GTBMC
Lean Six Sigma
Interview with Lean Expert Bill Waddell

Wendy Walden: Continuing our discussion on Lean Manufacturing and my next guest is Bill Waddell. Bill is an internationally renouned Lean Manufacturing expert, speaker and author. Welcome, Bill.

Bill Waddell: It's great to be here, Wendy.

Wendy Walden: Nice to see you. Bill, let's talk about Lean and manufacturing. In fact, most people associate Lean strictly within the manufacturing component of an organization. When, in fact, it can also be applied to various areas of a business - such as HR, for instance, as well as finance. Let's talk about different areas where Lean can be applied.

Bill Waddell: Well, there really are two dimensions to that question. There are people who try to apply Lean principles to the - in HR, for example, to their hiring process to find a way to streamline it to take some of the waste out of that process of hiring. But at a more fundamental level, companies are beginning to understand that the very nature of the HR process needs to change in order to support Lean. The types of people that they hire, the way they compensate them, the way they deploy training programs and so forth. And that's true in all of the management support areas - in accounting, in information technology - that all of those functions really need to go through a fundamental transformation, in addition to just getting better at what they do.

Wendy Walden: Got you. So they have to be prepared also, not just apply it. They have to gear up and sort of change their practice before it can be implemented.

Bill Waddell: Absolutely. Lean is an enterprise-wide, a business-wide transformation.

Wendy Walden: Got you.

Bill Waddell: Everybody has to be a part of it.

Wendy Walden: Now, what is your observation of Lean in the US. We look at automakers within the US and you're hearing recently that there's downsizing, there's reconstruction, there's recent, you know, lay-offs, but we look across the water at one of our competitors, Toyota, who pretty much wrote the book on Lean.

Bill Waddell: Correct.

Wendy: Who has never layed off or downsized. Where do you see us going and what is your observation of Lean in the US?

Bill: Well, you know now there really are two answers to that question, because there's really a growing divide within the manufacturing community in the US. The observations you make about the big auto makers are certainly valid in the big publicly traded companies. The ones that buy and sell on Wall Street are struggling and for the most part failing almost across the board at becoming Lean and in developing the necessary level of manufacturing competitiveness. On the other hand, the privately owned companies - the smaller and the medium sized ones are becoming extraordinarilyLean. There are some very high performing, very competitive family-owned, privately owned manufacturers in this country that are really not suffering at all and they're competing globally very, very well.

Wendy: That was my next question. Where do you see us? Do you see the US as competitive globally as other nations, or are we lacking in that area?

Bill: Well, the US is still the dominant manufacturing power in the world. It's not a question of whether the US is still a great manufacturer. It's a question of are we moving in the wrong direction and are we going to change course before we get in even more terrible than we can bail out of. Again, the Lean companies, the smaller and medium sized companies are competing very effectively all over the world.

Wendy: Sure.

Bill: It's only the big companies. It's the companies that were pretty much the fortune 100 in 1970 are all either in trouble or are gone.

Wendy: Right. Well, let me ask you this. What do you think some of the barriers are for a company implementing Lean?

Bill: The single biggest barrier is their accounting system. The way companies calculate and manage cost. The folks from Toyota were very clear when they said that inventory is wasten that's not just a philosophy or a euphamism.

Wendy: Right.

Bill: American companies, on the other hand, by the law of that land, for the most part treat inventory as an asset.

Wendy: Sure

Bill: There can't be two more fundamentally different concepts. Either inventory is an asset or waste. Now as long as the accounting system is encouraging people to build inventory, lean is going to be very difficult. The other dimension to that is American acccounting's just preoccuption with direct labor. Most companies will tell you they can't compete with the Chinese because the Chinese make a dollar a day compared to the ten or fifteen dollars a day in this country. Well, they're talking about seven percent of their total cost. Now that's a pretty small fraction to - they need to be a little more worried about the other 93% of their cost where they have great opportunity. So, the accounting systems that manufacturers use are by far their biggest obstacle to becoming Lean.

Wendy: Wow, that's amazing. Do you - what can, what do you think we can do as Americans to keep more manufacturing jobs in the US?

Bill: Well, you know - I posed that question to a woman by the name of (Carlie Murdy)? who used to be - she just recently retired - the education director for the United Auto Workers. And she had an interesting answer. Her suggestion was that certainly management needs to learn Lean practices and Lean principles and deploy them. Certainly, labor's approach to how they do their work has to change, but she advocates Lean as a community-wide effort that the schools at all levels need to be cranking out students with a different set of skills whether it's better math skills for the people who are going to work in the factories or an understanding of Lean management for the people coming out of college educations - but also, government at the local, the state and national level. Now these accounting rules are federal law.

Wendy: Right.

Bill: Then the federal law in the United States is destructive to manufacturing.

Wendy: Sure.

Bill: So the government officials have a big role to paly here, too. Everybody needs to get involved. It really starts with a commitment and understanding manufacturing. People don't really understand it too well.

Wendy: And that's part of the problem, I believe. Is that it's not - it's probably not defined or people just don't have a clear understanding of what it's all about. Now back to your point earlier. So what she's suggesting is that we start to apply Lean from the accounting perspective at an earlier age.

Bill: Well -

Wendy: College level perhaps?

Bill: Well, even earlier than that. When one is understanding work and all things that we do as a process - learning how to be process thinkers. This show for example, we can view this part of it as an event and we can try to get better at this, but the objective is - how do we go from start to finish.

Wendy: Sure.

Bill: From when you first walk into the studio until it goes on the air.

Wendy: Sure.

Bill: Then look at the entire process and try and optimize that. That's not a way of thinking that's normal to Americans. Teaching kids to think about things as a process rather than just a series of events.

Wendy: Sure.

Bill: Is a real important first step.

Wendy: So just think, if we are able to do that now - 20, 30, 40 years from now we'll be light years ahead of where we are today.

Bill: We'll have grandchildren that understand that are far

Wendy: That are practicing Lean.

Bill: That are far more successful than you or I will ever be.

Wendy: And we might even add also that Henry Ford practiced Lean back in the early 20's, the 1920's.

Bill: He really invented Lean. And he had so many terrible character flaws and he made so many outrageous statements that it's easy to not like Henry Ford or at the very least to write him off as a little bit of a lunatic. But his approach to manufacturing was right on and the folks from Toyota make it clear that all of the important parts of what they are doing they learned from Ford.

Wendy: Wow.

Bill: And it's too bad because his lessons - what he taught - really have been ignored.

Wendy: Right.

Bill: And all the keys - it's a little bit like Dorothy and the Wizard of Oz - it's been right there in our backyard all along. All we had to do

Wendy: We just haven't tapped into it.

Bill: Just haven't tapped into it. It's kind of ironic that we need the Japanese to tell us

Wendy: What to do and how to do it.

Bill: what Henry Ford taught them.

Wendy: Tell us a little about your book - Rebirth of American Industry.

Bill: Rebirth of American Industry is a, you know, on the surface, I guess you can describe it as a combination history and accounting book. But what I really tried to do was to start pealing back the layers of the onion and understand why do we manage the way we do? Where did this come from? Who thought that up? And when were these principles developed - by who and for what purpose. I went all the way back to the early 1920's when Alfred Sloan, Pierre Dupont were the people in charge of General Motors and created much of what we know as modern management, and traced the same evolution through Toyota back to Henry Ford. I tried to understand why these companies evolved their methods of doing business along two different and widely diverging paths. And once I had discovered some of the secrets there and understood exactly what did Toyota get from Ford, and so forth, and why did GM do what they did. It became pretty easy then to see the different principles and see how they effect manufacturing, and be able to go look out a see that it's very clear. The companies that manage by the Ford and Toyota principles are extraordinarily successful. Those that continued to manage the way Alfred Sloan taught us the manage 83 years ago

Wendy: Wow.

Bill: are in big trouble. That's the premise and the case that Rebirth made.

Wendy: Let me put a plug for your book - where can folks find the book if they're interested in reading that?

Bill: Well, it's published through PCS Press and PCS Press is run by my co-author, fellow by the name of Norm Bodack. Norm Bodack is legendary - referred to by many people as the "godfather" of Lean.

Wendy: Okay.

Bill: He was one of the first Americans to go over to Toyota and start poking around and try to understand what they were doing.

Wendy: First hand.

Bill: He was a contemporary of (Ishigi Oshingo and Tiechi Ono)? and knew all of these people first hand who created the Toyota production system. Norman helped me with the book and he's also the publisher, and it can be purchased through his company PCS Press. Of course, it's on Amazon. And they can also get in touch with me. It's not hard to find.

Wendy: Not hard to find. Well, Bill Waddell, thank you for joining us today and giving us your insight on Lean manufacturing.

Bill: Well, thank you very much for having me. I've enjoyed being on your show.

Wendy: Thanks.

Wendy: That's going to do it for today on Momentum. If you're interested in learning more about Lean or Six Sigma, visit us on line at GTBMC.com, or give us a call at 864 - 250 - 8800. See you next time.