A ran across a blog post on BNET penned by Jim Henry that stated that BMW is betting that Flexible manufacturing, not Lean is the next big thing in auto manufacturing.  The article quotes Rich Morris, a vice president at BMW’s U.S. operations as noting that “everyone has to become more flexible.“  Flexibility was defined as both the ability to shift production of different models among different plants as demand shifts among different global markets.  It can also manifest itself as building different models of autos within the same plant. This is somewhat different than designing overall manufacturing capability on the basis of pure Lean methodologies, where complete efficiency becomes the overriding goal. There is also a hybrid combination model, similar to Toyota that attempts to build and distribute vehicles in the leanest plants, but in the fastest cycle-time to customer orders.

This type of argument comes up frequently and can sometimes take many views, depending on a supply chain professional’s built-in bias or training.  In the case of BMW, the context is defined as the overall need of customers.   Morris indicates that “in 2008, 70 percent of (BMW) production was built to customer order.” The alternative, which many other auto manufacturers practice is to schedule production based on dealers’ orders, which is their best forecast as to what customers may buy, or I might add, which options can be the most profitable for dealers. The disadvantage is duly noted, that being that the customer has to often compromise his or her needs to what may be available for sale.

My view is similar to BMW in that any production or supply chain model has to have its first priority focused on the needs of the overall customer.  Because BMW is a premium brand that differentiates on performance and features of its vehicles, flexibility makes sense.  BMW vehicles are very expensive, hence having many unsold finished vehicles in inventory is not efficient.  Contrast this approach with the recent market introduction by Tata of the Nano automobile in India.  Here, the vehicle has been designed with very limited options and marketed to a very cost-sensitive, entry-level consumer. Tata elected to go with a highly lean and efficient manufacturing process focused on vehicle sub-assembles, which are shipped to actual dealers who assemble the final car configuration based on a consumer order. 

Ford Motor Company has recently rolled out a flexible manufacturing strategy for its newer U.S. operations, while Honda can build its Accord sedan in a existing truck plant with little interruption.

 Which model provides the most value?

I believe that if customer need and some degree of efficiency is the goal, Than BMW is correct, everyone has to become more flexible in production capability.

 Bob Ferrari

Over on the Evolving Excellence blog, Bill Waddell had a recent entry, Cash Is Right On The Money, that once again reminds us that many of today’s Lean process concepts alone, will not make any company into a world class performer without a corporate culture and management performance reward system that supports structural efficiency change. 

The posting references Cash Powell, a mentor of Mr. Waddell, who back in 2005, reflected on the then profitability challenges of General Motors, and how GM booked revenue based on production completion vs. retail sale, and thus finished goods inventory was not considered a measure of overall supply-chain or production efficiency.  Waddell goes on to point out: GM has done as much or more Lean stuff in their factories as anyone, and you all know the results.  Without a fundamental change in accounting, along with the management processes accounting drives such as performance metrics…, no company can be truly lean.”

This posting provided me another reminder that Lean-focused initiatives do not stand as the end-state goal. I’m also amazed in reading so many middle-management job postings that call for intimate knowledge or certification in lean methodologies, but hardly mention change management skills. Few senior management job descriptions call for a basic understanding of Lean methods and their applicability toward facilitating structural change.

An end-state goal is a vision and supporting operating objectives, embraced by the entire organization, seeking a positive change.  Lean methods are one of many tools that can be deployed to support a process.. As elegantly stated by Bill Waddell, no company is going to get long term Toyota-like results without the willingness to change overall thinking, or challenge the current way works gets done. Even Toyota, who is now challenged with suffering its first operating loss in corporate history knows enough to take a pause and re-examine strategic intent.

Bob Ferrari