During the past 25 years I have seen manufacturing migration and service degradation in the U.S. economy. We first transferred manufacturing of parts or products to our offshore subsidiaries due to our inability to solve problems. Some of the problems could be solved at offshore facilities, while others remained puzzles.
This opened doors for offshore providers to offer other services to U.S. corporations, beginning with customer service. We outsourced our ability to create tangible value and our ability to service customers. What was left in the middle was preserved here, which included management, design, quality marketing and sales. With loss of profit margin because of manufacturing capability, U.S. corporations felt the burden of the remaining support functions. As a result, we have been trying to cut cost wherever we can, including design. We have used methods such as Six Sigma and lean to cut cost in order to stay profitable, yet neglected to grow the business. We forgot that we could never compete on cost alone because rest of world has a lower cost of operations.
My experience has shown that in order to outsource processes, it must be first perfected internally. However, achieving perfection is still an issue. We probably can relate today’s experience to the experience of Toyota which systematically with a strong leadership and long-term perspective mastered the ability to solve problems almost to perfection. It took Toyota about 30 years to move from the bottom to the top of the hill. I am sure it required a long-term vision, commitment to excellence and profitable growth. While we are offshoring, Toyota is expanding operations in the United States.
Why can’t U.S. corporations adapt a similar approach to revitalizing manufacturing capability to gain a competitive advantage? Why can’t we start an industrial war against our enemies of past success, such as satisfaction with acceptable performance? We expect excellence from our suppliers, but we like to deliver mediocrity. When we ship to customers we want to know the acceptable defect level, but as customers we expect ‘zero’ defects. It simply says that we like the taste of perfection, but we are not willing to do our part.
What we need to do is regain our edge by creating value through care for customers and suppliers, commitment to nothing but perfection, correct understanding of the purpose of business and creativity of all employees. Care for customers implies we need to learn what our customers love to have, what they value, when they want it and what price they can afford. We cannot simply supply product or service that needs justification to the customer. The delivered performance must be unquestionably the best value-not acceptable by some arbitrarily set standards. The delivery of products or service must be when customers need it-not as soon as possible. If it takes extra effort, we must put into it. And finally, we need to match price with the affordability of the product or service.
Of course, it is easier said than done. Perfection can be a moving target. In the business world, perfection means being right on target to ensure the customer’s love. Perfection also means being best in class to ensure market leadership. Combining the two, perfection implies a target for being best in class for the customers’ love.
After commit to the target, we must design failure-free processes, and deploy the daily discipline to reproduce perfection, or virtual perfection. We must be cautious about delivering virtual perfection through inspection and test leading to 100% acceptable product, because it is going to be more expensive, unprofitable and marginal at best. The quality needs to be built-in through perfect design of products and processes.
Our quality societies, trade associations and government organizations must promote perfection in design, perfection in production or perfection in delivery. However, it all begins with listening to customers and making a value proposition to deliver the best-in-class, rather than the lowest cost. The total cost for a best-in-class produced product may actually be less than the cheapest product. Forming partnerships with customers is the first step for the U.S. businesses to revitalize manufacturing or the value creation.
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