Evolving Excellence

The Productivity Conundrum... Again

Here we go again...

US worker productivity unexpectedly accelerated in the first quarter and helped curb inflation as companies showed no loss of output with fewer employees.  Productivity, a measure of worker efficiency, rose at a 2.2% annual rate after a 1.8% gain the prior quarter, the Labor Department said.

Among manufacturers, productivity rose at a 4.1% pace from January through March following a 4.2% gain in the fourth quarter.

Something to cheer about, right?  Especially in light of the so-called recession?  Couple that with the ongoing rise in U.S. manufacturing output and you have the makings for a great manufacturing economy.  But of course there's the other side of the productivity coin...

Hours worked dropped at a 1.8% pace, the most since the first quarter of 2003, today's report showed.  US employers cut payrolls in each of the last four months, bringing the total number of jobs lost this year to 260,000.

Output up, productivity up, therefore jobs must go down.  Everything must balance.  Really?   

The easy way out would have been for productivity to increase at the same rate as demand, whether that demand was driven by pure population increase or higher purchasing power.  Therefore the presumption with the decreasing jobs number is that we've been too good.  Productivity has increased faster than demand, thereby not balancing the jobs side of the equation.

But wait a minute... what about the unemployment rate?  It has crept up slightly over the past couple quarters, but it is about what was considered "full employment" during the economic meltdown of the 1970s and even lower than at the end of the Clinton administration.  Taking a look at employment by state and you see another clue.  Michigan is dead last in 51st place (yes, that through me for a loop at first until I realized that CNN apparently thinks DC is a state). 

There's a probable reason for that, if you take a look at Michigan's tactics toward employers.  You'll note that the states at the top of the list are either very business friendly or they have a preponderance of guaranteed government jobs.  Guess what... business employs people, business pass costs on to consumers and increased costs reduce employment and may even force a business to relocate, people pay taxes that support state governments.  So if you look at the current position of state budgets... wow... correlates nearly perfectly with the state unemployment rate... and state tax rates... in reverse.

Am I the only one that thinks the solution is just a little too obvious?  Want to spurr demand to employ more people to balance government budgets through increased taxes, with that increased employment offsetting increased productivity?  Make it easier for business.  Or you can just continue to pound away at "excess profits" (ever compare the profit margins of oil companies versus the likes of Microsoft or even your local 7-11?  Don't get me started on that public misperception...!) and wonder why employment drops and budgets don't balance.   

By the way, for those of you curious about the impact of outsourced or offshored intermediates on the productivity equation, take a look at our multi-post investigation of this anomaly, which after discussions with some leading economists concluded that the effect was rather small.

 

Woes of Dream Factories

Flight Global has become one of my favorite online reads, not just because I spend an inordinate amount of time in the air, but also because it has some great in-depth reporting on the operations and manufacturing side of aircraft.  Over the past couple weeks they've detailed the headaches of the past year for Boeing's 787 Dreamliner program and the similar ongoing delays for the Airbus A380.  I guess their audience of predominantly pilots are also tech geeks and like manufacturing, as they just dived into the factory side of the 787 supply chain.

Far from the 787 final assembly line, two facilities in north Charleston, South Carolina were established to manufacture and integrate fuselage barrels for the Dreamliner. 

The Vought plant fabricates the two aft barrels of the fuselage, Sections 47 and 48. Next door, Global Aeronautica integrates structural sections from Japan and Italy. Alenia delivers sections 44 and 46 from Grottaglie, Italy, while Fuji and Kawasaki Heavy Industries deliver Section 43 and Section 45/11, the centre wing box and main landing gear wheel well. The four sections are joined, stuffed with systems, wiring and ducting then shipped to Everett.

That's a chunk of airplane, "far from the 787 final assembly line," which then needs to somehow get to Everett on that neat trick of supply "innovation" called the Dreamlifter.  If only it was assembled next door to Everett like in the old days, using those 20,000+ Boeing employees that were laid off several years ago...   But let's move on.

Each site was designed as an ultra-lean facility with a highly trained staff capable of signing off on the airworthiness of their own work. Boeing saw this as the next generation of aerospace manufacturing teams of "super mechanics" would build the 787. Each "super mechanic" would hold multiple manufacturing certifications to expedite the production process to build a greater degree of quality assurance directly into the integration of the aircraft.

 

But rather than a highly trained staff, Global Aeronautica and Vought were peopled by mechanics whose expertise lay outside aerospace. One Boeing veteran says that some staff had no manufacturing background.  The skills that staff brought to the 787 were not applicable to building aircraft. "The folks working on the floor say if we can build a fire truck or a fork lift, we can build an aircraft," says a veteran Boeing engineer in Charleston. "It doesn't work that way. It's an aerospace state of mind, and it isn't here."

Lack of expertise among the workforce caused quality workmanship to suffer, resulting in time-consuming fixes that had to be completed in Charleston, delaying delivery or slowing final assembly.

Using highly-trained staff to self-check work is definitely along lean lines, compared to the old method of using the cheapest pair of hands available and then inspecting, reworking, and reinspecting by a series of QA gates.  But "ultra lean"...?  I have no idea what that means, especially in a world of supply chain nonsense populated by Dreamlifters.  They couldn't find people with aerospace experience?  I bet there are a few thousand around Everett...  But once again, let's move on.

Global Aeronautica built in "locked steps" for assembly that must be completed before future milestones can take place. As the centre fuselage sections transition through the assembly process, each centre section must pass through assembly "cells". The first cell is where structural sections are joined and aligned and the second cell is for continued assembly and early installation of wiring and insulation.  These "locked steps' prevented the centre fuselage from being moved between assembly cells unless a certain percentage of fasteners are installed.

Cells are nice.  "Locked steps" (presumably "one piece flow" in the non- "ultra lean" world), are good.  But I'd really prefer if ALL the fasteners were installed.  I hope someone remembers to check that before I take my first ride in a 787.  But there's more!  And you don't even need to buy some ginzu knives!

During the 10 October delay announcement, Scott Carson said: "I like the Charleston factory. I like having it next to Vought. We like having Vought as a partner. If there's a lesson learned, it might be you'd start earlier and do a little more training, perhaps with our people there. But there's no fundamental flaw in Charleston."

Except that it is three thousand miles away from the final assembly operation, and three thousand miles away from thousands of people with aerospace experience.  Nothing fundamental.

Senior Associate Ladder Climber

This is really starting to bug me... yet again I've received an email from someone who lists their title as

Senior Associate Manager of...

Give me a break.  So you finally made "manager" (woo hoo!  you get to wear a tie!)... but you're still an "associate"... and you've put in a little time so you're "senior."  Let me see... there's a permutation in here somewhere.  I can just sense it.

Assuming there's both "junior" and "senior" (presumably there isn't a "middle-aged"), and "associate" and "full" and probably "senior"... that would be 2x2x2=8 levels just for that manager.  That's getting as bad as the grade/step nonsense of the government. 

Who cares?  Or perhaps I'm just a wee bit overly cynical ever since I visited that company in Florida that had no titles except "plant manager"... the dude that was charged with watering the plants.  No, not a rinky-dink group of college kids... this was a $170 million multi-site company employing over 1,000 people.  And it worked.

No job titles... that's one extreme.  At the other end are banks... and apparently Yahoo!  If they really have "300-odd" vice presidents it is no wonder they can't get anything done, and why Microsoft may have been smart to run away screaming from the merger proposal after they did a little due diligence.  Not that I imagine Microsoft is much better.

Recently I was having a beer with a fellow lean guy and we discussed the fact that there were only two types of people in a lean organization: leaders and executers.  Actually after another beer that last one became "executioner" but we can't rationalize that title yet.  We barely remember it anyway.  Further into the discussion I seem to remember that we concluded that everyone was a leader but we should be focusing outward, not controlling inward, therefore there was really only one function: Value Creator."

Sure, titles can help define how an organization is structured, especially to an outsider.  But they also define how an organization works, what it believes in, its ego, rigidity... you get the picture.  So when I see a title like "senior associate manager of..." I immediately picture a person yearning to climb the latter, "managing" instead of "leading," and constrained to a very narrow window of operational latitude.

I challenge you to remove all instances of "senior," "junior," "associate," and "executive" from titles.  I then challenge you to change "manager" to "leader."  Demonstrate your commitment to lean manufacturing by throwing in a "value" or two.

I bet you'll be amazed at the effect it will have on the culture of your organization.

Vigilant People

A few days ago I received my latest issue of the MIT Sloan Management Review.  Generally I don't have too high an opinion of academia-driven leadership analyses, but lately the Sloan Review has been chock full of insightful nuggets.  We often discuss the power of people, the oft-forgotten second pillar of lean manufacturing, and an article in this issue provides yet another reason why they are important.

Vigilant leaders are those who make a practice of being abundantly alert and deeply curious so that they can detect, and act on, the earliest signs of threat or opportunity. They seek to nurture equally vigilant employees by modeling such behavior and by providing incentives for managers to look for — and interpret — weak signals.

Having people that are trained to identify threats or opportunities, and then act on that knowledge, requires a recognition that people are more than just a pair of hands that cost a few bucks an hour.  They have brains, creativity, and experience that adds value.  They are an asset.

Vigilance is not just a leadership trait, it is something to be valued in all employees.  The machine operator that notices a subtle trend with increasing defects, the order entry clerk that notices increasing orders from companies in a certain market segment, the lawn maintenance guy that notices a small but growing crack in the wall of a $100M factory.

Such vigilance is a skill most valued in its absence.  The words no board or investor wants to hear about a company's leaders are "they ignored the warning signs" or "they missed the boat."  On a positive side, vigilant leaders can spot opportunities and threats before rivals.  Boards don't expect prescience, but they do rely on the leadership team to sense and act on early warning signs of trouble, or opportunity.

Vigilant leaders are different from leaders that simply strive for operational excellence.  According to the authors, the characteristics of vigilant leaders are:

• focuses externally and stays open to diverse perspectives
• applies strategic foresight and probes deeply for second order effects
• encourages others to explore widely by creating a culture of discover

Their definition of "operational leader" seems more like "operational manager" to me... leaders are inherently expected to be more.  But the bottom line is that it is amazing what people can do...

Others Forget About People

A few days ago we told you again about the importance of people to a lean manufacturing transformation.  Now a few examples of how most consultants and organizations don't understand the second pillar of lean: respect for people.

First, an article on the success of Merit Medical.

Net income for the first quarter of 2008 improved 45% to $4.3 million. Quarterly sales grew 5% to $53.6 million. Catheter sales increased 11%, inflation device sales rose 7%, stand-alone device sales grew 6% while custom kit and tray sales remained flat.

In 2007 Merit’s CEO, Fred Lampropoulos (pictured), implemented a program of lean manufacturing, automation, off-shore production and consolidation of the company’s Sensor Systems facilities.

Gross margins for the first quarter of 2008 were 40.3% of sales, compared to 37.0% of sales for the first quarter of 2007. The improvement demonstrates the increased productivity stemming from an 18% reduction in manufacturing headcount and cost savings initiatives.

Successful, top and bottom line growth... and whacking a bunch of people while claiming to implement a lean manufacturing program along with off-shore production.  Sorry... that's LAME.

Next, Carl Wright gives us a "roadmap to lean implementation."  It's interesting, so I'll paste a chunk of it here.

1. Form team (mix of lean manufacturing and relevant business experience)
2. Develop communication and feedback channel for everyone
   
3. Meet with everyone and explain the initiative
   
4. Begin to train all employees (lean overview, eight wastes, standard operations, kaizen, RCPS, PDCA)
   
5. Facility analysis – Determine the gap between current state and a state of “lean”
   
6. 5-S - It is the foundation of lean. Workplace organization is critical for any lean initiative
   
7. TPM – Begin Total Productive Maintenance early (used throughout lean)
   
8. Value Stream Mapping – Determine the waste across the entire system
   
9. 7 (or 8) waste identification – Use with value stream mapping to identify system waste
   
10. Process mapping – A more detailed map of each process
    
11. Takt time – Determine need to produce on all processes, equipment
    
12. Overall equipment effectiveness and six losses – Determine the losses on all processes and equipment
    
13. Line balance – Use, if necessary, with takt time and OEE
    
14. SMED – Push setup times down to reduce cycle time, batch quantity and lower costs
    
15. Pull / one-piece flow / Continuous Flow Analysis – Utilize kanban and supermarkets
    
16. Analyze quality at the source application – Poor quality stopped at the source
    
17. Implement error-proofing ideas
    
18. Cellular manufacturing/layout and flow improvement – Analyze facility and each process
    
19. Develop standardized operations – Concurrently with SMED, line balance, flow, layouts
    
20. Kaizen – Continue improving operations, giving priority to bottlenecks within the system

Tools, tools, and more tools.  Good stuff.  Some human elements like Kaizen and training, but the respect for people pillar goes far deeper.  Far, far deeper.

Remember the words of Fujio Cho.