Every american remembers learning about Henry Ford and the assembly line in school. We all remember sitting in a circle drawing parts on Model Ts and passing the papers along to illustrate the increase in speed and accuracy over “the old way.” Back in the Early 1900s, the assembly line was a revolutionary way of thinking with regard to manufacturing.
Also common in the childhood of a Gen X, Y, Z, Digitals, Millennials was the cultural idea that american cars were poorly made and Japanese were made to last. Seemingly, the only thing sustaining US automakers was patriotism and work trucks. The latter only because Japanese manufacturers didn’t make American sized trucks…until the Tundra. How did american manufacturing go from first to worst?
How did we lose the manufacturing presence we had in the first half of the 20th century? I think two things happened. 1. We became great business men and women. Our money made us money. We sold concepts and ideas. 2. With #1, we lost sight of the product and customer.
These two points can be summarized in the Japanese term: Genchi Genbutsu (現地現物). Which translates to “go and see.” The idea is simple: Don’t attempt to solve the problem from behind a desk, go out and see what the issue is. Don’t rely on the past, constantly look for new things you didn’t see. Had the US auto manufacturers went out and seen, they would have seen what worked, what didn’t and responded to peoples complaints. They didn’t do this in the 70s, 80s, 90s and most of the 00s.
There is a tv show based solely on the “Go and See” principle. It’s called “Undercover Boss.” The concept is simple: take a CEO of a fortune 100 company; put him in a blue collar; watch him re-learn his business from the ground up. Sprinkle in a dash of human interest and VIOLA! It’s a hit. Why is it so revolutionary? Why does it take TV to get us to do this?
The Just-in-time manufacturing system took it’s leads by going and seeing. It appropriated what works from history and improved what didn’t. If you read my about page “What is Real 5S?” you would remember the word Kaizen (continual improvement). Kaizen is the life blood of the Just-in-time manufacturing system. After all, what good is going to see, if you aren’t going to implement what you learned?
Taiichi Ohno (1912-1990) is commonly referred to as the father of the T.P.S. or Toyota Production System (then called Just-in-time production system). He was responsible for documenting the 7 areas of waste, which lies at the core of the TPS. By reducing waste in manufacturing, you can make a product faster, reduce the costs and provide better quality. So why didn’t america adopt this? Some of us did. This methodology is commonly referred to, now, as Lean Manufacturing.
What happened to those who didn’t? In the last decade we watched our US economy bubble pop. It delivered a hefty blow to american manufacturing and economies around the world. To add insult to injury, much US based manufacturing moved to China. Many american’s lost jobs and the quality of many products suffered. Most important to me, China does not fully adopt lean manufacturing. Labor is so cheap, they would rather throw 50 humans at a problem which should be automated. This is a short term gain, but a long term loss. Also, it doesn’t give them the ability to pivot. Disclaimer: Im not an economist, my experience is in manufacturing. So I will look at our economy from that perspective.
In my opinion, the bubble popping wasn’t the cause of the heavy hit to manufacturing, but merely a catalyst for it’s change. Pre-crash: “credit” was used in every aspect of the supply chain. Whether setting up new accounts with suppliers or selling finished goods to the customer. The checks and balances were few and far between. People were buying million dollar homes on stated income with 0% down. Supplier terms would be NET 60, NET 90 and no one was collecting.
Everyone was scratching everyones back. There is nothing “Lean” about a box of IOUs. Further, WIP or Work in Progress was high on the hog. It wouldn’t be unusual to have a half of your cash-flow tied up on the production floor. Finally, finished products were also grossly mis-calculated. In short, companies would mass produce a product that wasn’t ordered with the understanding that the only thing that could hurt them was a quality assurance issue. (side note: This is where the China model differs. They make american’s buy a huge lot of products and then manufacture it start to finish.)
It was never a consideration that the demand for product could drop off or die completely. Can you imagine the cost to produce thousands of automobiles and have your demand dry up? If you make cars, then you make money selling cars. No money in = defaulting on your loans. Unsold products tie up cash flow. WIP or Work-In-Progress, ties up cash flow. In the end, the biggest mistake with the american manufacturing was not the product they produced, but the way they produced it. When demand dropped off, they were not agile enough to adjust their manufacturing.
Some companies were already using “Lean Manufacturing” methods. They were harmed less by the bubble pop, as they could make pivots and didn’t have much tied up. Some companies couldn’t make the jump and either went bankrupt or were bailed out by the government. The once booming city of Detroit has become a wasteland with roaming packs of wild dogs and $20,000 foreclosure sales.
For me, it all peaked when even Toyota lost sight of their goals. There was a tremendous recall of all vehicles made from 2009-2012 for a drive-by-wire fault which would cause the accelerator pedal to be stuck down. This would have never happened if the TPS methods were used. Production would have been shut down in it’s tracks and inferior products would not have been used. I digress.
Don’t lose heart. We’re seeing a resurgence. The global perspective on debt and credit has changed for the better. The consumer is becoming conscious of the affects of their spending. They now hold a higher value to their hard earned dollar. They are willing to pay more for locally made high quality goods. Credit applications actually have requirements and people are being turned down; Collections are being pursued instead of charged off and Dave Ramsey’s book “Total Money Makeover” is commonly known in every household. We live in an exciting time and I’m optimistic about the future of our landscape.