The Manufacturer Magazine : Promoting best practice in Manufacturing

Opinion: Is the Wolf Coming Again?

Manufacturing News, Source : The Manufacturer US
Published : 03 May 2007 20:23

by David Gleditsch, Dean of the Demand Flow Institute at DemandPoint

Growing up in Pittsburgh, I saw what the complete decimation of the steel industry did to that community.

My favorite book on that event is And the Wolf Finally Came by John Hoer. The book’s thesis is that the overall steel industry – as defined by management, workers, and government policy – really thought they had time to work out the problems they faced. And the industry got clobbered.

So I am very saddened to now see – even with the incredible pain occurring today – the lack of urgency to fix the glaring flaws that exist in other manufacturing sectors like the automotive industry. The lack of urgency can be found not only in the executive suite but in the middle layers of management and most certainly within Washington as well.

The sweeping production cuts of 10 percent to 20 percent we saw last year is a simple, visual signal that no flexibility exists in the Big Three supply chains. Flexible supply chains would move production rates up or down 2 percent or 3 percent a month – always moving in the direction of demand.

Many industries have been aggressively moving toward Demand-Driven Supply Networks as a matter of survival, but what we see in Detroit is a fundamental infrastructure of fixed-broadcast, forecast-driven supply chains. They don’t respond to events; they march along maddeningly to their locked-in production rates without a serious call for change being made.

Making matters worse for American manufacturers – not only in the auto industry – is the fact that manager after manager I talk with is dealing with what I call the 35 percent problem – the landed cost advantage for most products and components sourced out of China. That 35 percent figure includes the significant costs involved in transporting goods overseas.

For the life of me, I can’t understand why that specific problem does not have more of a national dialogue. Not just talking about the fear of losing jobs overseas, but the need for our manufacturing base and our economic policies to really focus and visibly deal with this 35 percent cost disadvantage.

Federal Reserve Chairman Ben Bernanke’s answer focuses on retraining workers who have lost their jobs to Asia. Meanwhile, the White House seems to believe that the challenges facing the auto industry can be overcome by less emphasis on getting lean and more focus on innovation. If the administration thinks that American manufacturers have gotten as flexible and cost competitive as they need to be, we are in some real trouble.

Taking a meeting with the Big Three CEOs was a nice public relations gesture, but what action have we seen since? Manufacturing was not a major topic of concern in the State of the Union address.

The White House should make it a high priority to address the real issues plaguing Detroit and our broader manufacturing sector. We need to drive more visibility and focus on concrete policies to help America overcome the 35 percent problem and the other competitive challenges we currently face.

There are other answers, but without a greater sense of urgency in our government and across the entire industry, I’m afraid the wolf may finally come to Detroit and other manufacturing hubs as well – just like he did to Pittsburgh in the 1970s.

Dave Gleditsch is a leading authority in business transformation based on lean principles with nearly 30 years of manufacturing and systems development experience with companies such as General Motors, Hewlett Packard, and American Standard. In his current position, he oversees the development and deployment of all Pelion technology. He welcomes any replies at dave.gleditsch@pelionsystems.com or visit www.pelionsystems.com.

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