The PEER Bearing Company (a manufacturer of bearings based in Illinois) was bought out by a Swedish company this year. The family that had owned the company gave surprise bonuses of $6.6 million to the 230 employees of the company (an average of over $28,000).
Family members signed two thank-you cards to each employee, one in Spanish and one in English, expressing gratitude for “the loyalty and hard work of our employees over the years.” “They treated us like extended family,” said Maria Dima, who works at the company along with her husband, Valentin. “We won the lottery.”
On the day the checks were distributed, Valentin Dima watched as co-workers broke down in tears over their bonus checks. He drove home first, then opened his envelope: $33,000. His wife received a check for a smaller amount, and the two Romanian immigrants have since taken a Caribbean cruise to celebrate.
The new owners intend to operate the company based 40 miles north of Chicago as a wholly owned subsidiary. Workers have been told that most will keep their jobs.
I predict American Motors will stop making cars in Wisconsin in the near future, whether or not the state’s money is used for a temporary propping-up operation.
These competitors are beginning to understand how essential it is to take a long-term view of their businesses. Toyota, for example, took its top 40 managers on a two-day retreat to ponder what their corporation will look like in the 21st century. They are studying totally new methods of management [20 years later large portions of these “new” methods are still ignored by many – John]. These methods take continuous quality improvement as a central, guiding principle.
Investing in American Motors now, in any form, is a mistake. If Wisconsin is to become a trend-setter in economic development, we need some long-term thinking in forming wise, creative policies.
It is difficult, I know, for legislators and other elected officials to take a long-term view when the tangible reward is re-election and elections come around quite frequently.
Our founding fathers are remembered for their long-term vision. We need to change the way our democracy works so that long-term visions is an integral part of all important discussions on economic development on the local, state and national level.
In 1985 I assumed the role of plant manager of one of the world’s foremost automotive tool manufacturers in a small northern Iowa town. It was then that I was introduced to W. Edwards Deming. At the time, the company had a greater market share than any of its individual domestic or foreign competitors, but ominous and encroaching signs from abroad began to threaten its pre-eminence in the automotive aftermarket. So steps had to be taken to arrest this incursion that could mean the end of its reign.
It was then, as I began my tenure at the company, that we began with Deming’s concept of Statistical Process Control, later changed to Quality Control, and the practice of Toyota’s kanban cell manufacturing techniques that would enhance the already high-quality standards that had defined the company for decades.
If we had listened, if we had followed him, if we had incorporated his thinking not only in the automobile industry but in government, in the ubiquitous economy collapsing around us and in our private lives, we would now be far better for it.
This state-of-the-art manufacturing complex in the northeastern Brazilian state of Bahia is not only the centerpiece of Ford’s Brazilian turnaround plan, it is also one of the most advanced automobile plants in the world. It is more automated than many of Ford’s U.S. factories, and leaner and more flexible than any other Ford facility. It can produce five different vehicle platforms at the same time and on the same line.
At Camaçari, more than two dozen suppliers operate right inside the Ford complex, in many cases producing components alongside Ford’s main production line. Having those supplier operations on-site allows Ford to take the concept of just-in-time manufacturing to a whole new level. Inventories are kept to a bare minimum, or dispensed with entirely. Components such as dashboard assemblies flow directly into the main Ford assembly line at the precise point and time they are needed.
Unlike many U.S. auto plants, where workers’ responsibilities are strictly limited to specific job classifications, workers like Silva dos Santos are encouraged to learn as many different skills as possible.
They each have improved over the years, but the standard is not just improving but doing so effectively and enough and they failed at that. The UAW shares some responsibility for failing to successfully lead their workers to a promising future but management is much more responsible for the failure in my opinion (the video and article try to say Ford wants to be innovative in the USA but the UAW won’t let them). It is management’s jobs to focus the organization on cooperation and success for all stakeholders. When management is more concerned with getting themselves huge payoffs (from the pockets of the other stakeholders) and then try to blame one of those other stakeholders for fighting management is disingenuous. Executive’s contempt for other stakeholders leads to the other stakeholders feeling that they should be just as greedy as management.
The USA’s share of the manufacturing output of the countries that manufactured over $200 billion in 2007 (the 12 countries on the top of the chart above) in 1990 was 28%, 1995 28%, 2000 33%, 2005 30%, 2006 28%, 2007 27%. China’s share has grown from 4% in 1990, 1995 7%, 2000 11%, 2005 13%, 2006 15%, 2007 16%.
Total manufacturing output in the USA was up 76% in 2007 from the 1990 level. Japan, the second largest manufacturer in 1990, and third today, has increased output 15% (the lowest of the top 12, France is next lowest at 32%) while China is up an amazing 673% (Korea is next at an increase of 271%). Continue reading →
Instead of sending the workers home, as the Detroit makers often do, Toyota is keeping them at the plants, though. The employees spend their days in training sessions designed to sharpen their job skills and find better ways to assemble vehicles.
At its Princeton plant, by contrast, Toyota is using the down time to hone its workers’ quality-control and productivity skills. The company has pledged never to lay off any of its full-time employees, who are nonunion.
Jim Lentz, president of Toyota Motor Sales, the company’s U.S. sales unit, said the company believes keeping employees on the payroll and using the time to improve their capabilities is the best move in the long run. “It would have been crazy for us to lose people for 90 days and [then] to rehire and retrain people and hope that we have a smooth ramp-up coming back in,” Mr. Lentz said.
In Princeton, senior plant manager Norm Bafunno said he can already see the benefits of the training. Mr. Bafunno cites a Teflon ring designed by an assembly worker during the down time that helps prevent paint damage when employees install an electrical switch on the edge of a vehicle’s door.
Mr. Mason, a 40-year-old former firefighter, added: “One of the major things that everyone is grateful for is that they thought enough of us to keep us here.”
Toyota continues to show intelligence, long term thinking, respect for people… in their management decisions. I worry they may capitulate and make explanations about how the economy forced them to abandon their principles. I hope they prove that cynical fear in me to be wrong, in their case.
Thomasville Furniture and Exxel Outdoors, a maker of camping gear, have both said they now are making products in the U.S. that they once outsourced to China; both have attributed the move to the soaring cost of transporting goods.
But other longtime outsourcers, such as Regal Ware Inc., a 500-employee maker of high-end cookware (sets go for as much as $4,000), have discovered that manufacturing abroad has another drawback: it isn’t nearly as efficient as they had hoped.
“We either had too much inventory, or not enough” of the products Regal Ware outsourced to China, says Jeffrey Reigle, CEO of the Kewaskum, Wisc.-based company. “We figured there had to be a better way.”
The better way, it turns out, proved to be right under his nose, at two Wisconsin plants where Regal Ware has produced stainless steel pots and pans for more than 50 years.
Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
The first line can seem to be at odds, but I think in practice it is not – though I admit it may seem that way based on the importance placed on process by Deming (I think you have to read on agile to understand why this is the case). For my use of agile software develop, a highlight of the most important ideas is:
Deliver working systems quickly (with limited features, add features based on user needs) – [management improvement practice: PDSA, pilot ideas on a small scale, go to the gemba (don’t sit in conference rooms talking about what might be an issue for the computer application you want to see in 6 months, create working systems and then continually improve it)]
Build systems that cope well with uncertainty and allow for constant continuous improvement of processes (with IT systems that can adjust as needed to changing business conditions and desires) – [continual improvement – what is good enough today is not good enough next year]
Important concepts addressed by agile management: highly collaborative, risk tolerance, systems thinking, customer interaction, craftsmanship ethic [joy in work], eliminate waste. Great quote from the webcast:
What we know about knowledge work, and software engineering, is that coordination cost grow non-linearly with batch size. We’ve known this since Greg Brooks published the Mythical Man Month, probably longer than that. So that is a key difference with manufacturing, coordination costs do not grow with batch size in manufacturing.
Toyota (TM) began operating in North America in the mid-1980s. It currently operates seven automotive plants there, four of which are in the U.S. A fifth plant is under production in Mississippi. Toyota employs 40,000 manufacturing employees in North America.
In addition to the manufacture of cars and trucks, Toyota runs four unit factories in the U.S., where they produce such parts as engines, transmissions and wheels. Toyota also has a wholly owned subsidiary, Bodine Aluminum, an aluminum casting company, which operates three factories in Tennessee and Missouri.
BMW began operations in the U.S. in 1994, when it opened a plant in Spartanburg, S.C. “Some natural hedging was always a part of the long-term strategy, but also we have a corporate strategy of having production follow the market,” says Robert Hitt, BMW’s manager of public affairs. “Our original plan was to have about 2,000 workers here by the year 2000. We are now at 5,400 people here on the site.”
Besides the actual manufacturing of their cars and trucks, Toyota and BMW are using domestic suppliers to provide parts and services for their operations. BMW has over 200 suppliers in North America, 52 of which are located in South Carolina, and 41 of these are new companies started for the purpose of supplying the plant. In South Carolina alone, suppliers of BMW’s Spartanburg plant employ over 14,000 people.
Toyota uses roughly 500 major suppliers in North America. “We’ve always had the philosophy that we should build vehicles where they are sold, so it makes sense to have suppliers close to your manufacturing operations,” says Mike Goss, external affairs manager for Toyota’s engineering and manufacturing division in North America.
Foreign production in the U.S., however, is not limited to the automotive industry…. In fact, almost 1 million Americans get their paychecks from Mexican companies, says Ton Heijmen, senior adviser for outsourcing and offshoring for the Conference Board.
Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.
Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.
About the only major thing that’s more expensive in Spartanburg is labor. Liu is looking to offer $12 to $13 an hour there, versus about $2 an hour in Dongguan, not including room and board. But Liu expects to offset some of the higher labor costs with a payroll tax credit of $1,500 per employee from South Carolina.
“I was surprised,” said the 63-year-old president of Shanxi Yuncheng Plate-Making Group. “The gap’s not as large as I thought.” Liu is part of a growing wave of Chinese entrepreneurs expanding into the U.S. From Spartanburg to Los Angeles they are building factories, buying companies and investing in business and real estate.
True this is still a relatively small macro economic factor. However, it is growing. The primary push so far is economic – not a move to lean manufacturing (as far, as I can tell) to put manufacturing close to the customer. What is the biggest factor? The USA is spending more than $400 billion every year more than it produces. The only way to consume more than you produce is to borrow (and take an obligation to pay back those that lend you money) or sell the stuff you own to those that are producing more than they are consuming. China is producing more than $200 billion more than it consumes every year.
For decades foreigners have taken debt from Americans that promise to pay back later (to pay for what they consumed). Now many are deciding that these debts are not attractive investments and are looking to own productive assets in the USA (companies, factories…). Which is smart on there part in my opinion.
Dana Holding Corporation (NYSE: DAN) emerged from bankruptcy recently and today announced that it has named Gary L. Convis, 65, to the post of Chief Executive Officer. Convis was appointed to Dana’s new Board of Directors in January 2008 after retiring from Toyota Motor Corporation, where he had spent more than 20 years culminating in his role as Chairman of Toyota Motor Manufacturing, Kentucky.
“We are delighted to welcome Gary as Chief Executive Officer,” said Dana Executive Chairman John Devine, who had served as the company’s acting CEO since January. “Gary is widely respected as one of the leading experts in lean manufacturing and management systems, including the Toyota Production System. Along with his strong leadership and global industry experience, we believe he is an ideal choice as our new Chief Executive.”
“I am honored by the Board’s confidence in me to lead Dana,” Convis said. “I’m also eager to join with our people in establishing world-class manufacturing systems and returning this great company to the leadership ranks of the global automotive supply industry.” Continue reading →
Toyota is investing $350 million in a second Indian manufacturing plant. The plant is focused on producing vehicles for the local market – as the Toyota Production System suggests that production be close to the market.
The new plant will have a production capacity of 100,000 units and will become operational by 2010, he added. The company’s current plant has a capacity of 63,000 units a year.
The plant will make the Corolla sedans along with the small cars The company plans to have high level of localisation for the small car by procuring several components and sub-systems from Indian vendors. Primarily the car maker plans to sell the small car in the fast growing domestic market, though some will be exported as well, the company stated.
The Japan-based automaker said last year that it plans to capture 10 per cent of India’s market. In 2007 Toyota sales accounted for a mere 0.6 per cent of the Indian car market
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.
Jules Verne predicted cars would run on air. The Air Car is making that a reality. The car would be powered by compressed air. Certainly seem like an interesting idea. Air car ready for production:
Refueling is simple and will only take a few minutes. That is, if you live nearby a gas station with custom air compressor units. The cost of a fill up is approximately $2.00. If a driver doesn’t have access to a compressor station, they will be able to plug into the electrical grid and use the car’s built-in compressor to refill the tank in about 4 hours.
The car is said to have a driving range of 125 miles so by my calculation it would cost about 1.6 cents per mile. A car that gets 31 mpg would use 4 gallons to go 124 miles. At $3 a gallon for gas, the cost is $12 for fuel or about 9.7 cents per mile. I didn’t notice anything about maintenance costs. I don’t see any reason why the Air Car would cost more to maintain than a normal car. Five-seat concept car runs on air
An engineer has promised that within a year he will start selling a car that runs on compressed air, producing no emissions at all in town.
Tata is the only big firm he’ll license to sell the car – and they are limited to India. For the rest of the world he hopes to persuade hundreds of investors to set up their own factories, making the car from 80% locally-sourced materials.
“Imagine we will be able to save all those components traveling the world and all those transporters.” He wants each local factory to sell its own cars to cut out the middle man and he aims for 1% of global sales – about 680,000 per year. Terry Spall from the Institution of Mechanical Engineers says: “I really hope he succeeds. It is a really brave experiment in producing a sustainable car.”
Now does that sound like the Toyota Production System to you? It should. If I were an executive at Toyota I would sure examine this to see if it really is as promising as it looks. And if it is Toyota sure has plenty of cash and the management practice to make a very compelling case for allowing Toyota to produce this globally. The engineers desires closely match what Toyota has learned. Both seek to eliminate the waste of transportation (friction).
With plants in 27 countries, more new factories under construction and workers speaking languages that include Russian and Turkish, Toyota’s top executives are trying a difficult balancing act – replicating the company’s success and operating principles in other countries while ceding more control to these new outposts at the same time.
Next year, it expects to sell more than 10.4 million cars worldwide, double what it sold in 2000.
At Motomachi, more than 3,000 tasks on the assembly line have been translated into video manuals that are displayed on laptop computers above 30 simulated workstations, situated where their functions would be carried out inside the factory.
The videos show everything from the correct way to hold a screw to the best way to hold an air gun so that a worker’s hand will not tire in a few hours. This month, workers from Toyota’s plant in Thailand took part in training required for jobs in their plant’s paint shop. Listening as an interpreter translated from Japanese into Thai, the workers were shown how to bend their knees and spray a water gun across a clear panel of Plexiglas.
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.
They are the invisible heroes in business, the men and women who make innovation possible. They are people like Mary Ann Wright at Johnson Controls in Milwaukee, the former chief engineer for the Ford Escape hybrid who is leading a team bent on establishing world leadership in hybrid battery systems.
Or Werner Zobel, a Modine Manufacturing engineer working in Germany who hatched the idea for a new cooling system that the Racine-based company believes could be revolutionary. The system uses ultra-thin layers of aluminum to dissipate heat, a breakthrough that has potential for car and truck radiators and air conditioning condensers.
Intellectual candlepower will fire the regional economy, the Milwaukee 7 regional economic development group believes. Its strategic plan relies on innovation-driven manufacturers that are heavy with engineers. But across the region, those companies say they can’t recruit enough engineers, and they worry that shortages will worsen as baby boomers retire. Complicating the picture is a shortage of visas for foreign-born engineers and increased competition from rapidly developing economies in China and India for those students even when they complete their studies in the United States.
The University of Wisconsin-Milwaukee, Marquette University and the Milwaukee School of Engineering are racing to fill the pipeline. Marquette and UWM are promising expansive new buildings and increased enrollment of both undergraduate and graduate students.
Workplace Management by Taiichi Ohno is an excellent management book. Taiichi Ohno is known as the father of the Toyota Production System (TPS), also called lean manufacturing. He dictated the text to the Japan Management Association (in a series of interviews in 1982), which gives the book a sense of listening to him talk about the ideas. I found the conversational tone made it very easy to read and reminiscent of Dr. Deming’s tone in many places.
Ohno focused a great deal on the faulty perceptions derived from cost accounting thinking. He discussed the importance of not letting your understanding be clouded by thinking with the accounting mindset. “If you insist on blindly calculating individual costs and waste time insisting that this is profitable of that is not profitable, you will just increase the cost of your low volume products. For this reason there are many cases in this world where companies will discontinue car models that are actually profitable, but are money losers according to their calculations. Likewise, there are cases where companies sell a lot of model that they think is profitable but in fact are only increasing their loses.” page 32
Another area covered in the book is the whole concept of one piece flow (with quick changeovers of equipment, just in time, small lot production…). This is one of the true innovations within the Toyota Production System. I don’t think this book alone can convey how it works and why it is important but this book does a good job of giving another take on these ideas, from the person most responsible for making it work at Toyota.
The book is full of wonderful quotes including:
“There is a sequence for implementing automation that must be followed, even though it is hard. Automation just for its own sake is a problem.” page 81
“If you are observing every day you ought to be finding things you don’t like, and rewriting the standard immediately. Even if the document hanging here is from last month this is wrong.” page 125 Continue reading →
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.
The idea of lean manufacturing is pretty close to a religion at Ariens these days. The tenets: Be quick on the draw. Improve continuously. Be open to change. Get everyone – shop floor to board room – involved. The company’s output has nearly tripled in six years with a work force that has remained steady at about 1,000. Productivity is up, on average, about 17% a year, Ariens says.
Manufacturing and related industries are still a huge piece of Wisconsin’s economy – nearly half by some estimates.
The state should boost funding for the Wisconsin Manufacturing Extension Partnership, which preaches the gospel of lean manufacturing. Statewide, companies helped by the partnership reported $233 million in improvements during fiscal 2006. The non-profit group offers low-cost consulting to small- to mid-sized companies and receives both state and federal funding.
It’s a sign that Wisconsin manufacturers can play a major role in the state for years to come. And lean manufacturing is a key to that.