New Look American Manufacturing

Posted on June 30, 2006 by John Hunter

The New Look American Manufacturing [the broken link was removed] by Dale Buss:

The evidence shows that American manufacturers that revise their processes and integrate technology in ways that allow them to stay close to customers can survive the onslaught from China. Adaptability is key above all other factors.

I agree by applying lean manufacturing and other management improvement ideas manufacturers can (and are) prospering in the USA. I don’t think one factor is the key. Many factors determine whether the USA will continue to lead the world in manufacturing. The USA has to continue to support a dynamic economic system, maintain a transportation system, improve the health care system, improve the educational system, maintain the rule of law, reduce excessive legal costs, improve the management of manufacturers etc.. Each country has to work on these and other systems to stay competitive globally.

“Those American manufacturers who are succeeding today are focusing on doing one thing: innovate, innovate, innovate,” says Scott Kingdom, global managing director of industrial markets for Korn/Ferry International, a management consulting firm. “They’re doing more valuable, higher-margin, mission-critical sorts of things that are less apt to be outsourced or taken abroad.”

Once again the innovation mantra is stated. I agree innovation is good and is helping American (and overseas) manufacturers. But it is not the only thing (unless you just classify everything as innovation – lean manufacturing, customer focus, long term planning, cooperation with suppliers, systems thinking, six sigma, savings through the proper application of information technology, quick response…).

Continue reading →

Posted in Economics, Lean thinking, Management, Manufacturing | Tagged , , , | 2 Comments

Trust: Respect for People

Posted on June 30, 2006 by John Hunter

Respect for People [the broken link was removed*], Toyota.co.jp

Respect for People has always been important to Toyota, and nowhere is this more evident than in the relationship among Toyota associates.
…
There has been only one exception to this rule throughout Toyota’s entire history. In June 1950, during a postwar period of great hardship in Japan, the company was forced to choose between corporate restructuring or risking complete collapse. Then-President Kiichiro Toyoda battled for months for the sake of his employees, but ever-worsening conditions showed the company to be unsustainable without significant change.
…
Management then vowed that this would be the first and last time such an event would come to pass at Toyota, and, in a gesture of respect to former employees, Kiichiro resigned from his position as president of the company.

A bit different than laying off tens of thousands of workers and then taking huge bonuses [the broken link was removed]. And in case you don’t know, I think Toyota’s approach is more honorable and what should be aimed for (I wouldn’t say the president always should resign but it should be a significant admission of failure).

Does this mean no workers ever come into conflict with Toyota management? No. But Toyota’s respect for workers is qualitatively different than that of most companies.

* sadly Toyota falls into the same short term thinking and failure to understand usability of internet technology trap that so many other organizations do. Many of those others fail in so many ways failing again isn’t so surprising, it is sad that Toyota can’t even follow basic long term thinking and web usability principles though.

Posted in Deming, Lean thinking, Management, Respect, Toyota Production System (TPS) | Tagged , , , , , , | 2 Comments

American Manufacturing Successes

Posted on June 29, 2006 by John Hunter

Lean and Unseen, The Economist:

But someone forgot to tell American manufacturers the bad news. Most of them have enjoyed roaring success of late. Net profits have risen by nearly 9% a year since the recession in 2001 and productivity has been growing even more rapidly than is usual during economic expansions

Yes, as I have been saying the demise of manufacturing in the USA has been exaggerated in the popular press (Global Manufacturing Data by Country – US Manufacturing Plant Construction – Manufacturing and the Economy). Manufacturing jobs have decreased dramatically, both in the USA and the entire world. This decrease of manufacturing jobs worldwide is the most significant change. The manufacturing jobs moving from one country to another is also true but is reported much more than is justified in comparison to the overall decrease in jobs.

Continue reading →

Posted in Education, Management, Manufacturing | Tagged

Innovation Needed to Keep USA Manufacturing?

Posted on June 29, 2006 by John Hunter

ICAR touted as example of innovation needed in U.S. [the broken link was removed]

“Our ace in the hole is innovation, and that’s why intellectual property is so important to develop,” Graham said. “How do we protect that advantage within the rule of the law?”

Lindsey Graham [the broken link was removed] and Hillary Clinton are co-chairs of the United States Senate Manufacturing Caucus. Is innovation our ace in the hole? I don’t think so.

There is no ace in the hole. If countries want to keep manufacturing jobs they are going to have to do lots of things right. No country has such an advantage they can expect to rely on their country being more innovative (or offering cheaper labor, or their citizens working harder or…) than all the other countries in the world.

Innovation has been an advatage for the USA. It should continue to be an advantage for the USA but many other countries will innovate very well (Japan, Germany, China, Korea, Singapore, England…). The USA has many assets: transportation infrastructure, banking, rule of law, educated and skilled workforce, huge market, decent tax laws, engineering education… The key will be to keep focusing on the whole system (and fix things like huge budget deficient, huge current account deficit, excessive health care costs, excessive executive pay…).

I also believe a key competitive advantage will be in applying management improvement concepts such as lean manufacturing. Companies that don’t use management improvement ideas will find it more and more difficult to compete with companies like Toyota.

Posted in Economics, Innovation, Management, Manufacturing, Systems thinking | Tagged , , , , | 2 Comments

Gas Tax

Posted on June 29, 2006 by John Hunter

An Increase in the Gas Tax Would Hurt Consumers and Slow the Economy [the broken link was removed]

Gross Domestic Product would decline by $6.5 billion per year, in real terms, from 2005 to 2014. In other words, this $131 billion in government revenues would shrink the economy by $65.5 billion.

There would be, on average, 37,000 fewer job opportunities each year. That works out to one lost job for every $351,000 in new taxes, which is equal to 11 years of work at average yearly wages.

Sure sounds bad. This was written in 2004 opposing a 5.45 cent increase in the gas tax. Of course gas price have gone up more than 10 times that amount. Those increased prices have the same negative impact of a tax increase but the increased prices paid go to foreign producers and the oil companies instead of the taxpayers. We would have been better off increasing the gas tax 50 cents a gallon and cutting the huge deficit instead of accepting such arguments.

Or just cut the gas tax: Why Congress Should Cut the Gas Tax [the broken link was removed], 2000

Gas Tax Now! [the broken link was removed] by N. Gregory Mankiw, 1999.

Many members of Congress have been pushing for a cut in income taxes, but they’ve been unsure how to pay for it. Fortunately, I’ve figured out an answer: with a tax increase. Let’s cut income taxes by 10% and finance it with a 50-cent-per-gallon hike in the gasoline tax.

That certainly is a better idea than what was done. Cut taxes and just have the next guy figure out how to pay for it (which will have to be by taxing the children and grandchildren of those granted tax cuts). When the government was projected to pay down the debt it had accumulated (the state when President Clinton left office) that was claimed to be taking money from citizens that was “theirs.” But piling debt on the children of the citizens that taxes are cut for is fine?

Continue reading →

Posted in Economics | Tagged , , | 1 Comment

Lean Furniture Manufacturing

Posted on June 28, 2006 by John Hunter

Pulaski’s passion for lean plumps up dealer service [the broken link was removed] by Jeff Linville

Pulaski Furniture says it has cut inventories, improved delivery times and reduced waste as part of a new emphasis on lean manufacturing.
…
This led to cutting out about 100 feet of conveyor line to reduce inefficiency, and moving machinery and other equipment around in the plant; a few new pieces were added too. Reducing waste didn’t mean cutting any jobs, Oakley said. Instead, some workers were reallocated to other areas as needed.

A driving influence in the decision to remake the company was to reduce inventory both for Pulaski and its retailers, said Oakley.

Reducing waste without cutting jobs it one sign of success in my book. In some instances it might not be possible, and job cuts are required but I would look at that as bad sign. Possibly necessary to save the remaining jobs but certainly something to be upset with not brag about. If a lean effort brags about job cuts I think that is a very bad sign.

Posted in Lean thinking, Management, Management Articles, Manufacturing

Our Policy is to Stick Our Heads in the Sand

Posted on June 28, 2006 by John Hunter

Conversation with Boston Volkswagen [the broken link was removed] by Paul Graham

I recently looked into getting a new car. The Kafkaesque conversation that resulted would have been funny if it were happening to someone else. If only Volkswagen could redesign the sales process to be as good as their cars….

For me it did happen to someone else so it is funny 🙂 However, I run across similar thinking and “customer service” and then I don’t find it as funny. The failure to adapt to a changing world (the internet is here to stay folks) is amazing. Most companies would benefit from just adapting to the changing world without elaborate innovation plans. Innovation is great, but challenging. Don’t ignore the possible improvements short of innovation.

It seems to me obvious the VW response is that of an organization trying to hold on to an outdated model of behaviour. Toyota needs to do a great deal of work in the dealership area too. At least they realise that they do and are trying: Park Place Lexus won a 2005 Baldrige award.

Posted in Customer focus, Innovation, IT, Management | Tagged , , , | 2 Comments

Innovation Example

Posted on June 27, 2006 by John Hunter
graphic of airline ticket prices over time

Farecast is a cool internet application, and one that might actual save you money to buy, say a digital camera.

Farecast provides data and analysis to those looking to purchase airplane tickets. The graph above shows ticket prices for tickets between Boston and Washington DC over the last 60 days. I have thought for quite some time I need better data to make the best purchase decisions. Farecast seems like a great fit.
Continue reading →

Posted in Fun, Innovation, IT, Systems thinking | 3 Comments

Employee Ownership

Posted on June 26, 2006 by John Hunter

H.C. Miller workers to earn ownership [the broken link was removed] by Richard Ryman.

I have always liked the idea of employee ownership. To me this can be a great help in creating a system where employees, owners, customers, suppliers work together. Alone an ESOP does little. But as part of a system of management it is something I think can be beneficial.

Employees of H.C. Miller Co. have learned to look at their company differently. And because they did, on July 31 they will become its owners.

The 120 or so employees of the 118-year-old company will implement an Employee Stock Ownership Plan. An ESOP is a retirement plan in which employees are assigned shares in the company annually. Those shares accumulate in a retirement account.

Employees shouldn’t allow too much of their savings to be tied to the company (see Enron). Of course those ignoring this advice that worked for Microsoft, Walmart… in their early days did quite well. Continue reading →

Posted in Investing, Lean thinking, Management, Manufacturing, Systems thinking | Tagged , , , | 1 Comment

Universal Health Care in San Francisco

Posted on June 25, 2006 by John Hunter

San Francisco’s Latest Innovation: Universal Health Care by Laura Locke:

Starting in early 2007, every uninsured San Franciscan can seek comprehensive primary care at the city’s public and private clinics and hospitals, including top research facilities like the University of California at San Francisco. Coverage includes lab work, prescriptions, X rays, hospitalization and surgery. Annual funding for the $203 million program will come from re-routed city funds (including $104 million that now goes toward uninsured care via emergency rooms and clinics), business contributions and individual enrollment fees, which will be income-adjusted.

This needs to be approved by the city council to go into effect. It is far from perfect but the health care system is broken and we need actual innovation to find workable solutions. The effects of the health care system on the economy are huge. Health care costs are a huge part of both losing jobs to other countries and eroding pay rates.

We need to experiment with ways to improve the health care system.

Posted in Health care, Innovation, Management