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November 2, 2005
State of Manufacturing II
As I pointed out in yesterday's discussion on the state of manufacturing as viewed through the lens of the recent NAM report on industry profitability, if you aren't making money you can't stay in business. Case in point is Delphi Automotive's bankruptcy -- which ironically is the last gasp effort to stay in business by shedding its debts. Delphi's downfall has created quite a stir in the manufacturing community -- since it was one of the companies that actually tried very hard. As the most recent issue of Manufacturing & Technology News pointed out:
No other company has won more Shingo Prizes for Excellence in Manufacturing than Delphi Corp. Over the past four years, Delphi has won 19 Shingo Prizes for individual factories, accounting for 42 percent of the 45 total awards. But excellence in manufacturing was not enough to stave off bankruptcy for the world's largest maker of auto parts.
"Legacy costs" is the usual explanation. As the blog Evolving Excellence put it: Delphi - Even Lean Manufacturing Can't Prevent Bankruptcy.
But that doesn't tell the whole story. The Shingo prize is about quality and lean production. At the risk of sounding like a heretic, I have to say that quality and lean production is "sooo last century." Ok, I'm being flippant. But quality is no longer a competitive advantage - it is the entry cost. And lean production is fine, if you are in a mass production paradigm.
Therein lies the problem. The US is not going to win in a mass production paradigm. We need to shift the paradigm: the middle "I" in the I-Cubed Economy is innovation.
Here comes the real kick in the teeth. Delphi has been a consistent winner of Automotive News PACE (Premier Automotive Suppliers' Contribution to Excellence) Awards for innovation.
Something is wrong. Something is drastically wrong. Either we are measuring and rewarding "excellence" wrong - or these other factors are overwhelming everything else. Or both.
(For a ray of hope, on at least one manufacturing company that is thriving, see last month's discussion of Illinois Tool Works. I still have to believe that new products, new processes, new markets are the real keys to manufacturing excellence.)
Posted by Ken Jarboe at November 2, 2005 1:51 PM
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