By Kevin Meyer

Several lean blogs have coincidentally discussed the importance of the daily stand up accountability meeting over the last few days, so I wanted to add my voice in complete agreement.

Mark over at the Lean Blog wrote about the daily huddle from a hospital perspective. 

The conversation quickly steered to the idea of starting each meeting, at any level, with a brief discussion of employee safety. As I thought back to my time in manufacturing  — yes, that’s a very common practice in manufacturing settings, including those that aren’t using Lean methods. So my mind went back to how rarely I’ve seen that practiced in hospitals — why is that?

Jamie Flinchbaugh has a video blog on the subject.  

Regardless of where you sit in the organizational hierarchy, daily huddles are a great tool for any team to create engagement, alignment, surface problems, and more.

Lee over at Daily Kaizen also had a post on the importance of a morning meeting.  

As an organization transitions to a Lean management system many of existing structures and practices change. Teams and individuals begin to work together in new, more disciplined and more effective ways. One of the most important changes early on in the transformation is the requirement that team members participate in a Daily Huddle. Having a Daily Huddle is a simple change, but for teams and managers it a profound change.

All in the past two days.  That should tell you something.

The daily stand up meeting is critically important, and it does change the culture.  Traditional organizations wait a week or two between staff meetings to discuss issues, and by the time the meeting rolls around many subtle issues have been forgotten.  Rigid agendas often prevent the surfacing and discussion of unplanned topics.  Team members can go days without talking with each other.

A brief morning meeting done right creates collaboration, communication, and accountability to results. 

At my morning executive staff stand up meeting we video conference in the managers from our other sites, occasionally poking fun at them when we can see snow out their conference room window while we're enjoying another sunny California coast day.  Then we get down to business.

The first topic on our agenda is always safety.  I mandated this as part of all department morning meetings and it has changed the culture.  As I commented on Mark's post, which focused on the importance of safety:

When we begin having “safety” as the very first topic at the daily 5 minute standup meetings for the leadership team and every department, our culture changed quickly. We also began noticing unexpected trends and coming up with immediate solutions – none of which effectively happened with the old “quarterly safety review” format. The impact on our safety statistics has been very positive, but perhaps just as importantly it sent a clear signal to our employees that safety is a priority.

It needs to be an open conversation where everyone is comfortable bringing up safety issues without blame or recrimination. One example of “unexpected trends” which I believe is a big issue in hospitals is that one of our managers brought up a slip near-miss incident. The other managers became sensitized to this and over the next week they all witnessed or heard about similar near-misses in their departments, which had gone unreported because they were underlying “normal occurrences.” Over the next couple weeks we discussed this in the morning meeting, created action plans, and ended up changing our mopping procedure, mopping fluid, and are now trying out new “anti-slip” shoes in specific areas. We would never have known about this, and would have continued to deal with the occasional real slip injury believing it was sporadic and random and not part of a trend.

That would never have happened with a traditional weekly or biweekly staff meeting, let alone a quarterly mind-numbing review.  I continued my comment with what I believe is a powerful result of having safety as the number one topic.

But the other major impact is the reflection on the oft-forgotten “respect for people” pillar of lean. What better way to send a message to your employees that they matter and you care? They will reward you for that with better service, commitment, and improvement ideas.

So safety is our first topic.  The second is a review of customer issues - complaints, shipping problems, and the like.  This gets them resolved or at least acted upon quickly and creates a customer-centric mindset among the staff.  Third is a quick review of our calendar to ensure we're all up to date on visitors, customer and otherwise.

The fourth topic is perhaps the most important after safety.  We rotate around the staff with each staff member thereby taking center stage twice a month.  The first time their day comes up in a given month they present their metrics against goals and what they are projecting for the future.  The second time they present the status of key projects in their department, in effect soliciting buy-in from the other staff members that they are still working on the right priorities.  All this time they are standing in front of a white board that holds our long term/3 year/annual hoshin strategy with A3's for the annual improvement programs.  Alignment and accountability is created.

Finally we have a brief open forum and usually there's a quick issue or two to be discussed.  Then off we go... just a few feet since last year I co-located my entire local staff around a central huddle area.  The improvement in communication resulting from colocation has been incredible, but that's the subject of another post.

It generally takes closer to 10 minutes instead of 5, but that's fine.

The problem with a daily meeting is that they can be tough to implement.  The last thing that most employees want is yet another meeting, let alone very first thing in the morning, and standing up no less. 

This is one of those tools that may need to be an executive mandate.  If they are done right the value will be seen after only a couple weeks.

By Kevin Meyer

Yours truly was quoted in the latest issue of M&A journal The Deal Magazine in a cover story titled Revisiting Manufacturing.  I was happy to see that it was one of the more balanced articles on manufacturing I've seen in a while, while covering the usual regulatory and tax burdens it also described how manufacturing could thrive in the U.S. with the proper focus.

My contribution:

For almost every example of manufacturing that has fled the U.S., there's a counterexample of one that's holding on. That's true even in long-buried American industries such as garments and electronics. "You have to see where the value flows from. If you only do what others can do, then it will flow to where the lowest costs are," says Kevin Meyer, who heads the consultancy Factory Strategies Group LLC. But if American manufacturers can add value is some way, he continues, whether that be technology, innovation or proprietary design, it's possible to overcome labor cost disadvantages. "I believe it can be done with some effort in any industry," Meyer says.

And some other notable quotes:

So manufacturing in America isn't dead, but does it have much of a pulse? The knee-jerk tendency in everything from politicians' stump speeches to Chamber of Commerce luncheons is to come down hard one way or the other: feast or famine.

As Timothy Sturgeon, senior research affiliate at Massachusetts Institute of Technology's Industrial Performance Center, says: "The debate is almost childish. On one side, it's the end of the world; on the other, everything is peachy." Instead, Sturgeon says, the role and status of American manufacturing equates to a very complicated formula. "I don't think we understand how all these things [related to manufacturing] play out."

And a topic we've covered in the past on the impact of offshore outsourcing on productivity:

Sturgeon cites one study that questions the accepted wisdom of productivity gains in U.S. domestic industry and suggests that at least part of this could be the result of offshore-made components being transferred back into the U.S. Other issues include everything from the oft-debated role Washington plays in research and development to the notion of China as a trade predator. The prognosis varies from sector to sector, sometimes from product to product within an industry. And it changes over time.

The bottom line:

There's one constant that nearly everyone agrees on: Manufacturing remains vital to America's economic engine. For all sorts of important reasons, from wages to trade to social cohesion, from community well-being to education, manufacturing has outsized importance. "By any measure, it's a strong driver of our economic prosperity," says Timothy Sheehy, president of the Metropolitan Milwaukee Association of Commerce. "Manufacturing is the goose that lays the golden jobs. We have to make sure it's healthy."

A pretty good, fairly-balanced article, even in an M&A journal.  I'm glad I could contribute.

By Kevin Meyer

It's almost becoming routine, if not boring.  Nearly every day there is news of companies realizing the follies of outsourcing and deciding to "reshore" or "onsource."  Not a bad thing and we enjoy reporting on it, but we must also keep the proper perspective.

The latest comes from an article in Manufacturing News titled Multinational CEOs Say Outsourcing Has Gone Too Far.

The CEOs are nervous about what this means for their children and grandchildren if the United States can't get back into the global manufacturing game. They recognize that outsourcing of manufacturing has not worked in the way they had envisioned. "We overestimated the issues associated with outsourcing jobs to low-cost nations and the consequences of that," says Giffi. "The executives underestimated the erosion that would have in their overall capabilities in places like the United States and how that would fundamentally shift their supply chains."

They also now recognize the folly of chasing low wages. "I don't think when the whole process started there was a fully baked understanding of the fact that this is pretty elusive," says Giffi. "It's like chasing drops of mercury around the table. It's very hard to contain once you start playing that game."

Like chasing mercury - what a great visual, and very true.  Glad to see these guys starting to realize the folly of their ways.  So they are realizing the problems, but who's at fault?

Companies can locate factories with the most advanced production technologies anywhere in the world. The significant factors that influence where those investments are made have been influenced by a nation's economic policies. In the United States, those policies have been focused on the financial sector and services at the exclusion of manufacturing.

"There is a completely different and more basic understanding now that says innovation is tightly tied to your ability to manufacture. Creating, researching, developing new products and making them is fundamental to the stability of an economy."

But the United States government can't dither in putting together policies that favor production over consumption. "This isn't something that can be debated indefinitely," says Giffi. "Business leaders are forced into a world of making decisions 24 hours a day seven days a week on where they have to make investments in plants, equipment and new jobs." If the United States does not address its cost structure, talent gaps, trade polices and infrastructure "then we will see a continual gradual deterioration and downward spiral. . ."

That's partially true.  The U.S. does have some of the highest corporate tax rates and is one of the only countries that tries to go after foreign-created income, largest regulatory burdens, and especially in California some bizarre work rules.

But at the same time there are companies, in every industry, that do compete globally from the U.S..  Right now and for the past several years.  It takes a lot of hard work and an ability to look beyond the blinders of traditional accounting, but by focusing on reducing complexity and adding value, and realizing that there's a valuable brain attached to the supposedly costly pair of hands, companies can succeed now.

Economic policies make the job far harder, but not impossible.  Those companies that want to return to the U.S. can become globally competitive now, if they really want to.

By Kevin Meyer

Today's Wall Street Journal has a review of the National Geographic Channel's documentary "Giuliani's 9/11" which takes tells us about the events of that day through the eye's of New York's then mayor.  What's front and center in the review and apparently in the documentary?  Giuliani's decision to go to the gemba.

The mayor rushed to the scene—a decision that later drew criticism from those who thought he took an unnecessary risk and could have better managed the situation from a distance. "I have this theory about managing an emergency," Mr. Giuliani explains, "which is you have to see it. It's one thing for somebody to describe something to you; it's another thing to actually see it."

Bingo.  Exactly why "go and see" is a key component of lean manufacturing.  Really going to the gemba is not just biz-school MBWA jargon - it's seeing for yourself, asking questions, taking charge, and teaching others how to see what you see.

Their vehicle brought to a standstill by the sea of pedestrians fleeing the area, the mayor's team decided to travel the last several blocks on foot. What they saw there was beyond comprehension. "It would have been impossible for me to make decisions about this if I hadn't seen it. I'd have made all the wrong decisions. I wouldn't have realized how vast it was, wouldn't have realized how many resources we needed."

So how many of you still make key decisions from a conference room?  What are you missing?

Just a quick note that you can listen to an archived Lean Nation radio show from last week featuring an interview with none other than our own Bill Waddell.  Listen here or download and listen to the mp3 here.

Evolving Excellence is hosting this 108th edition of the Management Improvement Carnival.  Previous carnivals can be found here.  Of we go with a sampling of posts from the past couple weeks.

• Gemba Panta Rei: 5 Ways the Obeya Increases Profit - A large room without walls can increase communication, reduce space, reduce meetings, and make bottlenecks visible.
• Lean Blog: Mental Models: Standardized Work and Performance Measures - Standard work and performance measures mean different things in a traditional command and control organization versus a lean organization.
• Flinchbaugh: Small-i ROI as Applied to Strategy - Sometimes instead of focusing on the big R in ROI, it can pay to find a unique niche requiring just a small i.
• Shmula: Your Baby is Ugly - It happens with babies, it happens with business.  Sometimes you become so invested in your idea or mindset that you fail to see the truth.
• Gemba Tales: Developing Leader Standard Work - Five Important Steps - key components of leader standard work.
• Lean Thinker: Using the Questions - Stay on track by holding to the five coaching questions.
• A Lean Journey: Personal Kanban Kaizen - Tim continues his quest to develop and refine a visual kanban system for his personal projects.
• Lean Reflections: Choosing Online Collaboration Tools for Teams - in the end it's not the tools, but the thinking.
• Curious Cat: Managing Our Way to Economic Success - some great words from John's father on two great untapped resources in an organization: potential information and employee creativity.
• Evolving Excellence: To Shingo or not to Shingo? - The second of two posts discussing, again, the impact of diluting the Shingo Prize with regional awards and "not quite a full Shingo" medallions.

by BILL WADDELL

Kevin sent me an article some of the kids over at McKinsey wrote asking me for my expert opinion on just what drug they had been smoking.  Knowing that I am a bit older than he is and, having grown up in the Woodstock days, I have seen quite a bit that qualifies me to assess such things, he often calls on my storehouse of knowledge.

They weren't smoking anything, Kevin.  The article in question is clearly the product of window pane - LSD - and large quantities of it.  While there are a number things one might smoke that could cause hallucinations of the sort in this article, most of them induce paranoia, rather than delusions of grandeur apparent in this piece of work.  Nope, this is the product of a good old fashioned acid trip.

Notice the inability to connect time and space - taking a relatively new concept like value stream mapping and deluding themselves into thinking they had discovered something original - calling them "product line pathways" - then abruptly time traveling with ease back before lean accounting, before activity based costing, to the early 1980's and making the case for using regression analysis to determine cost behavior along the pathways.  Typical acid induced thinking - kind of like believing you saw Thomas Edison and Bill Gates eating lunch together and being unable to grasp the fact that such things cannot be - or believing you saw a huge purple spider morph into your grandmother and having a talk with her even though she has been dead for twenty years - you know - LSD stuff.

The article is introduced by some basics that were cut and pasted from elementary lean accounting literature, but they make no effort to connect it to the pathways, regression analyses, purple spiders and other incredible visions in the article, and stick a completely incoherent boilerplate of change management principles in the middle - again with no apparent link to anything else.

The icing on the cake is that portion of the article which was clearly written during that stage of the acid trip when 'the giggles' set in.  It is easy to see the authors gleefully consumed in the challenge of trying to describe weighted averaging without using the term"weighted averaging".  The notion that there is value in accomplishing that feat is another classic symptom of LSD abuse.

So there you have it Kevin.  It is nothing more than garden variety, psychedelic, 1970's insanity expressed in a similarly incoherent jumble of words.

By the way, the senior economist at the Federal Reserve you asked about who said that, due to lean manufacturing the state of Wisconsin should resign itself to a permanent loss of manufacturing jobs was dearly just smoking pot - good stuff, no doubt, and smoked through a very well designed bong - but just weed.  Same with the guy at the New Yorker who wrote that lousy customer service is basically an unavoidable consequence of lean.  Just the usual result of mixing pot with Microsoft Word - nothing to be concerned about.

let me know if there is any other strange behavior I can help you understand.  You know I am always glad to help.

By Kevin Meyer

I just returned from a very successful business trip to Shanghai.  Contrary to what many companies are doing, mine is selling TO China, not outsourcing.  There are several reasons we're able to do that, ranging from high quality to unique technologies and even to a competitive cost situation thanks to lean, but that's not what I'm going to talk about.

It has been a few years since I have interacted this closely with China, and much has changed.  So here are some thoughts - and if you make it to the end I'll show you a couple short entertaining videos.

First, the infrastructure has improved immensely.  Shanghai is incredible from the wild modern high-rise architecture to modern highways and bridges.  Everyone is on cell phones, the internet is fast, although as I'll mention later it is not "complete."  Much of this is being paid for by the interest payments on our debt - more on that in a minute.

The bureaucracy is still there.  Thanks to a wire transfer that did not happen as planned, I had to change a few thousand bucks at the local Bank of China.  The number of forms and stamps required was mind-boggling.  Similarly just to make a couple minor payments to subcontractors for our booth at a trade show I spent more time filling out forms and getting crazy approvals than the payment itself was worth.  I would have paid out of my own pocket to avoid that mess.  There's a significant cost of doing business that needs to be streamlined - and probably will be.

Censorship still exists, but is changing fast.  No YouTube, several blogs are blocked (but not Evolving Excellence!), CNN is partially blocked but not Fox News (go figure...).  The state-run newspapers are surprisingly open about crimes and even poor economic data.  Tibet (aka "the Autonomous Region") is discussed, and there was even a quote from the premier saying that "rapid economic growth means that the political system will need to be changed" - that got people buzzing.  And the government is looking at reducing the number of crimes eligible for the death penalty from 68 to 64 - but still including such vices as filing a false tax return.  Perhaps that's why a city of 20 million is still so safe.

The local Chinese market is huge - 1.5 billion people becoming wealthier every day.  The medical device companies I visited were interested in foreign markets, but now (different than before) more interested in the domestic market.  A small product idea has an instant large market - "playing the percentages" takes on a whole new meaning when you just need to capture 1% market share to get rich.  And that's what will become scary from an international financial perspective: until now we've been ok with the Chinese owning so much of our domestic debt because we figured they needed us as much as we needed them.  As their internal market becomes wealthier, perhaps they won't need our markets as much - then what?

Product quality is becoming more valuable.  It's got a long ways to go, but for the first time I actually heard a Chinese medical device company say "price is not a consideration - we need quality" when discussing what my company might provide.  Right now I have the upper hand on quality compared to my Chinese competitors - but I wonder how long that will last.  I must continue to improve - rapidly.

There is an impending socioeconomic crisis coming.  Many Chinese are becoming wealthier, many are not.  There are something like 100,000 millionaires in Shanghai alone, yet a bar we went to had five people working for just a couple bucks a day.  A chasm is being created, and that is never a stable situation.

The bottom line?  China is evolving rapidly, its internal cost structure is increasing, but the market is huge.  It will soon become a place too expensive to outsource from, but a market of its own too large to ignore.

Ok I promised you a couple of short videos - I took these with my iPhone 3 so I apologize for the quality.  The first is the Shanghai skyline at night, with a full moon, from the Bund.  The second is a minute of driving.  Drivers have the right of way, even when pedestrians have the light.  Top it off with some crazy bicycles and cars backing into busy streets and... well you get the picture.  Enjoy!

by BILL WADDELL

At the University of Memphis you can get a master of science degree in engineering with a certificate in Applied Lean Leadership.  It's mostly lean tools based, but good stuff. Of course, that degree won't be cheap -better than a hundred grand by the time you spend your six years at Memphis to get it.  I suspect it would be a bit more affordable, however, if the U of M had not increased their administrative ranks by 35% over the course of the last fifteen years while student enrollment stayed flat.  The U is in financial trouble and a couple of years ago announced they would have to look at eliminating programs and increasing class sizes, and of course, raise fees and tuition.

They sound like so many manufacturers who are bulging with waste they think is necessary, and look to cutting the only things that add value and raising prices as the solution.  Memphis is hardly the only school where paper shuffling waste is spinning out of control at a far greater rate than students are coming in the door. The Goldwater Institute released a study on "administrative bloat" and it seems that teaching kids the principles of lean while hiring administrators by the busload to engage in ever more 'management by committee' and jacking up prices to pay for out of control costs is more the rule than the exception.

The Ivy league is collectively out of control with Harvard increasing their total employment by 46% while enrollment actually dropped.  In the interest of full disclosure, while the hallowed halls of the University of Cincinnati that I once debauched have admirably reduced total employment by 2% while increasing enrollment by the same 2%, they have accomplished that by slashing clerical and other support employees while adding a lot of administrators.

Academia has a spotty record when it comes to teaching the lean principles of eliminating waste, and maximizing value to their customers; and the Goldwater study makes clear their record of applying those principles is abysmal.  

The big problem, I am convinced, is that the entire concept of college as we know it is waste and should be scrapped. When Harvard was formed in 1636, and the University of Cincinnati in 1870, the concept of a bunch of young people leaving home and congregating in a place where a handful of smart folks could teach them something made sense.  In 2010 however, there is nothing they know in Cambridge or anywhere else on the planet that cannot be just as easily known in Barrow, Alaska.

A few years ago I was traveling somewhere and jet lagged enough to find myself in a hotel, channel surfing at two in the morning.  I came across a local community college station that was broadcasting a lecture from an English professor from Ohio State.  I don't recall where I was but it wasn't Ohio, and the idea was that the kids at the CC should tape the lecture and watch it as part of their curriculum.  The guy was really engaging and I found myself watching an fascinating lecture on some nuance of literature and thinking I wish I had teachers like him.

Why should a kid have to travel anywhere and pay outrageous prices for a collection of instructors ranging from outstanding to wretched?  Why can't a kid stay at home and learn English from that guy from Ohio State, and math from some great instructor from Cal Tech, and history from some brilliant lecturer from Texas A&M, and philosophy from the best Harvard has to offer?  Kids are apt to take many - even most - of their classes online anyway.  A year ago one of my kids took every class online and only had to go on campus to take mid-term and final exams. Sitting in a dorm 200 miles from home - or worse yet in an apartment off campus - paid for with federal grants and student loans to learn lessons as a captive to one school makes no sense... especially when the administration of that school is using much of that money to create a self-serving empire with little regard for the value provided for students.

A higher education system in which each professor has to compete with every other professor for students, one in which no kid has to leave his or her own bedroom if they so choose, and one without the waste of useless administrators and the outrageous expense of heating, air conditioning, powering and maintaining unnecessary, gargantuan buildings makes a lot of sense to me.  It is a system that would cost a fraction of today's wasteful scheme.  In other words - a system of higher education with a laser focus on teaching kids, without the bureaucratic, politically correct, paper shuffling, committee laden bloat parents and tax payers currently underwrite.

By Kevin Meyer

I posted this photo yesterday over at Lean Pics, but I can't get it out of my mind so I thought I'd share it with the EE community.  This is a photo of the lobby of the Sheraton Hongqiao in Shanghai - sorry about the quality - I had to wait for one of the very few times you could see without a bazillion people around.

The gentleman on the far left sitting at a small desk right out in the open between the registration desk and the bank of elevators, where every one of the thousands of guests has to walk by him multiple times a day, is Thomas Mueller, the General Manager of the hotel. There's a large sign saying "General Manager" and he welcomes questions and concerns. He works at that desk all day, and if he has to leave his assistant general manager immediately steps in (and changes the sign to "Assistant General Manager").

Keep in mind this is a very large urban hotel with multiple restaurants and meeting rooms - it's a complex place to run. But if your business lives and dies by customer service, what better way to know what's going on and to immediately address concerns?

Now if he'd only been standing...!

By Kevin Meyer

So here are some news stories from the local paper:

• Sales of new homes down 48%
• Uncertain times for business
• Hospitals probed over 'unnecessary' surgery
• Major cities coping with flight delays
• Con artists fill spiritual void

Pretty typical stories, right?  Economic problems, healthcare problems, transportation problems, nefarious people preying on the less fortunate.

Except that the local paper in question is the Shanghai Daily, left on my hotel door this morning.

People of haven't visited China recently, or never, might be surprised by how this highly-controlled supposedly communist country has grown up.  When you arrive at the very modern (but also coldly modern) airport you are met with lots of advertising and even a Burger King, and are then whisked into the city at 400kph on the Maglev.  Vast stretches of skyscrapers, great superhighways, mostly late-model cars (especially Buicks...).  CNN, Fox, HBO, and Cinemax on the hotel TV. 

The internet is a bit slow as everything goes through the Great Firewall, but the only sites I visit that I've found to be blocked are YouTube and our friend Ron's Lean Six Sigma Academy blog... the only blocked lean blog.  But we always knew Ron was the dangerous subversive type.

Presumably political and social news is filtered a bit, however I was still a little surprised at how much was freely reported.

And that points to the concern for the future.  There's some incredible infrastructure being built, presumably paid with by the interest payments the U.S. is making on the massive and increasing debt the Chinese are nice enough to buy.  In effect we're funding all of this by spending far more than we should.  Sort of an interesting concept being a loaning country instead of a debtor - maybe we should give it a try.

The standard of living in China is increasing and incredible wealth is being created - there are something like 100,000 millionaires just here in Shanghai.  But it's a dangerous dichotomy as most workers are still paid very little.  Up until recently wages have been depressed thanks to an abundance of eager workers from the countryside to fill the positions created by businesses fleeing the regulatory, tax, and supposed labor cost burdens of the U.S. and elsewhere - but wage inflation is starting.  News is being reported more freely.  That's setting up a clash of power and control between people officials, profit-based business and a "people's republic." 

The next several years will be very interesting - and something for all of us to keep an eye on.

by BILL WADDELL

"People are making a ton of money off of us and we're making nothing off of them."That quote from an unnamed woman from Chicago squarely defines the issue that is costing politicians from both parties their jobs and is very likely to cost the Democrats control of the House this Fall, rendering Barrack Obama virtually powerless for the duration of his term.

The Tea Party movement has the political establishment thoroughly stymied.  The career politicians have long paid short shrift to the average American living in what they sneer at as the 'fly over states', seeing the people as a bunch of ignorant rubes to be manipulated every few years when election time comes.  And now that the unwashed masses are taking matters into their own hands, the pols are hopelessly unable to grasp the situation.

Through their limited 'inside the beltway' lens, the Democrats figure the Tea Partiers must be a Republican organization because they toss the governors of Virginia and New Jersey out on their ear and do the seemingly impossible and take possession of Ted kennedy's old seat that has been long assumed to be the private property of the Dems.

But then they turn around and send Republican senatorial institution Bob Bennett packing in Utah, and ignored the Republican Party's support and investment in McCollum in Florida, and now it looks like Murkowski in Alaska.

Perhaps if the politicians saw Facebook as vehicles for two way communication between 'friends' rather than just another forum for preaching down to those they seek to manipulate, they would have taken notice of the 400,000 people who signed on as followers of the 'Re-elect Nobody' page within 24 hours of its creation.

The message is even clearer in a poll published a few months ago by the Alliance for American Manufacturing, a supposedly non=partisan group that is really driven by the Steelworker's Union.  According to the poll, (which is the source of the quote at the beginning of this post), 66% of us agree with the statement "Manufacturing is a critical part of the American economy and we need a manufacturing base here is this country are to thrive in the future."  Only 30% sign on to the alternative, that innovation, high tech and services are acceptable replacements for manufacturing jobs.

Most significant about the poll is that "We have lost too many manufacturing jobs" is the 4th greatest concern among the voters - a greater concern that health care, terrorism and illegal immigration.  If the
politicians would look at that data, and then compare it with this chart, they might begin to get a clue.  While Obama administration fiddles and does nothing to help manufacturing and a great deal to hurt it, the voters are hardly ignorant of the fact that the the wholesale abandonment of manufacturing took place on the Republican watch - and long before the economy went in the tank.  Republican political hacks like Bob Bennett got the boot because he sat in D.C. sipping cognac with the lobbyists from Wall Street while America's manufacturing base was tossed in a scrap heap.The Tea Partiers may share a lot of social values with Republicans but they are fed up with the Republican Party's sell-out of main street free enterprise for Wall Street's version.

And the Democrats are in even deeper trouble with the rubes from the fly over states.  The same Steelworkers who are behind the Alliance for American Manufacturing sat and listened to candidate Barack Obama tell them on July 2 , 2008 that "we have to stand up to countries that are manipulating their currency or flooding our markets with subsidized goods; that it's wrong to have a "one-size fits all" trade policy that treats countries as different as China and Mexico as if they were the same; and that our job ends not when a trade deal is signed, but when it's enforced."  They then saw the issue of Chinese currency manipulation taken off the table at the G-20 economic meetings in Toronto a few months ago because the Chinese announced a decision to let the currency float just days before the G-20 Summit.

As the chart shows, the Chinese made the announcement and allowed a minimal correction in time for the Summit, and now have sent their currency well on its way back to the level before the Summit.  No big surprise - the Chinese lied and Obama fell for it, and has yet to do anything about it.  The number one worry identified in the poll is that "We are too deep in debt to China".  The Dems have to wrap their minds around the fact that the Tea Partiers are not a Republican plot, rather they are a whole lot of Americans who see Obama's campaign talk as just another politician's lie, and they see Obama and his economic team as so deep in the pockets of the Wall Street interests they poured billions of tax dollars into bailing out to care.

Whether they have joined a Tea Party, clicked that they agree with 'Re-elect Nobody' on Facebook, or they just gripe with their friends at the bowling alley, the American people in large numbers see the abandonment of manufacturing for a load of insane theories about globalization as something they will no longer tolerate.  Manufacturing is very much a central issue in the upcoming elections. Politicians from both parties who think they are going to keep their jobs by telling America that Wall Street is too big and too important to fail, that China is too critical to the future of the universe to upset, and that closing thousands of American factories is is good economics will find themselves in the same unemployment lines as the manufacturing people they chose to ignore.

"People are making a ton of money off of us and we're making nothing off of them,"is a far better assessment of the economic issue facing Washington than the most profound white paper Timothy Geithner has ever written, and Washington had better come up with meaningful solutions fast.

By Kevin Meyer

Those of us in the U.S. often look to our friends from the great white north for ideas on beer and policy.  Yes I know those links date me a bit, but that's what you get for reading something from a guy that went to school rather close to the frozen tundra a few decades ago.

So policy ideas... everyone seems to want to copy the Canadian health care system.  Perhaps in these tough financial times we should look at some of their other inventions.

When Americans look to Canada, they generally think of an ally, though one dominated by socialist economic policies. But the Canada of the 1970s and early 1980s—the era of left-wing Prime Minister Pierre Trudeau—no longer exists. America's northern neighbor has transformed itself economically over the last 20 years.

The Canadian reforms began in 1988 with a U.S. free trade pact that would lead to the North American Free Trade Agreement. But change really began to take off in 1993. A socialist-leaning government in Saskatchewan started by reducing spending and moving towards a balanced budget.

In 1995, the federal government, led by the Liberal Party, passed the most important budget in three generations. Federal spending was reduced almost 10% over two years and federal employment was slashed 14%. By 1998, the federal government was in surplus and reducing the nearly $650 billion national debt. Provincial governments similarly focused on eliminating deficits by paring spending and reducing debt, and then they started to offer tax relief.

Uh... wait a minute.  A left-leaning government reducing spending (and actually doing it, not just promising it and basing "unbiased" analysis off of the promises...) and reducing federal employment?  Seriously?  I thought that something genetic prevented even thinking that way!  But it gets better.

Jean Chrétien (a Liberal) won elections in 1993, 1997 and 2000 by promising to balance the books, to prioritize federal spending to ensure that government was doing what was needed, and also to deliver tax relief. Mr. Chrétien's former finance minister, Paul Martin, became prime minister in 2003, but he lost power to the Conservative Party in 2006, in part because he moved away from some of the Chrétien principles.

Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%.

Canada has also reduced capital gains taxes twice (the rate is now 14.5%), cut the national sales tax to 5% from 7%, increased contribution limits to the Canadian equivalent of 401(k)s, and created new accounts similar to Roth IRAs.

Ok this is just nuts.  Since when do liberals reduce taxes, let alone corporate taxes?  And as a side note, with Canadian corporate taxes at 18% versus 35% in the U.S., I wonder where corporations... and their jobs... will want to go.  We know that the cold Canadian winters must make their men accustomed to shrinkage, but government shrinkage?  How was that accomplished?

During the mid-1990s, Canada's commitment to reform allowed it to tackle two formerly untouchable programs: welfare and the Canada Pension Plan (CPP), equivalent to Social Security in the U.S. Over three years, federal and provincial governments agreed to changes that included investing surplus contributions in market instruments such as stocks and bonds, curtailing some benefits, and increasing the contribution rate. The CPP is financially solvent and will be able to weather the retiring baby boomers.

They got the gumption to tackle ever-growing entitlement programs?  Their politicians obviously have more guts than ours.

There is one area where our Canadian friends are looking to learn from us, but they better look fast as we're trying to emulate what they are already trying to change.

The one area Canada has been slow to reform is health care, which continues to be dominated by government. However, some provinces have allowed a series of small experiments: a completely private emergency hospital in Montreal and several private clinics in Vancouver. British Columbia and Alberta also are experimenting with market-based payments to hospitals. While these are incremental steps, the path in Canada is fairly clear: More markets and choice will exist in the future. The trend in the U.S. is the opposite.

How's Canada doing today?

Most strikingly, Canada is emerging more quickly from the recession than almost any industrialized country. It's unemployment rate, which peaked at 9% in August 2009, has already fallen to 7.9%. Americans can learn much by looking north.

Perhaps we should.

By Kevin Meyer

As you read this I'm probably on a long United flight from San Francisco to Shanghai for a week of customer visits and a trade show.  Yes my customers are in China, not vice versa, thank you.  Amazing how a little lean can make you globally competitive.

So anyway, I'm flying United, and as I mentioned a few weeks ago one reason I fly that airline more than any other is because I can count on them to be on time.  I fly a lot and it has been a very long time since I've had a significant delay, let alone one that compromised a trip.  On time flights are very valuable to me, and I will often pay more for that value. According to an article in The Street I'm not alone in recognizing and being willing to pay to obtain that value.

Scott Dolan, United senior vice president for airport operations, said on-time performance has played a role in the carrier's financial resurgence, although the impact is impossible to quantify. "It's about when customers make a choice, especially schedule sensitive, high-yield business travelers," he said. "We can't break down how much of our current financial performance is due to this, but we know it has a major impact."

So how did they do it?

In terms of execution, United has empowered its station managers to tackle problems as soon as they occur, without trying to ascribe blame. Historically, airlines seek to resolve on-time problems during regularly scheduled conference calls. While station managers don't necessarily oversee such functions as maintenance, flight operations and crew performance, Dolan noted that they generally coordinate airport operations. "When a flight goes out late, we try to have people discuss it right then and there," he said. "Then we try to put the right resources in place to avoid [repeating the problem]."

Fixing problems, root cause without blame, empowering decision-making at lower levels, accountability meetings.  Sound familiar?  

I do have to ding United for one policy that I believe hurts their efforts: baggage charges.  Now more and more people try to carry on larger and larger bags, almost always creating some havoc near the end of boarding when the overhead compartments fill up.  I wonder how much higher their on-time percentage would be if more people were cajoled into checking bags rather than carrying them on.

But all in all, I'm impressed.  They've managed to create value for the customer, which is paying them financial rewards.  Now if they'd just get rid of the ridiculous red carpet treatment at the gates.

by BILL WADDELL

None of the contributors - either bloggers or commenters - to Evolving Excellence, and no serious lean student anywhere would condone an organization that rationalizes its defects, explains them away, kills the messenger who reports the defect, or otherwise seeks to avoid responsibility for error.

The Shingo folks should take their own medicine, walk their own talk, and acknowledge that something is wrong with a process that grants recognition to Calloway.  Kevin accurately pointed out that they are just another direct labor cost driven, old school manufacturer, and somehow they were able to mask that clearly proven reality from the Shingo examiners.  The correct response based on the Shingo Prize' own criteria is to accept that feedback and thank Kevin for it, look to the root cause in their process, identify where it failed, and take corrective action.

Excusing Shingo for such an obvious hole in their prize evaluation process does not facilitate their continuous improvement.

by BILL WADDELL

In Philly They're Partying Like It's 1979

Yesterday Irish reader Simon Cunnane fired up his DeLorean, cranked it up to 88 miles an hour and took me back in time about thirty five years to the Akers ship building company in Philadelphia.  It was 1975 all over again at Akers where they believe "Labor is your company's biggest cost, and it's also your biggest opportunity for improvement. Getting the right setup in place can provide major benefits".  The "right setup" apparently is to have as many temps and contract folks as employees, and to lay off 150 of them to get the huge cost down.  I would have guessed that steel was the bigger cost of building a ship, but maybe Akers has other ways of going about it.  Just like in those pre-Ronald Reagan days, the folks at Akers are prolific MRP users and take pride in being particularly adept at tracking variances from standard costs.

But here's the good part: Akers is flat broke- busted - and groveling around every politician they can find looking for handouts in order to stay alive.  I can sympathize with them - I'm sure getting orders for tankers is tough in this economy.  So what do they do?  Why they declare themselves to be lean and stage a webinar on Industry Week to share the secrets of their success, of course.  "Best In Breed Strategy", they call it.  "Lean Labor Results".  I think I'll pass on that webinar.  It took me a long time to undo the management lessons I learned back in the day, and I don't need to get dragged back into it.

The Jill and Art Show

While the Akers webinar raises some good questions about Industry Week's editorial standards, there's no questioning whether senior Editor Jill Jusko knows lean.  She wrote a great article on the confusion surrounding lean, and had the wisdom to rely heavily on Art Smalley for input.  The piece is well worth the read.  For those who don't know Art, he was the first American manager to work for Toyota in Japan.  He goes back to the early days and learned from the founders.  Nobody knows lean manufacturing better than Art, so when Jill does the writing and Art does the thinking the result has to be great.

Why The Good Get Better

A week ago I announced we are selling a Lean Assessment Tool to raise a few bucks for Special excellence.  The response has been great - thanks to everyone who wrote in for it.  Last night I had my first chance to look at the list of buyers and could not help but notice that it is by and large a who's who of very lean companies.  For instance, while reasonable people can disagree over which is the leanest auto maker in the world, they same three or four names would be on everyone's list.  They all bought it.  While I don't divulge the identities of companies I do anything with unless they put it into the public domain first, I am under no such obligation to those i don't work with. So I am free to tell you that no one at GM or Chrysler thought the tool was worth $35 dollars  (more likely, no one at those companies reads Evolving Excellence).  Now I am not saying that you have to buy the tool to be lean, but I am saying that it is noteworthy that companies that are already very, very lean in anyone's book are always on the prowl for anything to make them even better, while those floundering about in their ivory cubicles never give self-assessment a thought.  Their woes are always caused by someone else.

What Goes Around Comes Around

In what has to come as a jolt to all of the financial wizards who have cranked out detailed economic rationalizations for why work is better done in countries where people will work for pocket change, Walgreen made an outsourcing announcement this week.  They are "Rewiring For Growth" and the starting point is to send 150 accounting jobs to India.

The Culture Clash

I wrote a few days ago about the culture of corruption in the cheap labor countries, and my contention that the lean fundamental of 'respect for people', and all stakeholders for that matter, and rampant corruption are fundamentally incompatible.  A couple of interesting updates on the topic:

in China, an American college that had been running an MBA program uncovered such rampant cheating they had to take drastic action.  They tossed out the grades of the 400 students and made them an offer - they could ether sit for an honest, comprehensive exam and get their degree, or they could have their tuition refunded and leave the program.  398 students took the money rather than sit for an honest exam.  Centenary College has pulled the plug on their Chinese MBA program.

In the Philippines (number 139 on the least corrupted list) the furniture manufacturers are losing export business to Europe at a serious rate.  It seems they need to have their furniture certified by an independent body that it came from the right sorts of forests - no endangered animals fell out of the trees when they cut them down for chairs, I suppose.  They can't get anyone to do the certifying.  Europe won't let the Philippine government do the certifying (says quite a bit about their credibility), and no private sector outfit is willing to put their name on a certification that the Filipinos followed the rules.

But the best tale - worst really - comes from Brazil.  The BBC reports that a Brazilian court has upheld a $2.8 million fine levied against an outfit called Lima Araujo Agropecuaria for holding workers as slaves - you read that right - slaves.  It was the fifth time they got caught and the government has decided enough is enough.  I can't even wrap my mind around that.  If you get caught one time holding one person in slavery for one day you should be horsewhipped, tarred and feathered, and tossed into the deepest dungeon in the land for a very, very long time.  A civil penalty - a fine - for getting caught five times describes a culture I cannot even conceive.

Have a great weekend!

By Kevin Meyer

My post about a week ago that took the Shingo Prize to task for awarding a version of the Prize to Callaway Golf, which has since chased cheap labor to Mexico, created a bit of a stir.  I received several public comments and a far larger number of private comments from people both supporting and questioning my position. 

I personally know many of the people at Shingo and have a tremendous amount of respect for them both as individuals and as lean leaders.  Much of what I know I learned from them. Because of this I feel the need to both recognize and address some of their comments.  First, snippets of a few of them.

Robert Miller, Executive Director of the Shingo Prize, had several points:

90% of the organizations that study the Shingo model for improvement do so with no intentions of challenging for recognition. Those who do, do it primarily as a way to publicly recognize the many associates within their organizations that contribute to their success.

Your illustration is an excellent example of exactly why we raised the bar so dramatically for "The Shingo Prize". A Bronze medallion is essentially the equivalent of what used to be a Shingo Prize but now is the validation that many of the associates are doing a good job of using lean tools for continuous improvement. this first level of recognition does not indicate that the leadership team of the plant, or the corporate headquarters, who most likely make these kinds of decisions, are fully aligned nor have they built deep cultures based on principles of operational excellence.

Paul Todd of the Shingo Prize Board of Examiners wrote:

There is no requirement that a certain number of awards be given each year, and in fact the toughening of the criteria was done with the knowledge that it would result in potentially fewer winners.

My long-time friend Norman Bodek, one of the founders of the Prize and recognized for being pivotal in bringing lean back to the U.S., provided considerable history of the Prize as well as the following:

Kevin, the purpose of the prize is to stimulate American organizations to strive for continuous improvement. The prize is a wonderful catalyst to get a company’s employees focused on improvement activities. It excites people just like any competitive sport, and like any sport we reward the winner not
the ideal of what could be possible.

Callaway did not win the Shingo Prize but the Shingo Medallion indicating that they had made substantial improvements and deserved some recognition but has, as yet, not attained the highest level. And the Shingo Prize does increase, almost yearly, the criteria for winning the Prize.

The Shingo Prize, like Lexus, always strives for perfection but problems unfortunately can always come unexpectedly. I like another motto, “You don’t throw out the baby with the bath water.” And you don’t condemn the Shingo Prize when the winners fail to adhere to the basic principles that won them the prize in the first place. Kevin, a few prizewinners disappointed us but look at the other hundreds of winners who over the years used the prize to make them more competitive.

By the way, regular readers know I often rant on the oft-forgotten "respect for people" pillar of lean.  That comes directly from listening to Norman speak, and I remember one of his lines as if I had just heard it: "Where is knowledge and creativity on a balance sheet??? Where???"  Now you know who to blame when I repeat that over, and over, and over!  Perhaps no one has shaped my understanding of lean more than Norman.

Finally, Brandon Ruggles wrote:

I would recommend going to the gemba on this one. Read the criteria for the prize, take an examiner course, and you could even apply to be an examiner so you can see how the decision is made for prize winners. Without going to the gemba the credibility of this post is minimized.

All excellent comments.  First off I personally know that Robert Miller is correct in that I have also used the Shingo Prize model when developing a transformation strategy for previous organizations, with no intention of actually applying for the Prize. 

Norman Bodek also makes an excellent point that I shouldn't condemn the Shingo Prize just because of a couple of bad apples.  The same reason why we shouldn't stop holding the Nobel Peace Prize in high regard after a couple of recent choices.

To Brandon's point I have reviewed the criteria, starting back in 2005 when I wrote the first post, again in 2008 when I revisited the issue, and once more last week.  There have been some good changes, especially the focus on results, the concept of principles, and the set of principles that deals with respect for people.  I have long believed that a lack of focus on respect for people, the second pillar of lean, is the reason most lean transformations fail.

But there are also some areas that bother me.

The concept of Bronze and Silver Medallions as the (per Robert Miller's description) "validation that many of the associates are doing a good job of using lean tools for continuous improvement. This first level of recognition does not indicate that the leadership team of the plant, or the corporate headquarters, who most likely make these kinds of decisions, are fully aligned" appears to fly in the face of the Shingo Prize model itself.  Here are a couple of the statements from the model that created my concern:

A Shingo Prize organization will have deeply embedded the principles of operational excellence throughout its leadership and in most aspects of its business processes: product/service development, customer relations, operations, supply, and management support processes.

One of the keys to implementation is to balance all of these principles, rather than picking one or two with a narrow focus. The genius behind ‘The Toyota Way’ has been their ability to knit together a complete set of tools and concepts that fit with their guiding principles and a propensity for continuous improvement that consistently improves the fit. The tendency to disassemble these tools and concepts into Six Sigma, TQM, TPM, JIT, etc., has resulted in a haphazard tools-driven attempt to copy, and delayed understanding of what is really required to become operationally excellent.

The Shingo Prize model is correct: operational excellence must be embedded throughout the leadership of an organization, and "tools-driven attempts" almost always fail.  Too many organizations focus on implementing tools without identifying and understanding the problem that requires a certain tool in order to be solved.  The ability to root cause a problem and find appropriate tools, align those tools and systems within a hoshin approach to long-term continuous improvement and strategy, and then marshall the knowledge and creativity of people to execute and achieve real results, is leadership. And the Shingo Prize model correctly asks for humble leadership.

Tools alone fail.  Lean without committed, knowledgeable, courageous leadership fails.  Lean without respect for people fails.

Recognizing and rewarding a great implementation of tools when they are not supported by leadership is almost asking for failure.  And perhaps that's what happened at Callaway Golf.

I understand and respect the desire of the Shingo Prize to want to reward organizations that are "on the path"...  but I believe that is dangerous and diminishes the value of the Prize.  As does a proliferation of sub-awards and regional awards. 

The Shingo Prize was called "the Nobel Prize of manufacturing" by Business Week back in 2000 I believe.  Perhaps the Nobel is a model to be re-emulated: there are just six of them each year, representing only the very top achievement in each category.  There are no "almost a Nobel" prizes or medallions, no "good chemistry lab procedure even though the results weren't there," no "sorry your boss didn't support you but good effort," and no "Sub-Saharan Peace Prize" awards.

The Shingo Prize model is good, and good in that it continues to evolve and focus on people and results.  The top prize winners are becoming better and better, although my gut still questions why they'd bother devoting scarce resources to go for a Prize.  But the rationale for diluting the value of the Prize with regional awards and medallions that could actually promote behaviors that fly in the face of the Prize model should be revisited.  Let's go back to the best organization and the best research.  Period.

By Kevin Meyer

Over the years I've often told the story of American Apparel.  A company that manufactures trendy but still basic clothing - think lots of plain t-shirts and underwear - in the U.S. employing thousands of U.S. workers paying them above minimum wage.  And making a profit, believe or not.  Perhaps... or perhaps not.

American Apparel Inc., the edgy maker and retailer of casual clothes, warned Tuesday it may not be able to remain in business amid declining sales and mounting debt.

The news sent American Apparel shares falling nearly 26% during regular trading to an all-time low of $1.03 on the American Stock Exchange.

So what's going on?  Just a year or so ago they were the star of the clothing world, opening stores left and right.

The company's warning had some financial analysts questioning whether Dov Charney, its chief executive, has the right skills to run American Apparel. "His enthusiasm for his product is perhaps at odds with the discipline that a retailer needs," said Richard Jaffe, a retail analyst at investment bank Stifel Nicolaus.

Peter Schey, a spokesman for the Los Angeles company, said there have been talks about bringing in more executives to the retailer. Mr. Charney, he said, is "aware of the need for increasing assistance on the management side."

There you have it.  Although American Apparel had no formal knowledge or implementation of lean manufacturing methods - and a couple years ago I visited them to investigate first hand - Dov ran an extremely streamlined operation.  Apparently too streamlined for such a dynamic and growing company.

Sometimes you just need some experience - financial, operational, sales, and otherwise.  And sometimes just trying to surround yourself with great experienced people doesn't work either - you have to know what to look for and how to evaluate advice.

American Apparel may survive, but it will probably require an injection of outside talent that has investor-driven authority to override Dov's desires.  How much do you want to bet that probably includes outsourcing overseas, chasing the dream of cheap labor nirvana?  Time will tell.

You may be very smart and able to convince the world of your vision of hope and change and a different way of doing things.  But sometimes you still need real experience to avoid the pitfalls of the real world.  Whether you're Dov... or many other leaders in similar circumstances...

by BILL WADDELL

Thanks to Joel Lown from the U of Tennessee for this article from Knoxvillebiz.com about a local company called Bailey Hydropower that outsourced manufacturing to India, found that it was not quite the Nirvana it was billed to be, and came back. In many respects it is just the same as the flood of similar re-shoring tales.  "But at the same time we were correcting the defects, there were two or three more containers on the water headed here with the exact same problem," Bailey said"  Yep - could have told him it is logically, mathematically, statistically impossible to have world class quality with long lead times.  Bailey learned this the hard way, it seems. "Bailey said. 'I think so often we are quoted cheap prices overseas and we don't realize there are hidden costs.'"  Could have told him that too. 

I was struck, however, by another aspect of the story.  Bailey said, "There is a totally different set of laws, different culture, a different work ethic and even a moral culture that is different."  He's got that right, and I am less and less sure excellent manufacturing can ever take place within such a culture.

Now I am fully aware of the fact that Peter Minuit introduced European business thinking to North America when he scammed the natives out of Manhattan for a few guilders worth of junk not more than a few blocks from where Bernie Madoff would set up shop 300 years later.  With used car peddlers, congressmen and the rest of the bottom feeding class of petty scam artists at the low end, and serious thieves on Wall Street who don't stoop to steal less than a million, we are in no position to lecture anyone on ethics.  And our Canadian, Australian and British friends are more than political allies - they are quite often accomplices in our criminal doings.

In between the extremes, however, we are generally an ethical bunch, and we try to deal fairly. While we fail often we want to be honest, 'my word is my bond' kind of folks.  So when I see the United States ranked 19th out of 180 countries in the 2009 Corruption Perceptions Index put out by Transparency International I wish we were #1 but I can't really complain.  It seems about right.  The bulk of Evolving Excellence readership and the heart of lean thinking - the USA, Canada, Germany, the UK, Australia and New Zealand - have an average ranking of 11.

On the other hand, the three big outsource destinations - for the USA anyway - of China, Mexico and India have an average ranking of 84.  The people running transparency International define corruption as "the abuse of entrusted power for private gain."  From my experince, that is pretty much cut and pasted from the job descriptions of every government official and senior business manager in those countries.  To me, that phrase encapsulates the polar opposite of lean thinking.  Obviously supplier partnerships and culture of optimum value to customers are not possible when people entrusted with power; are out for 'private gain'.  Respect for people is out of the question.  In fact, abusing power for personal gain is the definition of disrespect for the people over whom one has power.

It isn't a religious thing.  Buddhist India, Catholic Mexico and China with its Gospel According to Mao cover the theological waterfront. Nor is it an east-west thing.  The local Chinese inspector who recently hit up an American company I know for a couple thousand yuan to OK their electrical system took that page right out of the Mexican playbook.

It has to do with the political , social and economic systems in the 'emerging economies'.  There is a reason why countries chock full of people willing to work and troves of natural resources are third world, while other countries often with fewer workers and less resources have solid economies.  The economists and those infatuated with globalization wax about BRIC - Brazil, Russia, India, China - as the economies of the 21st century - the up and coming global powerhouses.  Let's hope they are wrong.  With an average rating of 96 on the corruption scale it would mean the coming of one very sleazy world.

I don't think there is much risk of BRIC ruling the economic globe, however.  More likely they are having their chance and, if they don't clean up their act, that chance will pass them by.  Serious, mainstream companies like Bailey Hydropower don't suffer liars and cheats lightly.  They try to play it straight and if the host country can't or won't step up and do business honorably, they pack up and go home.  And God help the third world folks when the decent western companies leave and they are left to do business only with the boys and girls from Wall Street. Those amateurs will get skinned alive when they find out how the 'Art of the Deal' is played out in the Major Leagues of Corruption.

by BILL WADDELL

There is a big Walmart distribution center not far from where I live in rural Illinois.  You can see it here.  You can also see that all around it are corn fields, except for evey few years when the local farmers, ever mindful of the need for crop rotation, plant soybeans.  The other buildings you see are a big horse farm and a place that services trucks and farm equipment - nothing to do with Walmart.

If you have ever been to an auto assembly plant the picture is a bit different.  Rather than corn fields the plant is more likely to be surrounded by supplier plants.  Granted a lot of those suppliers are more assemblers of components they sourced in China, but manufacturers nonetheless.

As dysfunctional as some of the auto companies may seem from time to time, they do understand that they are the final link in a supply chain, and it behooves them to tend to that supply chain - some very wisely and some heavy-handedly, but they spend a lot of time thinking about the economics of it.

The big retailers have long been like the Walmart DC all alone in the middle of nowhere.  I'm pretty sure that when Peter Drucker wrote of manufacturing as a "wide spot in the supply chain" no one at Walmart or JC Penney read it.  After all, it was in an article titled "The Emerging Theory of Manufacturing" and in their world, manufacturing has nothing to do with them.

The business model of the big retailers has been to sit in their buying offices in Bentonville, Arkansas or Plano, Texas like so many Grand Poobah's while the sales folks from manufacturing companies groveled and begged for a few scraps from their tables.  Where those manufacturers were located, the issues they faced and how they did business was their problem - not of concern to the retailers.

Turns out, however, that who, where and how of manufacturing is something they should pay attention to.  The problem is that they are run by the folks who went to the same business school the big brand manufacturing folks attended - the schools that said purchase price is all that matters and strategy consists of a combination of spending as little as possible on the product and as much as you can on advertising.  In other words, the schools of thought in which the word 'value' had no meaning, and the old adage that 'time is money' was just that - an old adage with no relevance to business.

But time is money and it really is all about value, and as their world is spinning into chaos with China costs spiraling and their customers very clear on what the term 'value' means, there is a lot of head-scratching going on in the big retail world.  Most have just scratched themselves bald and haven't come up with any answers, but the light bulbs are clicking on at JC Penney.

They made two big moves recently that are likely to have a profound effect on the retail landscape. According to the Wall Street Journal, "American department stores were caught off guard by the onslaught of fast fashion rivals that own local factories, enabling them react quickly to changes in demand. They have trained their customers to expect scarcity, leading to higher margins and more store visits.  Department stores, by contrast, source most of their products from faraway vendors up to a year in advance. The sourcing model keeps production costs down, but can lead to fashion miscalculations and aggressive discounting that kills profits."  So JC Penney, "unveiled an unconventional collaboration with Mango MNG Holding SL, the closely-held Barcelona chain known for whipping up cutting edge looks that go from design studio to store shelves in as little as four weeks."

"Unconventional"? - to say the least.  Even more unconventional is the move they made with Liz Claiborne.  The Keystone Comedy that has passed for management at Claiborne has just about ruined that once proud brand.  Penney's arch-rival Macy's responded the way retailers have always done in the past - they kicked them out and found other sources for women's clothes.  Penney's, on the other hand, bought the brand name - not the company, mind you, or their designs or the manufacturing - just the name.  According to another WSJ article, "Under a new licensing agreement, the brand will only be sold at J.C. Penney and will be manufactured and marketed by the retailer."  They didn't pressure Claiborne with a private label or store brand - they turned Claiborne into a store brand. ... and they want to control the manufacturing.

The days of retailers operating in an imperial vacuum are rapidly coming to an end.  I think the corn fields around Walmart DC's might just be a good real estate investment.  The day is not long off when the Grand Poobahs from Bentonville figure out that surrounding the DC's with regional manufacturers in the JC Penney 'fast fashion' mode, and having serious partnerships with those manufacturers if not outright owning them in the JC Penney Claiborne mode, makes a lot more sense than worshiping at the alter of the 'China Price.  They are starting to figure out that time is, in fact, money.