In the 1970s, U.S. manufacturers -- including automakers -- did not comprehend the true nature of the worsening productivity crisis. While today's factories undergo process optimization and technology upgrades continually, renewing a plant in the '70s meant simply replacing old equipment with new versions of the same.
Managerial attitudes on productivity tended to be cliches, such as: "The most obvious solution to any productivity problem is the maximum utilization of the best productive equipment available, or the best equipment that can be made available."
Ideas such as lean manufacturing, Six Sigma and Total Quality Management had yet to be discussed, much less implemented. Even as late as 1980, the primary productivity constraints were considered to be labor and government. That was the conclusion, in the spring of 1980, by a Harvard conference of 150 academics, business managers and congressmen. Their simplistic recommendations seemed limited to increasing the dialogue among business, labor and government -- plus tax cuts.
Threat From The East
In that same year a better clue to manufacturing's future was found in a Sunday, March 30, headline of the Cincinnati Enquirer: "U.S. Workers Perform Better Under Japanese Bosses."
The story compared the performance of three plants of Savin Copier Co. The comparisons were among two Japanese-managed plants, one in Japan and one in California, versus a California site that was American managed. The story's conclusion: Both Japanese-run facilities were equally productive and clearly superior to the American-managed plant. The Japanese were profiting from the lean thinking of the Toyota Production System, a practice pioneered by the Japanese automaker of the same name. According to the Department of Labor's Bureau of Labor Statistics, U.S. productivity from 1968 to 1978 increased by 23.6%, but the Japanese achieved an 89.1% increase in the same decade. In the summer of 1980 an NBC television program asked: If Japan can, why can't we?
Automakers began investing in new technology to increase efficiency (i.e., reduce labor costs), but that alone was not enough . According to Maryann Keller's book "Rude Awakening," the automotive analyst researched what happened when Cadillac opened its then-new Hamtramck plant in 1985 with a somewhat flawed, initial strategy. The luxury-car division was hoping to win the competitive battle by playing just the new technology/new equipment card.
What Keller discovered:
- Robots designed to spray-paint cars were painting each other.
- A robot designed to install windshields was systematically smashing them.
- Factory lines were halted for hours while technicians scrambled to debug the software.
- Robots went haywire and smashed into cars, demolishing both the vehicles and themselves.
- Computer systems sent erroneous instructions, leading to body parts being installed on the wrong cars.
In 1991, after those problems were resolved, Larry Tibbitts, then Hamtramck's plant manager, gave IndustryWeek a perspective on their causes: "So much unproved technology had been installed that just removing it improved production and efficiency."
Looking To Lean
Overall, Tibbitts pointed to employee involvement as the key ingredient in solving the problems at Hamtramck. For example, the 2,989 employees achieved:
- A 73% reduction in discrepancies per vehicle from 1986 to 1991. Included was a 33% reduction in the 1991 model year compared with 1990.
- A 65% improvement in productivity from 1986 to 1991 in all measures of quality, customer satisfaction and other metrics of competitiveness.
The transformation of the Hamtramck plant led to its winning the Malcolm Baldrige National Quality award in 1990 and IndustryWeek's Best Plants Award in 1991. Both events helped confirm Tibbitts' setting an even more ambitious goal -- a further metamorphosis via the principles of lean manufacturing.
The essence of lean thinking is also reshaping the product. One example: the new 2005 Escape Hybrid -- the first "full" hybrid to be built in North America. Ford Motor Co. designed the vehicle to achieve between 35 mpg and 40 mpg in city driving. That's a 75% improvement over the conventional Escape. On the highway the Escape is expected to approach 30 mpg. Overall that is a 50% fuel economy improvement over a conventional Escape. Performance is not diminished, Ford says.
At that time the International Motor Vehicle Program of the Massachusetts Institute of Technology (MIT) described the benefits of lean manufacturing: "Half the business effort in the factory, half the manufacturing space, half the investment in tools and half the engineering hours to develop a new product in half the time." Tibbitts took notice.
Also setting the stage for lean's adoption at the Hamtramck plant, in 1982 Toyota had decided to partner with GM at the NUMMI joint venture at Fremont, Calif. Then in 1992, in a move that helped cinch manufacturing's lean revolution, Toyota created the Toyota Supplier Support Center for the purpose of establishing lean ideas in U.S. industry.
The GM results: corporate-wide, the automaker has made admirable progress in capturing lean, even in improving its J.D. Powers quality rankings. In time-to-market metrics, it outperforms MIT's claim. What was once a three-to-four year process is now routinely 18 months or less, says Terry Kline, global product information officer.
The quick spread of lean ideas beyond the OEMs was facilitated by Toyota's original idea of involving more and more supplier participation in the building and assembly of automobiles. In the 1980s Toyota was already talking in terms of 40% of final assembly being handled by supplier/partners who of course would be indoctrinated in lean thinking.
The 1980s also saw a dramatic proof of concept when lean thinking became the operating basis of newly founded Dell Computer Corp. In "Direct From Dell," (1999, Harper Business) founder Michael Dell revealed that lean thinking helped establish the company's direct marketing strategy. (The original marketing plan used retail outlets.)
Today lean thinking is bringing competitive improvements not just throughout the value chain, but throughout the company as lean principles are starting to be applied to back-office functions a well.