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Dr.
Shigeo Shingo may be the most important person in
the world you have never heard of. The Japanese
engineer, a leading theorist of “lean
manufacturing,” was the creative force behind the
Toyota Production System, a method for squeezing
waste, defects and costs out of manufacturing
processes. The application of his techniques around
the world and far beyond the automobile industry has
contributed more to global affluence, arguably, than
have Bill Gates, Warren Buffett and any other half
dozen billionaires combined.
The
Shingo name will become a lot more familiar around
Virginia
in the years to come as the Virginia Manufacturers
Association spearheads an initiative to disseminate
lean manufacturing techniques to
Virginia
companies. The VMA has partnered with
Utah
State
University
– administrators of the Shingo Prize for
manufacturing excellence – to create the first
state-level Shingo Prize initiative in the country.
Spreading
the doctrine of lean manufacturing is the first step
in Brett
Vassey’s
ambition to vault
Virginia
to the top tier of manufacturing states on a par
with Michigan
and Ohio.
The president of the Virginia Manufacturers
Association is determined to overhaul the old-line
trade association -- which traditionally has focused
on narrow public policy issues such as taxes,
workers compensation and environmental regulations
-- into a force for business transformation.
Vassey
is more than a breath of fresh air – he’s
a cleansing, gale-force wind bringing
radically new perspectives on what it takes to build
a vibrant manufacturing sector in the Old Dominion.
In an integrated world economy in which
manufacturers are outsourcing more and more of their
production to China and other developing nations,
Virginia can't hang on to its manufacturing base
relying on the nostrums of low taxes, subsidized
industrial parks and a friendly regulatory
environment. Vassey understands that
Virginia manufacturers' only sustainable competitive
advantages are innovation and productivity.
Innovation
isn't distributed throughout the global economy at
random. It tends to be concentrated in geographic
regions where businesses in the same supply chain
aggregate. The most famous example is the
semiconductor industry in Silicon Valley, but the
phenomenon applies to wine in the Napa Valley,
automobiles in Detroit, finance in London,
shoes in Italy, software in Bangalore. The intensive
interaction between companies in a cluster sparks
new ideas, partnerships and innovations that would
not have occurred otherwise.
Virginia
has a number of industry clusters, from Northern
Virginia's info-tech industry to Hampton Roads'
maritime community to Richmond's tobacco sector. But
Vassey is the first person in Virginia, to my
knowledge, to assemble a manufacturing cluster with
the goal not just of seeking special consideration
from state government but of improving business
practices to compete more effectively.
In
cooperation with Virginia Tech, the VMA has
announced its intention to host a "Woods to
Goods" summit of Virginia's forest products
industry which, under pressure from global
competition, has experienced a loss in revenues and
jobs. The summit will bring together stakeholders
including the transportation sector, equipment
manufacturers, the pulp, paper and packaging
industries, textiles and plastics. According to VMA
materials, "the entire supply chain must
develop a strategic dialogue that will lead to
meaningful changes in the business practices between
them that will improve efficiencies, competition and
communication." The hoped-for result will be
strategies for controlling costs as well as possible
legislative action on the state level.
The
state can play a key role in cluster building by
reallocating dollars spent on workforce development,
higher education and directed R&D, and
by focusing its industrial recruitment efforts on
businesses that would augment existing clusters.
Of
course, it would help to know what clusters Virginia
has. The state can tell you how many companies it
has in a particular industrial code -- the number of
pulp and paper mills, for instance -- but no one in
a policy-making position commands a detailed
knowledge of an entire manufacturing supply chain.
In my 20-plus years of covering business in
Virginia, I've seen only a handful of
industry-specific studies, and they're all out of
date.
Vassey
wants to remedy that deficiency, too. Another one of
his projects is to conduct an authoritative cluster
analysis of Virginia's economy. Such studies are
labor intensive and expensive, however, and the
money is not readily available. But Vassey has
received enough indications of interest that he
hopes to raise the funds eventually.
Ross
Robson, executive director of the Shingo Prize at
Utah State, is passionate on the subject of
maintaining manufacturing competitiveness. There are
legitimate reasons for locating manufacturing
capacity overseas, he says, particularly if a
company wants to supply a local market. But the
stampede to China strikes him as a managerial fad in
which CEOs are throwing good sense to the winds.
Many
companies that invest in China, or any other
developing country for that matter, often aren't
taking all their costs into account. Sure, they may
pay lower wages, buy cheaper real estate and avoid some regulatory costs, but they probably
incur higher costs in other areas. Shipping costs
are higher, inventories are bloated, and the cost in
airline tickets -- and management time -- of
shuttling executives between the United States and
China can be enormous. (Investors in China also may
be underestimating the risk of political and social
instability. See "The
Five Instabilities," April 28, 2003.)
Just
as Vassey's mission is to spark a manufacturing
renaissance in Virginia, Robson wants to revitalize
manufacturing in America. If manufacturing
executives accounted for the true costs and risks of
operating overseas, and if they adopted the
management theories of Shigeo Shingo, he says, he's
convinced that American manufacturing could thrive
again.
In
a nutshell, lean manufacturing substitutes workers'
brains for their brawn. Shingo's methods require
creativity and disciplined analysis from executives
at the top down to the guys on the shop floor. One
core principle is mistake proofing. By relentlessly
seeking "zero defects," manufacturers
squeeze out waste while improving quality. Another
Shingo methodology, according to Robson, is to
"eliminate problems where they're assumed not
to exist" -- in effect, to continually question
established truths. A third technique is "one
piece flow," turning the mass-production
scenario on its head and learning how to produce
small runs profitably. "If you can do one-piece
flow (a production run of a single item)," says
Robson, "you can do anything the customer asks
you to."
The
Shingo Prize is administered much like the famed
Baldrige quality awards, in which companies submit
detailed entries and inspection teams tour their
plants. One Virginia winner was Merillat's door
plant in Smyth County. The company listed
achievements such as 98 percent reduction in lost
work days, a drop in customer complaints from one
per day to less than one per week, reduced
work-in-progress inventory of 80 percent, and nearly
10 percent reduced costs over two years.
Virginia
is the first state to adapt the Shingo Prize for a
state-level competition. With Robson acting as
consultant, the Virginia Manufacturers Association
will administer the event. "It's nice to be
first," said Vassey in announcing the
competition. However, North Carolina may be close
behind. Two representatives of North Carolina State
University attended the VMA's press conference.
The
immediate purpose of the Shingo Prize is to
publicize lean manufacturing techniques among
Virginia manufacturers. Early competitors
undoubtedly will be companies that already practice
lean manufacturing. Longer-term, the VMA hopes that
other companies will see the value.
Towards
that goal, the VMA will incorporate lean
manufacturing topics into its programs and
conferences. Meanwhile, VMA Director of Development
Joe Croce has built a partnership with the Philpott
Manufacturing Extension Center to collaborate in the
delivery of lean-
manufacturing
training. Ultimately, the discipline needs to be
extended to Virginia's engineering, business and
community-college programs.
Vassey
has laid out an ambitious agenda for the VMA, which
only two years ago was struggling for its existence
and contemplating a merger with a much stronger
Virginia Chamber of Commerce. "Eighty-one years
of tradition - it's hard to turn on a dime,"
says Vassey. "But I've got a great board and a
great staff."
No
one accomplishes great deeds alone, and the VMA team
undoubtedly has been crucial in bringing the new
vision to fruition. But I've been watching Vassey
during the year since he came on board, and I've
been impressed by his independent thinking, his
willingness to take risks and his readiness to put
his personal credibility on the line to make things
happen. After years in the shadows, the VMA and
Vassey seem destined to play important roles in
shaping Virginia's future.
--
June 30, 2003
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