also have no-layoff policies.

Good for them. Smart management practices that pay off in long term results. One thing I think some employees forget is the value of such respect for employees. When times are good it is easy to see the lure of higher pay, over long term stability. Layoffs are never good. If you work with an employee and cannot find a way for them to provide value after serious effort then letting them go is fine with me. But that shouldn’t have to do with the economy. That has to do with them not being able to fulfill their responsibilities. I am very suspicious of such claims though, normally management either needs to fix the hiring process or the employee management/development process. The system is the problem not the person (the vast majority of the time).

Related: Bad Management Results in LayoffsFiring Workers Isn’t Fixing ProblemsFind the Root Cause Instead of the Person to Blamemanagement improvement jobs

Financial Market Meltdown

The financial market meltdown has grown to the point where it has profound ramifications for everyone. The common wisdom for financial market variation, for most of us, is just to focus on the long term and don’t worry about short term fluctuations. That is good advice. This panic is threatening to override that wisdom however. There are at least 2 areas to consider: personal finance and business prospects (how managers need to take this crisis into account).

On personal finance I still believe the same smart personal financial decisions last year, or five years ago are wise today: avoid credit card debt, have an emergency fund of 6 months of expenses, save for retirement, have proper health insurance, don’t buy what you don’t need and can’t afford… The biggest change I see is that the risks of failing to do these things (and the risks of failing to have done them in the past) are increasing greatly.

One of the challenges with personal financial matters is they are by nature long term issues. What you did over the last 5 years cannot be fixed in a few weeks, most likely it takes years. For more details follow the links in the paragraph above (to posts on the Curious Cat Investing and Economics Blog). You can’t make much progress quickly on these matters if you failed to do so over the last 5 years. However, you can at the very least start doing so now and you can even go a bit further if you were doing well (I am seriously considering raising my retirement contributions to take advantage of low stock prices).

On the impact to management area, this crisis has reached the point at many companies that managers not involved in finance have already been dealing much more with the importance of cash flow. And all indications indicate the risks related to manage cash flow are increasing dramatically. The expected sources of cash to provide for long term investments, for medium term investments and even short term cash flow needs are disappearing in a way I don’t think anyone predicted was possible.

What will happen in the next 1-6 months is very hard to predict. Most likely the credit markets will recover some (it is hard to imagine they could stay this broken). But to what extent is hard to say. And the real business risks of almost unimaginable (anytime the last 70 years anyway) problems raising cash, require managers to evaluate how to react today based on these risks. Even a month ago, for most businesses (outside of the financial industry or those with extremely heavy financing needs) this was not likely a consideration.
Continue reading

Our Failed Health-care System

The bad idea behind our failed health-care system by Malcolm Gladwell

One of the great mysteries of political life in the United States is why Americans are so devoted to their health-care system.

Americans spend $5,267 per capita on health care every year, almost two and half times the industrialized world’s median of $2,193; the extra spending comes to hundreds of billions of dollars a year. What does that extra spending buy us? Americans have fewer doctors per capita than most Western countries. We go to the doctor less than people in other Western countries. We get admitted to the hospital less frequently than people in other Western countries. We are less satisfied with our health care than our counterparts in other countries. American life expectancy is lower than the Western average.

Health Savings Accounts represent the final, irrevocable step in the actuarial direction. If you are preoccupied with moral hazard, then you want people to pay for care with their own money, and, when you do that, the sick inevitably end up paying more than the healthy. And when you make people choose an insurance plan that fits their individual needs, those with significant medical problems will choose expensive health plans that cover lots of things, while those with few health problems will choose cheaper, bare-bones plans.

In the rest of the industrialized world, it is assumed that the more equally and widely the burdens of illness are shared, the better off the population as a whole is likely to be. The reason the United States has forty-five million people without coverage is that its health-care policy is in the hands of people who disagree, and who regard health insurance not as the solution but as the problem.

This is another article with an interesting take on the problems with the broken health care system in the USA. I don’t totally agree with the conclusion. I think the failure of the system and refusal to make substantial change have multiple causes including: smart lobbyists paying politicians lots of money to support their interest in keeping the current system, people being fearful about change, false perceptions about the system performance (thankfully an understanding of the poor performance is becoming more widespread recently), that the system works least poorly for the wealthy who have more influence than those without insurance, that the benefits of spending huge amounts today are going to specific companies and people and thus are available for buying political support (not just paying politicians but also funding marketing campaigns, experts to provide journalists the position of those in favor of the existing system…) while the benefits of changing are much more distributed. Luckily companies are increasingly – decades after Deming noted this health care costs are a huge problem for companies in the USA – focusing on the need for improving what is often one of the largest expenses for companies. The issue many fail to understand is how much the excessive costs of health care in the USA harm the ability of companies in the USA to compete – many even fail to appreciate the human cost of tens of millions of people without health insurance.

Related: Drug Prices in the USAMeasuring the Health of NationsOverview of 5 Nations Health Care SystemsFixing Health CareImproving the Health Care System

California Uses More Gas than China

Amazing Stat: California Uses More Gas than China:

California alone uses more gasoline than any country in the world (except the US as a whole, of course). That means California’s 20 billion gallon gasoline and diesel habit is greater than China’s! (Or Russia’s. Or India’s. Or Brazil’s. Or Germany’s.)

That’s according to the California Energy Commission’s State Alternative Fuels Plan, which was posted online last Christmas Eve (pdf). The whole report makes for some fascinating reading because it’s a blueprint for a low-carbon and renewable transportation fuel future. The dominant takeaway: it ain’t going to be easy.

One more choice statistic: gasoline usage in California has increased 50 percent, that’s 10 6.7 billion gallons, since 1988.

But China’s oil thirst is growing — to almost 20 billion gallons in 2007 — and perhaps as early as this year, China’s 1.3 billion people will overtake California’s 37 million people in total gasoline and diesel usage.

Interesting data. The Curious Cat Economics Blog recently posted on the top oil consuming countries.

Related: Car Powered Using Compressed AirFailure to Increase Gas TaxCurious Cat Science and Engineering Blog – Energy posts

Manufacturing Employee Shortage in Utah

Utah scrambling to meet need for technical workers

The state faces challenges in generating necessary interest to fill available manufacturing jobs for what Utah’s governor has called the state’s “Aerospace Hub,” both immediately and in the future, the report said.

The situation continues to worsen, with jobs being created and unemployment remaining low in the state. And as the current work force ages, the supply of skilled workers is diminishing, forcing employers to recruit outside of Utah and sometimes leave Utah altogether, the report said.

The college’s Lean Manufacturing Center was built from an old warehouse with state funds and $30 million from rocket-booster manufacturer Williams International. Williams provides the college with equipment and mentors to train students with practical, real-world applications, said Lloyd McCaffrey, the Lean Center’s director.

Related: Engineering Innovation for Manufacturing and the EconomyApplied Quality Engineering EducationWisconsin ManufacturingTop 10 Manufacturing CountriesHelp Wanted: Lean Manufacturing ExpertsThe Lean MBACurious Cat Management Improvement Job Board

Drug Price Crisis

In 2005 I posted about some of the problems with drug pricing. It is nice to find at least a couple of people at MIT that want to have MIT focus research on the public good instead of private profit. As I have mentioned too many universities now act like they are for-profit drug or research companies. That is wrong. Drug companies can do so, institutions with purported higher purposes should not be driven to place advancing science below profiting the institution.

Solving the drug price crisis

The mounting U.S. drug price crisis can be contained and eventually reversed by separating drug discovery from drug marketing and by establishing a non-profit company to oversee funding for new medicines, according to two MIT experts on the pharmaceutical industry.

Following the utility model, Finkelstein and Temin propose establishing an independent, public, non-profit Drug Development Corporation (DDC), which would act as an intermediary between the two new industry segments — just as the electric grid acts as an intermediary between energy generators and distributors.

The DDC also would serve as a mechanism for prioritizing drugs for development, noted Finkelstein. “It is a two-level program in which scientists and other experts would recommend to decision-makers which kinds of drugs to fund the most. This would insulate development decisions from the political winds,” he said.

I see their idea as one worth trying. Lets see how it works. Their book: Reasonable Rx – Solving the Drug Price Crisis by Stan Finkelstein and Peter Temin

Related: USA Spent $2.1 Trillion on Health Care in 2006Measuring the Health of NationsAntibiotics Too Often Prescribed for Sinus Woes$600 Million for Basic Biomedical Researcharticles on improving the health care system

Management Advice from Warren Buffet

As usual, Warren Buffett’s letter to shareholders is packed with wisdom. He is best know for his investing genius but his writing provides great thoughts for managers also: Berkshire Hathaway 2007 Letter to Shareholders:

We will soon purchase 60% of Marmon and will acquire virtually all of the balance within six years. Our initial outlay will be $4.5 billion, and the price of our later purchases will be based on a formula tied to earnings.

This deal was done in the way Jay would have liked. We arrived at a price using only Marmon’s financial statements, employing no advisors and engaging in no nit-picking. I knew that the business would be exactly as the Pritzkers represented, and they knew that we would close on the dot, however chaotic financial markets might be. During the past year, many large deals have been renegotiated or killed entirely. With the Pritzkers, as with Berkshire, a deal is a deal.

Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag. We like to buy the whole business or, if management is our partner, at least 80%

A truly great business must have an enduring “moat” that protects excellent returns on invested capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business “castle” that is earning high returns.

Susan came to Borsheims 25 years ago as a $4-an-hour saleswoman. Though she lacked a managerial background, I did not hesitate to make her CEO in 1994. She’s smart, she loves the business, and she loves her associates. That beats having an MBA degree any time. (An aside: Charlie and I are not big fans of resumes. Instead, we focus on brains, passion and integrity.

I should emphasize that we do not measure the progress of our investments by what their market prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the businesses we own. The first test is improvement in earnings’ with our making due allowance for industry conditions. The second test, more subjective, is whether their “moats” – a metaphor for the superiorities they possess that make life difficult for their competitors – have widened during the year.

You will recall that in our catastrophe insurance business, we are always ready to trade increased volatility in reported earnings in the short run for greater gains in net worth in the long run.

What is no puzzle, however, is why CEOs opt for a high investment assumption: It lets them report higher earnings. And if they are wrong, as I believe they are, the chickens won’t come home to roost until long after they retire.

Related: Buffett’s Letter to Shareholders (from last year)Buffett’s Shareholder Letter (2006)Overview of Warren BuffettAnnual Report by Warren Buffett (2005)Hiring the Right People
Continue reading

Creating Jobs

Do Lean Companies Create Fewer Jobs?

No, they create more. If you assume the lean company grows sales at the same rate as some poorly management company then it may well be that the lean company creates fewer jobs. However that is not a valid assumption. Deming provided the reason in his presentations to Japan in the 1950’s with his chain reaction. From page 3 of Out of the Crisis

  • Improve Quality —>
  • Costs decrease because of less rework, fewer mistakes, fewer delays, snags, better use of machine-time and materials —>
  • Productivity Improves —>
  • Capture the market with better quality and lower price —>
  • Stay in Business —>
  • Provide jobs and more jobs

For an example of this process at work see GM, Ford and Toyota. Toyota defines lean (Toyota’s management system is what was called lean manufacturing by Jim Womack and Dan Jones). Toyota continues to add employees while Ford and GM have been shedding jobs.

It is true, for lean (and un-lean) companies alike, productivity is improving (it just improves more at lean companies) which means that fewer people are needed to produce the same amount as we have in the past. We have posted previously about the mistaken belief that jobs are moving overseas.
Continue reading

Measuring the Health of Nations

Measuring the Health of Nations: Updating an Earlier Analysis

In a Commonwealth Fund-supported study comparing preventable deaths in 19 industrialized countries, researchers found that the United States placed last. While the other nations improved dramatically between the two study periods (1997–98 and 2002–03) the U.S. improved only slightly on the measure.

Rankings: 1) France 2) Japan 3) Australia 4) Spain 5) Italy 6) Canada… 18) Portugal 19) USA. Maybe the United States is last but still not significantly behind?

According to the authors, if the U.S. had been able reduce amenable mortality to the average rate achieved by the three top-performing countries, there would have been 101,000 fewer deaths annually by the end of the study period.

It might seem like a stretch to compare the lowest ranked country to the average of the top 3, but, for all those that feel the USA is the best health care system it raises the questions of why they don’t think 100,000 annual deaths is a significant enough problem to lower their opinion of the current system. And remember the USA system costs something like twice as much as the average system: up to 16% of GNP in 2006.

I must say I would rather have the Toyota mindset shown by those talking about the USA health system instead of the claims of how the current USA health system is number 1. In Toyota’s horrible last year they still had a profit of about $14 billion (I believe something like 20 companies have every made that much). The United States health system sure has some things to point to positively but the system seems to be losing ground to the rest of the world more and more quickly while many cling to a belief it is the best system around.

Related: Evidence-based Managementposts on improving health careImproving Hospital Performancearticles on improvement health careBest Research University RankingsTop 10 Manufacturing CountriesDr. Deming’s Seven Deadly Diseases of Western Management

Applied Quality Engineering Education

Classroom projects translate into immediate workplace gains for working professionals in engineering

In the final semester of his UW–Madison master’s degree, Bob Aloisi didn’t just earn a letter grade in his quality engineering class: He saved his company $50,000. It wasn’t the typical classroom outcome — but it wasn’t a typical classroom. As a student in “Quality Engineering and Quality Management,” Aloisi accomplished a major class project in quality improvement at his own workplace.

The project is the capstone experience in the College of Engineering’s award-winning distance-education program, the Master of Engineering in Professional Practice (MEPP). Designed for mid-career engineers who live and work all over the country, MEPP’s Internet-based curriculum strives to provide knowledge students can apply immediately at their companies.

“Our project was a very good example of the Kaizen approach,” says Aloisi. “It wasn’t one specific thing, a home run type of thing, that we changed to make our improvements.” Instead, his team met its targets through many small steps, including adjustments to equipment settings and better training for machine operators.

Good news. Related: Wisconsin ManufacturingImproving Engineering EducationTeaching Quality Improvement by Quality Improvement in TeachingThe Lean MBA

Global Manufacturing Data by Country

I am still looking for a good source for manufacturing data by country and year. Today I found some data from the United Nations Statistics Division. The data for the top five manufacturing economies: China, Germany, Japan, United Kingdom and United States. Figures are in current $US billion. The data used is for Mining, Manufacturing and Utilities (because China and Germany do not have manufacturing data separated out).

Country 2001 2002 2003 2004
United States 1,781 1,779 1,876 2,012
Japan 991 929 1017
China 507 551 638 754
Germany 421 449 545 613
United Kingdom 280 283 322 378

For manufacturing output only:

Country 2001 2002 2003 2004
United States 1,460 1,463 1,523 1,623
Japan 866 812 894
United Kingdom 220 223 254 298

This data shows the United States manufacturing economy is continuing to grow and is solidly the largest manufacturing economy: which contradicts what many believe. It is true manufacturing jobs are decreasing in the United States and worldwide – China is losing far more manufacturing jobs than the USA.
Continue reading

Manufacturing and the Economy

In Global Market, Iowa Manufacturers Fight for Survival:

The conventional wisdom has been that expanded trade would result in the United States losing low-pay, low-skilled manufacturing jobs, said David Swenson, an economic scientist at Iowa State University. But “a lot of the jobs that we have traditionally thought of as high value, high quality, high benefits are in trouble, too.”

The conventional wisdom was that the rest of the world would not be able to compete with the United States for high wage, high value jobs. It turns out the rest of the world is much more able to compete for that work than was expected.
Continue reading

  • Recent Trackbacks

  • Comments