Steps 2 & 3 to Regain Manufacturing Prowess

By August 27, 2015Uncategorized
  1. Develop and use “Thoughtware”

Companies must invest and unleash the intellectual capital within their organizations. Too many companies are spending fortunes on hardware and software and getting little return on that investment. While technology continues to advance, there is still no substitute for thinking. Hardware and software are ineffective without the right “thoughtware.”

Currently America’s educational system prepares students for more education rather than teaching them to think critically and adapt to a changing environment.

The late Dr. Eliyahu Goldratt, author of “The Goal,” frequently commented that the average manager would rather spend $5 million than spend 5 minutes thinking. Economic recovery through the development of a strong manufacturing base is not as dependent on money as it is on creative critical thinking.

Such idea-generation has always been at the heart of success in American manufacturing and entrepreneurship. Companies and schools must continue to nurture that spirit – and tap into it.

 

  1. Become demand driven

Build what the customer wants to buy rather than what the company wants to sell. Despite the advantage of being close to the American consumer market, American industry will not and cannot compete with operating methods designed in the 1950s that cater to detached boards of directors and financial markets rather than the consumer.

The post World War II mode of “Push and Promote” based on low unit cost and high efficiency is a recipe for disaster in today’s intolerant fickle markets. The automotive industry is an excellent example. In January 2012, Ford had almost twice the inventory at the dealership as auto executives like to have on the lot and in the showroom, but the plants continue to push more Focus and Fiesta cars out of the plant. Ford isn’t alone.

American industry must start making decisions based on customers first and old school accounting costs second. This requires a significant operating shift from making what the forecast says because it is more efficient to making what the customer wants because it is more profitable.

This is not a new idea.  In the 1980’s, Chrysler increased its sales by 40 percent when shifting to this velocity model, which enables customer demand to pull products through the system. When Chrysler reverted to the old ways of doing business, sales plummeted consistent with the other Big Three automakers at that time.

Improved responsiveness doesn’t have to be synonymous with increased cost. However, the cost of being efficient but out of synch with the market is staggeringly high and is currently bankrupting companies daily. Successful American manufacturing companies develop the ability to significantly reduce the time to manufacture the product , reduce working capital, and improve customer service – all at the same time.

About Carol Ptak

Carol Ptak is currently a partner with the Demand Driven Institute, and was most recently at Pacific Lutheran University as Visiting Professor and Distinguished Executive in Residence. Previously, she was vice president and global industry executive for manufacturing and distribution industries at PeopleSoft where she developed the concept of demand driven manufacturing (DDM). Ms. Ptak is also a past president of APICS and has authored several books on MRP, ERP, Lean and Theory of Constraints (TOC).

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