Understanding Lean at Whirlpool

A few days before Christmas I received a long email with the subject of "Help me to understand."  It was from a worker a Whirlpool's Evansville factory, who was among 500 people laid off earlier in the month.  To avoid causing him any further grief, I'll just call him "Bob."

The human side of Bob's email tugged at me, as only five years ago I had to lay off 183 people, including myself.  It was on September 10th, 2001, and the events of the next morning put things in perspective again.  Thanks to lean we had quadrupled productivity in under a year, but because we had done such a poor job of promoting our success, our operations were being absorbed into far less efficient operations at corporate headquarters.  I vowed to never let that happen again.

Coincidentally we wrote about Whirlpool's Evansville operation just last August, comparing their announcement of impending layoffs to a same-day announcement of Sealy building a new domestic plant.  We found the difference between a couple statements in their press releases very telling:

Whirlpool: "The company will continue to have committee explore lean manufacturing an efficiency practices."

Sealy: "The company will employ lean manufacturing techniques in the design and operation of the plant."

The difference is what we called the "Nike factor"... some companies think of lean as some foreign concept that has to be studied and analyzed by committees with plans and buy-in from all groups to achieve synergy and consensus and other meaningless buzz words.  Some companies just do it.

Bob's first email to me described several situations that unfortunately make perfect sense when you think about the statement in their August press release:

• "Management is consumed with operating like Toyota.  I heard it everyday for more than a two years."
• "Management was not willing to make the necessary changes in conjunction with their employees."
• "Meetings, meetings, meetings all day long.  All that really gets accomplished is a re-hash of the previous meeting."
• "Waste is abundant.  They talk about it being a problem but every year it seemed to multiply."

Whirlpool's rationale for the layoff is that demand for top-mount freezers has been shifting to side-by-side models, which aren't made at Evansville.  However, at the same time Whirlpool is adding over a thousand new jobs existing factories in Clyde and Mason, Indiana, as well as Amana, Iowa.  But those jobs need to be netted against almost a thousand jobs soon to be lost at the Fort Smith, Arkansas plant due to the rapid expansion of the Ramos Arizpe plant in Mexico.

So let me get this straight... tens of thousands of years of manufacturing knowledge are being disposed of in Evansville and Fort Smith, huge hiring and training costs in Clyde, Mason, and Amana to bring workers up to a few weeks of manufacturing knowledge, it's "too expensive to retool" the Evansville plant but easy to swallow a hundred million bucks of severance charges (not to mention what the taxpayers shoulder).  A few bucks an hour savings in Mexico is worth a much longer multinational supply chain that requires more oversight, longer transportation of thousands of heavy objects a day, far more training expenditure to handle a foreign language in an area notorious for extremely high turnover, and the resulting quality problems from such a lack of long-term manufacturing knowledge.

That is some wacky accounting.  Actually it is traditional accounting, and it makes sense to a traditional accountant.  But not from a real-world perspective, does it?  Experienced employee knowledge and creativity doesn't show up on the balance sheet.  A severance charge is easier to sell to short-term shareholders than a long-term investment.  Turnover costs are always underestimated.  A pair of hands with a day's experience is worth the same (if not more... they "cost" less) than a pair of hands doing the job for ten years.   Some companies are realizing that this is bizarre and not the real world, which is why lean accounting is starting to take root.

After a couple emails back and forth, I had hoped that Bob wouldn't be soured on the potential of lean manufacturing itself.  He wrote back "

"

Best holiday wishes to you and yours, Bob, as well as to your Whirlpool coworkers who have suffered through this pathetic situation.  I hope the new year brings a good job with a company that truly understands excellence, and you have one nearby at Toyota's Princeton facility.