Thursday, October 15, 2015

Expansion Continuous Improvement Program = Growth????

Continuous-improvement programs alone won’t grow American manufacturing-finding new customers, finding new markets, and developing new products that your customers want and need.

Numerous United States manufacturers have built-in many methods of cost reduction and efficiencies for over 35 years.  We all know, recognize and ‘love’ these programs with the following acronyms: MRP, JIT, ERP, LEAN and Six Sigma.  All of these programs lead us to believe in cost reduction, improve profitability and will make the company globally competitive. 

To assist these companies in this belief we created agencies such as The National Institute of Standards and Technology (NIST) and MANTEC, both of whom preach on their websites that mastering these programs will lead to growth.   However, there is no suggestion that growth has anything to do with marketing and or sales. 

Continuous improvement is not about global or external improvements or growth such as customers, markets and sales revenue growth, but rather on internal processes.  With past successes in improving internal processes, many seem to think it is the cure for all the manufacturers’ problems. The implication is clear: if you are excellent at all internal operations, then the company will grow and increase sales. 

A perfect example of this situation is gathering LEAN consultants together and posing several questions:
1.      Ask them what measurements they used to determine if their clients had become lean?

Most of the time the answer is: if manufacturing company had excess capacity for more

2.      If lean created more capacity, how did they ensure the company would have more sales?

Their answer to that question was uncertainty.

After many years of investing in these programs it does not appear that American manufacturing is growing.   If you examine the chart below with four key aspects where is the evidence of growth?


 It is clear to all that since the year 2000, U.S. manufacturing has steadily declined with the lose of over 5,000,000 employees and or jobs and the closings of over 60,000 factories.  The GDP had declined by 3% and where is the capital investment?  

Something is seriously amiss.  The continuous improvement programs have not manifested into real growth for manufacturing.  Growth is not going to come from continued cost reduction or the LEAN journey.  Growth will come from the development of plans for finding new customers, new markets and cultivate new products. 

Increasing sales and overall growth are not going to automatically occur due to a company’s LEAN certification.  Sales growth requires a singular plan in conjunction with any process improvement project. Otherwise, a firm will reach the end of its LEAN journey with extra capacity but no sales to fill that capacity.  Needless to ask, but I will what the use of extra capacity without filling that capacity?  

Following are five questions that need to asked and answered prior to embarking on any continuous improvement project:

1.     1.  Can you identify the best customers to sell your products to?
2.      2.Do you know the kinds of products and or services those customers want?
3.      3.Do you know which customer groups to focus on now and in the future?
4.      4.Can you and how do you compare your products to the competition’s products in terms of price, delivery, quality, etc, – item by item?
5.      5.Do you know the specific reasons you lost orders to competitors?

Manufacturing has done an extraordinary first-rate job in implementing continuous improvements.  However, we will never reduce our costs (labor) enough to compete with third world countries. 

Cost reduction and efficiencies have kept us as participants in manufacturing, but manufacturing is not growing.  Manufacturers need to ‘travel’ from internal focus to external focus and create methods to find new market opportunities and sales.  It is very plain that they need to expand their continuous improvement projects to embrace a sales plan and to analyze external factors.