Before Shigeo Shingo’s chicken there was another well-known fowl by the name of “Chicken Little.” Do you remember the story? Struck on the head by a falling acorn, Chicken Little concludes that the sky is falling and so decides to warn the king as well as everyone else he meets on his way to the palace. I recall that in the end a fox invites all the frightened parties to a safe haven in his den, and there eats them all. The moral to this story: Don’t believe everything you hear. When someone tells you “The sky is falling,” go see for yourself.
While we often remember Chicken Little, really his only transgression was communicating what appeared to him to be a threat. The great mistake lay with those who listened to Chicken L., and then followed blindly. Today, there is even a societal malady named after our hero: “Chicken Little Syndrome”, defined as “a sense of despair or passivity which blocks the audience from actions.”
American business it seems to me had been locked in that sense of despair and passivity for a decade, making short-term cash decisions to bolster flagging quarterly earnings – in many cases paper profits fabricated from cursory cost assumptions. Businesses are going to China, well . . . because other businesses are going to China.
Now come two separate studies from Accenture and Boston Consulting Group that “Chinese net manufacturing costs are rapidly converging on U.S. costs.” When all cost and competitive factors are considered, it turns out, reshoring manufacturing to America makes good competitive sense. And from Professors Gary Pisano and Willy Shih of Harvard Business School come a revelation that “U.S. innovation declines when manufacturing is offshored because the partnership of manufacturing and engineering is weakened.”
One week to go before the Made Lean in America Northeast Shingo Prize Conference. Don’t be passive. Come join the learning, networking and sharing on October 5-6 in Springfield, Massachusetts: www.neshingoprize.org
See you there!
For anybody who has experienced the pain and politics of offshoring, you speak the absolute truth. What Willy Shih states in his report is actually nothing new. A former executive I know called the effect “the hollowing of the corporation” 15 years ago – just before he left in frustration. He (correctly) noted that although the initial plan is always just to outsource assembly (because it’s so simple), one forgets all of the things that are required to truly support a “simple” assembly operation. Let’s go back a few years to see why.
In the “good old days” of vertical integration,” many companies did almost everything themselves. This meant that you did all of your own research, design, prototype, manufacturing, assembly and even service work yourself. Since all of these functions reported to the same company, they were usually located not too far apart and regularly talked to each other. For instance, a problem arises in assembly due to a part manufacturing or design issue. Somebody from assembly walks down the hall to manufacturing to talk to them. They then bring in the Designer who quickly re-designs the part – which is then quickly made – and send the fix on to assembly. While all of this was happening, everybody learned something to avoid, and a better way of doing things. Powerful relationships were forged that benefitted the whole company. Sometimes these issues even led to whole new ways of manufacturing things. Call it what you want, but it led to continuous improvement.
Once one outsources assembly to another country (and China is no longer the only place stuff is going to), the company quickly realizes that sending engineers “down to assembly” requires a several thousand dollar trip and weeks instead of hours. Meanwhile, the assembler (contract manufacturer) is still under the gun to get product out the door. So they start to develop the needed internal expertise as a matter of survival. The company that did the original outsourcing is also happy because their indirect costs for sending engineers around the globe just went down – but they’re no longer learning anything either. And so begins the very predictable hollowing of the corporation. Said another way, the kids eat their parents. How can we continue to be so blind?
We think you have it totally right. We recently redesigned our platform of electrical enclosures consisting of three commonly off-shored material types: gray iron casting, aluminum die casting and plastic injection molding. We drove down needless design variation; added features through Voice of the Customer activities and had numerous front line team members on the design team to ensure ease of manufacturability and use. We quoted tooling and production quantities to U.S., Chinese and Indian manufacturers. Our landed costs to our plant came in even among the three and we sourced tooling and production in the U.S. Lot sizes were smaller domestically. The design of manufacturability process was so much easier and faster. The hidden costs of a long supply chain were avoided.
The product launch was smooth and the improved product acceptance has been good by our customers. Jobs were saved or created in the supply chain and our facility as a result. Our company sales and profits are stronger as a result.
Thanks, as always, for encouraging “look and go see” to help us clear the fog.