Farewell To APICS

The major effect of the Sloan management system on America, and much of the rest of the world, was the demise of the manufacturing companies.  General Electric, General Motors, NCR and the rest all began as manufacturing companies that had sales and accounting functions.  After Sloan, they all became marketing and finance companies that happened to do some manufacturing.  When it is more expeditious, they are all willing to sell off or outsource manufacturing.  Marketing and finance, however, will never be outsourced because those are "strategic' and 'core competencies'.

The most nonsensical business theory to spring from this concept of business is "Brand Management".  What "Brand management" too often means, in the end, is creating the illusion of value for the purpose of duping customers into paying more than a product is actually worth.  The business theory boils often down to the idea that creating the right image can mislead some ignorant consumer into paying $2 for Brand A, instead of $1 for Brand B even though they are pretty much the same.  It assumes that customers are not sharp enough to see past the illusion and discern value.

Levi Strauss went down the Brand Management path, peddling a couple of yards of denim and a handful of rivets for $50 by duping folks into thinking their denim and rivets were much more valuable than someone else's.  Walmart hung 'em on a rack next to a couple of yards of denim and a handful of rivets called Faded Glory, priced at about $15.  It did not take long until Levi was no longer a manufacturer.  They import 100% from Asia because the customers were not quite as dense as the Brand Managers assumed and they are struggling to get their cost and price closer to the real value of the product.

Will Rogers said, "If advertisers spent the same amount of money on improving their products as they do on advertising then they wouldn't have to advertise them."  He got that right, and the business world proves that point every day.  The problem is that delivering value is a function of engineering and manufacturing and the Sloanistas have written those functions off as the sort of things that might just as well be done in India or China since they are not really strategic - like marketing is.  Unfortunately, the old saying, "Fool me once, shame on you; fool me twice, shame on me" has merit.  Teenagers are easily conned by the brand management scams, but adults usually will fall for clever advertising once - then the product has to stand on its own merits.

All of this is a long-winded preamble to bidding a fond farewell to APICS.  For 40 years, APICS has been a powerful, positive force for manufacturing improvement.  However, the last decade or so has seen their steady decline in relevance to the point that their contribution to lean manufacturing is insignificant.  Once the first stop for leading manufacturing resources, they are now an afterthought.  I personally hate to see it happen.  I first joined APICS a quarter of a century ago; I'm APICS certified; my career was greatly enhanced by the knowledge I gained through APICS, and some of the best personal and professional relationships I have formed began at APICS meetings and conferences.

In my quest to try to understand how such an important organization could fade away, I stumbled across this on their web site: "APICS will eliminate the tag line 'the educational society for resource management,' and will develop new tag lines based on further consideration of how best to promote the APICS brand." That said it all.  I needed to look no further.  It is clear that APICS has missed the paradigm shift, and as its product deteriorates in value, they are trying to prop it up with the illusion of relevance.  "Tag lines"?  The "APICS brand"?  Manufacturing people are not that stupid and APICS kids themselves by thinking that we will return to them as a result of their tag lines and brand positioning.

The psychology of the paradigm shift was a big thing in management a few years back.  For those too young to have caught the wave, a paradigm is a model or set of accepted rules about how things are.  When something comes along to reset the rules, it can be hard to accept the change.  The example often cited was in wristwatch technology.  In your grandfather's day, the paragon of timekeeping perfection was the Swiss watch, and they were intricate mechanical marvels and pretty accurate.  When the quartz crystal came long, however, watches could be made much cheaper, smaller and with substantially better accuracy.  The Swiss rejected the new technology, stubbornly clinging to the rules of watchmaking that had served them for centuries.  In the end, watch making all but went out of Switzerland and the industry died.  The irony was that the creator of quartz crystal time keeping technology was Swiss, but his own country had no use for the radical change he was suggesting.  The moral of the story is that the Swiss had made the mistake of defining their product by the technology deployed, rather than the functional application that gave it value in the eyes of their customers.  They believed they were in the mechanical watch business, rather than the broader time keeping business.

APICS has fallen into the same deep hole.  While they bill themselves as"The Association For Operations Management", in fact, they are still centered on MRP.  As manufacturing becomes leaner, MRP becomes less significant, and often harmful.  APICS has not been able to see that their MRP-centered product is steadily losing value in the eyes of their customers.  Repackaging it, relabeling it and redefining the "APICS brand" will not make MRP more relevant.

The psychological barrier to the paradigm shift is the resulting devaluation of knowledge and experience.  Those old Swiss watchmakers refused to accept new technology because the day mechanical watches were replaced with quartz crystal was the day all of their accumulated skills went out the window.  The grizzled old master watch craftsman was no more more skilled in quartz crystal than the apprentice.  Tossing out a lifetime worth of knowledge is hard to do, and APICS is suffering from it.

The blog posts that get the most emotional, negative responses are those that dismiss MRP as unimportant.  The chapter in Rebirth of American Industry that brings out the greatest reaction - pro and con - is the one entitled "The Illusion of MRP". The old APICS guys come out of the woodwork to vehemently defend their technology.  Asking APICS to accept the fact that the 1971 "MRP Crusade" is over, that it needs to be tossed out entirely, and that APICS must redefine its core through lean principles, with no MRP bias at all, is akin to asking the Swiss watchmakers to dump all of their tools in the river and start fresh.  It is the right thing to do - it is the necessary thing to do - but it is probably expecting too much.  It's too bad because APICS has the infrastructure and the track record to pull the lean body of knowledge together and disseminate it in an objective, thorough manner - but it does not look like it is going to happen.

Comments

[Kathleen Fasanella]

Boy, I sure hope my comment comes out the way I intend it to sound but frankly, I didn't have any problems with anything you had to say about traditional management and accounting practices in your book. Imo, it's all true! Maybe I should explain that I'm coming from a different side of the equation than most of "you". I'm labor. I'm a factory floor grunt. I've had a long held distrust of all of this crap; it makes no difference to the bottom line -not on the factory floor! I don't care what the accountants say. I don't care what consultants say. I know that lean manufacturing is the only solution for profit and compassion. If Lean makes all this management type crap obselete, well, it was too long in coming in my opinion.

Lean is an elegant solution. It's the only place where management and labor (to say nothing of consumers) can come together with shared expectations, goals, resources and renumeration. Everybody's happy so what's not to like?

[Karen Wilhelm]

APICS was blind to lean from the start of the JIT thing, which was a good situation for SME. We were not well-positioned in the production and inventory control world, but have gained recognition through our publications, video and education on lean.

Now,with AME and Shingo, we have developed the "lean" body of knowledge and certification.

We flirted with branding, but fortunately did not substitute image for reality.

Even though times are tough for us right now, I'm proud of the job SME and its members have done to make lean known in the US and the world.

Thanks, APICS, for not raising any competition.

Karen

[Henry Hutchins]

I agree with what most of you are saying about APICS missing the JIT boat because they (we) were stuck on the MRP paradigm. And I am also disturbed that APICS does not seem to be able to find the right direction for today's business environment.
But, I want to caution all of you that you do not make the same mistake. Lean is not the answer to every situation. There are still many companies out there that could benefit from a correct application of MRP.
If your customer will not accept delivery of what you can produce each day, then your company does not qualify for lean.

Henry Alex Hutchins

[Dean Meierdiercks]

I agree with most of what was said, but there is another perspective to APICS in my opinion. Many companies are upgrading and/or implementing their ERP systems, and APICS CPIM and other materials I feel are excellent training and education tools for understanding how an ERP system can work and should work in theory. Whether you choose to implement the mrp portion or not. Is there a need for improved Lean modules in many of the ERP systems? Sure there is.

Dean P. Meierdiercks, CPIM

[Bill Waddell]

I don't know about that - implementing ERP with the understanding that the MRP basis for it won't help strikes me as something like building a three story house knowing in advance that the first floor will be unihabitable.

Regardless, it seems to be carvng out a pretty small role for what was once the thought leader in American manufacturing.

[Ron Myers]

I unfortunately have to agree that APICS has lost its leading thought position in the manufacturing and service community. I think it is as much a result wherein APICS has placed too much emphasis on enveloping a Body of Knowledge within the sole domain of APICS, and an emphasis on Certifications as a means of reinforcing that ownership, wrapping it like a fixed product under a Brand umbrella.

Business seems to look at Lean as the salvation, where it really is one leg of a stool upon which manufacturing excellence sits, whether in the United States or elsewhere. If you control your market and your demand, you can stabilize your flow, Lean lets you focus on 'easily' taking the non-value added elements out of that process. Business wants to believe that it can stabilize and smooth that demand, but our customers demand one-off, low cost solutons to their wants and immediate desires. To handle variability in the evolving and globally competitive market, a manufacturer and service provider has to understand the role of contributors in the supply chain to their success and effectively participate in that chain to meet customers expectations-whether any of the players are Lean or not. Obviously much is left on the table if you aren't effectively a Lean operation, but that is not much help if the other chain players aren't Lean as well. And what business really isn't trying to optimize their role in the chain financially, to the detriment of other participants.

If you don't understand the elements of inventory control, and MRP, supply chain management/participation etc, you won't succeed with just Lean. Because the world does not operate on a nice level, uninterrupted production flow.

APICS, in repositioning itself in the arena of Operations Management, has an expanded opportunity to become once again more relevant in the business community, but only if it effectively codifies and integrates Lean AND TOC components to augment their core ERP product as a more holistic solution to the difficulties in global competition today. Planning concepts for those things that aren't smooth, Lean for a focus on value delivered to the customer in the eyes of the customer, and TOC to focus on those constraints having the most impact on flows if they fail and thought processes to address decisions about a constantly evolving economy, as well as a more beneficial tool to derive business decisions outside normal accounting based practice.

American business has lost its focus on having an educated workforce, especially when we seem to relegate that no longer core competency to offshore operations. American business has relied on the big schools business model focusing on financial prowess, and marketing genious to see what they make, rather than making better what the market wants. Lean brings back an awareness of the contribution of the factory floor, but business still doesn't seem to want to educate the floor more, to allow an employee to contribute more to the bottom line.

I think that was the focus of the APICS CPIM and Fundamentals programs. The CIRM certification was intended to break down the operations silos and get the employee thinking cross-functionally. But we've focused on Subject Matter Experts and built our walls up again thus the discontinuance of the CIRM program. We'll see if the Certified Supply Chain Professional certification sufficiently increases the desire of business to develop their employee instead of buying it or otherwise outsource that knowledge. And we will see whether it will compete effectively against those other professional organizations competing for business face time in the same arena.

I think APICS did the right thing in expanding their umbrella, to reflect, as the brand strategists and marketing folks analyzed, a participation in that space already, and no one there to 'claim' it. APICS now needs to convince business again, in an uphill battle, that an educated employee is the best investment in survival of the business. And they have to develop, assemble and effectively deliver education programs to provide some direction to the business, direct to the business leveraging their Chapter channels to make that contact and delivery via a variety of media against participant demands and competition for their time.

True, APICS is not as relevant as it once was, but if you don't constantly evolve your product, that happens. I think APICS has one shot to do so again, perhaps alone or in 'coopetition' with other Societies.

[Steve Carle]

Bill,

I understand your concern that APICS has not reacted well to the market’s embracing of lean concepts and appears to be dealing with it with spin instead of substance. However, your “long-winded preamble” equating this spin to perceived ills in American business is way off base, if I may say so. De-coupling the manufacture of a product from the ownership or management of the product is founded on the universally accepted economic Theory of Comparative Advantage (a group as a whole benefits most when those best suited to a task are assigned the task). I fail to discern upon what principle you imply that this de-coupling amounts to a lack of integrity. When a company says “we are experts at (fill-in-the-blank), but we leave the complexity of manufacture to a different company skilled in manufacturing,” I sense no hypocrisy or lack of integrity. On the contrary, I react favorably, as it builds my confidence that they know what they’re good at and what they’re not. As a side note, the Sloan School was, at best, among those to apply Comparative Advantage to the decision between in-house and outsourced business functions, but you give them way too much credit.

If saving American jobs is the basic point, this argument boils down to one of greed, the willingness to sacrifice the good of the whole for the improvement of one’s own lot. Personally, I can’t abide that argument, and it certainly doesn’t deserve credibility among those who believe in a market-based economy.

It almost goes without saying that marketing and finance functions are not off limits from outsourcing. Think of the incredibly large industries ad agencies, consulting firms and investment banks comprise. These industries do a lot of the heavy lifting in marketing and finance that companies could do in-house if they saw fit. And this is to say nothing of the legal field. The production-side parallel is, of course, contract manufacturing, ironically a service industry, located on-shore as well as off, that can attain in-house expertise and economies of scale that, left to their product-based customers, could only be dreamed of. There is no debate the world economy and standard of living is far better off with that production activity consolidated. The dots I can’t connect from your essay are what there is about manufacturing that makes it an exception to every other discipline.

Regarding your derisive interpretation of Brand Management, frankly I think you misrepresent what a brand is. A brand is a promise, a reputation, your word. It’s the modern day equivalent of doing business with someone you know, because you know what they have to lose by breaking their word, or their promise. It reduces risk in the buying decision because (1) a buyer assigns a relatively high probability to the outcome that the supplier will do, this time, the same thing they did before and the time before that, and (2) a buyer instinctively understands that a brand has a lot to lose by breaking its’ word. Since reducing risk has value, brand and price are correlated. Think of the adage: “No one ever got fired for buying IBM.”

To characterize a brand as a tool of deceit of the unwary is tempting when thinking about brands whose value proposition is far removed from our own values (in my case, say, Rolex). But it is not true. The sustaining of brand credibility is absolutely vital in consumer markets and even in most industrial markets. And most brands don’t have a lot of momentum, they require constant vigilance to maintain, let alone grow.

To risk a brand’s credibility on a quick, dishonest money grab is possibly the single largest mistake a company can make, as the foregoing of future sales and possibly even the ongoing nature of the business is the “I” side of the “ROI” calculation of such a decision. So unless a company has one whopper of a “R” to gain, or cavernously deep pockets to re-build the brand in the event the fraud is discovered, which is more difficult and expensive than building it originally and which quickly swamps the hoped for “R” by orders of magnitude, such a risk is only for a fool. The only place I ever see it is in the case of diversified conglomerates buying a low volume boutique brand, blitzkrieging promotion and market penetration and striking a quick payback from scale-up before consumers have caught on to the scale trick and removed the prestige component of the brand’s promise and corresponding price premium. But it’s a trick and requires putting a lot of money at risk, not just in the acquisition price, but in the marketing investment. After the smoke clears, the brand starts down the road to banality, sustaining shelf space only through lower and lower pricing and among lower and lower tiered retailers (in the case of consumer products).

Finally, to bring my own long-winded counterpoint to a close, I happen to be on assignment in Switzerland at the moment and can report, in no uncertain terms, the Swiss watchmaking industry is alive and well! But on your point that organizations fail to adopt better technologies only at their peril, you and I are in complete agreement. In point of fact, this is my company’s mantra as we are selling an improved technology into the homebuilding market! Good luck with your lean endeavors.

Steve

[Randall]

Don't companies still need all levels of resource planning and execution even if they have lean cells with EOQ=1 and synchronous flow of perfectly self-balancing lines? Isn't MRP just a component of the "watch" as a calculator or a "gear" in a machine? Don't we need to know what, when, and how much we need to do anything from cook spagetti to dig a ditch to build an aircraft carrier? I love reduction of waste and tightening everything up from the iron ore to the engine block and make the kan ban loops as big as possible, but how to get away from MRP ? (em are not :) )

Randall