The Lean Way Forward at FORD
By
Jim Womack, Coauthor of Lean
Thinking
I've been reflecting on today's remarkable headlines about the latest retreat by the Ford Motor Company as part of its "Way Forward" campaign. While reflecting, I have found it useful to think about the history of lean thinking at Ford, going back nearly 100 years. I believe it offers many useful lessons for our current-day lean journey and Ford's immediate choices.
The historical record is clear. Henry Ford was the world's first systematic
lean thinker. His mind naturally focused on the value creation process
rather than assets or organizations. And he was the first to see in his
mind's eye the flow of value from start to finish, from concept to launch
and from raw material to customer. In addition, Ford was history's most
ferocious enemy of waste. (Except, possibly, Taiichi Ohno at Toyota who
claimed that he learned what to do from reading Henry Ford's books.)
Ford
relentlessly emphasized the need to analyze every step in every process
to see if it created value before finding a way to do it better. Otherwise
the step should be eliminated. (This was Ford's greatest criticism of
Fredrick Taylor and Scientific Management. Why, asked Ford, was Taylor
obsessed with getting people to work harder and more efficiently to do
things that actually didn't need to be done if the work was organized
in the right sequence and location?) Then, when the wasteful steps had
been eliminated, it was time to put the rest in continuous flow.
By 1914 at his Highland Park plant Ford had located most of the manufacturing
steps for his product - the Model T - in one building and had created
very nearly continuous flow in many parts of the operation, using single-piece-flow
fabrication cells for components in addition to the moving final assembly
line. He had even devised a very primitive pull system by using "shortage
chasers" on timed routes along the assembly line to check inventories
at every assembly point and convey the information back to the fabrication
areas. This speeded up upstream processes that had fallen behind and slowed
down those that were getting ahead.
Equally
remarkable, Ford had designed his Model T in only three months in one
large room with a small group of engineers under his direct oversight.
This surely was a high point in lean practice for decades to come.
Then
it gradually fell apart. Ford's span of management control at Highland
Park had been remarkably broad because he could easily take a walk to
see the condition of every process, in design, assembly, and fabrication.
And he could train a cohort of managers to see what he was seeing and
remove more waste. No abstract measures of performance were needed.
However, as the company grew Ford's personal management method became
impractical. But what to replace it with? Ford himself seems not to have
had an answer except to link every step by conveyors - as he attempted
to do at the massive Rouge complex completed in the late 1920s. By the
1930s the whole Ford Motor Company was in a sense one linked process.
(Ohno, of course, realized that lengthy conveyors governed by a central
schedule are a push not a pull system, but this was much later.) Did this
mean that in the founder's mind that the company needed only one manager
-- Ford himself -- even as it became the world's largest industrial enterprise?
In
any case, the system came crashing down in the 1930s as Ford tried to
produce multiple products with multiple options in wildly gyrating markets.
Only the staggering cash reserves from retained profits during the Model
T era kept the company going until Henry Ford II was able to take over
in 1945.
But
what management system should he impose on the chaos? Henry Ford II read
Peter Drucker's 1946 classic, The Concept of the Corporation, praising
the General Motors management system and quickly remade Ford in the image
of GM.
What
a different system it was! Henry Ford had managed by going to the gemba
to inspect the value creation process. General Motors executives managed
by analyzing financial abstractions. For example, asset utilization (normalized
for sales volume), days of inventory, cost of scrap, etc. in the factory.
Available engineering hours utilized in product design. Managers were
then rewarded for making numerical targets using methods developed by
staff experts that managers rarely understood. A good way to make many
of these numbers was to make products in large batches in order to achieve
high asset utilization and low cost per individual step. The total value
creation process from end to end -- which had been so clear to Henry Ford
-- was gradually lost from view.
Soon
Ford executives using the financial measures developed by finance czar
J. Edward Lundy were even more rigorous in analyzing the performance of
their area of control than GM executives. Robert McNamara and the Whiz
Kids were the exemplars. And Ford did regain competitiveness as a GM clone,
claiming a stable second place in the auto industry.
In addition, by the late 1940s Ford was one of three U.S. auto companies
using the same management system in the same town with the same union.
With high investment barriers to entry, a remarkable era of stability
was put place, lasting nearly forty years until the transplant Japanese
factories succeeded in the U.S. in the later 1980s.
When
it suddenly became apparent at that point that the leading Japanese companies
-- Toyota followed by Honda -- were using a different management system,
it was very hard for Ford to respond.
In
the late 1980s, as Dan Jones, Dan Roos, and I wrote The Machine That Changed
the World, we were able to document that Ford had applied a number of
lean techniques in its assembly operations and was making dramatic progress
in manufacturing productivity. We took this to mean that at least one
American company was applying lean principles and with good results.
What we couldn't report, because we had no way to measure it, was the
status of the management system. And this was largely unchanged. Ford
managers were still manipulating abstractions because the gemba consciousness
of the early Ford Motor Company had been lost. Even worse, in the product
development and supplier management processes, no change had occurred
at all.
But
Ford could still be successful in its home market for another 20 years
by developing large pickups and SUVs. These were essentially America-only
vehicles, suited to wide roads and low energy prices. They could only
be challenged by Toyota and its Japanese emulators if they were willing
to design vehicles specifically for the U.S. market and to locate production
in North America.
In
1997 I got a call from Jac Nasser, who had just taken over Ford's North
American Automotive Operations on his way to becoming CEO of Ford. He
matter-of-factly told me that Ford's Explorer and F100 pickup series were
the only Ford products that made serious money and that he calculated
that he had four years to become as efficient and effective as Toyota.
Otherwise, the large pickups and SUVs would be copied by foreign firms
at lower cost with higher quality and Ford would be in terminal decline.
"So," he asked, "how can Ford become Toyota in four years?"
We
sat down to talk over just what this would mean -- dramatically changing
the supplier management system, dramatically changing the product development
system, dramatically changing the production management system, dramatically
changing what managers do -- and he quickly concluded that it was just
too hard. So he changed the management metrics, purged the poorest managers
according to the metrics, and experimented with selling cars on the web!
I was not asked back and had no desire to go back.
Ford
actually survived for five years beyond Nasser's projected meltdown date
- although Nasser didn't as CEO -- to arrive at its current crisis. But
my prescription for new Ford CEO Alan Mulally is the same: Fundamentally
rethink the supplier management system. Fundamentally rethink the product
development system. And fundamentally rethink the production system from
order to raw materials and from raw materials to delivery, with special
attention to the information management system. (Much can still be learned
from Ford's Mazda subsidiary, which became an able pupil of Toyota after
a crisis in 1973.) Above all, fundamentally rethink what mangers do and
how they do it in order to regain the gemba consciousness that originally
took Ford to world dominance. In brief, Ford needs to remake itself once
more, this time in the image of the company that copied Ford's original
system: Toyota.
In
addition, finish rethinking the social contract as Ford becomes a normal
company (not an oligopolist) in a normal town (where labor doesn't come
from one supplier) that must live in a global market. Finally, rethink
brand strategy to get rid of hopeless makes that can never make money
- Mercury, Jaguar, Lincoln too? -- while refocusing the remaining brands
on what customers really want -- sophisticated, hassle-free transportation
in every price range. (A hint: Rethink the vast gap between the company
and the customer to provide hassle-free mobility on a continuing basis
to user-partners rather than selling cars to strangers in one-time transactions.)
Who knows whether this is doable in the time still available but it is
the lean way forward. It will be tragic if the originator of lean thinking
is crushed in the end by failing to learn lean lessons from its most earnest
pupil.
This free
e-mail is a service of ICMS, Inc.
For more information on ICMS products and services, call 817-475-2945.
ICMS,
Inc.
PO Box 13206 Arlington, Texas 76094
Phone: 817-475-2945
E-mail: tompryor@icms.net
