Leveling Demand at Boeing

I was intrigued by an article in The New York Times this week describing how Boeing is actually turning away orders, even from some of its best customers.

            Boeing is hot right now, partly because of troubles at Airbus. Orders for Boeing’s extremely popular 737 and the new 787 are pouring in.

            But current Boeing executives remember how the company was hot not quite a decade ago. At that time, the company accepted every order coming in the door. Production couldn’t keep up, and serious problems resulted. Many of today’s executives used to work for people who lost their jobs because of what happened.

            So today, Boeing is taking only the work it is sure it can handle. For example, Southwest Airlines, a very good customer, wanted to add two planes to an existing order for 737s, and Boeing said no (though it did make Southwest aware of two nearly-new planes that could be purchased elsewhere). Keep in mind that planes being ordered now won’t be delivered for several years.

            In effect, Boeing is seeking to level demand. And if I read the story correctly, it is trying to do so not in a high-handed or arbitrary way, but by communicating with customers so they will understand and accept what the company is doing.

            Leveling demand and building partnerships with customers are certainly elements of a lean strategy, and I’m inclined to commend Boeing for its approach.

            Now I’ve never heard of Toyota declining an order from a customer. But that doesn’t mean Boeing has done anything wrong. True, Toyota is probably better at predicting demand than Boeing. However, selling planes is very different from selling cars, with longer lead times, hugely expensive products (and correspondingly huge orders), and a global marketplace that can suddenly change in a radical way (as it did after 9/11).

            Perhaps Boeing has learned more about lean than the U.S. automakers. Ford’s hiring of Alan Mulally of Boeing to be Ford’s CEO increasingly looks like the right move.

            The Times article also noted that, in contrast to its practices years ago, Boeing now does little more than design and final assembly. Major assemblies, including parts of the fuselage and wings, are built by suppliers in a variety of countries and shipped (in 747s) to Everett, Washington. That may not be lean, but it certainly spreads risk on to suppliers.

            One last note: Early this year I went on a public tour of the Boeing facility in Everett (which, they boast, is the largest building in the world by volume, according to the Guinness book of records). It’s quite a sight; if you’re ever in that area, make it a point to go.



The Greening of Lean

I was impressed by a Baxter Healthcare presentation at the recent AME conference for two reasons. First, the speakers described how to apply lean principles in an unusual way – and it’s always good to find new ways to achieve the benefits of lean. Second, they dispelled a common myth about lean improvement efforts.

            The myth is that making your operations leaner and more efficient will automatically help you when it comes to energy and environmental issues.

            But as Jenni Cawein and Rob Currie of Baxter pointed out, while the company has seen a dramatic decrease in non-hazardous trash since beginning a lean journey four years ago, there have been no corresponding decreases in use of energy or water.

            The reason is that these areas are typically ignored during kaizen events. The result can be – and for Baxter, sometimes has been – that a kaizen event may produce some operational improvements but actually make things worse when it comes to EHS (environmental health and safety).

            For example, a kaizen team at one Baxter plant decided that segregating plastics was a waste of time. As a result, the piles of clean, segregated plastics – which had been producing recycling revenue – turned into a non-revenue-producing pile of trash.

            The good news is that by applying lean to EHS areas, or by incorporating EHS metrics into lean methods, significant benefits can be achieved.

            Typically, measurements on the shop floor might focus on cycle time, takt time, WIP, etc. By also measuring energy usage and water usage, for example – and taking those measurements every day – problems can be spotted more rapidly, causes identified and problems solved.

            This approach produced annual savings for Baxter of more than 200,000 euros in energy costs at one European plant. And Baxter calculates that as a company, its EHS-related improvement efforts produced $23.6 million in income, savings and cost avoidance in 2005, plus another $62.2 million in cost avoidance as a result of efforts during previous years.

            Baxter is now inserting EHS data into value stream maps. In addition to listing cycle time and scrap rates, some maps now also show the amount of hazardous waste generated (per X number of units) and the gallons of water used per day at each of the steps of a production process.

            Baxter – a $9 billion manufacturer of healthcare products such as IV delivery systems as well as dialysis and anesthesia products – is applying a variety of lean tools and methods to include EHS issues in its improvement efforts.

            This approach also is getting a boost from the EPA, which has launched a “Green Suppliers Network,” at least in its region covering the six New England states. It is a joint effort with other agencies to help small companies focus on EHS waste.

            The program, as described at the conference by Linda Darveau of EPA, involves a review of environmental impact opportunities, the cost of which is discounted by EPA for qualified suppliers.

            Would this approach help your company?


A Lean Thanksgiving

Thanksgiving is tomorrow, so I thought I’d depart from the usual subject areas for this blog to ponder how one might achieve a lean Thanksgiving.

            And no, I don’t mean preparing a low-fat meal. I’m talking about applying lean principles to make preparation of Thanksgiving dinner easy and efficient.

            Now I have heard of male executives schooled in lean getting into trouble with their wives for doing just that. Apparently the wives didn’t appreciate being told how to organize their kitchens. So if you are not the person who actually does the cooking, take that into account before you try this at home. 

            I did a little research on the Internet to see if there was anything that might apply here. I found some articles offering a few pearls of wisdom.

            One you read frequently is to, whenever possible, prepare ingredients in advance, preferably the day before. That is consistent with lean principles – certainly one of the tactics of quick changeovers is to have everything ready to go before the changeover actually occurs. (OK, we’re not talking about changeovers here, but you get my point.)

            Another that I liked was to let other people do the small stuff. I’ve certainly assisted my wife by doing my share of peeling, chopping and the like. And that is consistent with the lean principle of having each person in a cell perform a specific set of tasks. A parallel thought is to have guests simply bring some of the dishes.

            What goes on in the kitchen on Thanksgiving Day might be viewed as a high-variety, low-volume value stream. A variety of different products are being made, each in low volume. Has anyone ever tried to create a turkey day value stream map?

            Certainly scheduling is important here, as different dishes take different lengths of time to prepare and may have overlapping demands on kitchen resources, such as utensils, pans and the stove.

            Another critical element is cell (read: kitchen) design. All the chef’s tools need to be close by, arranged in the right sequence and easy to access.

            If you want to see an example of the value of these principles in the kitchen, try watching the television program “Top Chef” on the Bravo cable network. It’s a culinary version of The Apprentice. You’ll notice that some of the contestants have no trouble completing a given show’s challenge within the allotted time while others scramble and end up with just a few seconds left.

            In any event, I don’t expect you to spend tomorrow thinking about lean. Let me simply offer a Thanksgiving wish that your holiday consists of good food, good times with family and friends, and as little stress as possible.

            That’s it for this week. I’ll see you all on Monday.



Lean Networking

If you want to learn about lean, your choices include hiring a consultant, attending seminars and conferences, visiting Internet forums or chat rooms, and reading books (yes, we publish a few).

            But there’s another alternative, not widely available: joining a local lean networking group.

            These are few and far between. One, described at the recent AME conference, is the Jacksonville Lean Consortium, the three-year-old brainchild of Jerry Bussell, a VP of operations for Medtronic. 

            Medtronic, which has offices in Jacksonville, has been involved in lean for some time. Bussell (who is a big booster of his home city) says the consortium grew out of an idea he had: “What if we took the whole city of Jacksonville lean?”

            The consortium’s mission is to improve the performance of businesses and organizations in the Jacksonville area, known as the First Coast.

            It started out as a group of 16 companies in the area. Last year, another group of 16 was created.

            Each group meets once a month at one of its member companies. They tour the facilities, and members offer a critique. They then go around the room asking “How are you doing?” to discuss best practices and share knowledge and experience.

            Actually, it’s more involved than that. The group has objectives and strategies for individual members, which range from implementing standard measurements in every value stream to implementing a minimum of three kaizens per week.

            And the consortium’s goals go beyond just spreading lean knowledge. They want to promote economic development in the First Coast region by positioning it as a center of excellence and a good place to do business.

            When Bussell and Lad Daniels, president of the First Coast Manufacturers Association, created the consortium, they modeled it after a similar organization in Vancouver. “We stole shamelessly,” Bussell says.

            And I know of at least one other example of this type of organization: the Northwest High Performance Enterprise Consortium, based in Portland.

            These types of groups can be extremely valuable, both in helping more businesses become lean and in creating pockets of business excellence.

            I suspect this type of group doesn’t work well if it becomes too large. Therefore, you need many of them around the country (and the world) to have a large-scale impact.

            Do you know of others? Is your company involved in one? Let’s do some online networking – share what you know with the rest of us.



The Lack of Lean Partnerships

I recently heard statements that were a perfect example of two things: what lean manufacturing is all about, and everything that is wrong with the U.S. automotive industry.

            The statements came at the recent Center for Automotive Research conference on suppliers, from Frank Macher. He is CEO of Collins & Aikman, a major automotive supplier that has been in bankruptcy since May of 2005.

            “I actually received an apology from Toyota for allowing us to go into Chapter 11,” he said. He explained that his company had worked closely with Toyota on development of some products, and the automaker told him it should have done more to improve the supplier’s prospects. And since the bankruptcy filing, Toyota has been a source of support and continued business, Macher added.

            On the other hand, he said, his conversations with U.S. automakers were “very confrontational. It was almost, how dare we go into Chapter 11 on them.”

            Toyota understands a true lean strategy means developing close relationships with your supply chain partners.

            But the U.S. automakers don’t think about partnerships. As Macher put it, “it’s about price, and it has been about price for a very long time.”

            As he spoke, Macher’s anger and frustration were almost palpable. He described the challenges suppliers face; to those of us unfamiliar with the inner workings of these relationships, they were shocking, or at least discouraging. Among them:

  • Customers promise to reimburse suppliers the cost of tooling required to make a new part, but the reimbursement goes unpaid for up to two years.
  • Customers order unrealistically high volumes, and the supplier gets stuck with the cost of the excess.
  • Customers seek bids on future business that they know is unprofitable. “To allow people to bid on business three years down the road that they know is underwater to start is immoral,” Macher declared.

            He proposed a customer/supplier bill of rights. The customer, he said, has the right to expect quality products, built to specification every time.

            He then rattled off a long list of supplier rights, including realistic volumes, a pay-as-you-go commitment, timely tooling reimbursement and more.

            My favorite: “It is not a sin to make money.”

            Macher recognizes the changes taking place in the industry. If better relationships can be established, he said, “At the end of the day, we’re all going to be smaller, but I think we’re going to be healthier.”

            He declared, “Suppliers have to be able to provide a quality product without any compromises. But in turn, we should receive fair compensation.

            “Is that really asking too much? It doesn’t seem like it. It seems like fair pay for a fair day’s work is a real deal.”



Lean, Productivity and Government Statistics

I’m always a little skeptical of business statistics from the government; they often don’t tell us what we really want or need to know.

            However, I’m at least a little bit intrigued by the latest figures on productivity.

            The government’s productivity figure is a measure of how much an employee produces per hour. It would be nice if this figure told us something about the application of lean principles in the marketplace, or how that is changing over time, but the metric is probably too rough to do that.

            In any case, productivity for the third quarter of this year was unchanged after a 1.2 percent gain in the second quarter. That’s because output and hours both increased 1.6 percent.

            The one interesting part of this report (which comes from the Bureau of Labor Statistics) is the breakdown of the productivity figure.

            It’s actually an average of three figures, for business (whose productivity went up 0.1 percent), non-farm business (productivity unchanged) and manufacturing, where productivity went up 5.9 percent. (I’m not clear on exactly what is included in each of the first two categories.)

            And the manufacturing figure is an average of two other figures: an 8.6 percent increase for durable goods manufacturers, and an increase of 2.0 percent for nondurable goods manufacturers.

            (Yes, I know, for each of those “average” figures, if you add the category numbers together and divide by the number of categories, you don’t get the government’s figure. If anyone can explain that, please post a comment.)

            The point is that, when it comes to productivity (as measured by the government), manufacturing is doing better than other sectors.

            Does this mean anything? Can we say that lean has anything to do with the difference? I look forward to your comments.



Building Public Support for Lean

It’s always encouraging when lean principles are applied to the public sector to make government work more efficiently. In a small community, every aspect of government could be affected.

            In the U.S., that might be one town. But elsewhere in the world, it could be an entire nation.

            Jayanth Murthy of the Kaizen Institute has been working to achieve exactly that kind of implementation. At the recent AME conference, he spoke about his group’s efforts to banish muda (waste) from the entire country of Mauritius – an island nation off the coast of Africa with a population of 1.2 million.

            The Institute didn’t start out in Mauritius with the government as its client. The group had been working on lean implementations for textile companies in Mauritius, and that led to contact with the government.

            The government efforts, which began five years ago with full support from the president, have focused on throughput time – reducing how long it takes for a government department to provide service to citizens. Targeted areas have included at least 10 ministries, from the police department to the tax office to the prime minister’s office.

            There have been real gains, such as reducing the submission time for a passport application from 45 minutes to seven minutes. And word of the Mauritius initiative has prompted interest in other countries; Kenya has launched a similar program after a visit to Mauritius by a Kenyan official, and programs are also being established in Botswana and Dubai. (The Mauritius activities were the focus of an article in the AME magazine Target earlier this year.)

            However, what I find most interesting about what is happening in Mauritius are efforts to involve the general public and not just government employees.

            The improvement efforts were accompanied by an advertising campaign for “Muda-Free Mauritius,” and schoolchildren were encouraged to become “Muda Busters.” (The children were asked to explain the concepts to others, and collect signatures, which they could redeem for prizes.) The campaign is ongoing.

            Think of it as making your customers aware of your improvement efforts, and encouraging them to support those efforts. If successful, this kind of PR campaign could condition people to expect and demand efficient service, which can help sustain the drive for continuous improvement. Now there’s a way to achieve culture change.

            U.S. politicians always talk about the inefficiencies of government and how we need to improve. The issue is so old in this country, with so little progress having been made, that our population may be too jaded for a PR campaign (even in one local community) to have much impact.

            Nonetheless, I hope the efforts to apply lean to the public sector in this country continue. And with any luck, the successes achieved may build some public support.

            By the way, the Mauritius government that has been supporting the lean initiatives was thrown out of office in elections last year. The lean initiatives are still in operation, but their long-term status remains unclear.



The Grim Automotive Industry Outlook

Comments at the recent Center for Automotive Research conference on “Supplier Challenges, Investor Opportunities” included some optimism that things will get better – after they get worse first.

            The optimism, such as it was, focused on the idea of a burning platform in the automotive industry. “I think the will for survival will cause these companies at the bottom to make gigantic adjustments,” said John Casesa, managing partner of Casesa Strategic Advisors.

            But he and other speakers said there will continue to be a major shakeout of suppliers first.

            For example, Brad Coulter, director of Amherst Capital Partners, said that a third of the nation’s tool and die shops – 4,000 out of 12,000 – have closed since the year 2000 – and we still have overcapacity. Meanwhile, prices have fallen up to 30 percent in the last four years.

            Casesa commented that the problems facing Detroit are structural, not cyclical.

            “I think it IS that bad now,” he said. “This crisis is upon us right now. We are in the eye of the storm right now.”

            He added, “Business failures and liquidations may be required. Companies have to go away. That’s going to be very painful.”

            He also said, “The data say to me: the domestic companies will continue to lose share for the foreseeable future. And the Japanese and the Koreans will continue to win for the foreseeable future.”

            What will it take to turn things around? “Right now the main theme is shrinkage,” Casesa noted. “It’s an absolute necessity, but probably not sufficient. It’s not the solution to the problem.”

            Tom Stallkamp of Ripplewood Holdings alluded to lean principles when he said “You have to get a culture where internally they know they have to generate cost reductions” that are greater than price cuts.

            However, he displayed some pessimism that suppliers understand that.

            “You can’t believe how unbelievably juvenile some of the business plans of suppliers are,” he said. “They’re all based on hope and prayer.”

            Stefano Aversa of AlixPartners commented that “cash is king” and “it’s wise to insist on a cash culture.” (Allow me to point out that lean companies typically have strong cash flow.)

            Aversa also singled out information technology as an area for improvement.

            “You are probably spending too much on IT,” he said. “We say that it’s time for lean IT. As a rule of thumb, virtually any company can cut IT spending by 20 percent and be better for it.”

            And perhaps the most telling comment on what is lacking in the industry came from Casesa, while he was discussing the need for automotive companies to go in new directions – consolidation or a different customer base, for example.

            “There has to be some vision of what the new business model is,” he said.



Lean Jobs – The War for Talent is Back

            If you’re looking for a job that requires lean skills, you’re in a good position right now – if you can document what you’ve accomplished.

            I say that after speaking with Adam Zak. Adam is a headhunter; specifically, he is managing director of Adams and Associates International, an executive search firm that specializes in filling lean positions.

            He says that for his firm, finding good people is a bit more difficult than it used to be, particularly in the middle to upper-middle levels of management.

            “The companies that are being successful, they are hanging on to those folks with every possible market-driven incentive that they can,” he told me. “They do not want to lose those people. This year we’ve seen more counteroffers than we’ve seen in the last five years.”

            He also commented, “This is the age of the empowered individual. Not a lot of companies are spending as much as they should, I think, on the training and development side. The people that are doing it on their own (obtaining training) have a lot to offer, and they are asking for a lot more than they did two years ago.

            “The war for talent is back, and I believe that it’s really being fought in the area of lean, operational excellence, continuous improvement.”

            Adam states that demand for people with supply chain expertise is particularly strong, but “not so much working with vendors. Customer demand has become a very large area, trying to understand, what are the customers doing, and what can we be doing to actually get closer to those customers. I am the supplier; what does my customer want? Am I doing the right kinds of lean things internally?”

            He adds, “I’d almost call it more of a marketing-driven lean. Companies are trying to draw a clearer and direct line to the customer organization. We’ve been talking a lot about product development for two to three years. This past year, we’ve really seen people come to us and say, ‘can you find people who know how to drive product development?’”

            There is also strong emphasis on distribution and warehousing. As an example, he notes, “we’re doing a search for a chief operating officer for a catalog outfit. They want to drive lean through this process, whereby you and I order golf shirts, and we want to have them personalized, and we want 10 for all the members of our golf team, each with a logo and a name. That’s a very complex distribution and production process. People are looking at that.”

            And “lean accounting is finally coming into its own,” Adam adds, noting that his company is involved in searches for CFOs and heads of accounting.

            Lean is also not just for manufacturing anymore. Demand for lean people in financial services is strong, Adam says, and “healthcare is coming into its own.”

            One challenge he faces is that “there are a lot of people who have only basic knowledge. They’ve gone to a seminar or conference or two, and read some books, and they’re marketing themselves as lean experts when they are not. It’s taking a little more time for us to figure out who’s really got the performance-based background.”

            If you are hiring, Adam advises you to look for people with a solid track record, who can demonstrate what they have actually done in implementing lean and who can, in some way, show what they can do for you.

            And if you’re job-hunting, he urges you to keep a weekly diary or log of your lean accomplishments.

            “I know that may be heresy, because we’re talking about team environments,” he says. “But you really have to be able to track the kinds of things you’ve tackled, what’s worked, what hasn’t. Track the metrics. Those will be team metrics, but they’ll show individual accomplishments as well. That’s what people are looking to see.”



Lean Hurricane Relief

Occasionally, we hear about lean principles being applied not just to improve a business, but to actually improve the world.

Such was the case with a presentation at the AME conference by Ken Meinert, senior vice president of Habitat for Humanity.

            Meinert didn’t actually use the word lean, and what he described might not be considered lean, strictly speaking. However, he did explain how the non-profit organization changed its processes to make them more efficient in the wake of Hurricane Katrina.

            Most of us have heard of Habitat for Humanity, which helps people become owners of affordable homes through the work of volunteers. The problem facing Habitat was that the demand for its services suddenly spiked to unprecedented levels when Katrina destroyed or severely damaged more than 500,000 homes.

            There were plenty of donations of both money and time for hurricane relief, but Habitat’s model – volunteers building homes from scratch – just wasn’t designed to meet this kind of need. So changes were implemented.

            One major change was the involvement of builders of modular homes through Internet-based supply chain software. This made it possible, once a building plan for a particular home was approved, for designs and plans to be generated and orders placed automatically. The modules are then built and shipped to the site, where volunteers assemble and finish the structure. With this approach, volunteers can complete many more homes in a given time period.

            Another streamlining occurred in the screening of potential homeowners. Habitat doesn’t build homes for just anyone; it has to be someone who can afford to buy the home and carry the mortgage, albeit at favorable terms. (Mortgage payments are reinvested into the home ownership program.) Since the victims of Katrina included many poor, even destitute residents of the region, many who came to Habitat for help faced rejection.

            To address that problem, Habitat teamed up with other organizations such as the Salvation Army and Lutheran Social Services, which were also screening hurricane victims and providing help.

            “They would find some families who fit the Habitat model,” Meinert said. “They wouldn’t reject the others, which is what we’re faced with. We took advantage of that.” Aside from eliminating rejections and the pain that goes with them, this also eliminated duplicate screenings. It made the Habitat process scalable while Habitat still kept control over selections of families for its homes.

            To put it in perspective: Habitat previously might have selected just one out of every 50 families screened. With the pre-screening by other organizations, half of families Habitat sees are selected.

            Since Katrina, Habitat’s efforts have resulted so far in 150 families already living in newly completed homes, with another 230 homes under construction. (Those figures are increasing all the time.) More than 1,000 building lots have been acquired. (Habitat volunteers also help clean out structurally sound homes, with nearly 1,600 cleaned so far.)

            By the way, if you’d like to join the 30,000 other volunteers (so far) and spend a few days, a week or more building homes in the Gulf Coast, Habitat would love to hear from you.



The Necessity of Lean Culture

Some people believe that the American automotive industry has been battered by external forces. Those of us who promote the cause of lean manufacturing tend to think the automakers did it to themselves.

            What I viewed as powerful reinforcement of our position came at a recent event I attended in Dearborn, Michigan, called “Supplier Challenges, Investor Opportunities: A Conference on Restructuring in the Automotive Industry.” Sponsored by the Center for Automotive Research, the event brought together about 200 people, mostly investors, investment advisers and consultants looking for opportunities in the wreckage of the industry.

            I’m going to write several postings about this conference because I believe it brought into sharp focus the necessity for a lean strategy in today’s global economy (and not just in the automotive industry), as well as what can happen when the wrong strategies are pursued.

            In truth, there were few explicit references to lean manufacturing by the speakers. But lean was the 800-pound gorilla in the room, underlying the vast majority of what was said.

            Daniel Howes, business columnist and associate business editor for the The Detroit News, hit the nail squarely on the head when he said, “The biggest enemy of this town is our culture in Detroit.”

            He quoted a study of the Great Lakes region by the Brookings Institution, which described the Midwest culture as “anti-intellectual, nativist and insular.”

            Howes noted that Americans tend to think “we are somehow unique,” and the best in the world. But the world is changing, he said: “American exceptionalism is dying, if not dead, and I’m not sure a lot of people in this town got the memo.”

            He supported Ford’s decision to hire an outsider, Alan Mullaly of Boeing, as CEO and president because “we don’t have anybody who knows how to do this.”

            Related comments on culture came from other speakers. Tom Stallkamp, an industrial partner with private equity firm Ripplewood Holdings, said “the tendency in this town is to shrug it off.”

            Stallkamp noted that he has a vacation home in Florida and said, “If you want to know what’s wrong with Ford today, go to Bonita Bay. There are 600 retired Ford executives. Go to Starbucks and listen to these guys bitch about Ford. The boys in Bonita Bay need to just play more golf and shut up because they don’t have the answer.”

            Stefano Aversa, managing director and COO of consultant AlixPartners, zeroed in on a key difference: “Toyota is never satisfied, and most of the others get complacent,” he said. “Unfortunately, this is not an industry where you can afford that.”

            Along the same lines, John Casesa, managing partner of Casesa Strategic Advisors, commented on the often-overlooked issue of auto dealers. “The silent killer right now is deterioration of the distribution system, which I think Detroit took for granted for many years,” he said. “Toyota did not.”

            For too many years, Detroit has viewed lean production as a good set of tools, and not an enterprise strategy that must become an integral part of your culture for true success. The current situation is a direct result of that blindness.



You Need a Lean China Strategy

A lean strategy may be one of the few ways in which you can compete effectively with China, at least for now – because few Chinese plants are becoming lean.

            That seems to me to be one of the more striking findings announced in a new report from Research and Markets. The report compares manufacturing performance data from the MPI/Industry Week US Benchmarking Survey and first-ever China Benchmarking Survey.

            Among the findings:

  • China plants are not adopting lean methodologies at the same rate as their U.S. competitors, and therefore miss significant improvement opportunities compared to U.S. plants, particularly regarding inventory management.
  • U.S. plants with a well-defined, thoroughly implemented improvement methodology – such as lean manufacturing, Six Sigma or others – outperform U.S. plants that do not follow a methodology. This generally is not true among China Study plants, where improvement approaches are primarily based on Total Quality Management and where ownership structures influence the ability to leverage improvement programs.
  • Even without lean and other improvement tools, China’s manufacturers still recorded many performances comparable to or better than their U.S. counterparts, in part due to more attractive cost structures.

            One of the more interesting statements in the Research and Markets news release is one that suggests Chinese manufacturers fall into what I think of as the “good-times trap:”

·        China’s manufacturers face an interesting dilemma: When the world is beating a path to your door, is it really necessary to invest time and money into an improvement program?

            Culture change is perhaps the most difficult part of lean, and the report notes that this is particularly true in China:

·        Communist China is still a difficult place to instill empowerment in workforces, and until that occurs, peak human performance – comparable to U.S. achievements – will not be attained.

            However, you shouldn’t stop worrying. Chinese manufacturing still has a lot of strengths and will undoubtedly improve. Consider these statements from the study:

  • China plants are adopting many Western human resource processes and practices (with a few notable exceptions) to get greater productivity from their employees and to more effectively compete with plants around the globe.
  • A surprisingly large percentage of China’s manufacturers are focused on quality and innovation – not low cost.
  • Although China’s manufacturers often beat their U.S. competitors on price, they generally do so while maintaining strong gross margins and not, as many believe, by dumping products to gain market share.
  • China plants of all types are investing in equipment and planning for additional capital investments at a pace that far outstrips that of U.S. plants.
  • China plants are grabbing at new information technologies, far more so than U.S. plants, and appear to be getting profitable returns from their much higher investment levels.

            You know where your competition is located. What are you going to do about it?