I have spent a lot of years working in many different companies in many different industries. And one thing I have noticed is that departments with the biggest assets are the most difficult to work with when it comes to implementing Lean. I used to assume this was because it took big men with lots of testosterone to run big machines. And these sorts of "men's men" tended to be strong-willed, opinionated.and set in their ways. But during a recent discussion with a colleague about his challenges working in a large press shop at an automotive manufacturer another reason occurred to me; accountants.
My colleague and I were discussing his efforts to implement Lean thinking in this particular press shop. And in particular the tendency of the operators to over produce parts each shift in order to get their Parts per Hour up.
For the benefit of those who have never been in a press shop allow me to describe the scene. To start with presses are used in a variety of industries where metal parts are made. As I have described in the past, presses do to flat sheets of steel what your teeth do to a stick of chewing gum. These machines, that range in size from a household appliance up to and including behemoths much larger than a house, essentially do the same thing. Their "jaws" continually open and close as sheet metal is fed in one side, and formed parts fall out the other.
In an automotive press shop stamping presses can be massive. And it is truly a humbling feeling to stand next to one of these beasts as it chews up sheets of steel up to a quarter of an inch thick, and spits out massive parts used to make hinges, car frames, and even entire body panels. And despite the multitude of safety equipment designed to protect the people who work with these animals, one has the distinct feeling that a 6,000 ton press the size of a building wouldn't even notice a finger, a hand or even a whole person who happened to get "bit."
The other thing you notice about stamping presses is that they are fast. A typical press will "bite down" on its steel meal once every second or faster. So depending on how many bites it takes to make a finished part, it doesn't take long to fill a bin or a rack with metal parts ready to be welded, painted and turned into a car. In fact cycle time is one of the factors that drives up the cost of these pieces of equipment well into the millions of dollars. And that's where the accountants come in.
Whenever a company makes a capital purchase there is usually some sort of justification for the expenditure that has to be approved by someone entrusted to make these decisions. When a decision needs to be made to buy a new microwave oven for the lunchroom this is relatively straightforward. Usually a manager is authorized to approve such a purchase.
As the cost of the new asset goes up, however, so too does the required "justification" for the expenditure. And this makes sense. In theory any purchase of new capital should cover the Weighted Average Cost of Capital (WACC); another fancy accounting term used to make investment decisions. Or the purchase should not be made and company capital should be put into other purchases with a higher return on investment.
So how do you justify spending five million dollars on a brand new 6,000 ton stamping press? Well it's relatively simple. You figure out how many parts you are going to make on the press over its operating life, and divide that number into the cost of the press. For example if a company plans to make five million parts on a five million dollar press, then in simple terms each part "absorbs" one dollar of the capital cost. Again accountants and finance people can make this much more complicated but for this discussion this will do.
If the purchase is approved then the next few months are filled with lots of excitement and anticipation in the press shop. A whole bunch of people, usually from a foreign country speaking an exotic language, will set up groups of trailers and begin working on installing the new press. A select few members of the purchasing company, usually young engineers and seasoned operators, will be assigned to work with the foreigners to assist with the project and learn how to operate the new piece of equipment. And these people will assume a certain level of awe and respect from the rest of the employees who watch the proceedings from their workstations and secretly wish they too could be involved in the exciting new project.
Eventually the press will be ready to run for the first time. For this occasion a lot of people wearing clean white hard hats who normally never even go out to the press shop will start to hang around. And on the big day the entire company will be invited to witness the start-up of the new machine. Speeches will be made about how the new equipment represents the company's "investment in the future." There will be handshakes all around. And finally someone will hit the magic start button. The crowd will gasp as the mighty motors roar into action. And everyone will cheer as the massive jaws start to chew noisily into the fresh flat steel for the very first time. And for a few minutes, or at least until the little sandwiches and cold drinks are gone, everyone will be filled with a sense of pride and optimism.
And here's where it all goes wrong. I explained earlier that when the original decision to purchase the new press was made it was decided in this case that every part would earn $1 towards the $5,000,000 purchase price. Well now it's time for this machine, and its managers, to start paying their way. All of a sudden smart rational men who clearly understand that Over Production is one of the 8 deadly wastes will lose their Lean minds. Instead of producing just the number of parts needed for the weld shop on any given day, they will become intoxicated on the notion that it isn't metal parts dropping out of the press, but rather piles and piles of shiny new $1 coins. In fact they start to see not bins and bins of Work In Process stacked to the ceiling. But rather bins and bins of countless coins and treasure.
Their schedulers will try in vain to make them stop. But drunk on their new found ability to generate untold riches for their department they will yell "faster! faster!" to the frantic press operators. Eager to obey their task masters the operators will forgo die changes (and preventive maintenance) in order to feed the massive beast.
All through the day and all through the night the madness continues. In fact if the press manager walks out into the press shop and notices one of his beasts not eating he immediately demands an explanation. Each morning reports are produced and those who haven't kept their asset-intensive pets eating are called to account.
Huge production runs are justified in the name of "productivity." Warehouses are built, rack are set up, and faster and bigger material handling equipment is justified and purchased all in the name of covering the cost of the presses.
Eventually, sometimes, the situation reaches a crisis. At some point it will be time to pay for the orgy of over-production. Either the material handling department will finally put its hands up in despair and explain that it can no longer manage the massive amounts of inventory. Or the downstream production department's complaints of continual parts shortages will become too loud to ignore. Or the very same accountants who turned the presses into figurative cash machines will start to raise issues about working capital tied up in inventory. Or the sky-rocketing costs of scrap and obsolete inventory, a guaranteed byproduct of over-production.
So the next time you are talking to someone who has spent his life around huge capital assets such as presses, blast furnaces or even airplanes. And you are trying to convince them that, despite what the accountants say, they need only ever produce exactly what their customers need. Do not attribute their resistance or apparent lack of understanding to a hormonal imbalance brought on by years and years of exposure to more horsepower than most of us will see in a lifetime. But rather understand that theirs is a mindset forced upon them by the relentless urning to financially justify their assets no matter what the cost. And to them there is no sound more deafening than the sound of silence.
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