Don't Let Delphi Drag Down the Shingo Prize

Apparently the manufacturing community should be on a continuous improvement curve, but consultants and Shingo Prize executive directors are exempt.  The article on Delphi in Manufacturing & Technology News, in which Shingo Prize executive director Ross Robson repeats the "Delphi was lean but legacy costs were too much to handle"  mantra is disappointing, to say the least.

When asked if the Shingo Prize should take financial results into account, ala the Baldrige Award, Robson's response was, "They've taken their criteria now and made it so heavy on financial results that they have lost sight of what is being evaluated. You may as well fill out your results and the [manufacturing] process doesn't make any difference."  That's pouting, instead of the product of serious reflection.  Perhaps Mr. Robson should be reminded that Eli Goldratt was right:  the Goal of manufacturing is to make money.  If a lean strategy does not generate significant improvement in financial results, it failed. Period.

Delphi was not lean.  Their inventory turned so slowly it was almost imperceptible.  Their cost did not improve.  They may have achieved excellent quality levels, but they proved unable to translate that to bottom line improvement.  We don't need to go over the same old ground.  They looked lean, but they weren't lean.  The legacy cost whining began after it was plain that their lean effort was not producing results.  They are back to the same old, worn out automotive industry solution - blame it all on the Unions, close plants, outsource work to Asian countries, blah, blah, blah.  They have a lawyer in charge who is trying to accomplish in Court and on Wall Street what they were unable to accomplish in their plants.

Mr. Robson would serve manufacturing and the Shingo Prize much better if he would focus his energy on what lessons can be learned.  Clearly the bankruptcy of Delphi is evidence of a gaping hole in the Shingo Prize criteria, as well as in the lean body of knowledge.  That is no big deal - just learn from it, improve the Prize criteria, and move on.  It is what good manufacturers do every day - they make mistakes, they learn, they improve.  To take a defensive position, however, and repeat the self-serving rationalizations coming out of Delphi management does a disservice to manufacturing and to Shingo's legacy.

Comments

[John]

Wow Bill that was very direct but also on the mark which is why I've subscribed to this blog. You may not make friends but it is important that us manufacturing types really think about these things and I for one am very happy to see someone finally forcing us out of our comfort zone. That will force us to improve.

There was a comment in that article saying "If you look at the price that they receive for their products and their costs, every [Delphi] plant [winning the Shingo award] save for perhaps one has been profitable." So one plant that won Shingo wasn't profitable? Then what's the point? Maybe that explains some things with Delphi, GM, and the rest.

[Thomas Sortino]

While I strongly believe that lean and all that it encompasses is an important step in getting and keeping any organization alive and well, I am also open-minded enough to know that there are other business models that incorporate customer focus, mutual respect, and system-level understanding to achieve financial success. So given all that, and in response to Mr Robson’s comment about the Baldridge criteria {“You may as well fill out your results and the [manufacturing] process doesn't make any difference.”}, I’d have to say: “Why should it?” I understand that the Shingo prize was set up to encourage use of the TPS, but it sounds like sour grapes for him to imply that if a company is successful without following his rules, then they shouldn’t be recognized for that achievement. I once saw tape of a heated exchange between Dr. Deming and Mr. Baldridge showing Deming’s issues with how that award had been set up (heavy focus on tools/countermeasures) – I wonder how he would feel about Mr. Robson’s apparent attitude?

[Bill Waddell]

Thomas,

i certainly agree with your sentiments (since you seem to agree with mine) I question however the debate you saw between Deming and Baldrige. The Baldrige award was established after Malcolm Baldrige's death and named for him posthumously. Any debate between Baldrige and Deming over the Award criteria would have been rather one sided. My guess is that you saw Deming going at it with the Director of the Baldrige Award council. Regardless of such details, your point is well made and well taken.

[Mark Graban]

I agree that company performance has to have some place in these lean assessments. I always teach that the goal of lean/TPS is to make money, but not in the traditional western "this quarter" focus sense. Goldratt's full statement of The Goal was "to make money now and in the future" I believe and statements about making money need to be not only short-term focused.

There are so many disfunctions that can come into play when you focus ONLY on process. The sin of most companies is not focusing on process at all, so it's easy to understand how when they get the process focused lightbulb going off that they go overboard. I remember a Tom Peters story about how he realized Motorola was screwed up when their cafeteria was bragging about Six Sigma cookies where the # of chips per cookie was statistically controlled. WHO CARES!?!? You can be "doing lean" or "doing six sigma" but if it's not impacting the customer, then that work is muda.

The engineers in the lean world tend to focus so much on the tools, they think "if we do all these tools better than the others, then results will follow". I think that's often the bias built into any of these lean prizes or lean assessments.

You have to be careful though in how you include profitability. You have to prevent an Enron house of cards type business from winning, because then your award/prize would be embarrassed in a different way.

Great blog, great discussion as always.

[Mark Graban]

Another challenge - if Toyota were to submit their plants for the Shingo Prize (and I assume they don't, probably thinking the activity is muda), would they win?????

Another challenge in these assessments, how can the Shingo People gauge culture during a brief visit? That is very hard to assess.

I've always been taught that TPS = tools + culture + philosophy. Tools are easier to see, therefore easier to measure.

I saw NUMMI (some thoughts on my visit are posted on my blog, link below) and it didn't always "look lean" in the sense it was dark and things were sometimes out of place. But the SPIRIT of the place seemed incredibly lean, the way people talked about problem solving and the role of people.

My NUMMI comments:

http://kanban.blogspot.com/2005/10/nummi-tour-tale-1-why-fix-escalator.html

[Sean]

Bill,

You're killing me! You don't have a clue when it comes to running a multi-billion company. You talked about the balance sheet and financials in several articles but failed to mention the costs that have risen on the sheets. You didn't mention that steel prices have risen 50+ percent over the past couple of years; you failed to mention that oil prices are up 100+ percent. Health care costs have risen 17-22% every year. And you failed to mention the Unions. All these costs have risen due to global demand, however, they could not be pasted on. Transportation costs have also risen and those have not been past on either. Delphi purchases 16 billion dollars worth of parts and material. Mostly steel and plastics. Do the math Bill. And you are right, Delphi is not the only one effected by this. But then again, most companies didn't get stuck with a contract that averages $120,000 per employee per year either. Toyota doesn't have this cost, yet. When their US workforce starts to retire, they too will encure extra costs and they know this. Also, you failed to mention this; If Toyota is your base line for lean, why did they have the single largest recall in history....spanning 15 years worth of cars and trucks? This would suggest waste to me.

I would like to know on a personal level what your credentials are? Your experience? I have dealt many times with educators and consultants and have when you get to the "real world" (gemba), they tend to fail.

I do agree with you regarding the management. Delphi needs to clean house and get rid of the old school GM personal. The buddy network has failed long enough.

[Bill Waddell]

I can handle being called clueless, but when you accuse me of being an academic, that is where I draw the line. Some insults just go too far. In fact, if you don't count football stadiums and basketball arenas, I have not been on a college campus to speak of for 27 years. I was barely on campus for the five years before that when I was actually enrolled in one.

Seems odd that you would take the position of Drs. Womack and Robson, PhD.s and blast me. I do not have the academic credentials to wear their hand-me-down pocket protectors or light their meerschaum pipes.

I am also relatively new to consulting, but given my propensity for irritating the potential client base, I may well have to return to the "gemba", as you call it.

Glad we agree on the management failure issue. You might want to read the article I wrote in this month's Superfactory Newsletter.

By the way, Sean, when you say I am clueless when it comes to running multi-billion dollar companies, which of Delphi's top dogs do I fail to measure up to - the one who got canned for financial irregularities, or the one who filed for bankruptcy immediately upon being hired? I am curious to know which is the manufacturing leader you are so enamored with.

[Ghost of Sean]

Yes Sean steel has gone up, health care has gone up, etc... for EVERYONE! Some companies deal with it, some avoid the hard choices and then run whining to bankruptcy court to get an unfair advantage over those that had the guts and foresight. Same with unions: there's a reason why GM/Delphi/etc have them and Toyota doesn't. Culture and leadership. You can ignore it whine and moan, or you can step up to the plate.

[ex-auto supplier]

Don't judge Delphi, its Lean progress, and its Shingo Prizes too harshly unless you've been there. I have worked for Toyota suppliers, and I've been in Toyota (and Toyoda) plants in the US and Japan. I've also worked for traditional US automotive suppliers, including another OEM spinoff.

The "manufacturing operations" of the Delphi plants I've visited hold their own in comparison with the best in the world. And they were not in that condition when Delphi was created! Did you ever see one of those plants when they were owned by GM? I did and they were almost indescribable!

Where Delphi fell down was the overall business model, not the Lean status of their operations. Delphi's business model was doomed to failure without growth at its largest customer and former owner - GM. Instead, GM has continually lost share and total volume - cutting Delphi's throat a little more each day. Delphi's cost structure (high with everything but material as "fixed") prevented it from competitively winning new business from its US plants. Full Direct labor rates for actual workers average around $65 per hour, and those on layoff and in the "jobs bank" earn around $60k per year just for sitting at home. I've been in their shoes on analyzing where to put new business and it is mind-numbing to see it is cheaper to employ a worker in a plant with competitive wages (in the US or globally) AND pay the layoff cost than it is to re-employ the person from the jobs bank. Cheaper, but still fatal!

Delphi needed one of two things: Growth at GM and more volume at "protected pricing" to ride out the legacy costs OR reduced wages and benefits. But: GM is not going to grow in the foreseeable future, and no elected leader at the UAW could go to their membership with the cut request. So now what needed to happen will happen under the supervision of a bankrupcty judge.

Delphi's international plants do not have this problem and are not part of the bankruptcy. They are profitable and have grown.

Also, it was said above that Delphi's inventory didn't move - based on their most recent annual reports: Delphi had 13.2 turns, Denso had 9.9 turns, and Bosch 7.1 turns - Delphi was the best of the 3 largest automotive suppliers.

The original Delphi is now dead. It was not a perfect company, and it made mistakes (including some serious ethical ones) but really did a great job managing the operations it was given by GM. Remember, that Delphi did not choose any of its initial businesses - they were "pushed" the non-assembly operations that GM did not want anymore. They also did not get the same terms that earlier spinoffs received.

It should also be said that the legacy cost comments did not recently appear after a lean program failed - they have been known since before the spinoff (hence the clauses that the UAW inserted into the spinoff agreement about what happens if a bankruptcy occurs).

Delphi should be recognized for playing the cards they were dealt very well and delaying the inevitable. Unfortunately for thousands of people, it wasn't enough.

[john becks mentoring america]

The challenge is to us, in the improvement world. We need to make our programs relevant, meaningful and real. If our leadership team does not actively support our improvement efforts....the blame largely rest with us.

[Bob Miller]

My name is Bob Miller and I am the new executive director of the Shingo Prize for Operational Excellence. Two important considerations; first, for twenty years the emphasis of a Shingo assessment was on the successful deployment of lean tools, and challenging organizations were allowed to define the scope of the challenging entity, most often choosing to challenge with the scope of an individual manufacturing site or value stream.

In the last year the bar has been substantially raised, now emphasizing not only lean tools but also lean systems and most importantly a deep lean culture. Many companies recognized in the past will require a significant effort to reach the level expected today.

That being said; we have seen many excellent Delphi facilities whose deployment of Lean rivals the best. Unfortunately Delphi as a corporation still bears the consequences of many sins unrelated to a challenging entity. At the Shingo Prize we are now strongly encouraging a much broader view of the Enterprise.

We also encourage people not to pursue the Prize for the sake of the prize but we view the Prize as the results made possible not only for customers but for all stakeholders. We also believe that good leaders need to know the truth about where their organizations really are and from that place are far better prepared to create the future. The Shingo model is an excellent way to reveal the truth and point the way forward.

Go to www.shingoprize.org to download the model and assessment guidelines. Read them and decide for yourself. We hope people will use the information whether or not they ever want to receive feedback and/or recognize publicly the efforts of their team members.