By October 30, 2006 5 Comments Read More →

It Depends on What "Lean" Means

I received an email newsletter from APICS the other day, an email I question the central premise of. The email headline says:

“A Lean GM?”

At least they put that in quotes. Maybe sometimes an editor does that to not take as strong of a stand as they might like (e.g., “Is Jack Welch a Turkey?“).

The author, Douglas R. Kelly, editor of APICS Magazine, says:

GM announced October 24 that it had posted a third-quarter operating profit nearly double what Wall Street had expected, prompting most analysts to echo Wagoner’s claim that the company’s turnaround efforts are beginning to bear fruit. “Our third quarter results again reflect significant progress in our fast-paced initiatives to turn around our business and create a company that is leaner, faster, and positioned for long-term sustainable growth,” Wagoner said in a statement.

The word “leaner” caught my attention when I read of the earnings news, because it’s descriptive of an organization that is on the road to greater efficiencies and faster time to market. GM has been a leader in developing and implementing lean methodologies for more than 15 years.

The word “leaner” caught my attention because it makes me think, “Huh? GM is lean?” It really caught my eye that Kelly then went on to write that GM is a “leader” in implementing lean. What?

One issue I have with Kelly’s analysis is that he appears to take Wagoner’s use of the word “leaner” to mean “we are a more lean company, in the sense of lean manufacturing and the Toyota Production System.” I’d argue that Wagoner, as a finance guy, most likely meant “lean” as in “we are now a smaller company.” That’s usually what finance guys and Wall Street types mean when they say “lean” — they’re hardly ever referring to Lean Thinking or the elimination of waste. They usually mean they’ve eliminated jobs.

One of the problems with the word “lean” is the negative connotations — “lean and mean” being one, and the idea of “lean” meaning that you take things away (such as inventory, etc.). Lean is more than that, which is one reason why the Gemba Blog is avoiding the word “lean” altogether this month.

Since the newsletter isn’t online (or I can’t find it), I will post the full text in the comments area. I think it’s telling that Kelly’s examples of GM using lean are the NUMMI plant (a factory that GM hasn’t really learned from and used to transform other plants) and a story from Saturn eliminating waste TEN years ago.

Kelly writes:

GM has adapted the Toyota Production System, creating what GM personnel call the Global Manufacturing System (GMS). The Cadillac division, in particular, has achieved good results using GMS methodologies in the quality and design areas.

I’ve been away from GM too long to know — is the “GMS” anything at all like TPS? Is it at all helpful or something that sounds good??

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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5 Comments on "It Depends on What "Lean" Means"

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  1. Mark Graban says:

    A Lean GM?

    By Douglas R. Kelly

    It’s been a busy month for General Motors. First came word that the automaker had broken off talks with Renault-Nissan aimed at forging an alliance between the three companies. Seems that a GM demand for payment to join such a partnership sank the negotiations. Rick Wagoner, GM chairman and CEO, told the media, “When you added it up, it wasn’t good value for GM shareholders.”

    Then GM announced October 24 that it had posted a third-quarter operating profit nearly double what Wall Street had expected, prompting most analysts to echo Wagoner’s claim that the company’s turnaround efforts are beginning to bear fruit. “Our third quarter results again reflect significant progress in our fast-paced initiatives to turn around our business and create a company that is leaner, faster, and positioned for long-term sustainable growth,” Wagoner said in a statement.

    The word “leaner” caught my attention when I read of the earnings news, because it’s descriptive of an organization that is on the road to greater efficiencies and faster time to market. GM has been a leader in developing and implementing lean methodologies for more than 15 years. In the early 1990s, the company’s joint venture with Toyota, called New United Motor Manufacturing Inc. (NUMMI), resulted in significant decreases in assembly hours and defects. At the same time, GM launched its Purchased Input Concept Optimization with Suppliers (PICOS) initiative, in which GM engineers worked with the automaker’s suppliers to design and implement lean tools and solutions in the suppliers’ operations. One of the leaders in GM’s push toward lean was the Spring Hill, Tennessee Saturn manufacturing plant, which managed to save some 270 tons of paint solvent in 1995 and 1996 by instituting lean production methodologies.

    GM faces a large number of hurdles in its efforts to get back on its feet. We reported on one of those challenges, the skilled worker gap (“The Shortage”) in the June 28 edition of APICS Extra. The company had just announced that more than 25 percent of its hourly workers in the United States had accepted the company’s offer of buyout or early retirement. That’s around 35,000 employees, which accounts for a pretty sizable cost savings for GM in 2006, but which further exacerbates GM’s shortage of skilled labor.

    Still, one of the central tenets of lean is to eliminate waste-and if an organization finds that it’s wasting resources trying to support a workforce larger than it needs, it is obligated to do whatever it can to reduce that waste. GM has adapted the Toyota Production System, creating what GM personnel call the Global Manufacturing System (GMS). The Cadillac division, in particular, has achieved good results using GMS methodologies in the quality and design areas.

    Lean isn’t only for production operations; it can be, and often is, applied to other functional areas such as administration, accounting, and so on. Can GM apply what it’s learned from the Toyota Production System and its own GMS initiative to challenges like its pension funding system-which adds hundreds of dollars to the cost of every vehicle the company produces-and its product design and launch operations? The answer lies, at least in part, with GM’s next two quarterly earnings statements.

    Douglas R. Kelly is editor-in-chief of APICS magazine. He may be contacted at editorial@apicshq.org.

  2. Anonymous says:

    “Still, one of the central tenets of lean is to eliminate waste-and if an organization finds that it’s wasting resources trying to support a workforce larger than it needs, it is obligated to do whatever it can to reduce that waste.”

    So lean is elimating the waste of too many people?

    Priceless…

  3. Mark Graban says:

    If GM could only design cars that people wanted and build them with sufficient quality, they wouldn’t have “excess” employees right?

    GM is a mess. If APICS tries to hold GM up as an example of lean, then APICS is a mess.

  4. Anonymous says:

    APICS became irrelevant years ago, the MRP folks can’t adapt to lean.

  5. Jon Miller says:

    Speaking of NUMMI, there was an article in the October 16th issue of Nikkei BP in which Kan Higashi, the Toyota executive who helped set up the NUMMI operation and was the head of site there, blasts GM for not having learned from that experience. The article title is something like “Toyota is Total Company Discipline – GM Fails through Partial Learning”. I might post more on it later.

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