Year of the Dragon

forbidden-city-dragon-200-squareHappy New Year for the Year of the Dragon to all of my Chinese friends around the world.

January 23 is the New Year. This message is timed to appear at midnight, Beijing time, as the fireworks are reaching a crescendo.

I look at the time I spent in China as a period of great personal growth and learning.

As a bonus, I got to know the culture, aspirations, conflicts and the fabric of life there.

The relationships from that time still impact my life in very real ways every day.

Flow Assembly of a 30 Story Building

Though I have some reservations (see below), this video shows a lot of good examples of flow for final assembly – only the assembly line is vertical, and the product is a 30 story hotel.

The video actually repeats twice, once with a music sound track, then a second time with no sound.

The Good

All in all, this is pretty impressive. Let’s look at the good examples that you can incorporate into your own thinking.

First, the product is designed for quick and easy assembly from the get-go. The engineers thought through how it would go together as a core part of their design process. There was no “throw it over the wall and figure it out” here.

The design itself is very modular. Detail work is done off-line in the “feeders.” This is how you want to set up an assembly line – the backbone (main line) is installation of “big chunks” that are assembled and tested in the feeders. This helps stabilize the work on the main line.

The assembly itself was flowing. Each floor progressed subsequently through the assembly stages as more stories were being added at the top. Contrast this with the more common approach of finishing the frame, then batching the various trades through.

What We Don’t Know

It is clear that this was done as a stunt. They did a good job. There are, however, legitimate questions about how, or if, the work was organized to surface and deal with quality issues. What was the line-stop process?

There are also legitimate questions in the building trade about the long-term stability of foundations and structure that does not have time to settle as it is going up. Building that go up fast can come down fast.

We truthfully don’t have enough information to make a judgment here, but I want to acknowledge those concerns as realistic whenever we see something like this.

Apparently those issues are unfounded. I admit I was repeating what I had read elsewhere. I am certainly not an expert. (See comment below)

Still, it is really cool so I wanted to share it as a good application of flow thinking.

Offshore Hazards

When doing the financial analysis of “low cost labor” off-shore production or outsourcing, some simple assumptions are often made.

One of those assumptions is that a country that has a history of political stability will continue to do so.

While those of us in the USA may not be all that aware, Tunisia has been a popular location for offshore production for companies in France. On the surface, it makes a lot of sense. The overwhelming majority of educated Tunisians, and a large percentage of the population, speak French.

I can only imagine, in one company in particular, the scramble going on as critical parts of an already weak supply chain are being disrupted by the sudden political upheaval there.

Then, of course, there is China. As my long time readers know, I spent a great deal of time there a few years ago, and started to develop a better sense of what they are about. The USA and China will be sorting out their relationship for the next few decades because China is changing fast.

And that is the point. Those careful financial analyses tend to assume that the future will be much like the present, or at least there will be a linear progression.

Of course the Chinese themselves are interested in moving things along much more quickly, but in their own way.

The government takes a much more active role in the economy, and we are seeing a new model emerge – “government sponsored capitalism” for lack of a better term. There is a clear industrial policy, and bluntly, a stable supply of cheap plastic “stuff” for U.S. consumers is only a side effect, not the purpose.

So it did not surprise me to read this story:

American businesses are nervous about the Chinese New Year


There are a couple of key points, the gist of the article is about the annual two week shutdown of just about everything in China as factory workers go home for the holidays.

This time, though, the concern is that many of them will not return as there are new government incentives for rural workers to remain in rural areas.

The low-cost factories that sprung up everywhere in the run-up to the recession died off just as quickly when we stopped buying stuff. The infinite capacity model no longer holds.

But the long-term ramifications are actually at the end of the article:

Manufacturing of high-margin clothing goods such as denim and swimwear is growing in southern California.

"Ordering these items from China can take 12 to 16 weeks," Cohen said. But by making these items domestically, retailers can replenish their inventory much faster.

Some electronics manufacturers are shifting some production to Mexico. Others are bringing production of household goods back to the United States.

The Container Store is looking for alternatives to China, including Vietnam, Indonesia, India and Thailand.

"We also source 30% of our plastic products in the United States," said Williams.

"We want the best quality products. Sometimes that’s still only found in China," she said. "But for us, a delay in shipment, or no shipment is also a serious problem."

What we are seeing is businesses starting to wake up to some realities. Unit cost means nothing if you can’t get the stuff when you need it. And three and four month lead times means your sales and operations planning had better be dead-on, because you HAVE to sell what you predicted.

If you are relying on your supply chain management to substitute for the bulk of your production, then your supply chain management had better be world class. Sadly, companies with weak production management – the ones who see offshore as the “solution” tend to also have weak supply chain management.

We can also see Chinese companies quickly starting to emerge in their own rights, designing and selling innovative products rather than just being a contract manufacturer. They are learning, and learning fast… much faster than the Japanese learned in the time leading up to the late 1970’s when “Made in Japan” came to mean all of the best stuff.

What this means for business in the USA and Europe is that they, too, have to learn fast how to (again) stand and compete on our own – they have to decide to become good at operations rather than pretending they can simply design something, and have someone else make it for them to sell. If they are competing against another company that can design AND produce, they will be at a disadvantage because most of the value is created in production.

The next ten years will be interesting times. I’d suggest taking a page or two from a global company that, while it has certainly had its problems lately, succeeds while building product in the same labor market where they sell it.

If The Student Hasn’t Learned…

The teacher hasn’t taught.

This article, titled “Why China is Not Ready for Lean Manufacturing” presents an account of trying to teach “lean manufacturing” in a Chinese factory. The experience is summed up in a couple of key paragraphs:

The team arrived in Dongguan and went to work giving an overview class on Lean techniques. The factory workers seemed attentive and interested in learning. The next day, the Silicon Valley Lean team gathered the people from the assembly line to begin the process of working on the quality problem. After 3 hours, the Lean team ended the session in utter frustration. No one participated. No one would identify problems on the line. No one knew how to approach gathering or analyzing data. No one volunteered.

So what happened? The training was adequate and the Lean principles and methods are sound and easily understood. Why weren’t the Chinese factory workers participating?

Why indeed?

The author’s conclusion is that Chinese worker’s culture and values conflict with the idea of collaboration and contributing ideas to improve production quality and efficiency.

But the article brought up two separate thoughts.

First, there is nothing magic about Western culture. These concepts can, and do, fall just as flat in the USA and Europe as they did in this factory. The problem in these cases has less to do with the national culture, and more to do with attempting to apply a rote approach to teaching.

Second, the result cited here was exactly the opposite of my own experience in a Chinese factory.

It took some persistence, and it took some deliberate steps to remove fear from the factory floor, but in the end we had these Chinese workers making some very innovative contributions.

400ArmBoringMock01 This photo is an old boring mill. It was a slow old boring mill. We needed to squeeze cycle time out of the process to make the projected takt time. We showed the workers some photos of other teams’ efforts to mock-up fixtures so they could quickly try out ideas. The workers, after a few false starts, constructed what you see here, and ended up with a pretty good set of fixtures that could be loaded and unloaded quickly. After some trials, they figured out on their own that they could fit two fixtures on the platform, which allowed them to be unloading and loading one while boring on the other.


One of the machinists complained that the machine could run faster if it had a liquid cooling system. With encouragement, he designed and built a simple, but working, cooling system for the cutting tools. (The steel box in the foreground with a pump on it.) The clever part was the chip filter made from a bottle cap and a nail.

400BucketCellMock01 Another team was working on a welding cell. They ended up designing and fabricating more efficient fixtures than had been provided by the engineers. Then they set out to develop the most efficient way to get parts positioned, to load them quickly into the fixture, and weld up the part.



What was different?400CellWorkDesign

First, we didn’t do any classroom education. Not quite true. We showed them photos of really good welding fixtures that had been designed by a sister company. That took about 30 minutes. We explained what features made those fixtures good. Then we continuously encouraged them to try things so they could learn on their own. And try they did.

We didn’t ask them to go beyond mock-up. We fully expected to take their ideas, turn them over to engineers to get them finalized and drawn up, then have the fixtures fabricated. But the workers took it on their own initiative to dig through the (embarrassingly large) amount of scrap metal out back, bring in what they needed, machine parts, scrounge others, and built their fixtures in steel.

A number of ideas were things I could clearly see would not work. I knew that heat distortion from welding would make a particular fixture design difficult (impossible!) to unload after welding. I could tell them it wouldn’t work, or I could let them try it on their own. I chose the path that would engage their curiosity and let them learn through experience. They became better welders for it.

Honestly – this was a slow time while we were working out other issues with market positioning, sales, design and sourcing decisions, and most of this activity was intended to keep people busy and engaged. But what we ended up with was production-ready work cells, all built upon ideas from the workers.

So why did I tell this little story?

First, I will admit that I was pretty proud of these guys. This was a few years ago now, but it was fun blowing away everyone’s stereotypes about Chinese factories and Chinese workers.

But I wanted to make a key point.

Instead of looking for cultural reasons why “this won’t work here” we kept faith that, if the initial response was silence and non-participation, there was something that we needed to address in the way we taught, and in the environment we were creating.

Indeed, what the Chinese culture brings to kaizen is a centuries-old tradition of improvising with what you have to get something done. This is a great strength that can be hard to find in cultures with longer traditions of wealth.

Just as we were encouraging these workers to try things so they could learn what did work, we had to do the same thing. We didn’t give up after three hours. Eventually we managed to remove the fear and bring out the best these people had to offer.

Classroom education is actually a very poor way to teach people how to study a process, understand it and improve it. Sometimes it kind of works, but I think that is because it is marginally effective if all of the other conditions are right. Perhaps in some cultures that starting point is past the limit of what classroom education can handle. That isn’t a problem with the culture, it is revealing the inherent weakness in the approach.

There is no cookbook. There is only a clear objective, and good faith effort to keep trying until a solution is found.

Epiloge: Yes, this factory got into production. However the parent company could never get traction in this market with this product and recently made a decision to close this plant and pursue a different strategic direction. That is not a reflection at all on the people who did the work in these photos.

Reprise (again) – Know Your Supply Chain

AP IMPACT: Chinese drywall poses potential risks

Although I hate to judge before all the facts are in, it’s beginning to
look like a huge set of customers got burned (once again) by quality problems from China.

Before I go any further, I have to say that I have spent loads of time in China. I have very close Chinese friends. The Chinese are like everyone else in the world – hard working honorable people. But, just like everywhere else in the world, now and then someone takes shortcuts with known technology, or doesn’t understand the “Why?” behind industry standard practices, and rarely, there is a real crook.

The great question, though, is “To what degree are the importers, builders and contractors culpable, and to whom?”

The U.S. arm of the Chinese company is swearing up and down that their product meets U.S. standards. Pretty standard rhetoric for muddling the issue.

I don’t even want to get into the legal issues here. They are going to be very messy.

But if you bought a car, and it turned out that the imported, outsourced seats were emitting noxious fumes, I doubt you would turn to the seat manufacturer to resolve the problem.

OEM’s? Know your suppliers, know your supply chain.

Unfortunately we will end up with a ton more government regulation as a result of industry being unable or unwilling to assure its own quality, and that is going to cost all of us.

Kind of makes the term “toxic assets” more real, doesn’t it?

Supplier Selection: Beyond Quality, Delivery, Cost

Do you have a responsibility to make sourcing decisions on anything other than Quality, Delivery, Cost? This news item about a mass-fatality industrial fire in China opens up some interesting thoughts about sourcing over here.

For future reference after the link dies, the lead of the story is:

A fire at an illegal shoe factory in eastern China has left 34 people dead..

That, by the way, is a great lead. It summarizes the whole thing in a few words:

  • China
  • illegal factory
  • fire
  • 34 dead

The rest is just syntax glue. But, as usual, I digress. What the hell is the point?

Just to be clear, by the way, the original breaking-news story in no way implies that this factory was producing for export, or for that matter, for any other company. So the story is just a lead-in for this post.

Back to the lead of this article: What is your obligation, as a purchasing company, to consider things other than quality, delivery, cost in your sourcing decision?

With the rush to source in China, it is very easy to overlook even obvious things like quality. Just ask Mattel. But if gross violations of China’s internal health, safety and environmental regulations give a potential supplier a cost advantage, do you know it? Do you make a conscious decision to let that “advantage” stand? Or do you go and look for yourself, and include only suppliers which comply with the letter and the spirit of the law – as well as “do the right thing?”

Chinese health, safety and environmental regulations, by the way, are in many cases stricter than what you find in the USA or Europe. Compliance and enforcement, though, is… ah… spotty.

This is, in my mind, an ethical decision, not a legal or financial one. I can only raise the question and let you answer it in your own mind.

One more thing. This was reported on the BBC. The only way I can read BBC news on the internet in China is to go through my corporate VPN. If you try to access BBC News on a normal internet connection, you will get a “Server not responding” error because BBC is not considered appropriate for the Chinese people to read. Frankly, it seems a little arbitrary since every other news service is more or less accessible. Maybe I will start another blog sometime and just talk about “other stuff.”

Trust, Then Verify

This article NPR : Mattel Recalls More China-Made Toys highlights one of the problems with doing business with an unproven supply chain.

In this case, the OEM in China had specified the correct paint to their supplier – who was a friend of the owner – but the paint supplier had given them less expensive lead based paint. (Some friend, huh?)

As the story reports, the owner of the OEM company took the coward’s way out and hanged himself.

So – Mattel probably trusted that their OEM supplier in China would deliver what they specified (and would continue to do so after first article inspections). The OEM, in turn, trusted their paint supplier would deliver as specified. Now Mattel’s reputation is in recovery mode and China itself is internationally embarrassed. (Believe me, they do not like it when that happens. On second thought, maybe suicide wasn’t a bad strategy after all.)

The awful truth is that the world out there has people in it who either do not understand that a particular specification is important (which is pretty common here), or worse, are out to make more money (less common, but it happens).

Lean Thinking Question:
What would you learn from this if YOU were Mattel?

Back in China

At the end of the last post I promised to write more when I was over the jet-lag of returning from three weeks in China. Well.. I didn’t, and how I am back over here.

While I was in the USA I took some time off, or at least I did during my “day job.” Since I live near Seattle, it is 5:00 pm there when the people here in China get to work and the Blackberry starts buzzing. Thus I am on and off email until either: Things get quiet long enough for me to just decide to go to sleep or 2:00 am when they end the workday here at 5pm.

For better or worse, my approach here has been to try to establish from the beginning a sense that we don’t wait for an “event” to study a process and look for improvements. Instead, we study and improve every time we do it. I am trying to instill a culture that continuously compares “what is happening” vs. “what should be happening” and acts whenever there is a gap.

Overall, however, I find the main role here is to get the right people equipped with the right skills and tools, and ensure they are working on the right things, then supporting them.

“Working on the right things” means taking responsibility for what is not going to get done right now rather than assigning a dozen “#1 priorities.”