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Economic Development from a Personal Perspective

Jan. 13, 2016
The initial spark for enterprise-wide supply chain initiatives usually comes out of the mind of single individuals.

Last fall I wrote a series of four articles in which the case for supply chain-based economic development was laid out [see Related Articles links below]. Over the next few articles I will discuss what I see as the benefits of individual and corporate involvement in economic development, both to specific stakeholders and to society in general. The article after this will get into the gist of why anyone in industry who believes in free market economics would want to get involved in government economic development efforts. This one will focus on an example of from-the-ground-up economic development I have been involved in. First, let me give some background about the platform of the proposal.

Over the last 25 years I’ve been deeply engaged in defining and enabling Lean supply chain performance. If you’ve been a regular reader of this column you know that I’m convinced that prioritizing Lean activities—or those from any other process improvement strategy—based on their potential impact on reducing manufacturing critical-path times (MCTs), i.e., “true” lead time, dramatically raises the consolidated impact of those activities as well as sets the table for increasing revenue generation. This is because MCT ties improvement efforts directly to the customer through improving order fulfillment capability.

Over the last three years my partner and I have been engaged on an MCT-reduction-based proof-of-concept supplier development demonstration project with a Fortune 100 OEM aircraft manufacturer. It has been hugely successful and has resulted in significant recognition both within and outside of the client. As a result that company is instituting efforts to apply the MCT-reduction strategy both within their own factory walls and throughout their supply chain.

About a year-and-a-half into the engagement I received a contact from an individual associated with the Puget Sound Regional Council (PSRC) wanting to know details of my work with this OEM. The PSRC has many goals, one of which is to foster economic improvement in northwest Washington State. They had been contacted by one of the supplier participants of the OEM’s proof-of-concept trial, who told them how happy they were with the MCT-reduction strategy that they had been introduced to. Due to a confidentiality agreement I was not able to relate anything to PSRC about that specific project; however, I did refer them to published articles on the subject and offered that if they were still interested in hearing more details about the MCT-reduction strategy after reading the articles they only needed to ask.

A couple weeks later I got a call back from my PSRC contact saying she would like to discuss development of a regional supply chain economic development initiative based on MCT-reduction. My partner and I are not positioned to actually provide the “boots on the ground” needed to support a large scale program so I proposed that together we approach Impact Washington—Washington State’s Manufacturing Partnership Extension Center—and include them in the initiative proposal as the actual service provider since they do have the needed on-site capability. Impact Washington agreed and about a week later I and representatives from these two organizations met with a director in the State of Washington’s Department of Commerce (WDOC) to discuss the outlines of what we were thinking of and the potential for the State funding a proof-of-concept pilot. WDOC liked our proposal and suggested we develop it further, although they could not commit to provide the actual “prime the pump” funding we were asking for—at least at that time.

Through my interaction with the PSRC I learned that they were preparing Washington State’s proposal for designation as an Aerospace Manufacturing Community by the U.S Department of Commerce (US-DOC). The Manufacturing Community concept aligns somewhat with Michael Porter’s Manufacturing Cluster work that demonstrated when manufacturers (OEMs/suppliers) in similar industries are located in close proximity, both innovation and the economic benefits derived from individual manufacturers tend to compound. The point was that US-DOC would be prioritizing their economic development funding support to areas with such designations. My PSRC contact suggested that the idea for our MCT-reduction pilot be featured in the supply chain section of their Manufacturing Community proposal. It subsequently was and, in later conversations, we learned that doing so helped separate out our proposal from those of other regional areas.

A month or two later PRSC was notified that the State of Washington did indeed receive designation as an Aerospace Manufacturing Community, a high distinction given that only a dozen such communities have been identified as such nationwide. Now that our pilot proposal was associated with an area that would be given prioritization in awarding of federal economic development funds, we needed a strategy for where to apply for our pilot’s funding.

Where do federal economic development funds come from? There is no short answer to this but arguably, the largest supply chain in the United States is associated in one way or another with Department of Defense (DOD) work. And the aerospace industry is one of the largest players in this supply chain. Defense spending goes up and down depending on threats to our nation. This action—for the most part unpredictable—creates a sort of whip saw effect such that in down years defense industry suppliers have economic difficulty. Because of this DOD is very interested in developing and introducing strategies to manufacturers that can apply to dampen the impact of spending cuts.

On top of this, a division of the DOD named the Office of Economic Adjustment (OEA) is charged with helping communities cope with DOD spending cuts, which unmediated can cause severe recessions in regional areas. Since Washington State was rife with DOD supplier chain participants that had seen recent sharp cuts on DOD spending—ever heard of the term “sequestration”?—we thought OEA might be interested in supporting proof-of-concept work involving a strategy that could make DOD suppliers more efficient and order fulfillment-capable.

In the end, a successful proposal was made through WDOC to the DOD ECA for a six supplier Next Gen Lean pilot based on a strategy of MCT reduction. This project started in April 2015 and is nearing completion.

Actual implementation of such a pilot represents a big challenge and requires significant support from a multitude of sources. I won’t get into naming them in this column but realize that in addition to the previously listed organizations, there was a lot of work done by other groups and individuals. In particular, the pilot required a large effort on the part of Impact Washington to engage and train their “traditional” Lean service providers on new strategies and tools, as well as a commitment from participating suppliers in both dollars and resources.

DOD requires impartial academic evaluation of the initiatives they provide funding to. The evaluation of these academics is very important to DOD since it lets them know if they spent taxpayer money on something that provided benefit or not. Since most professors I know are not standing around looking for things to do, it is sometimes difficult to engage them to write a case study report that will have perhaps minimal readership. That wasn’t a problem here as MCT-reduction as a waste elimination strategy is gaining more and more traction, both in industry and academia.

A professor at Columbia University—a highly respected university, to say the least—accepted this assignment and has been personally conducting face-to-face interviews (not a small concession since most professors have graduate students do this type of legwork) with pilot participants as well as reviewing its impact. I had the opportunity to have lunch with him in December and while he wouldn’t “spill the beans”—the report, while a public document, must initially be delivered to the DOD—he did indicate that he had documented many positives in his review. I expect the final report to be delivered this coming spring and/or summer and will cover its conclusions in a future column.

This effort could have not become a reality without engagement and coordination between many organizations, which although having overlapping charters, do not necessarily have common directives driving their activity. What was needed was a group of people to define the “middle ground” between those varying directives, and a funded Next Gen Lean proof-of-concept initiative was the result. Without compromise, the initiative would likely have been still-born.

The initial spark for initiatives usually comes out of the mind of single individuals, and that was the case here. In this instance the owner of a supplier who had participated in the aircraft manufacturer proof-of-concept initiative had a vision for what MCT-reduction could lead to. She then reached out and planted a seed within her network that grew into what will likely become a program with high general impact.

Regardless of the pilot’s outcome (and I think it will be very positive) that person, Rosemary Brester of Hobart Machine, needs to cited and thanked for having an idea and then going way out of her way to move it forward. Based on Rosemary’s initial action on this we should all have increased faith that “bottom up” economic development initiatives can be successful.

The next column will dig more into why individual stakeholders might have wanted to be involved in Rosemary’s idea in the first place.

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