Evolving Excellence

Presidential Candidates and Manufacturing Issues

I'm probably asking for it, but the political junkie and the manufacturing geek in me had a meeting while I was sleeping last night... which will probably teach me to not have that last glass of local Justin cabernet.  Those two devils on my shoulders thought it would be interesting to see who our readers thought would be the best President for manufacturing... however that is defined.  And then see what those same people thought were the most important manufacturing-related issues.

So here are two online polls.  The first simply asks who the best candidate is from a manufacturing perspective, and the second lists a variety of manufacturing-related issues and opportunities and asks which are most important.  Below the polls is a listing of the candidates and what I could find in terms of their positions on manufacturing and trade.  Some is rather nebulous, which I guess in effect says something in itself.  I'll create links to these polls on the left side of the blog so they are easy to find later.  I've done my best to keep my personal views out of this post; in fact, some of the information in the descriptions comes from websites with diametrically opposed perspectives.  I'll eventually decide what to do when candidates drop out or the race solidifies after February 5th.

Here is the information on the candidates, in apolitical alphabetical order.  If anyone has more specific manufacturing-related issues information, please let me know.

Joe Biden (D)

Biden has voted for some trade agreements, but he has steadfastly voted against recent agreements covering Central America, Oman, the Dominican Republic, Singapore and Chile. He also has been fighting to retain manufacturing jobs in Delaware by working with other officials to keep Chrysler’s Newark plant open and save 2,100 jobs. He has lobbied Chrysler to keep the plant open, meeting with company officials and writing a letter on the plant’s behalf. He also has proposed legislation to help make the plant, and Chrysler, more competitive. Biden’s legislation includes $500 million for research and development of advanced battery technology for hybrid vehicles and a raise on the cap of the number of hybrid vehicles that would be eligible for consumer tax credits.

Michael Bloomberg (I, not declared)

"We are launching a comprehensive industrial policy that involves designing new business zones and creating new incentives to encourage long-term investment in manufacturing, warehousing and other industrial businesses throughout the five boroughs,” said Mayor Bloomberg. “As I said in the State of the City, we are committed to diversifying our economy in order to create opportunity and jobs for all New Yorkers. Over the past half century, the City’s industrial base has declined, along with many other American cities, but the industry remains a powerful engine of our economy and its 500,000 jobs represent about 15% of our workforce. We believe that our new industrial initiatives will stem this tide and grow our manufacturing sector." Mayor Michael R. Bloomberg announced the creation of the Mayor’s Office of Industrial and Manufacturing Businesses to support New York City’s industrial sector. The Office will manage the creation of new Industrial Business Zones (IBZs), in addition to carrying out a number of initiatives to assist the manufacturing sector such as relocation tax credits, enhanced sanitation services and employee training programs.

Hillary Clinton (D)

Clinton voted against CAFTA and a trade agreement with the Dominican Republic, but she voted for trade agreements with Oman, Singapore and Chile. Clinton voted against renewing Fast Track authority in 2002. "One of the reasons I voted against CAFTA is that we should never ever enter into a labor agreement in the 21st century that does not have labor and environmental standards in trade. We've got to enforce the trade agreements that are already on the books, something that this administration refuses to do. That is why we cannot grant Thailand access to the U.S. auto market. You know, we are in the position we find ourselves today—where we are losing good paying jobs, where wages are stagnant, where people are losing health care and pension security, and where we have a government that wants to undo the work of the 20th century…. And it just reinforced, for me, that whatever is wrong with American manufacturing can be fixed by doing what is right with American manufacturing and putting people in charge who know how to do that. "We have competitive advantages that nobody in the world has. We have a strong, flexible, hard-working, experienced workforce. We just have to unleash you to be able to be competitive. We have a real commitment to innovation, but we don’t get any support from our government on that front."

Chris Dodd (D)

Dodd has voted against recent trade agreements including CAFTA and trade agreements with Oman, Dominican Republic, Singapore and Chile. In 2002, he offered an amendment to Fast Track trade-promotion authority legislation requiring U.S. trade negotiators to seek workers’ rights standards and enforcement provisions in future agreements.

John Edwards (D)

Edwards opposes a proposed trade deal with South Korea, which he says would be bad for the U.S. auto industry, and wants to see real labor standards in future trade agreements. "We need trade that works for American workers, which means there need to be real labor standards, real environmental standards…."As a U.S. senator, Edwards voted against trade agreements with Singapore and Chile. He also supported an amendment to Fast Track trade-promotion authority legislation to require U.S. trade negotiators to seek workers’ rights standards and enforcement provisions in future trade agreements, equal to those negotiated in the U.S.-Jordan agreement.

Rudy Giuliani (R)

Giuliani, who previously opposed NAFTA, now says he supports free trade: "We no longer have separation between a domestic economy and a global economy. It's one in the same thing. And I generally agree with the principles of free trade and ...increasingly have become more convinced of those principles because I almost think they are inevitable. If we fight them, we hurt ourselves. If we embrace them, we kind of move to the future." "Over the last 10 to 15 years, I've become more and more convinced that globalization, free market economics, is the way to go for the United States." He also said tackling the trade imbalance with China is "an agenda for the past." "Sen. Hillary Clinton was on the CNBC network a few weeks ago. She talked about limiting the foreign purchases of U.S. government bonds aimed especially at China. She also talked about taking some action to limit the U.S. trade deficit.  Generally a bad idea and generally self-defeating. And certainly not an agenda for the future, kind of an agenda for the past. It's a way of trying to keep yourself in the past, lock yourself in the past. The best way to deal with the global economy is to take advantage of it in an aggressive way, in an optimistic way. Let's build industries that we can sell in this—in this—in this new part of the world where we have a growing number of consumers."

Mike Gravel (D)

NAFTA has been a "disaster," according to Gravel. "NAFTA has been a disaster for the working class of both the U.S. and Mexico and has been a godsend for corporations. A study by the Economic Policy Institute found that through 2004 over 1,000,000 U.S. jobs were lost as a result of NAFTA, a third of them manufacturing jobs. In Mexico, 1.3 million farm workers lost their jobs in the same period. This has led to a wave of immigrant workers looking for work in the U.S. job market. "Major structural changes must be made to NAFTA in order to restore lost jobs. Reforming unfair trade policies will stimulate job growth on both sides of the border and allow Mexican workers to remain in their motherland. We must make fair trade a priority if we are to rebuild the American middle class."

Mike Huckabee (R)

Huckabee has expressed some skepticism about free trade in his recent campaigning in New Hampshire. "[Huckabee] said strengthening economic prospects would additionally require tougher trade negotiations, because 'there is no free trade without fair trade.' ...The U.S., for example, granted in 2000 Permanent Normal Trade Relations with China and arguably placing the country at a disadvantage. International competitors are not meeting the same wage structures, environmental and health and safety standards, and economic models of foreign competitors are undermining standards in this country, he said. The companies based in the United States have to face litigation, treat workers fairly and meet ethical standards of practice. The United States needs tougher negotiations to ensure competitors meet these standards, and the soft power of tariffs and sanctions could be used, he said."

Duncan Hunter (R)

Hunter supported the free trade agreement with Oman, but voted against CAFTA and the Chile and Singapore agreements. He also voted against the final conference version of Fast Track authority in 2002. When Hunter announced his run for the presidency, he said his candidacy "would emphasize his support for the war in Iraq, his opposition to abortion and his belief in free trade.” He said he would also emphasize the need to restore the balance of trade with China. 'This is not free trade, this is not fair trade, ' Mr. Hunter said according to the text of his speech. 'It is cheating.' ” Hunter also used the "cheating" theme in accusing a high-level delegation to Beijing led by Federal Reserve Chairman Ben Bernanke of appeasement

Dennis Kucinich (D)

Kucinich is a vocal opponent of free trade policies and job exporting. He opposed CAFTA, Fast Track authority and trade agreements with Oman, Chile and Singapore. "I have traveled across America. And I have seen the effects of agreements like NAFTA and CAFTA: padlocked gates of abandoned factories, grass growing in parking lots of places where workers used to make steel, used to make washing machines, used to make textiles, used to make machine parts. "Free trade has meant freedom for the American worker to stand in the unemployment line while their jobs were traded away. So-called free trade has brought broken dreams, broken homes, broken hearts to the American manufacturing worker. Trade without equity is tyranny. Trade without economic justice is theft. Trade without integrity, without workers' rights, without human rights, without environmental principles is not worthy of a free people." (Kucinich advocates the end of NAFTA and the World Trade Organization to protect workers and the environment.

John McCain (R)

In an appearance in Miami's Little Havana, McCain said that as president “he would work on political, diplomatic and economic fronts to counter the rise of socialism, including efforts to spread free trade.” In the Senate, McCain voted for Fast Track trade authority. He also voted in favor of CAFTA, as well as free-trade agreements with Singapore, Chile, Oman and Australia. McCain voted to normalize trade relations with China and Vietnam and voted against the Schumer-Graham bill, which would have imposed tariffs on China as a penalty for currency manipulation. In 2001, McCain voiced concern that Congress was showing "hostility" toward corporate-driven trade. In a statement praising the U.S.-Jordan Free Trade Agreement, McCain said: "Indeed, it has seemed as though free trade is no longer a priority of this body. In addition to the strategic significance of this legislation to U.S.-Jordanian relations, it is my hope that passage of this bill represents a change in the direction this Congress will take toward a policy of free trade that has upheld our prosperity and advanced our values around the world."

Barack Obama (D)

Obama voted against CAFTA but for the Oman Free Trade Agreement. He said he opposed CAFTA because workers are not getting help dealing with the negative effects of the corporate-driven global economy. "I wish I could vote in favor of CAFTA. In the end, I believe that expanding trade and breaking down barriers between countries is good for our economy and for our security, for American consumers and American workers.…I meet these workers all across Illinois, workers whose jobs moved to Mexico or China and are now competing with their own children for jobs that pay 7 bucks an hour. In town meetings and union halls, I've tried to tell these workers the truth—that these jobs aren't coming back, that globalization is here to stay and that they will have to train more and learn more to get the new jobs of tomorrow. But when they wonder how they will get this training and this education, when they ask what they will do about their health care bills and their lower wages and the general sense of financial insecurity that seems to grow with each passing day, I cannot look them in the eyes and tell them that their government is doing a single thing about these problems. That is why I won't vote for CAFTA."

Ron Paul (R)

Paul says he backs free trade—meaning free of what he calls government interference—but opposes many trade agreements. He voted against CAFTA and free-trade agreements with Oman, Singapore and Chile. In an opinion piece on his views of CAFTA, Paul wrote: "I oppose CAFTA for a very simple reason: It is unconstitutional….We don’t need government agreements to have free trade. We merely need to lower or eliminate taxes on the American people, without regard to what other nations do….CAFTA and other international trade agreements do not represent free trade. Free trade occurs in the absence of government interference in the flow of goods, while CAFTA represents more government in the form of an international body."

Bill Richardson (D)

As U.N. ambassador under President Bill Clinton, Richardson represented the administration’s view that free trade could ultimately be a positive thing for the country. In a speech at Denver’s Annual Free Trade Dinner: “Richardson warned…against the threat of passivism in the face of global opportunities and challenges, and emphasized the growing importance of free trade, both to Americans and the world at large….'We must be willing to embrace, not selfishly evade, the responsibilities and obligations that the imperative of American leadership entails,' Ambassador Richardson told the several hundred guests. To do so, 'we must do more to seize the opportunity and the limitless possibilities that free trade and global engagement represents for the American people.'" But Richardson supports stronger enforcements for wage disparity and worker and environmental protection.

Mitt Romney (R)

Romney advocates unrestricted trade. "We have to keep our markets open or we go the way of Russia and the Soviet Union, which is a collapse. And I recognize there are some people who will argue for protectionism because the short-term benefits sound pretty good, but long term you kill your economy, you kill the future."

Tom Tancredo (R)

Tancredo voted against the Oman Free Trade agreement, CAFTA and the Singapore and Chile trade agreements. He has tied his opposition to trade agreements to his stance on immigration: "Falling U.S. taxes on imported products and slowly crumbling foreign barriers to U.S. commerce have provided a number of benefits for Americans and American businesses.… Unfortunately however, it isn’t all good news. Many recent trade agreements have done far more than just phase out high U.S. taxes on imports and open new markets for U.S. businesses—a lot more. In fact, the primary 'import' American trade negotiators seem concerned with these days is foreign workers."

Fred Thompson (R)

In the Senate, Thompson had a record of supporting so-called “free trade” agreements. He voted for Fast Track trade authority and for trade relations with China. He also voted to kill an amendment that would have required future trade agreements to have enforceable standards for workers’ rights.

The Lean Approach to Email Management: It's Not About Technology

(Note: this is a copy of a post I just put up on my own blog.  For more goodies on the lean approach to managing email and information, and how to create individual lean work habits, go here.) 

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Yesterday's Wall Street Journal article, Email's Friendly Fire (available for free here), shows just how wide is the gulf between lean thinking and conventional thinking.

First, the sobering (frightening?) data: last year, the average corporate email user received 126 messages a day, a 55% increase from 2003. Translating that number into your most valuable commodity -- time -- workers are now spending 26% of their day managing email, a number expected to hit 41% by 2009. (All figures from the Radicati Group.)  And while your mileage may vary, you're probably not too far off these numbers.

The problem isn't really spam, either:

Email overload is now considered a much bigger workplace problem than traditional email spam. Inboxes are bulging today partly because of what some are calling "colleague spam" -- that is, too many people are indiscriminately hitting the "reply to all" button or copying too many people on trivial messages, like inviting 100 colleagues to partake of brownies in the kitchen. A good chunk of today's emails are also coming from brand new sources, like social- and business-networking sites like Facebook Inc. and LinkedIn Corp., or text messages forwarded from cellphones.

Naturally, when there's a problem like this, there's always someone ready to take venture capital and create a technological solution. And sure enough, one of the companies mentioned, Xobni, has a product that places a set of features on top of a customer's email inbox, such as "profiles" of online contacts complete with photos, and quick links to set up appointments.

But is that going to solve the problem? Are you really going to have fewer messages or spend less time processing email if you have a photo of the sender?

Look, I'm sure there's more to Xobni than that, but I still question the blind faith in a technological solution. And that's where we come to lean thinking.

Toyota is legendary for its production efficiency. The company is also legendary for being slow to introduce new technology. Management has always felt that it's pointless to spend money on shiny new hardware, software, and equipment when the underlying process is broken: first get the process right, and then figure out whether it makes sense to invest in new technology. (This is true for both factories and offices.) Detroit automakers learned this lesson the hard way, when after investing billions in robots and the highest-tech plants in the 1980s and 90s, they found that their quality still couldn't match Toyota's standard.

So when a company develops a program that promises to make email management in Outlook easier, I'm skeptical. Because the greatest technology in the world is worthless if the underlying process is broken. And it is.

The real reason why workers are pissing away their days in their inbox is that most of the mail is worthless crap. In conjunction with yesterday's article, the WSJ did a reader's poll in which 79% of responders said that less than half their emails are valuable.

   

You want to talk about muda?  Think about the colossal waste of time these numbers represents. Conservatively speaking, people are spending at least 13% of their days wading through electronic garbage. And the number is probably a lot higher than that.

The real solution to the explosion of email isn't a new Outlook add-in that makes sorting, filing, or finding email easier, any more than the solution to your weight problem is buying a bigger pair of pants.

The real solution -- the lean solution -- is to reduce the volume of email that you're generating and receiving in the first place.

I'm not a Luddite. I don't think that we should go back to the Pony Express to handle all our communication. Email is an amazingly powerful tool that can make business easier and more productive. (Although, in the words of Matt Cornell, it should be treated like a chainsaw: powerful but dangerous.)  And it's not going away anytime soon.

But if you don't begin to reduce the volume of email you deal with and actually start doing your job, by 2009 you're going to become one of those folks who spend 41% of your day dealing with email. And that doesn't sound like fun, unless you really enjoy working at home while your family stares like Sigourney Weaver in Alien.

A tax attorney I know was just told by Alcoa, his client, that they no longer want to communicate with him via email. Apparently, Alcoa's in-house attorneys and accountants are so swamped by email that they can't deal with any more. Now they have a conference call twice a week to cover all the issues. Not coincidentally, they're getting more done in less time. Documents are still being sent by email, of course, but the substantive discussions are done by phone, which is a far more effective way of communicating.

You may not be ready (or able) to make such a Draconian change in email policy where you work, but here are some simple ideas that you can try to manage the flood of email:

• When you send an email to a group of people, put the recipients in the BCC field. That prevents them from hitting reply all. (If you want to show who was on the list, put their names in the body of the email.)

• Commit to a daily 10 minute meeting/phone call with your main email correspondents. Be focused: cover all non-urgent items that you might otherwise have put in an email. You'll be amazed at how many emails you can preempt. And honor that commitment: put it in your calendar so that you don't forget.

• Pick up the phone.

• Get off your ass and walk over to the other person.  (Speaking of getting lean....)
  

To paraphrase Kevin Meyer, it doesn't pay to worship the false god of the technological solution. Attack the problem at the root, rather than trying to apply some sort of electronic panacea to a fundamentally broken system. That's lean thinking. And it works.

Offshore Manufacturing Execution Squads

Over the last couple days I've come across some examples of offshore manufacturing problems that really make me wonder if it's worth it.  To be fair they aren't by any stretch indicative of the vast majority of factories.  But something to think about.

For starters, here's a story from today's Fox News website:

A North Korean factory chief accused of making international phone calls was executed by a firing squad in a stadium before 150,000 spectators, a South Korean aid group reported. In October, the North executed the head of a factory in South Pyongan province for making international calls on 13 phones he installed in a factory basement, the aid group said. Six people were crushed to death and 34 others injured in an apparent stampede as they left the stadium, the aid group said.

That will teach his comrades about the danger of making calls to inquire about offshore outsourcing.

Earlier this week Alex from the UK pointed me to a New York Times photo essay on how New York City's manhole covers are manufactured in India.  The photos are enough to make any manufacturing person cringe in fear and any OSHA inspector spontaneously combust, and the accompanying story is almost equally descriptive.

Eight thousand miles from Manhattan, barefoot, shirtless, whip-thin men rippled with muscle were forging prosaic pieces of the urban jigsaw puzzle: manhole covers.  The scene was as spectacular as it was anachronistic: flames, sweat and liquid iron mixing in the smoke like something from the Middle Ages. 

And of course I have to wonder if it's really cheaper to ship hundreds of tons of cast steel from India to New York instead of giving some of NYC"s finest homeless folks a living wage to perform the relatively unskilled job locally.  Unfortunately New York doesn't have much of a choice.

New York City gets most of its sewer manhole covers from India. Mark Daly, director of communications for the Department of Citywide Administrative Services, said that state law requires the city to buy the lowest-priced products available that fit its specifications. Mr. Daly said the law forbids the city from excluding companies based on where a product is manufactured.

When supposedly sophisticated Fortune 20 companies can't figure out the vagarities of "total landed cost," especially taking into account subjective variables like human safety, ethics, and risk, how can government bureaucracies be expected to get it right?

Which reminded me of a YouTube video I found a year or so ago which is making the email rounds for the third or fourth time.  In it you'll see a sheet metal press at a Chinese factory, where the operators sit INSIDE the press.  It opens, the operators remove the pressed steel, and then they hunch up just in time for the press to close... hopefully making sure they are within the confines of the human-sized cavities designed into the tool. 

Just for grins, forward that on to your factory safety officer as an example of a new project you'd like to try!

The Best Lean Companies for 2008

Earlier this year Mark over at the Lean Blog did a poll of the "Best Lean Companies."  After over 800 votes the results were pretty much as expected, at least for the top half.  I don't agree with a few of them, but then again I'm no expert.  Just for kicks I did some research on the stock performance of the top 20 (obviously not including the two or three private companies), ranking them by quarter and year to date with comparisons to the S&P/Dow/Nasdaq, and came up with the following:

2007-Q1			2007-Q2			2007-Q3			2007-YTD
Deere	14.3%	..	Intel	24.1%	..	Deere	22.9%	..	Deere	64.8%
Parker-Hannifin	12.3%		Textron	22.6%		Parker-Hannifin	14.2%		Parker-Hannifin	49.1%
Illinois Tool	11.7%		Caterpillar	16.8%		Textron	13.0%		Textron	42.8%
Tesco PLC	9.8%		Parker-Hannifin	13.4%		Illinois Tool	10.1%		Intel	23.8%
Steelcase	9.5%		Deere	11.1%		Danaher	9.5%		Illinois Tool	18.3%
Caterpillar	9.3%		DOW	8.5%		Boeing	9.2%		Tesco PLC	16.9%
Nike	7.3%		General Electric	8.3%		Intel	8.9%		Danaher	12.0%
HON	3.4%		Boeing	8.2%		General Electric	8.2%		Caterpillar	11.9%
Kimberly-Clark	0.8%		NASDAQ	7.5%		Kimberly-Clark	5.0%		NASDAQ	7.5%
NASDAQ	0.3%		S&P 500	5.8%		Tesco PLC	5.0%		DOW	4.2%
S&P 500	0.2%		Danaher	5.7%		NASDAQ	3.8%		S&P 500	1.6%
Boeing	0.1%		Illinois Tool	5.0%		DOW	3.6%		General Electric	1.2%
DOW	-0.9%		Honda	4.1%		S&P 500	1.6%		Boeing	0.8%
Danaher	-1.4%		Southwest	1.4%		Nike	0.6%		Kimberly-Clark	0.4%
Southwest	-4.0%		Toyota	-1.8%		Caterpillar	0.2%		Southwest	-10.4%
Textron	-4.2%		Kimberly-Clark	-2.3%		Southwest	-0.7%		Honda	-15.4%
Toyota	-4.6%		Tesco PLC	-5.8%		Steelcase	-2.8%		Steelcase	-16.1%
General Electric	-5.0%		Steelcase	-7.0%		Toyota	-7.2%		HON	-17.5%
Intel	-5.5%		HON	-10.7%		Honda	-8.1%		Toyota	-18.5%
Honda	-11.8%		Nike	-45.1%		HON	-12.2%		Nike	-35.6%

There are obviously some interesting observations.  The market overall has been a rollercoaster, and even Toyota has had a rough year.  Only a handful of companies actually outperformed the major indices.  At the same time we don't want to get sucked into the short-term mindset that bedevils lean improvements or a focus on traditional measures of value.  There are a lot of games that are played between the time a sale is realized and when the effect of the sale hits the bottom line... and especially to when that bottom line is translated to a stock price.

But it is still an interesting, albeit admittedly flawed, analysis.  There are some companies on the current top 20 that I don't believe belong there, and some (such as Wabtec) that I believe are missing.

Let's try this again, looking forward to 2008.  What lean-driven companies will be tops in 2008?  We'll lock the top 20 at the end of December, and then Evolving Excellence will report the performance and any notable news.  Here's the poll:

Fun With Statistics, Compensation Edition

Many of us have long been struggling with helping employees understand the confluence of benefits and compensation.  Straight wages are the most obvious form of compensation, but those of us that get to experience the exciting employer side of things also realize the cost, and value, of benefits as health care, insurance, and other costs rise.  Some employers completely shield employees from those rising costs, in which case the employees are oblivious to their "total compensation" while most share or pass on the increases.

Both a former employer as well as my current company have tried to educate employees as to the value of their total benefits package by creating personalized annual statements, usually with a nice fat bar graph showing how benefits are worth 30-50% above straight wages.  Unfortunately the message doesn't seem to get across, which explains the popular perception of "stagnant wages."  Our friend Steve Conover over at The Skeptical Optimist has a couple of posts on the subject.  In the first he takes on the stagnant wage myth itself.

Here's how the BLS describes their compensation data: "The Employer Costs for Employee Compensation product is a quarterly survey that shows the employers' average hourly cost for total compensation and its components."  I charted the BLS numbers, and calculated the change in real compensation for the six years from Q4 1999 to Q4 2005.  A pleasant surprise: real compensation per hour has been the opposite of "stagnant"; in fact, it grew by 6.7% in the 2000-2005 interval.  That's better growth than any six-year period in the last twenty years, including 1995-2000.

He then goes on a bit of a well-deserved rant on how the presidential candidates, especially from one side, are blathering about the myth and the moderators and press aren't calling them on it.  However he really gets interesting in a follow-on post asking Do Employee Benefits Benefit Employees?  What the heck kind of question is that, you ask?  Let's let Steve describe his quandary.

In the three days since I posted the article below this one, I've had to revise my opinion about employee benefits.  Specifically, I've had to revise downward my estimate of the number of people who actually consider them beneficial to employees.

Benefits apparently aren't benefits to those whose political talking points get more difficult if employee benefits are assumed to benefit employees.  If the cost of health insurance increases, and a company pays part or all of the increase, guess what: that doesn't "benefit" the employee; sure, it cushioned the blow, or even eliminated it, but somehow that's not good enough to be classified a "benefit."  (Makes one wonder how many employers realize that any extra money they'd pay out for health insurance cost increases would not be considered of "benefit" to their employees.) 

Whatever.  In my judgment, employee benefits benefit employees, just as money wages do.  Compensation (pretax) is the sum of the two, and real compensation (pretax) has increased significantly since the business-cycle-peak year of 2000.  And, because everyone's income tax rates went down since 2000, the after-tax effects would have to be even larger; too bad the BLS doesn't publish after-tax numbers. 

I've been called an "idiot" for that thought process.

I guess that forces me to join the idiot club as well.  As a final note, I've always been intrigued with how some benefits are critically valuable for some and not others and how some benefits become attached to employee compensation and others don't.  Employers don't provide car insurance, so why are they should they provide health insurance?  Sure, healthy employees make for good employees, so there is a business interest.  But in supporting that business interest do we add far greater unnecessary complexity with regards to health care portability?  Similarly many employers are experimenting with "opt-out" forms of 401k enrollment to help "encourage" employees to save for retirement, but we run into a wall with young kids more interested in where the weekend's beer money will come from than in what they'll be living off of in fifty years. 

Toyota and the Power of People

The past week has seen a flurry of articles on the problems Toyota has been facing as it surpasses GM for the number one spot... in sales.  As a side note, several months ago we commented on how sales is meaningless; the real number is the bottom line where Toyota has been king for a long time.  But the reality is the same in that Toyota has experienced some quality, people, and operational issues lately.

Two of the better articles were the USA Today's piece by Chris Woodyard and the LA Times piece by Ken Bensinger.  I've mulled both of them over for several days, and had an email chat with good friend Norman Bodek on Bensinger's article, which coincidentally quoted Mr. Bodek.  My conclusion is that the problems, the visibility of which can be attributed to Toyota's new elevated status, is rooted in people.

Let's start with a comment on that visibility factor.

"It's not very fun being No. 1, is it?" asks Rebecca Lindland, an automotive consultant for Global Insight. "They are just proving in the end they are a company run by human beings and not a machine."  "The nail that stands highest gets hammered," says spokesman Xavier Dominicis. But he adds that Toyota is taking its situation seriously and is starting an initiative to get back to basics.

True, but irrelevant as I'll note after a surprising statement in Woodyard's article.

Toyota downplays the trouble, saying that growth makes it a bigger target and that the issues aren't that big a deal.

That's what a GM or Ford would say, but not what someone truly rooted in TPS would dare think.  A problem is still a problem, and needs to be fixed.  No issue is "not a big deal."  Which is what a quote from Bensinger's article reinforces.

Toyota President Katsuaki Watanabe recently appointed two executives to oversee quality control, announced plans to hire 8,000 more engineers to work on that issue and decided to make more prototypes of cars prior to release. "We're very concerned about quality," [Toyota spokesman] Kwong said.

Now on to the quality problems that are getting a lot of press.

Consumers Union, the non-profit that rates products, said in October that Toyota showed "cracks in its armor" in its 2007 Car Reliability Survey. Three models were rated below average in reliability.  Consumers Union also gave it the top recommendations for reliability in 17 of 39 picks. A study from the business school of the University of Michigan in August said that Toyota had slipped in the American Customer Satisfaction Index, even though its Lexus division moved up slightly. "We did see a drop in product quality," says Claes Fornell, a business professor.

As the article points out, reliability and other quality comparisons are just that: comparisons.  If you dive deep enough you'll find the underlying "defects per unit" and such data, but that usually isn't reported.  The lowest quality Chevy today is still better than the best Toyota of a decade or so ago.  Ok, maybe two decades.  But the comparison number is definitely important, as that describes one of the competitive advantages, or disadvantages, that sells cars.  So what's going on? 

J.D. Power and Associates, another quality-ranking group, found that Toyota's rivals are gaining. "It's not that Toyota is getting worse" says David Sargent, Power's vice president for auto research. "It's that others are catching up."

And why are others catching up?  In my opinion, it comes down to people.  Yes there are other components, such as Toyota's rapid ramp-up that has severely strained its supply chain.  But the people aspect works in both directions.

The speed of Toyota's growth has meant that it can no longer draw from deep experienced talent at existing facilities.  Assemblers, supervisors, and even senior management needed to be sourced from outside of the company.  Instead of the assurance that the leadership was steeped in years of TPS, relatively quick (although still far longer than most companies) training programs have been used.  Culture cannot be effectively learned, or transferred, in a training program.

At the same time Toyota has been losing some key people. 

Jim Press, then-president of Toyota North America, the New York-based holding company that oversees all of Toyota's U.S. operations, and the first American to serve on Toyota's board in Japan, left in September to join Chrysler. His resignation was bracketed by goodbyes from Lexus marketing vice president Deborah Wahl Meyer, who also went to Chrysler, and Lexus general manager Jim Farley, who went to Ford.

Those are people that truly understood TPS and were instrumental in Toyota's success.  The impact isn't so much a hit against Toyota as it is an opportunity for Toyota's rivals.  If those executives are given the power and authority to make significant changes, they could truly improve the operations of Chrysler and Ford.  However if they are stymied by bureaucracy and NIH as they attempt changes that are often counterintuitive, then those companies will have missed a golden opportunity.

It's going to be an interesting few years.  If Toyota does what it has done best in the past, it will improve and maintain its lead in delivering customer value in terms of quality and innovation.  If its competitors try to implement real lean instead of the superficial projects of the past, it will be a battle.  Norman Bodek said it best to me the other day:

It is good to be periodically disturbed to shake up any complacency. Toyota will just work harder to get it absolutely right in America.

That's good advice for all of us, in any industry.  Never stop being worried.  Never stop improving.

New at Superfactory - November 2007

Each month new articles, book reviews, and other content are added to the Superfactory website. The new content is featured in the free monthly e-newsletter which goes out to 50,000 subscribers worldwide, and we will also post a monthly heads-up on this blog.

New content in November includes:

The featured article is from our long time friend and one of the founders of the lean movement in North America, Norman Bodek, and is titled A Japanese Study Mission.  The following is a brief excerpt, and you can read the entire article here.

This past September 1st, I led a study Mission to Japan, something I used to do on a regular basis. From these study missions, miraculously, I found Dr. Shigeo Shingo, Taiichi Ohno, Dr. Ryuji Fukuda, Dr. Yoji Akao, and many many more management geniuses. I could hardly absorb what they had to offer. But somehow, I was able to recognize their genius and to produce their books in English. From this past trip, I came back with “tons” of new information. I am overwhelmed and trying to find a way to disseminate all the things I found. I am grateful that Kevin Meyer at superfactory.com asked me to write about my learning and experiences from the study mission. I found probably the best Toyota training course available in English and I think I also found some of the real secrets that Toyota uses to motivate their employees, definitely lacking with companies in the West.

The Featured Blog Post is our recent piece titled The False God Opens a New Front. The following is a brief excerpt, and you can read the entire post here.

Well after many months of retreat, and even battling among themselves, the false gods have opened a new front: document and compliance management software. Many of us have worked in companies with huge documentation and compliance management infrastructures. Whole departments of people doing nothing except processing SOP changes, fixing typos, and revving drawings. Then those documents need to be printed, distributed, and especially in regulated environments the down-rev documents must be collected and destroyed. Some larger companies should probably invest in forests in order to maintain a stable supply of paper. How many times have we had to wait weeks for something like "watter bath" to be corrected to "water bath" and how much time, effort, and reduction of value to the customer was involved?

The featured book this month is Kaizen and the Art of Creative Thinking by Shigeo Shingo.  The following is a brief summary, click here for more Information and to download Chapter 5, From Ideas to Reality.

Never before published in English, this book provides the single most important tool for  initiating a Lean transformation, Dr. Shingo’s own Scientific Thinking Mechanism. For the first time ever, you have access to Toyota’s secret model of success; learn how to dissect the status quo so you can address the actual problem, generate innovative ideas in group environments, and learn the best way to implement solutions. This book unlocks the secret to managing creative thinking

We continually update the other major sections of the website, including:

• Events Calendar: a listing of lean excellence seminars, workshops, training, and conferences worldwide
• Topic Information: Summaries and resources on over 40 enterprise excellence topics.
• History of Excellence: A growing timeline of notable events that helped shape current-day enterprise excellence
• Online E-Learning Center: Fourteen interactive online presentations on the core concepts of lean manufacturing.
• PowerPoint Presentations: Over 50 downloadable PowerPoint presentations on lean manufacturing, quality, enterprise, and safety concepts.
• Factory Toolbox: Almost 300 downloadable forms, procedure templates, assessments, and tools to help you not reinvent the wheel.
• Tools and Assessments: Downloadable assessment tools.
• Virtual Factory Tours: Web and streaming video tours of over 100 factories.

We are always looking for new articles and other content.  Contact us via the Superfactory website if you would like to contribute to our knowledge base.

Lean is Not a Metric

Earlier this week our friend Mark Graban over at the Lean Blog penned what I consider to be a very important post on "measuring leanness."  In it he has the gall, and guts, to take on one of the major players in the lean movement, Richard Shonberger.  I have tremendous respect for what Richard has accomplished.  I also firmly and passionately believe Mark is right.

In his IIE article, Shonberger highlights and focuses exclusively on a single reported financial number, inventory, as his measure of "leanness." I think this is a huge error. I am hesitant to criticize Shonberger, as he deserves much credit for the spread of Lean and Just in Time principles in the U.S. But, this narrow laser focus on inventory numbers does little to help others be successful in their Lean efforts, I believe. It would be like looking at data that shows that teams that win the Super Bowl tend to commit fewer penalties than other teams (I'm making that up, but it could be true) and then assuming that the key to winning the Super Bowl is to avoid committing penalties (and focusing on that almost exclusively as a goal or a metric).

Lean companies, such as Toyota, Danaher, or others might tend to have to have low inventory, compared to their peers, but low inventory isn't the primary goal of a business. That goal should be long-term profitability. That's how we should gauge the success of a company. Not the short-term profit this quarter, but long-term profitability.

Bingo.  I would even take it a couple steps further.  Lean, and especially TPS, is about two things: creating value from the perspective of the customer and respecting people.  It is not about stellar implementations of 5S, kanban, hoshin kanri... or inventory reduction.  Those are just tools and metrics that in a very general sense can usually help create value for the customer.  But we must not lose sight of the focus on value creation.

I learned that lesson a few years ago while touring a medium-sized medical device company in southern California.  They were, and continue to be, an exemplary example of lean.  But their products have hundreds of different configurations, have long raw material and processing lead times... and customers consider it critical that the products arrive within two days of the order.  Being able to achieve that lead time creates tremendous value for the customer, and also considerable inventory.  While touring their facilities we saw amazing examples of 5S, visual controls, empowered people, kaizen, and the like.  Then we peeked through the double doors and saw a warehouse filled with inventory.  It made our eyebrows rise a bit until we thought about customer value.

That company does work very hard to reduce that inventory by changing designs to allow for later and later final configuration and working with vendors to truly reduce raw material lead times (instead of the fake "just in time" practiced by the Detroit 3 who have trucks circling their factories).  But there's still value in that inventory.  They wouldn't be considered lean by Schonberger's metrics, but I'd put them up against pretty much any of the top lean companies in terms of delivering value to their customers.

Lean is not a metric or a tool.  It is a passionate focus on delivering value by leveraging the knowledge and creativity of people.

Update on the Battle

Although it's relatively unrelated to any important message, we've enjoyed watching the battle between SAP and Oracle, aka the false gods of the almighty algorithm.  The fact that they are spending considerable resources duking it out means they have less to spend on convincing naive manufacturers that they must have complex software to perform simple tasks that can often be done with a whiteboard and some pizza.  We first told you about a particularly bizarre front of the battle way back last March:

The lawsuit is obviously no laughing matter, although the allegation is of an ingenious attempt by SAP to offer better and cheaper customer service on Oracle products to Oracle customers than Oracle itself does in order to eventually convert them to SAP.  Get that?  Pretty neat trick, eh?

Just before Oracle completed its acquisition of PeopleSoft, 37 PeopleSoft support techs created a new company called TomorrowNow, based in Bryan, Texas.  SAP rapidly snatched them up, closing the deal at almost the same time as Oracle closed the PeopleSoft deal.  Oracle's lawsuit alleges that SAP TomorrowNow (SAP TN) then began to access Oracle's protected customer support databases, using usernames of PeopleSoft (now Oracle) customers that would soon expire.  Massive downloading of technical and support documentation was recorded and traced back to Bryan, Texas.

Ingenious?  Perhaps.  But messing with intellectual property is a hot potato.  And yesterday it finally became a bit too hot.

Battling allegations of corporate espionage, business software maker SAP AG cut its ties with the leaders of a subsidiary that infiltrated rival Oracle Corp.'s computers to fetch information about Oracle's products.  Besides overhauling TomorrowNow's management, SAP said it is exploring selling the Bryan, Texas-based subsidiary, which will now be run by one of SAP's top U.S. executives, Mark White, who was appointed TomorrowNow's executive chairman in July.

Oracle's lawsuit against SAP is still moving forward, with the trial expected to begin early next year in San Francisco.

We simply enjoy this battle out of pure amusement; there is really no deep underlying message, except perhaps to be careful about messing with IP.  But some see it as a negative.  Take for instance Frank Scavo of The Enterprise System Spectator blog...

It's too bad, because the nascent third-party support model has a lot to offer as an alternative to direct vendor support. It gives customers choices and puts the primary vendor on notice that it cannot take its maintenance and support business for granted. Unfortunately, SAP's misstep with TomorrowNow has been a setback for the model.

True, but when the "third party" is also your arch competitor... hmmm.  Well I don't know.  But it's fun to watch.

Ginger, Toys, and What Else?

The Wall Street Journal this morning has a front page article detailing the long and convoluted supply chain that brings ginger from small farms in China to my local Albertson's store here in California.  Although the point of the article was to describe how long supply chains can create control problems for food, there is an analogous message for many other outsourced products.

The path of this batch of ginger, some 8,000 miles around the world, shows how global supply chains have grown so long that some U.S. companies can't be sure where the products they're buying are made or grown -- and without knowing the source of the product, it's difficult to solve the problem.

The ginger in question was tainted with a dangerious pesticide, and the FDA, even with the cooperation of Chinese officials, found it difficult to find the source.

Layers of middlemen obscure who actually produces goods, complicating efforts to police the production process. In the case of the tainted pet food that first raised concern over Chinese imports in March, neither the Chinese government nor the U.S. Food and Drug Administration has pinpointed the original source of the problem ingredient, contaminated wheat gluten.

This isn't just a problem with food.  Many hard goods companies also exercise very little control over their supply chains. 

Industry analysts say many U.S. companies save money by sourcing in China but are reluctant to spend on vetting supply chains. "You can't just throw the [orders] over the Great Wall and hope it comes back good," says Kent D. Kedl, general manager for Technomic Asia, a consulting firm in Shanghai. He says companies "need people camped out" in China.  Some U.S. companies dedicate hundreds of people to keeping track of Chinese shipments, but others dedicate little to the effort.

Companies with higher end products, such as Apple's iPod, know that a quality reputation is critical, therefore they exercise a high level of control and oversight over their offshore manufacturers and suppliers.  Many more companies, like Mattel, are in the middle tier where defined specifications and procedures are in place, but they aren't consistently followed.  And then there are those that "throw it over the Great Wall and hope it comes back good."

The article then goes into great and sometimes excruciating detail about the ginger market itself.  Grocery stores are reacting differently to this latest problem.

Trader Joe's, a Monrovia, Calif., grocery chain with some 280 stores in more than 20 states, decided to indefinitely discontinue sales of all individual food products from China by year's end, a spokeswoman says. Safeway Inc., the nation's fourth-largest food retailer by sales, has stopped selling Chinese-grown ginger and garlic "for the foreseeable future," a spokeswoman says.

Which is similar to the current backlash against Chinese toys.  Of course that doesn't fix the root cause of the problem, which is a lack of supply chain control, a lack of procedures, and a lack of following those procedures.  This does not have to take the form of additional regulatory oversight.  Just a definition by purchasers of what is expected from offshore suppliers and then monitoring and reacting to compliance.  But perhaps the actions of Trader Joe's, Mattel, and the general consumer will create a free market incentive for improvement.  Chinese suppliers that do demonstrate the will and ability to adhere to quality standards, coupled with purchasers that insist on those standards, will thrive.  Those that don't, won't.

At the same time there's yet another lesson in the conglomeration of variables that make up "total landed cost" of an offshore outsourced product.  It is no longer simply the advantage of cheap labor.  Slighly more enlightened companies have considered the cash cost of holding boatloads of inventory on the high seas.  The next level of companies consider the potential risk involved in all of that inventory fomr a direct product quality standpoint. 

These latest incidents drive home yet another potential cost: reputation.  It's rarely on the balance sheet, except perhaps as some fudge factor called "goodwill."  But when consumers stop buying your product thanks to problems at your supplier, it can hit the P&L in a very real way.