Category Archives: Manufacturing

NUMMI, and GM’s Failure to Manage Effectively

Gipsie Ranney recently sent me an article on her thoughts on NUMMI and the current problems with the Big Three car makers to post to the Curious Cat Management Improvement Library. NUMMI is the plant that Toyota and General Motors run together as a joint venture. The article is excellent.

The answer to a question asked by someone else on the tour was stunning to me. The person asked what kind of computerized inventory system they had at NUMMI. The leader of the tour at the time – a materials management person – responded, “we don’t have one; the Japanese say that computerized inventory systems lie.”

The most remarkable insight I gained at NUMMI came as an answer to a question from a member of the touring group. The person asked what had been learned about the reasons that management/labor conflict had been reduced so much. The tour guide answered, “The answer we get from members of the labor force is that the Japanese do what they say they will do.” This was the same labor force that had held the record for most grievances filed per year in an assembly plant in the U.S.

The Big Three are responsible for managing their organizations wisely. I think that will take more than money. It will take a different culture and a different mind.

I agree. The problem is that management fails to manage well and has been failing to do so for decades. They have improved over the last few decades but not nearly fast or consistently enough. Gipsie worked closely with Dr. Deming and serves on the W. Edwards Deming Institute Board of Trustees.

Related: Could Toyota Fix GM (2005)At Ford, Quality Was Our Motto in the 1980sBig Failed Three, Meet the Successful EightWhy Fix the Escalator?Invest in New Management Methods Not a Failing Company (AMC) by William Hunter, 1986 – Ford and Managing the Supplier RelationshipNo Excessive Senior Executive Pay at Toyota

Big Failed Three, Meet the Successful Eight

Big Three, Meet the “Little Eight”

The 1,300-acre plant, in which Toyota has invested $5.3 billion, produces a car roughly every minute. Georgetown’s population has doubled. In fields where farmers once grew tobacco and raised cattle, McMansions, apartment complexes, and condominiums have sprouted. A 150,000-square-foot upscale retail center is rising near the Toyota plant, the better to serve its 7,000 employees.

In San Antonio, the Toyota Tundra plant lay idle for three months this fall, though Toyota hasn’t laid off anyone. Instead, according to Richard Perez, president and CEO of the Greater San Antonio Chamber of Commerce, Toyota offered the city “a whole bunch of folks who need to get busy.” (San Antonio put them to work on beautification projects.) Of course, Toyota has resources to act in a more paternalistic manner – in part because the parent companies aren’t saddled with the burdens of providing health care and retirement for workers in home markets.

This is not behaving in a paternalistic manner, this is behaving in an honorable manner with the other long term stakeholders that have a shared interest in the long term success of the company. When managers and executives do their jobs the company will succeed in good times and have a plan for bad times and will deal effectively with obvious long term issues. Health care costs, pensions costs, and bad labor-management relations have been obvious critical issues to solve for GM, Ford and Chrysler for decades. The pathetic job those 3 have done with those, and other issues (they still don’t understand how to work with suppliers, how to stop the obsessive focus on quarterly profits, how to demand honorable behavior [not looting] from senior executives…), lead to their current situation.

The poor economy leads the the situation you now see with Toyota and Honda: profits being cut, having to put in place plans to retain employees while they are not needed to produce output today, etc.. You don’t see companies needing billions to survive a few months unless they were incredibly poorly lead. And those leading them were paid many times more than those that led Toyota and Honda. They have had decades to act responsibly. They have failed. And there failure will be felt by those that enabled them to take huge pay packages that were not warranted. They should be ashamed.
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Ford’s Camaçari Plant in Brazil

photo of Fords' Camacari plant in Brazil

Brazil’s Camaçari plant is model for the future

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.

Here is an interesting video [the broken link was removed] on the plant. It is sad how poor management at GM, Ford and Chrysler has created such a bad situation for those working at those companies, their suppliers, the communities that support their production… GM and Ford had the advice they needed to succeed from Deming in the 1980’s but they chose to focus on the short term, large executive payments, accounting gimmicks instead of continual improvement…

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.

Related: Ford’s Wrong TurnFord and Managing the Supplier RelationshipGlobal Manufacturing Data 2007Toyota’s New Texas PlantWomack Podcast on GMVW Phaeton Manufacturing plant

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Global Manufacturing Data 2007

The updated data from the United Nations on manufacturing output by country clearly shows the USA remains by far the largest manufacturer in the world. UN Data, in billions of current US dollars:

Country 1990 1995 2000 2005 2006 2007
USA 1,041 1,289 1,543 1,663 1,700 1,831
China 143 299 484 734 891 1,106
Japan 804 1,209 1.034 954 934 926
Germany 438 517 392 566 595 670
Russian Federation 211 104 73 222 281 362
Italy 240 226 206 289 299 345
United Kingdom 207 219 228 269 303 342
France 224 259 190 249 248 296
Korea 65 129 134 200 220 241
Canada 92 100 129 177 195 218

See manufacturing data for more countries.

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%).
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Idle Workers Busy at Toyota

Idle Workers Busy at Toyota

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.

Related: Bad Management Results in LayoffsToyota Management Not Close to Being DuplicatedToyota’s Commitment to CustomersPeople are Our Most Important AssetJim Press, Toyota N. American President, Moves to Chrysler

2008 Deming Prize: Tata Steel

Tata Steel, India, has been awarded the 2008 Deming Prize. They were the only organization to receive the prize this year.

Mr. B. Muthuraman, Managing Director, Tata Steel, while expressing satisfaction over this accomplishment said, “No other activity made us think so deeply about our business and relationships than the process of applying for the Deming Prize. Total Quality Management (TQM) is a fundamental way of managing business and every organization can gain from institutionalizing the culture necessary to win this prize.” He dedicated this recognition to the employees of Tata Steel, its customers and business partners who have consistently embraced the culture of continuous improvement and demonstrated a great teamwork leading to several recognitions in the last 20 years since the TQM journey started at the Steel Company in 1988.

India continues to do very well, collecting more Deming Prizes than all other countries combined since 2000. Countries of organizations receiving the Deming Prize since 2000 (prior to that almost all winners were from Japan):

Country Prizes
India 15
Thailand 8
Japan 4
USA 1
Singapore 1

The 2007 Deming Prize for Individuals went to Mr. Masahiro Sakane, Chairman, Komatsu Limited, Japan. Previous recipients include: Kaoru Ishikawa, Genichi Taguchi, Shoichiro Toyoda, Hitoshi Kume and Noriaki Kano.

Related: 2008 the Deming Prize Winners AnnouncedTata Steel India wins Deming Application Prize-2008Deming Prize 20072005 Deming PrizeDr. Deming’s Thoughts on Management

Guess What? Manufacturing in the USA is a Good Idea

More people learning about manufacturing truths lean thinkers have known for a long time. Made (again) in America

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.

Learn more about lean manufacturing.

Related: Lean Manufacturing Saving Jobs AgainMade in the USA (2006)Workplace Management by Taiichi OhnoNew Look American ManufacturingWisconsin Manufacturing

Lean IT Systems – Not ERP

I am not sure, IT needs to get lean on manufacturing, does the clearest job of explaining some things, but it does state some things well:

you can see how typical offshoring doesn’t work here, as it is counterproductive to true lean manufacturing. If your plant is 8,000 miles away, you need to plan even further out, building in as much as an extra month for transoceanic shipping. Manufacturers also need to carry a larger safety stock in case shipments do not arrive on time. Due to the high costs of shipping, especially with fuel costs rising, manufacturers typically order more than is needed in order to reduce per unit shipping costs, filling an entire container rather than ordering by the smaller palette size.

SAP or Oracle MRP are a problem because they cannot set up an “execution” system to perform based on lean principals.

It is this new concept that is the biggest stumbling block for IT in terms of adopting lean manufacturing. Most major companies have invested multiple millions in their ERP system, and it’s IT’s job to run the system. On top of that, these software-acquisition decisions for the major ERP systems are made by the CEO and CIO, who don’t understand the shop floor.

What the article is really talking about IT departments providing the proper tools for organizations to manage. IT should also adopt lean methods for their operation (many in IT that are practicing lean are doing so with agile software development methods). Toyota, not surprisingly does well at using IT to support lean manufacturing.

ERP stand for Enterprise Resource Planning and in IT circles referrers to amazingly complex IT systems to manage the organization. Some people think they are useful, I think they are overly complex, poor management implementations that end up having organizations conforming processes to the IT system instead of having an IT system that support the organization. And they are far too complex – web 2.0 type applications should be the focus not ERP. IT should liberate people to be more flexible with designing processes, PDSA… not act to enforce rigid rules.

Related: lean manufacturing articlesInformation Technology and ManagementAgile Management

Rhode Island Manufacturing

Manufacturing has new look in R.I.

She used the auto industry as an example, pointing out that in the early years of the last century Henry Ford manufactured Model-T’s that were all the same. The consumer today demands a choice in models, colors and a host of other features when buying a car. “Manufacturers must be able to change processes very easily and very quickly,” she said, to meet constantly changing consumer demands.

The closing of an old-fashioned assembly-line, low-wage factory always makes headlines, contributing to the image of the industry as one with a bleak future, Taito noted, while advanced manufacturers who steadily grow and add three or four jobs a year win no notice. “But that’s real growth, sustained growth,” she said of the latter.

Grove said RIMES has promoted the advantages of the lean initiative to Rhode Island manufacturers for about 10 years. “When you adopt lean manufacturing, it becomes the process of the whole shop and, by necessity, employees have to be more of a team than in the past,” he said. On-the-job training is routine at Pilgrim, according to Grove.

Still, the industry’s transition has not been painless. The number of manufacturing jobs in the state has declined steadily. In 2002, there were 64,796 people employed in manufacturing in Rhode Island and, 30 years ago in 1978, there were 134,654, according to figures from the R.I. Department of Labor and Training.

Yet another illustration of what I have been saying for years. USA manufacturing continues to grow and USA manufacturing jobs continue to shrink (as do worldwide manufacturing jobs). And as I have been saying for years, China manufacturing output continues to grow very quickly and China manufacturing jobs continue to shrink (China lost 7 times as many manufacturing jobs as the USA from 1995-2002).

Related: Manufacturing and the Economy (2005 post)Creating JobsTop 10 Manufacturing Countries 2006America’s Manufacturing FutureWisconsin ManufacturingManufacturing Employee Shortage in Utah

Mississippi Plans Manufacturing Management Center

Ole Miss plans manufacturing center

Ole Miss plans to build a center to teach manufacturing management skills. Gov. Haley Barbour, Ole Miss officials and Toyota executives announced the $22 million Center for Manufacturing Excellence on Monday in Jackson. Construction of the 47,000- square-foot center could start this fall.

“We in Mississippi continue to have a larger percentage of our population employed in manufacturing than the country as a whole,” Barbour said. “One way to help our businesses innovate and stay successful is to give them world-class people to employ, whether it’s engineers or business majors or people who work on the line.”

By teaching principles of lean manufacturing, total quality management and just-in-time inventory delivery, the center will produce workers for many sectors including aerospace, electronics, technology and polymer sciences.

The center’s funding comes from the state’s $323.9 million incentive package for Toyota. The automaker is building a $1.3 billion plant in Blue Springs, about 50 miles from Oxford. Toyota reset the opening of the plant from early 2010 to May 2010 for economic and model-changeover reasons.

The center will offer four bachelor’s degree programs, two business-related and two engineering-related, all with a manufacturing emphasis. Barbour and Ole Miss Chancellor Robert Khayat will appoint a board to create a curriculum and oversee the center.

“We have completed the building drawings and expect to be receiving bids shortly. I would hope that construction would begin this fall,” Khayat said.

He said he expects 20 to 40 students the first year, with enrollment increasing dramatically in the following years. Most of the initial students likely will switch their majors from engineering or business. The interdisciplinary program will include cooperatives and externships.

“We’re going to see an interesting marriage between engineering and business. We think it will be a model for the future of manufacturing,” Khayat said.

Related: Engineering Innovation for Manufacturing and the EconomyManufacturing Employee Shortage in UtahGlobal Manufacturing Data by Country (Feb 2006 post)Trends in Manufacturing Jobs