By Gerald Najarian

Indeed — what is the matter with manufacturing in our country? Well, the answer might be nothing. At least nothing out of the ordinary in the capitalist system.

But wait. Doesn’t everyone say that all our manufactured goods are made outside the United States? Aren’t manufacturing jobs being outsourced to China, India and other countries in Asia and the subcontinent? The answer to all these questions is, yes! But…

What really happened to U.S. manufacturing is fourfold:  globalization, comparative advantage, automation and policy neglect at the national government level — all pretty natural in the American capitalist system. The first three of these are unavoidable, but the last, policy, can be addressed. More about policy neglect later in the essay. Let’s look at the unavoidable after a little statistical background.

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By Gerald Najarian

In the Pleistocene era of manufacturing cost accounting (actually, only about one hundred years ago – it just seems longer), product costs were classified as: Labor, Materials and, Overhead – in that order. The order was not haphazard; it connoted the relative importance in dollar size of each. Labor was then the highest cost component, materials was next and overhead was a poor third. Well, now at the dawn of the twenty-first century and actually around the middle of the twentieth century, the order is reversed. Overhead is the most expensive component of the cost equation. In fact, as labor declines to third in the cost hierarchy and materials costs begin to stabilize in some of the mature manufacturing companies, the management of overhead spending can be the strategic management element in the profitability success equation. Knowing that overhead is the major component of manufacturing spending and putting aside the arcane methods for its accounting and allocation, how then can the senior management of manufacturing companies discern value in overhead in relation to its cost? Let’s take a look at some of the options and combine them into an overall program to find the value and reduce the costs.

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By Gerald Najarian

“You get what you measure” is an old saying but is never far from the truth.  The old paradigm measurements led us to do the things in the shop and in the warehouse that were the antithesis of lean manufacturing and supply management.  So, if you are talking lean and are trying to influence shop floor people to implement lean, then you have to measure what is done in lean terms so that the message is clear.

To test the “get what you measure” axiom, just try putting up a chart of a particular measurement statistic showing performance over time in a place in a place where plant people (particularly managers) are likely to see it.  Questions will be asked and soon, behavior will begin to reflect the desired direction of the numbers.  When the New York City Police Department senior management began a program of measuring crime statistics by precinct (known in the NYPD as “COMPSTAT”) and asked the commanders to explain the unfavorable trends, crime declined in the city.  Similarly, corporate senior management measures activity, much of it, like overhead absorption, unrelated to lean manufacturing leading to non-lean results.  So to get going in the right direction, let’s look at some desirable lean metrics.

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By Gerald Najarian

OK, the title sounds facetious.  But we are, in fact, schizophrenic about the state of manufacturing in the United States.  It seems like all the familiar products we buy from the expanded pharmacy to the big box stores come from developing countries in Asia and Latin America so we think that manufacturing has left the country never to return.  Yet lately, we hear reports of a “rebirth” of manufacturing based on anecdotes about one or another company’s decision to relocate a plant back home and opinion surveys.  The press also reports that “manufacturing is leading the recovery.”   Small wonder that there is confusion!

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By Gerald Najarian

Here’s a question for you:  who created the first cellular factory?  Hint – it was an automobile company.  We’ll come back to the answer later in the article but first let’s look at cellular organization in the lean factory.

Why organize in cells?  In a lean factory, cells, in fact, create little factories within the big factory (not exactly like the fad a few years back called “factory within a factory,” but similar) that allow a mixed model product line to be manufactured as an island by itself.  Cells, when organized and balanced properly, permit product to “flow” in one piece production from the first part to the final product without stopping to become a subassembly so there is no WIP inventory between the work stations in a cell.

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Traditional accounting measures are out-of-date-established more than a century ago when customers were content, not demanding, and when inventory was seen as beneficial. It’s time to recognize lean manufacturing concepts in accounting practices. Join Gerald Najarian as he explores how certain methodologies and concepts, held dear by many, must be re-examined in order for accounting to be effective in a lean operation.

Click here to view the PDF of the article

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By Gerald Najarian

A materials planner identifies the need for a particular component part, prepares a requisition. The buyer surveys at least three vendors, selects one based on the economics (price) and issues a purchase order for delivery in thirty days. The vendor, new to the company or accustomed to sporadic demand for the item from this customer, forces the item into the schedule and begins the process of sourcing needed materials. When the item is finally produced late and isn’t delivered to the door of the customer’s plant as expected, the phone starts ringing with expedite requests. At last the item arrives at the plant and is received, inspected to pass an AQL standard, and stored in a parts stores area. There it awaits requisitioning to a shop order that has been delayed due to unavailability of the part. Sound familiar?

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By Gerald Najarian

Did you know that the exemplar of lean manufacturing, Toyota, assigns an industrial engineer to each foreman in its plants?  It’s true.  Toyota has long understood the value of optimizing operations through traditional industrial engineering techniques.  For example, the company “stopwatches” each operation to assure that the people performing work tasks can actually accomplish the task in an optimal amount of time.  Optimal is defined as the rate feasible to do the task “right the first time” according to the Toyota standard method (for quality purposes) and to be economically efficient in the traditional manufacturing cost paradigm.  If the time assigned to an operation is not “optimal,” then the workers receive additional training or the operation time is adjusted.  Assigning an industrial engineer to each foreman has other benefits – work flow management, cycle time reduction, work methods and the like.

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By Gerald Najarian

There is no question that lean and its antecedents—Just-in-Time (JIT), flow, and demand-based manufacturing—contribute mightily to a company’s ability to deliver outstanding customer service while tying up a minimum of working capital principally in the form of inventories. The attributes of well-managed manufacturing shops have been gathered under the broad heading of lean and have been given programmatic status.

Based on a variety of research, here are the benefits claimed for lean: (more…)

By Gerald Najarian

Well, we are ten years into the new  millennium and well into the age of the supply chain. We successfully survived the Y2K non-crisis and, in the process, have gotten a new enterprise resource system (ERP) to support the company’s information management infrastructure. Now, in the age of supply chain management, we are trying to tie all the nodes of the supply chain together so that materials flow seamlessly along a path beginning with a customer’s order and pulling through from the raw material supplier all the way through the process. All of this is good. The previous 20 years were turbulent ones for the manufacturing/materials executive as we absorbed the new disciplines of the period and saw the old ones disappear: ERP replaced Manufacturing Resource Planning (MRP) II, the Just-in-Time wave from the far east morphed into Demand-based Flow and then Lean, shop organization went from functional to product-based, and the multitudinous materials management functions began to creep together into a homogenous unit known as the supply chain.

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