by BILL WADDELL

In a couple of news items of note ...

Amazing But True

A guy by the name of Chuck Fellows is a candidate for the Michigan state senate.  Among the issues that have Michigan voters agitated this year is some controversy over giving tax credits to the film industry.  When asked for his thoughts on the matter, Fellows replied, "I want to see a cash flow statement and a value stream map of the process before taking a position. My ‘gut’ tells me it brings jobs and positive attention to the state." Now there are lots of consultants and employees working on lean in government, but this is the first time I have heard an elected official talking about value stream mapping a process to determine its effectiveness.  It is not quite as remarkable as it might seem, however.  Fellows has only been a politician for a couple of years, following 34 years in production management at Ford.  Maybe we need to start sending more Ford folks to capitols.

Leopards Can't Change Their Spots

I have noted a Wall Street Journal story a couple of times over the last year in which a young lady was none too happy to find out that P&G was putting the same shampoo they sold for $5 in a prettier bottle, hyping it up with their brand management voodoo as something marvelous, and selling it to her for $17.   Since then, P&G has come out with a diaper innovation called Dry Max.  Only it seems lots of mothers believe the chemistry in the diapers is bad and the Dry Max diapers are causing serious burns and rashes.  True to form, P&G opted not to change the chemistry, trashing the young mothers as crackpots who know little about babies and diapers, and instead, came out with a designer series of Dry Max.  Same diaper inside, but with stripes, plaids and ruffles on the outside - which they sell for $6 a box more.  A more cynical observer than I might suggest that flaming rectums cloaked in designer wrappings fits P&G well.  However I will leave it at saying P&G needs to learn from the lean world and start paying more attention to value and less to image.

Those Happy Cows

Last Fall I wrote of the Ethnicity of Cows, suggesting that the cattle in Happy Cow ads from the California Milk Advisory Board ought to be from California, rather than New Zealand.  Ms Jennifer Giambroni from that august group wrote an eloquent response to my post.   The California State Assembly, however, isn't buying it and saw things my way. In May they overwhelming struck a blow for the rights of California bovine screen talent, and from here on out all of the cattle in the ads will have to actually be California cows.

Somebody Oughta Do Somethin'

Summoning all of the vision, courage and statesmanship which has become the hallmark of the US Congress, the House of Representatives passed major sections of the 'Make It In America' act the other day to do their part in bolstering American manufacturing.  Nancy Pelosi's bill (1) says manufacturing's woes are all George Bush's fault, (2) says we need a strategy, (3) says clean energy is a good thing, (4) calls for establishing a commission to study the problem, (4) says we ought to put American flag logos on farm products, (5) says we should restudy the problem every four years, and (6) says the President should come up with a plan. All of American manufacturing can exhale, and certainly sleep better now that Congress has demonstrated such a clear sense of purpose and resolve to get us back on track.

That's it for now ... enjoy the weekend

The days of multi-hour delays at the airport aren't gone by a long shot, but things at JFK at least are considerably better than they were. The Wall Street Journal writes about the new software system the airport is using to reduce the lineup of planes on the tarmac.

In contrast to European airports, which assign specific takeoff times to each flight, the FAA has always allowed planes to depart first come, first served. Consequently, if flights didn't leave the gate and get in line on the taxiway, they didn't go. That's why you had to spend 90 minutes in seat 22K with the screaming children instead of the Admiral's Club.

Essentially, the airports were treating the departing planes as one giant batch. (At least that's interpretation, but I'm not an industrial engineer.) With the new software, however, they're working with small batch sizes:

Now, airlines file flight plans with the Federal Aviation Administration indicating what time they want to take off. A metering program compiles requests, and takeoffs are scheduled in 15-minute blocks of time. Airplanes don't leave the gate until their assigned time. And as a result, the conga line of 40 jets lined up at the end of a runway has been reduced to six to eight.

Okay, this doesn't really eliminate the delays -- it just shifts them from the tarmac to the airport terminal. But that's good for passengers, who really don't want to spend any more time than absolutely necessary in the plane, and it's good for the airline, who save money on fuel costs:

Airlines get a big bonus, too, in fuel and maintenance savings. Engines can burn lots of fuel idling and revving up to move forward in line. And engine maintenance is often scheduled and paid for by the hour, so taxiing for an extra hour each day can significantly run up maintenance costs.

And by having smaller batch sizes on the taxiway, logistics for the airlines and the airport are far easier:

when shifting winds force takeoffs and landings onto different runways. With fewer planes in line, it doesn't take as long to re-arrange the airport.

Managing the flow of traffic is still a staggeringly complex process. Even with this new software and system, airplane mechanical problems and sudden weather changes will wreak havoc. But it's nice to see how smaller batches can pay off in yet another arena.

Now, if they could only make a larger batch size for seat legroom.

by BILL WADDELL In a story in today's China Daily ... Rutgers' Chinese solar panels show clean-energy shift "At Rutgers University in New Jersey, 7,600 panels convert sunlight into electricity, saving some $200,000 in energy costs this year in the... Bill Waddell

by BILL WADDELL

In a story in today's China Daily ...

Rutgers' Chinese solar panels show clean-energy shift

"At Rutgers University in New Jersey, 7,600 panels convert sunlight into electricity, saving some $200,000 in energy costs this year in the biggest solar-power experiment at a US college.

Yingli Green Energy Holding Co, China's second-largest solar-panel maker, supplied the $10 million project. Yingli is one of several Chinese manufacturers that have slashed costs to reduce global prices for solar modules by about 50 percent in two years. The drive made them more affordable for buyers from Rutgers to Wal-Mart Stores Inc, the biggest US retailer.

"It's all about economics," said Chief Executive Officer Al Bucknam of SunDurance Energy, the South Plainfield, New Jersey installer that picked Yingli over Western competitors on price and helped sell the deal to Rutgers as a money-saver.

'The ability of the Chinese to manufacture at scale is a very big reason why the cost of these panels has come down,' said Kathleen A. McGinty at venture capital firm Element Partners in Radnor, Pennsylvania. 'They're a big part of the reason why we can even start to talk about grid parity.'

'The vast factories of Asia will drive prices down, just as they did with consumer electronics,' said Jenny Chase, head of solar energy analysis for New Energy Finance, the London- based research firm owned by Bloomberg LP."

In another story in the same issue of China Daily ....

Air quality drops in first half of year

"Beijing - Economic recovery has partly caused the country's air quality to fall in the first half of the year, the first such fall since 2005, figures from environmental authorities showed on Monday.

'It was the first time for these cities to record a fall in the number of days with good air quality and a rise in the concentration of inhalable particles since 2005,' ministry spokesman Tao Detian said.

That means the country is still facing 'a grave situation in fighting pollution', he said.

The ministry's report also warned that China is still faced with "severe challenges" in pollution control, as a nationwide sampling on water supply found that more than one-quarter of the country's surface water was contaminated.

Environmental monitoring authorities found 26.4 percent of the country's surface water samples at levels IV and V, good for only industrial use and farm irrigation, the ministry reported.

China classifies water quality into six levels, ranging from level I, which is good for drinking, to level VI, which is too polluted for any purpose.

The ministry's latest report said 189 cities out of the 443 cities monitored also suffered from acid rain in the first half of this year."

So the folks at Rutgers feel good about their clean energy and it is affordable because it was manufactured in China at discount prices.  Chinese pollution is up in no small part because they bring about those low costs by ignoring the environmental regulations American and European manufacturers have to follow.

So how is the planet helped when we merely shift pollution from the US to China?  I can clearly see how American manufacturing and the American economy is harmed by shifting all of this wealth to China, but from where I sit it looks to me as though the planet has not been helped at all - we have merely enabled the folks at Rutgers to feel good about pretending to have help the planet .. and they get to feel good at the expense of US manufacturing and the economic well being of our children and grand-children.

You cannot be a sincere environmentalist and at the same time be a supporter of offshore outsourcing to countries with no regard for the environment.  All you can be is a feel-good environmentalist, concerned with appearances but unwilling to step up to the tough issues involved in making a real contribution to the environment.

by BILL WADDELL

Thanks to Jim Fernandez for sending me this article about Fiat's struggles to get their Italian workers to adopt American work practices - like the practice of showing up for work.  The gist of it is that Sergio Marchionne, "fresh from rescuing Chrysler in the United States", "is pushing these workers to be more devoted to their jobs, mirroring a larger effort by the government to improve Italy’s competitiveness and reduce its debt through austerity measures."  Now I think the jury is still out - and will be for quite a while - before anyone can say that Chrysler has been 'rescued', but the Fiat folks have been doing the right things.  Whether the Italians can embrace lean, however, is another question.

This calls to mind the bigger question of national cultures and lean, begging the question whether lean is for everyone.  The first time I saw this model was about twenty years ago when it was used as the basic framework for something called the 'Japan 21' project, which was Japan's manufacturing strategy/policy planning effort for the 21st century.  The idea is that the physical and philosophical aspects of the business and the physical and philosophical aspects of the country or region have to complementary.

In many regards it is another one of those not-so-common matters of common sense, but the point is that the physical attributes of the region - geography, transportation networks, natural resources and so forth - have a lot to do with what products can be made and how.  Continuing around the chart, the lay of the land has a lot to do with the culture of the country - island nations have a different outlook than landlocked ones, and mountainous countries develop different from ones in which it is easy for people to travel around and interact with each other, and so forth.  The culture and outlook of the people has major implications on how the company can and should be managed, and the management of the company has to fit with the manufacturing methods, technology and product line-up.

It is a bit clearer in this chart with the details filled in.  The point is that building steel mills in countries that have no coal or iron ore mines may not be a particularly wise idea.

As obvious as the basic principles may be, examples of an utter failure to grasp the obvious abound.  In the USA,it is hard to find a region in which the economic development thinkers have not poured money and effort into an 'innovation center' with grandiose plans of turning their area into the next Silicon Valley ... never mind the fact that the only institute of higher education within a hundred miles is a community college and there is no reason to expect an exodus of engineers into the area any time soon.

I have known American purchasing managers who source copper wire from Israeli processors ... never mind the fact that the last copper mine in Israel was tapped out in King David's time and that copper products from Israel originated in Peru and have the waste of two trans-Atlantic trips embedded in their cost ... an economic scheme that cannot possibly sustain.

To the point of lean, the connection between the two bottom boxes is the issue.  In the United States and most western companies people actually believe that Abraham Lincoln was right when he said our country is "dedicated to the proposition that all men are created equal", which seems to me to be a critical element of engaging and empowering people.  While some of us let our egos get in the way, we know deep down that my superior education and higher slot on the org chart does not mean I am a better person than you.  I am keenly aware of the fact that at another business across town my wife may be working for your wife, or that in twenty years, your kid might be my kid's boss.  It is not that big a stretch for me to respect you and the potential input your knowledge and thinking can provide to the business.

Not all countries are that way, as much as we would like them to be.  In many cultures both boss and subordinate honestly believe that the company pecking order is truly a reflection of character and worth.  The boss is the boss because he actually is a better man than you, and he deserves your respect but you certainly do not merit his.  And as much as we beat ourselves up over the dismal quality of the US education system, it is light years ahead of the compulsory sixth grade public school education the typical Chinese or Mexican worker brings to the job.  There is a genuine limit to the contribution a person so completely ignorant can bring to bear on manufacturing's problems.

In many cultures a 'command and control' management system is not only necessary, it is expected and anything else is greeted with complete confusion.  The case can be made that Henry Ford changed the culture of the United States, but as a rule, a company is not going to change the culture of its host country.  It is up to the company to adapt its management processes and strategy to the culture in which it operates.  I suspect a failure to recognize this is the reason for all of the strikes and labor problems Toyota encountered in India.  To the point of the Fiat article, I don't think they stand a prayer of bringing Italy around to acting like their American employees.

Of course the implications of this are that, because lean manufacturing management that embraces, includes and empowers employees generates the best results, a lean company that builds a plant in a country with a cultural infrastructure incompatible with lean can never expect to get the same results in that country it gets at home.  Global companies would do well to keep this chart squarely before them as they decide where and how they want to do business.

by BILL WADDELL Thanks to Jim Fernandez for sending me this article about Fiat's struggles to get their Italian workers to adopt American work practices - like the practice of showing up for work. The gist of it is that... Bill Waddell

By Kevin Meyer

A couple of news items lately prompted me to take a look at my undesired investment, as a taxpayer, in General Motors.  With a couple of very specific exceptions I've gone to "all cash" over the last few months in response to several looming problems on the horizon that I think add significant near-term risk to the overall market.  So any investment, even undesired and for which I can do nothing about, should be scrutinized.

First let's take a look at Ford, which decided not to take any government bailout and weather the storm on its own:

Ford Motor continued its successful turnaround as better-than-expected sales and profits easily outdistanced expectations and reversed the operating loss of a year ago.

The automaker earned $2.7 billion, or 68 cents a share, excluding special items. The consensus forecast of analysts surveyed by Thomson Reuters was for earnings of 40 cents a share, and Ford easily topped even the most bullish forecast of a 48 cent a share profit.

The results were the best quarterly results for Ford in six years and marked the fourth straight quarterly operating profit for the company, which had suffered more than than four years of steady losses before it returned to profitability in the second half of last year.

Ford was the only major U.S. automaker not to go through bankruptcy in 2009.  The company has been steadily gaining market share over the last year, with the introduction of critically-acclaimed new vehicles.

Even better results ahead. "We are ahead of where we thought we would be despite the still-challenging business conditions," said Ford President and CEO Alan Mulally in a statement. "We remain on track to deliver solid profits and positive automotive operating-related cash flow for 2010, and we expect even better financial results in 2011."

Not too shabby.  Amazing how a crisis and forced frugality can create excellence.

And now for General Motors, predominantly owned by us taxpayers.  Not a report on financial results, but on strategies the company is taking now that it has access to so much cash.  Eerily similar to how the government operates with its perceived unlimited access to taxpayer cash - or Chinese credit - depending on your perspective.

Extra cash is not always a good thing for a corporation. This may be the case with General Motors.

The theory is that managers should act in a disciplined manner in spending and operations. By limiting the amount of cash that a company has on hand, managers remain more focused and are less likely to take undue risks with their excess cash. This theory has been documented in a number of academic studies. Managers with too much cash to burn will burn too much cash.

G.M.’s announcement on Thursday that it was acquiring the subprime lender AmeriCredit for $3.5 billion may show that the automaker has stepped into this trap. G.M. is also paying a 24 percent premium to AmeriCredit’s closing stock price on the day before the deal was announced.

Once you take into account the government ownership element, even more issues and problems emerge. First, when G.M. owns a captive lender, it subsidizes the plants, labor unions and dealers. Captured finance means nonmarket financing for buyers when they receive a loan. Think zero percent financing. Lease financing for automobiles usually results in artificial residual pricing for the buyout price at the end of the lease. All of this helps empty dealer lots and keeps plants running. But it oversupplies cars. The problem of artificially oversupplying new cars (like new houses) is put off for another day. Second, the subsidy ensures that people who may not otherwise qualify to buy new cars do so. They overconsume and overspend as they shift their buying from used cars to new cars.

Silly me - I continue to delude myself that we can learn lessons from the past.  Even very recent lessons such as the dangers of subprime lending - not to mention over production and venturing outside of your core competencies.  Of course what can we expect of an owner that has just tried to regulate financial markets by purposely ignoring the two largest contributors to the financial collapse, Fannie Mae and Freddie Mac.

By Kevin Meyer A couple of news items lately prompted me to take a look at my undesired investment, as a taxpayer, in General Motors. With a couple of very specific exceptions I've gone to "all cash" over the last... Kevin Meyer

By Kevin Meyer A couple of news items lately prompted me to take a look at my undesired investment, as a taxpayer, in General Motors. With a couple of very specific exceptions I've gone to "all cash" over the last... Kevin Meyer

Our partner Gemba Academy has released a new online training course called "The Seven Quality Control Tools."  This 22-module course goes through the various types of quality control graphs, pareto charts, check sheets, cause-and-effect diagrams, scatter diagrams, histograms, and control charts with supporting examples and applications.

Gemba Academy courses are unique in that they are a series of high definition quality video modules, coupled with quizzes and supporting downloads developed by lean leaders with real shop floor experience.  HD quality lets you watch the video at your computer, or project the video to a large training room with no perceived loss of resolution or quality.  The 10 minute videos are designed to be the optimal length for an effective learning experience.  The subscription model (although DVDs are also available) is unique in that there is no per-person charge - it is by site, which lets you train as many as you want for one low cost.

Take a look at all of the Gemba Academy lean learning courses, which now include the following:

• Lean Starter Package - a FREE group of 8 video modules to demonstrate the technology and quality
• 5S Workplace Productivity (9 modules)
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• Practical Problem Solving (20 modules)
• Transforming Your Value Streams (16 modules)
• The Seven Quality Control Tools (22 modules)
• Quick Changeover: The SMED System (12 modules)
• Lean Lingo Explained (12 modules)

New courses are being added every couple months and are included in the subscription packages.

As a special promotion until the end of July, new subscribers to the Complete Lean Package Premium (all courses plus the DVDs) will receive all 100+ Superfactory PowerPoint training presentations for free!

Give Gemba Academy a try - we think you'll be impressed with the technology, quality, and depth of the content!

Our partner Gemba Academy has released a new online training course called "The Seven Quality Control Tools." This 22-module course goes through the various types of quality control graphs, pareto charts, check sheets, cause-and-effect diagrams, scatter diagrams, histograms, and control... Kevin Meyer

Our partner Gemba Academy has released a new online training course called "The Seven Quality Control Tools." This 22-module course goes through the various types of quality control graphs, pareto charts, check sheets, cause-and-effect diagrams, scatter diagrams, histograms, and control... Kevin Meyer

By Kevin Meyer

Over the last decade or so, perhaps as lean took root and oozed from my professional to my personal life, I've changed from wanting a larger house to wanting smaller and smaller houses.  A necessary corollary is the requirement for less stuff - which I wrote about a couple years ago while wondering if less storage space in a home was actually better. 

This morning there was a great article in the lifestyle section of The Wall Street Journal on an architect after my own heart.

By Manhattan standards, the Upper East Side apartment inhabited by architect/designer Deborah Berke and her family suffers no shortage of space: The three-bedroom duplex measures about 2,700 square feet.

There is, however, a shortage of stuff: The tabletops sit mostly empty, walls and shelves are mostly unencumbered by magazines and knickknacks. "I think it is a misperception that the neat or minimal is an impediment to comfort and warmth," said Ms. Berke, age 56, who has designed homes for artist William Wegman and gallery owner Marianne Boesky as well as commercial projects like the James Hotel in Chicago. "The lack of visual clutter allows you to relax."

Exactly what I've found - even from one of my very first blog posts over five years ago (egads!) on the dangers of horizontal surfaces.

Ms. Berke's philosophy rubs off on people.

Several years ago, Suzanne Shaker enlisted Ms. Berke to design a 1,300-square-foot contemporary on Shelter Island, north of New York's Hamptons, with a wall of sliding glass doors. Ms. Shaker says she took Ms. Berke's advice and created a full basement to help keep the place uncluttered. "When we moved in I really edited and said I just want what we love and need and I don't want to just fill the space," she says.

Hold onto just what you love (and what you truly love, not what you "might unexpectedly love at some unknown time in the future") and need, and nothing more.  Think about that as you go about your chores this weekend.

Minimize to achieve the elegance and peacefulness of simplicity.

By Kevin Meyer Over the last decade or so, perhaps as lean took root and oozed from my professional to my personal life, I've changed from wanting a larger house to wanting smaller and smaller houses. A necessary corollary is... Kevin Meyer

by BILL WADDELL

Company #1

Next week it will be one year since I first heard from a mega-giant, multi-national company everyone has heard of with a few questions about lean - and lean accounting in particular.  They had heard of some of the work I had done with a few other companies in very similar industries, and those companies are enjoying a lot of success.  It is important to point out that these guys are in trouble - which is why they called. The phone call ended with them wanting to find a time when they could get their top six or eight accounting people on the phone for a conference call so they could better understand lean accounting.

It took exactly four weeks for their accounting people to collectively find an hour.  Another four weeks after that, they got back in touch with me to further explore whether they were interested.  By this time the Lean Accounting Summit had come and gone and the two months since we began talking was not enough time for them to line up anyone to attend.

The story goes on and on, with the bottom line that, after going back and forth in slow motion with dozens of emails and a half dozen phone calls for ten months, they decided that they do not want to learn about lean accounting, and they opted to engage McKinsey to help them with a new strategy instead.

Note that all of this was not to decide whether to engage me to do anything but come in and give them a one day seminar on lean accounting - a few bucks (I work cheap) and a day out of their lives.  They decided that learning was not a solution to their problems - they altready knew all there is to know about accounting.  The problems they had a year ago are worse today, but I suspect that announcing a major initiative with a big name consultant to impress Wall Street was their primary objective, and actually doing anything much different was not something in which they are particularly interested.

Company #2

This company is a smaller one that caught wind of lean accounting as a result of a talk I gave.  They called me to learn about it and wanted me to come in for the same education I offered to Company #1.  After the conversation we swapped emails for a day or two, and picked a date two weeks later for my visit.  Less than a week after the visit, their controller sent me a couple of spread sheets on which she had broken spending and revenues down by value stream, and had taken her first pass at segregating value adding and non-value adding expenses.  We passed the spread sheets back and forth for a couple of days, and four weeks after the first call they were launching a new cost reduction plan, changing course from worrying about labor to getting rid of the waste; and they were planning a new course of sales and marketing action to use a radically different pricing strategy to take advantage of a lot of idle capacity.

Company #1 is loaded with very well-educated and experienced talent.  The folks who met, discussed, contemplated and did nothing for almost a year have great resumes and make a lot of money.  The boss at Company #2 is an engineer who was brought in to run things by his older relatives who own the business, and I imagine the controller has dreams of living and working her entire life in the same small town in which the company is located.  Company #2 also asked me if it was all right to have a guy from their local CPA firm sit in so he could support them in the future since he is local and cheap - fine with me since I am from far away and basically lazy.

So what are the morals of the story - which is not a particularly new one for me?  Company #1 is like a lot of companies with which I have dealt.  They are big, bureaucratic, unwilling to learn, and doomed to extinction - even though their leadership is smarter, more experienced and much better compensated than the vast majority of manufacturers.  Company #2 is less educated, less experienced, much less well compensated, but long on native common sense and willingness to work, and absolutely committed to the long haul, to the community and to each other.  They are already showing signs of serious improvement.

So draw your own conclusions about the relative importance of resume qualifications versus character, and the strategy versus culture.

by BILL WADDELL Company #1 Next week it will be one year since I first heard from a mega-giant, multi-national company everyone has heard of with a few questions about lean - and lean accounting in particular. They had heard... Bill Waddell

By Kevin Meyer

I often talk about the importance of the oft-forgotten second pillar of lean manufacturing: respect for people.  So many companies, usually driven by enslavery to traditional accounting methods, think of their people as just a set of hands - completely forgetting about the value in the brain attached to the hands.  Which explains why companies would run around the world in search of lower cost hands while casting off brains containing an incredible - but unrecognized on a balance sheet - investment in training and experience.

This morning I happened across a TED Talks presentation originally discussed on Presentation Zen.  While Garr was more interested in the delivery characteristics of the presentation, I found the content to be inspiring.  Here was a person that inspired 200 of her young students to create change, then helped that to cascade to 30,000 students in one city, and eventually to over 100,000 students across India.  Identifying a problem and enabling young brains to create and implement a solution.  Kaizen.

So if a schoolteacher can do it for young students, shouldn't we be able to do the same for our teams?  Take a few minutes to watch the video below and think about the power.  Not to mention what India might be like in a decade if this continues to take root.

By Kevin Meyer I often talk about the importance of the oft-forgotten second pillar of lean manufacturing: respect for people. So many companies, usually driven by enslavery to traditional accounting methods, think of their people as just a set of... Kevin Meyer

by BILL WADDELL

Like a lot of companies, Nissan approaches lean like the woman who orders a double cheeseburger, chili cheese fries ... and a Diet Coke ... approaches weight loss.  It's a cafeteria approach  - "I'll take the JIT and single sourcing (not to form a strategic relationship but to use the volume to hammer supplier pricing), but I'll pass on managing people as a fixed cost and compressing cycle times."  And contrary to the opinions of the idiot savants writing for the business press, they are no more lean than the woman with her chili cheese fries is really dieting. 

It seems Nissan is having to close several plants for a few days due to a part shortage.  The part at the root of the problem is a microprocessor made by a Swiss outfit called STMicroelectronics.  Despite Carl Ghosn's international pedigree, Nissan is still a very Japan-centric company.  I am admittedly a bit fuzzy on the overall supply chain for these things, but they go into the motors for Nissans, which are produced by Mitsubishi and a Mitsubishi motor for a car made in Mississippi and sold in the USA is, of course, made either in Japan or Thailand.  The electronics for the motors are provided, naturally, by another Japanese company - Hitachi - who does just about all of their manufacturing in Japan and China.  STMicroelectronics assembles the microprocessors in China, but in spite of the marvels of Chinese manufacturing, the wafer fab is a bit tricky so it is done in Italy, France and Singapore.

So the supply chain, to give Nissan the benefit of the doubt and plot the shortest route would be from Singapore to China to Japan to another place in Japan to the United States - about a 15,000 mile four stop world tour.  At worsts if there is more China and a trip to Thailand in the mix, it might be 20,000 miles plus.  At the end of this tedious pipeline, there are not enough microprocessors coming out - "drawbacks of lean manufacturing methods, which call for carrying little inventory but make supply snags tougher to offset," according to the Wall Street Journal.  This same weakness in lean manufacturing is at the root of Apple's troubles, as well, according to this guy. Now that one is really a stretch inasmuch as Apple does no manufacturing and would not know the first thing about it.  They seem to agree with our friend Joe that manufacturing is first and foremost a pastime to occupy the idle time of stupid people - or at least something for the wretchedly poor to do to justify their daily bowl of rice.

There is nothing lean about Nissan and there is especially nothing lean about this ridiculous supply chain, and attempting to run it with minimum inventory in the supply chain no more makes it lean than washing down chili cheese fries with a Diet Coke means you are watching your weight.  This is the supply chain for a company that has no concept of cycle times, and therefore, no concept of lean.

The old adage that a chain is as strong as its weakest link applies very well to supply chains, and STMicroelectronics does not even qualify as a link - more like a paper clip.  If you read about them here, you can stop reading at the second sentence where it says, "While STMicroelectronics corporate headquarters and headquarters for EMEA region [Europe, Middle East, Africa] are based in Geneva, the holding company, STMicroelectronics N.V. is registered in Amsterdam, Netherlands.  That tells you all you need to know about them.  It is the structure of choice for companies who think skirting EU tax laws is more important than getting work done quickly and effectively.  The fact that they have laid everyone off in countries close to end customers, and have restructured their way to China is the natural next step for such an outfit.  And the fact that Nissan plants are shutting down due to their inability to manage capacity and execute quickly to customer demands should come as no surprise to anyone - least of all Nissan. 

Lean is a unique and powerful business model - not a menu of devices to use at your convenience to beat up suppliers or to manipulate this quarter's working capital metrics.  It requires ordering the salad and the broiled fish along with that Diet Coke, which is often a little more commitment than many are ready to make. 

by BILL WADDELL

So a guy named Mark Selway is brought into the Boral Company - a  big global building products company based out of Australia - to turn things around.  Boral has been in some trouble the last couple of years, which should come as no surprise in light of the complete collapse of the construction business, but their problems run a little deeper than that so new leadership was in order.

Selway does what a new boss should.  He launches a global, strategic review and conjures up a plan to get out of some peripheral businesses and focus on core building products appropriate for each region, and he determines that a couple of small acquisitions are needed and some investment in capacity in a couple of areas where business is good and the prospects are better..

No matter what the strategic review turns up, however, Selway's first order of business is a commitment to lean manufacturing.  Now his understanding of lean is limited to manufacturing and there is still plenty of room for the folks at Boral to learn as they find out how big the lean iceberg is that is still below their surface view, but they are off to a pretty good start.  Selway is personally involved and he leans on what he calls his "automotive buddies" - four guys from Toyota and Ford - for inspiration.  You can read about some of Selway and Boral's lean thinking here in a company newsletter - scroll on down to page 5 and you will see that they have a good handle on the fundamentals.

The strategic review was finisheda few months back and Selway went to the investment community to raise $490 million (that's in Kangaroo bucks - about $430 million US) to beef up a plant here, replace a quarry there, buy up the rest of a joint venture somewhere else - all pretty basic stuff reflecting the commitment to the core business.  The investment community was not impressed, however. Specifically, "Boral Shares fall 10% As Capital Raising Fails To excite Investors."

There are a lot of things to consider before anyone decide to pony up $432 million, but it appears as though Boral's lean strategy played no part in the investment equation largely because the investors knew next to nothing about it or the implications of it.  Investors get their advice and insight from clowns like Joe Weisenthal who I wrote about yesterday, and a guy who sees the primary purpose of manufacturing as something to keep the stupid people busy is hardly going to understand or appreciate the significance of a fundamentally different manufacturing management approach. 

But beyond The outrageously clueless guys like him, I am struck by the incredible ignorance of the basics of lean evident in statements such as, "It is about implementing just-in-time production, taking inventory out of the system and rationalising.  At Toyota the introduction of such methods reportedly helped lower the percentage of working capital as a percentage of sales to 11 per cent from 25 per cent in five years."  This from a guy by the name of Damon Kitney, writing for The Australian - an affiliate of and brother to The Wall Street Journal.  Not only does he completely miss the point in describing lean, the Toyota statement is simply not factually true - not even remotely, wildly true.

So we have some little old lady in Topeka, Kansas - a retired school teacher - who wants to make good investments with the nest egg upon which her security depends.  She relies on fund managers, who in turn rely on industry analysts and the people like Joe and Damon who write about the prospects of the companies representing her investment options.  And it seems apparent that all of the folks between the old lady with the money and the management that will either blow it or put it to good use are completely in the dark when it comes to how the fundamental decisions will be made in the company using the money.

I believe that the old lady's interests and priorities, and the interests and priorities of Mark Selway are pretty closely aligned.  The explosion of the online investing industry is a reflection of this fact.  The investment advisors and analysts are subject to the same, core lean principles of value - either add it or be written out of the equation as waste.  As it becomes more and more obvious that these people are not doing the job of connecting investors with the sort of companies they want - not providing value commensurate with their compensation - it is inevitable that they evolve or face extinction.  Who would want to listen to the insights of someone concerning a manufacturing investment who knows so little about the current state of manufacturing that he thinks Toyota introduced lean to reduce working capital over a five year period?

My bet is on Mark Selways and his "automotive buddies", and their success will put one more nail in the coffin of the investment experts whose ignorance has a lot to do with the loss of so many little old ladies' nest eggs.