8.24.2010

The Wall Street Journal and "The Drawbacks of Lean Manufacturing"

Back in July, an article, authored by Daisuke Wakabayashi and Jung-ah Lee appeared in The Wall Street Journal that reported such companies as Apple Inc. and Nissan are experiencing delays in production because their respective suppliers cannot fill the currently increased demand for certain parts required in popular products. The authors claim that the reason for this these shortages stem from "the drawbacks of lean manufacturing methods, which call for carrying little inventory but make supply snags tougher to offset" and generally believe that "the pitfalls of Lean manufacturing methods, a hallmark of cash-rich and efficient companies, arise when parts either prove faulty or in short supply."

Previous to this article, I had never seen Apple referred to as a Lean organization -- I've come across no other articles that have described the company as such, and I've never seen Apple reference it in its literature. Surely the authors could have provided a bit more discussion about Apple's global supply chain and how it functions before making the claim to help warrant their argument.

This article has come up quite periodically during discussions with colleagues during the past month, and I'd very much like to hear readers' opinions and thoughts about it. What was your reaction when you first read this article?

8 comments:

Mark Stover said...

I think the Wall Street Journal has shown time and again that it does not have a grasp of what it is to think lean. They are mired in a typical mindset of the late 1980s that JIT - Just In Time - inventory management fully characterizes lean thinking. Toyota did not use global supply chains - they used local suppliers to the factory and built a partner relationship with their suppliers. Apple and Nissan have done neither of these things. Since lean thinking challenges the mindset of so many of the Wall Street types, it is no wonder that the Journal will take any and every opportunity to bash lean - even when they are not talking about lean companies.

David Drickhamer said...

WSJ frequently jumps from a unique and temporary business/operations challenge to the "failure of lean." It's become a reflex, like they're bashing Democrats' political ideas. This is a perennial supply chain challenge that lean methods can only help resolve, not make worse.

Dissecting the assertions:
"production stoppages result from having interwoven and sophisticated supply chains"--That makes no sense. Interwoven and sophisticated means supply chains are even more responsive to demand. A capacity issue for a cutting-edge technology/part that requires a billion dollar capital investment to produce in volume against unpredictable demand is a different story.

"an essential way for manufacturers to shave costs, reduce inventory risk and fatten profit margins."
--Since when aren't mfrs supposed to limit costs, reduce risk and make a profit? Are the titans of Wall Street the only firms who should make a healthy profit?

"lean manufacturing methods, a hallmark of cash-rich and efficient companies"--If only it were true.

"when parts either prove faulty or in short supply."--How exactly would having more faulty parts/designs (like a certain cell phone antenna) in the pipeline be a good thing? And how exactly would it be possible to have more inventory of a part that's in short supply?

"Production delays or stoppages are common in the electronics and automotive industry."--If they are common, as they can be in a short lifecycle industry like electronics, how exactly do lean methods make the situation worse? The reason the global auto industry needed such a big correction over the past several years is that global manufacturers have overbuilt, overproduced and over-incentified buyers for decades. What auto plant stoppages? News flash: short and limited supply is often a marketing decision. Since when has Apple ever wanted a surplus of any new product.


Full quotes:
"Companies like Apple and Nissan are seeing the drawbacks of lean manufacturing methods, which call for carrying little inventory but make supply snags tougher to offset.

They are also victims of an overstretched global supply chain trying to meet recovering demand after the recession forced suppliers to slash production capacity and postpone plans to upgrade their facilities.....

Production stoppages can plague companies that strive to exert tight control over interwoven and highly sophisticated supply chains, considered an essential way for manufacturers to shave costs, reduce inventory risk and fatten profit margins.

The pitfalls of lean manufacturing methods, a hallmark of cash-rich and efficient companies, arise when parts either prove faulty or in short supply. Production delays or stoppages are common in the electronics and automotive industry."

Dean Bliss said...

I agree with Mark. The WSJ seems comfortable that their first exposure to Lean, the single component of JIT, is what Lean is all about, which they perpetuate over and over again. Either they are too lazy or too uninterested to explore the depth and breadth of Lean. Unfortunate, since they are held up as a trusted source of information.

Loaferman said...

It is even more basic than that. The authors are using the word lean literally. This is an honest mistake, but an irresponsible one. Kind of like saying, "French fries don't impress me. I can't believe the French think this is food is so wonderful. Pass me that English muffin."

Adam Zak said...

Here's another thought. So many companies today claim to be "doing Lean" even though they're actually doing "L.A.M.E." And therefore getting lame results for their efforts.

I guess I can't find it in me to fault WSJ for not digging deeply enough to discover the difference. There are so many Kaizen Kowboys who mislead well-meaning CEOs with their focus on tools-only solutions. When this approach doesn't work, yep, Lean gets the blame, again.

By the way, Apple and Nissan both make some pretty good products, I think, even if they aren't "Lean."

Adam Zak - Enabling Operational Excellence Around the World

John Mueller said...

WSJ article mixes the problems of Nissan and Apple with those of their suppliers and their suppliers' suppliers. First, the life cycles of electronic components are short and manufacturers (suppliers of electronic chips, for example) can not afford to keep huge stockpiles for something that may become obsolete within few months to less than a year. Second, the article says that the demand was soft for electronic parts which may lead me to believe that there were excess inventories at the beginning. When demand heated up and inventories were being exhausted a lean manufacturer (supplier of parts) would have the systems to identify the increase in demand and respond accordingly. Overall, WSJ analysis falls short of explaining why Apple and Nissan problems are caused by Lean Manufacturing.

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