Apr 26, 2008

Quality pays

Mike Spector, The Wall Street Journal (as published in the online edition of the Atlanta Journal-Constitution, wrote a few days ago about Ford's surprising improvements in financial performance. One detail jumped out at me: "...quality ratings of Ford vehicles spiked. That chopped $1 billion off Ford's warranty costs last year."

That's billion with a "B." In manufacturing, we often view quality - as we should - as an end in itself. Just doing it right, with the right processes and human systems, to meet our customer's expectations. But, obviously, there's a big payoff for getting it right. If you're trying to promote change that improves quality, don't forget to dig out warranty costs as a persuader for doubters.

Apr 24, 2008

New hotel sits empty for eight years

In New Castle, Delaware, there stands a hotel, intended to be a Radisson, built in 2000, that has never been used. It’s empty. You can’t find many bigger examples of waste than that.

The site is in a wetlands area, so there are specific requirements about the amount of land a building can use. In addition, most building codes require parking for a specific number of people based on the expected occupancy of the building. The capacity of the hotel will affect the acreage to be covered with asphalt.

All went well until the building was finished and the county noticed that it was two floors higher than what had been approved. Was it intentional, or a blunder made by both the county and the builders? Some say there are construction companies in Northern Delaware related to crime families. But maybe the county employees who saw and approved the plan were negligent. Or the developer had a miscommunication with its architects and engineers. All these claims have been made.

The county was outraged at the overbuilding. They refused to grant a certificate of occupancy. They said the builders could tear down the top two floors, or – get this – fill them with foam.

After eight years of legal wrangling and $1.6 million in attorney fees, buying and selling of the building, the original developers won $7.5 million from the county in court. It was a jury trial. Not hard to get juries to side against the government.

The new owners, who bought the hotel in 2003 for $11.2 million to add lodging for the horse racing track they operate, have found problems with the electrical system, fire sprinklers and temperature controls, fire escape stairs and fire doors. Hmmm… did they order enough stuff for the two extra floors on the hotel? Eight years of vacancy is a recipe for deterioration too.

Funny story. But think about the amount of copper, aluminum and steel sitting there for all this time. The polymers in the carpets, d├ęcor and plastic components – that will probably be scrapped – were produced from petroleum products. Labor was wasted in the construction, but also in manufacturing all the bathroom fixtures, doors and windows, and elevators. And fire control systems. And attorneys’ fees.

And it was a plain and simple human system at the root. Intentional or not, the lack of common understanding of the product and process produced a monster.

Apr 20, 2008

Farley's move from Toyota looks good to Ford dealers

First, understand that my husband Mike took a Ford early retirement buyout and our pension and healthcare insurance benefits depend on the future of the company. However good Fancy Feast is, I don't want to be eating cat food because all my money went to buy medication. After all these buyouts, there are a lot of us out here who will be up s**t creek -- and too old to do much about it -- if Ford can't turn around.

So I've got personal reasons for watching what happens under Alan Mulally, and now Jim Farley, the marketing guy hired away from Toyota. Obviously, no matter how much money you save through lean, you've got to sell cars. They have to be appealing enough to get customers interested. I've been bored to death by our choices of Ford products to buy -- Ford employees can't drive competitors' cars to work and expect to do well. We don't get the great deals you might think we do - the employee discount on the smaller cars we favor are meager, because the profit margins are so slim.

Today's New York Times ("A Star at Toyota, a Believer at Ford") profiled Farley as he led a four-day summit of dealers and top executives and it's more than reassuring. I'm starting to feel some hope. Since Bill Ford hired Mulally, I've been waiting to see what kinds of people he'd bring in to breathe new life into the company. (I've got a Google news alert with the words "mulally hire" so I can hear when there was news on that front.)

Dealers have a right to be skeptical and angry. Product that won't sell. Inventory forced on them. A 1970s ordering process that requires all sorts of workarounds. Tepid ad campaigns. Lookalike vehicles.

The dealers hammered the execs. But at the end of the conference, Farley stood before 1,400 of them, and said, "The work here is simply more important than the work I was doing at Toyota." And the article tells why he'd say that. He got a standing ovation.

I won't even try to list all the things Farley has said and done. The article does it better. At heart, he's a Ford guy. A grandfather who worked at the Ford Rouge River plant in Dearborn, and later became a Ford dealer. His first car was a classic 1966 black Mustang that he immediately drove from California to Detroit - that's what Detroiters do, drive cross-country. I need to know whether he spent a lot of time taking his car apart on his driveway, if I'm going to see him as a Detroit kind of guy. He'd need to know what it's like to have grease under his fingernails.

I'm cautious, but may be starting to be a believer that Farley is a believer in Ford, as well as experienced in understanding problems and finding solutions through people and product. A lot depends on him. He's at the end of the company that makes it or breaks it - next to the customer. Watch closely.

Apr 18, 2008

Toyota subsidiary cuts jobs in Long Beach

Yuri Kageyama of the Associated Press reported early this morning that Toyota will stop building Hino trucks at its TABC Inc., plant in Long Beach, Calif. Production will be be moved to Hino's other U.S. plant in West Virginia by July, according to a statement by Hino spokesman Hidenobu Tezuka.

That plant will continue to make parts for Toyota. Hino's annual production capacity in North America will be reduced to 4,500 trucks a year from 9,500. Hino's North American sales for the last fiscal year dropped 19 percent to about 6,600 trucks from 8,200 trucks the previous year, according to the AP story. The drop is blamed on high fuel prices and a slow economy. Hino is 50.11 percent owned by Toyota.

Toyota watchers looking for the company to make a misstep that violates its much-studied principles will ask, “What about the workers?” Kristopher Hanson, Long Beach Press-Telegram writer, says the company is offering buyouts to employees with 10 or more years of experience, with as many as 100 accepted. The reports also don’t say how many jobs are being cut, and whether there are enough contingency workers to make up the difference. Will full-time associates be let go, and how will the company help them?

Hanson reports that Louie Diaz, a TABC employee and vice president of Teamsters Local 848TABC workers said they were given a deadline of today to consider the buyout offer, (Hanson doesn’t say when employees were told about it) but that deadline may be extended. The Teamsters represent more than 500 workers at the site.

"It's an unfortunate situation where the company is taking good jobs from Long Beach and sending them off to facilities all over the place in other states," Diaz told Hanson. "We're very concerned."

As noted, the plant doesn’t have all its eggs in the Hino basket. The plant will continue to make other parts, so some workers will stay.

Elsewhere, Harley-Davidson announced it is cutting 370 unionized and 360 nonproduction workers from the payroll. Sales of the bikes are down in the U.S. and, although they are growing overseas, prospects don’t look promising. Some have speculated that Harley is limiting production to maintain its scarcity factor in marketing. Though Harley is among the best in lean production, it evidently likes long lead times between itself and its dealers’ order dates. Hey – it maintains the mystique that attracts buyers, so it’s a legitimate business strategy. Won’t make the workers, mostly in York, Pa., any happier, though.

Apr 16, 2008

Auto production shifts to and from Mexico

It was interesting to hear yesterday that Chrysler and Nissan are working together on some new vehicles. It was not surprising to hear that Chrysler will manufacture a pickup truck for Nissan in Mexico, and that the Nissan product for Chrysler will be made in Asia. But it may have been a rebuke to doomsayers to hear that current production in Saltillo, MX, will be moved to a plant outside St. Louis.

In addition, Chrysler and new partner Getrag will build an innovative fuel-efficient dual wet clutch (whatever that is) at a plant going up near Tipton, IN, that will employ 1,400 people. In Kokomo last month, workers at Chrysler’s casting plant learned that they will make transmission cases for the new transmission, and engine blocks for a new six-cylinder engine Chrysler will be introducing. Chrysler spokesman Ed Saenz said the company won't hire more workers to deal with the extra work, which says a lot for productivity gains there. The Kokomo Casting Plant employs 760 people, who are probably sleeping a little better after hearing the news. The new work for Kokomo casting and the Tipton plant are part of a $3 billion investment in powertrain upgrades by Chrysler in North America.

Chrysler would never make these moves based on labor costs alone. It has to be that executives are seeing the effects of excellent plants and total system cost that makes manufacturing in the U.S. a good deal.

Yet good manufacturing results may not be the only reason for the move to Missouri. Gov. Matt Blunt said in a statement that "…it shows that the pro-jobs, pro-growth changes we have implemented are helping employers and entrepreneurs succeed in Missouri." Let’s hope the state didn’t just buy the jobs.

And it’s an ill wind that blows nobody good. A factor in production decisions is the soft dollar. Ontario is getting anxious about jobs moving to the U.S. Catherine Madden, an analyst who tracks auto manufacturing for Global Insight, says, "…advantages have gone away with the U.S. dollar weakening so much." She said GM, Ford Motor Co. and Chrysler LLC may threaten to move assembly work from Canada to the United States in upcoming contract talks with the Canadian Auto Workers union.

Not all the automotive employment news is rosy, however. Striking workers at American Axle have raised the ire of Richard Dauch, once regarded as a friend of labor. Dauch made $10 million in 2007, but he wants the same two-tier wage concessions as companies like Dana have gotten that would pay new workers about $14 an hour. He’s been a holdout in current union negotiations, despite the fact that he’s idling his customers’ plants by starving them of parts.

Dauch has punished unions before by shifting production out of the country. An earlier conflict between Dauch and the UAW, says an article this week in Crain’s Detroit Business, hurt the Buffalo Gear, Axle & Linkage plant in Buffalo, N.Y. Workers there were slated to build axles for the next-generation 2009 Chevrolet Camaro muscle car. But after the union local declined to agree to contract concessions, Buffalo employees were told in September 2006 that Camaro axles would be built elsewhere. A little more than a year later, American Axle idled its Buffalo plant.

According to Crain’s, the UAW suspects the work will go to Mexico. That would mean the axles would travel 2,000 miles to the Camaro plant in Oshawa, Ontario. The trip from Buffalo would have been 120 miles, and the parts would cross two international borders instead of one.

In lean terms, that adds up to the wastes of time, flexibility, and resources. With longer distance and lead time, production plans need to be frozen sooner (not really a factor if other parts have the same lead time, however). Fuel for trucks and trains is costing more and more which has to add to the final cost of the parts to GM, burning it creates CO2 and particulate emissions and depletes finite stocks of oil. But as most readers know, hourly wages - no longer a dominating cost of production - distracts executives from considering total system cost of a product.

Apr 14, 2008

China's low wage future

There was an article on NPR this morning about China's "one child" law. As you know, that has been in place for decades and limits most parents from having more than one child. Now, two only-child parents can have two children. (There may be some exceptions for farm families, if I recall correctly.) When it comes to consumption of scarce resources, this has seemed to some as a good thing.

Demographers in China are now warning of some looming crises. One is a high proportion of older people who will have to be supported by a much smaller base of young people. Not so different from our baby-boomer crisis, except that we allow immigration and have a long history of mechanization and automation.

Another is that the birth rate for boys is much higher than that for girls. That is due to the cultural preference for boys in China, and the ready availability of abortion. Think it's hard to find a girlfriend here? Male Chinese engineers may have yet another reason to stay on after their education in other countries.

The third really has economists in China worried. Too small a labor force for low-wage manufacturing jobs, which will go to India or Bangladesh. It's no secret that lean and automation are increasingly important in the China of the future. But it sounds less likely that your job will go there. Better pick another place to worry about.

Apr 11, 2008

Increasing the supply of engineers and technicians

There's a big barrier to students who'd like to become engineers and it hampers the country's ability to keep up with the demand for engineers and technicians. It makes me think about a conversation I heard between my son and his cousin. Brian said he dropped out of school, where he was majoring in electrical engineering, when he couldn't make it through calculus. He now drives a route for Cintas and likes his job. (If you want to find a huge job market with high growth, it's for truck drivers. Think about it.) My son had also failed calculus. He didn't drop out of school, but did have a hiatus, where I forced him to retake calculus at the local community college and he managed to pass. He diverted his path to scientific writing, but parlayed a high-school program in Pascal programming into his current job in IT.

The nub of the problem was this -- Brian said, "Nobody told me how hard calculus was going to be." Chris said, "Nobody said how incredibly boring calculus was going to be." There you saw the loss of two potential manufacturing engineers.

Another thing nobody told Chris and Brian is that there are engineering-related career paths for those who can't get over the calculus hump. (Well, Chris's mom managed to interest him in the Michigan Tech program that combined the sci-tech writing with an associate's degree in mechanical technology.) Brian's dad was on a path from machine operator to plant manager, but they didn't really know about college alternatives to engineering.

I have a couple of proposals. One is that educators and employers think about how critical calculus is to working as an engineer. On the job, all the math is contained within CAD and CAM, finite element analysis and so on. Could there be an engineering degree that didn't require it? Business schools don't require it like they did when I was in school - I got an A in calculus, by the way, without having any mathematical vision of what was going on in the formulas. I was just good at memorizing.

I have a nagging problem with diluting the requirements, especially when I'm guessing that engineering schools in India and China are doing a better job teaching math. Or are they just washing out the same proportion of people from a much bigger population of beginning engineering candidates? Calculus trains the mind, if the student gets it, and the analytical thinking it requires must certainly sharpen one's ability to tackle problems. Could we do without it? At the same time, let's beef up our courses in statistics and teach its relevance to problem-solving. If taught right, applications of statistics like statistical process control are accessible to everyone from manager to machine operator.

If consensus is that no engineer can do without calculus, let's make a different change in the process that would increase production of engineering people. Employers should get across to schools that they should look at students who choose not to surmount the calculus obstacle and make certain that they are aware of other technical bachelors degree programs like technologist degrees and associates' technician degrees. Combining the technician AS and another BS like business or even writing as Michigan Tech does would go far to supply our manufacturers with smart non-mathematicians to strengthen our technical workforce. They don't present the alternative at that critical discouraging point in a student's education. Sorry Chris, but you wouldn't have made that choice if your mom didn't pore over the MTU course catalog and say, "Hm, that's interesting." You just thought it was your own idea. That's why engineering educators have to do the job. At the age of 18 or 19, the last person you want to listen to is your mom. Especially when she's forcing you to retake calculus as a condition of living at home in the summer.

And you manufacturing managers? Have you taken a good look at your employees who didn't go to college and identify those who'd be good candidates for technical associates' or bachelor's degrees? Are the only ones taking that path being forced to use all the hours they should be spending time with their families, or just refreshing their minds so they can help you solve problems, to pursue their educations? What about letting them take classes on company time? What about bringing the teachers to your plant to cut down on students' travel time to school? You could make this happen? Yes, I hear the old argument - "They'll take the education we've paid for and go somewhere else." Well, do you hesitate to hire a person whose current employer paid for their schooling? I don't think so.

The total system of giving talented people engineering and technical knowledge is not working. Dr. Deming probably said something about that. In fact, Dr. Myron Tribus, one of Deming's associates, did write a thought-provoking paper on the subject of education. But words floating through the air or living on paper or some server somewhere are not going to build the workforce we need. Employers and educators need to do a better job of informing students (and their parents) of the attractive opportunities for those who find calculus overwhelmingly difficult - or incredibly boring.

Apr 6, 2008

Parking system "improvement"

Yesterday Mike and I went to see Othello at the Chicago Shakespeare Theater in Navy Pier, which we do three times every year. That gives us time to have made comparisons over time.

Before you get impressed by my intellectual choice of entertainment, let me confess that I almost always snooze through a good part of the first act of a Shakespeare play. We saw a more experimental play the night before in which a character very similar to John Kerry talked about theater’s great ability to induce sleep. So I’m not alone in the gauche experience. Mike’s a very alert and knowledgeable Shakespeare fan, so I try to not feel too bad about the waste of ticket money on someone who can’t quite get into it.

Parking at Navy Pier on a Saturday is a challenge. Shakespeare Theater subscribers are guaranteed parking, so as you drive up to the guys waving you away from the parking entrance, you just shout “Shakespeare,” and they let you through. It’s the secret password.

We won’t even talk about the fact that we were routed to a different garage door from the usual and never saw our Shakespeare garage location, as we wound up and up past full parking aisles as curtain time drew even closer.

Personally, I hate Navy Pier. Mostly carnival, it attracts crowds that fill the high empty spaces above with echoing sounds of chaos. My nerves don’t do well under those conditions. The theater is a complete contrast – it’s rather like a place where you’d see a play.

After one’s entertainment, whether carnival of Shakespeare, leaving a big parking lot always takes some time because of the lines before the cashiers. Someone pondered the problem at Navy Pier and came up with an excruciatingly poor “improvement.” Some company made a lot of money for installing it, and the inconvenience in total system cost must be huge, if anyone measured it.

How does it work? First, you take a ticket when you enter the garage. Same as anywhere else. Then signs everywhere tell you to take the ticket with you because you’re going to have to pay inside before you leave. Of course, lots of people never notice the signs and leave their tickets in their cars. What happens if they don’t comply and they become a defect? Do they have to stay forever?

If you did notice the signs, you take your ticket and promptly stop thinking about the process. As you leave, you may become aware of the fact that long lines of people are standing in front of automated kiosks clustered by the doors to the parking lot. Approximately half the machines are not working. The other half have confusing instructions that take perplexed users longer to use than the designers estimated. Is it a benefit to have a long line of people clustered in front of the exits to the parking lots instead of a long line of cars at the exits from the parking lots to the street? Not for the customer.

As I waited in the kiosk line, irritably, I sent Mike off to see if there were any shorter ones. Sure enough, he came back and reported that if we walked about a quarter mile, there was a machine nobody knew about. It probably didn’t take any less time, but at least we were in motion.

So we passed the big obstacle and found our car. Now we might have expected leaving to be simple, except nothing ever is. When we get up to the exit, we see that the line of cars is about as long as it ever was. Also, you can pay by credit card right there, which I had done inside, so why didn’t I get that information before? There wasn’t a need to stop at the kiosk after all. And as we approach the end of the process, where we insert our paid-up card, we see that there is a parking attendant there. She is pushing a button to let each car through, because the card reader is malfunctioning. So much for saving on personnel costs.

So where was the big benefit, either to Navy Pier or to the customer? You go figure it out. For myself, I’ve got to stop expecting people to have actually thought through systems, because it makes me crazy when they haven’t.

Copyright @ 2005-2014 by Karen Wilhelm