Once again, on the same day, we have an example of how some companies understand what lean is really about, and some don't. Let's start with General Dynamics, which has an active lean program and should know better.
About 45 General Dynamics Armament and Technical Products employees in Marion learned Thursday their jobs are being cut over the next few weeks. According to a release from James D. Losse, General Dynamics’ vice president and general manager of advanced materials, the layoffs are “part of a broad program to improve its competitiveness that also includes the introduction of Lean Manufacturing/Six Sigma techniques and other efforts to improve the company’s ability to compete.”
Good luck with that introduction of lean manufacturing techniques. How often do we have to remind people that there is a second oft-forgotten pillar of lean: respect for people. You need to knowledge, creativity, and experience of people to navigate the often counterintuitive waters of a lean transformation. That value is far greater than their unit labor cost. And you need their commitment. Sort of hard to get commitment when you lay them off. Especially when you lay them off right after getting a new order.
Last month, General Dynamics was awarded a $48 million multi-year contract by Lockheed Martin Aeronautics Co. to produce components of the F-22 Raptor fighter aircraft. Production and program management is performed at General Dynamics’ Advanced Materials Marion with the first deliveries being made this month.
Normally a cause for celebration. I wonder if employees will be working hard to get new business now.
But let's move quickly to a more positive story. D'Addario & Co. sells $115 million a year making wires and cables for the music industry.
Jim D'Addario's family has been making strings for musical instruments since the late 1600s. He heads a company that is one of the world's biggest makers of guitar and violin strings, drumheads and reeds. And he just might have found the secret to keeping manufacturing alive on Long Island. In the past seven years Long Island's manufacturing sector has lost 20,000 jobs and nearly 600 companies, leading people to think the business of making things is going to vanish here.
Jim had a different plan.
D'Addario runs a factory with three shifts of workers in a series of low-profile buildings in Farmingdale, where he's engaged in a radical efficiency drive based on Toyota's lean manufacturing process. D'Addario & Co. bucked the trend partly by going global, developing new markets in Russia, Eastern Europe, India and China, and by gaining efficiency and control by doing everything it can in-house. D'Addario designs its own machines to make strings for fretted instruments like guitars and banjos and bowed instruments like the violin and cello.
Competing globally from U.S.-based factories. He does it by leveraging the power of the knowledge and creativity of his employees.
D'Addario's bigger plan to increase profitability lies in his Toyota-inspired "lean manufacturing" initiative. The company is putting 12 employees, who volunteered to become "lean champions," through about 400 hours of training to root out unnecessary steps in the manufacturing process.
What does he hope to achieve?
Lean manufacturing measures the proportion of time a firm spends adding value to a product, defined as value a customer will pay for. At Toyota, D'Addario says, more than 20 percent of the time a product remains in a factory, from order to shipment, is spent adding value. At D'Addario, the comparable figure, including time it takes to make the core of a string and wrap metal windings around it, is only 3/10ths of 1 percent.
Like many manufacturers, D'Addario has produced large lots of a particular product, letting it sit until it's needed. So it takes four months or more to use up the inventory. With lean manufacturing, the idea is to produce only as much as will be needed in a short period of time. D'Addario aims to turn over the inventory 12 times a year.
I'm guessing with some work he could actually get that to around 20 to 30 times a year. Pure cash driven to the bottom line, with increased agility to boot.
The savings can be huge -- the company won't have to borrow money to buy raw material it may not need and store products the market may not want. "What that will do for our cash flow will be phenomenal," D'Addario says. The firm hopes to save $1.3 million a year in interest payments.
What's the lesson?
If there's a future for manufacturing on Long Island, it is likely going to involve companies following D'Addario's example of finding a way to play a new tune on their old strings.
Not just on Long Island. Anywhere. In any industry and any organization. Maybe General Dynamics' James Losse should spend some time making music.