The Stalwart

The Lean Index In The Black

My friends at Evolving Excellence put together an "index" of publicly traded lean manufacturers, so that their performance could be compared to the broader indexes. Been meaning to give 'em props on that forever. Anyway, not that it means too much at this point (it'll mainly be interesting 10 years from now, says I), but the index is now in the black this year and is an outperformer. Very cool.

Apparel Manufacturing In New York State

If you live in New York. And you tire of your desk job. Then read up on it at Fashion Incubator.

A Good Old Enterprise Software Failure Lawsuit

Reuters:

Waste Management Inc said it spent more than $100 million on a computer system that was supposed to help it save money, but instead turned out to be a "complete failure," according to a lawsuit filed.

A couple things I wonder about. How many companies experience the same level of "complete failure" but don't sue? How many companies see a "complete failure" but assume the problem is on their own end, spending hundreds of millions more on post-implementation service?

Will be interesting to watch how this unfolds.

Making The Number

Andrew Schmitt, in the comments to a previous post, mentioned the predilection of semiconductor firms to smooth out their earnings numbers, often through illicit means. You often hear about companies "smoothing" out or "engineering" their numbers, though there's not a lot of discussion about what this actually means, or what the consequence of this.

The book Rebirth of American Industry, which basically argues that our system of accounting creates perverse to actual industry had a great section walking through the process a widget maker (ACME widgets, not Facebook ones) goes through to make the number. It's an ugly process that involves all kind of waste, overproduction, moving goods into a different basket, etc. Unfortunately, I've lent out my copy at the moment, so I can't copy an excerpt. The point is, it's counterproductive and it has long-term negative consequences, because it leads to a build up of inventory and plant mismanagement. I recall after reading it feeling a little bit of a chill thinking about the analogy would be in the financial world -- the furious end-of-the-quarter machinations to hit the number and what they looked like.

Software Failure Leading To Bankruptcy?

Shades of Hershey's infamous ERP disaster here... American LaFrance, a manufacturer of fire engines is blaming a failed ERP implementation from IBM on its going into bankruptcy:

Almost immediately upon the changeover to the ERP System, ALF recognized serious deficiencies with the system that had a crippling impact on ALF’s operations. Some of the problems that ALF encountered in implementing the ERP System included, among others: (i) inability to reconcile data between the Freightliner system and the ERP System; (ii) incorrect or incomplete inventory, purchasing and customer data due toeither problems with the Freightliner system or the conversion of thedata to the ERP System; (iii) inaccurate or incomplete vehicle configurations loaded in the ERP System; (iv) insufficient training on the ERP System; and (v) missing financial information including accounts payable detail, incomplete or inaccurate accounts receivable data, and inaccurate beginning general ledger balances.

For the next several months following the changeover, ALF attempted to solve the plethora of problems with the ERP system. Despite such efforts, as a direct result of the problems with the ERP System, ALF became unable to complete the manufacture of many pre-ordered vehicles.

It's hard to say whether there's validity to this, though the above link offers some analysis. Actually, it's worth reading the whole thing, cause it goes pretty into depth.

Hmm, there doesn't seem to be a Wikipedia page for the most infamous ERP implementations of all time. Someone get on that, please?

(via RISKS Digest)

More: Ah the bizarre things that lie in the dark recesses of the brain. I was trying to remember a particular instance when Nike blamed an earnings shortfall on a failed software information. Couldn't remember the name of the software provider (though I knew it wasn't SAP). What I did remember was that some magazine titled their report on the situation "Flagrant Foul!". Yeah, I know. Turned out it was a Smart Money piece back from 2001, and the software maker was I2 Technologies. Read all about it here:

NIKE TELLS THE world that its shoes are great for basketball players, giving them the ability to jump 30 feet into the air, perform a 360-degree slam dunk and land squarely on top of a defender's head, leaving an imprint of the famous swoosh on an opponent's face.

But much to the dismay of I2 Technologies, a maker of business-to-business software working for Nike, the swoosh footprint can also be squished into a teammate's head when the shoe company is in trouble.

On Monday afternoon, Nike announced that it expected its third-quarter earnings to fall at least 28% short of the consensus Wall Street expectation. And, perhaps trying to deflect shareholder wrath, Nike blamed I2 for part of the shortfall. I2 is overhauling Nike's supply-chain system in its footwear division, which provides 57% of the company's overall sales. I2's system, Nike contended, directed the company to stop shipping shoe models that were selling well and produce more shoe models that weren't.

Shareholders left tread marks all over both Nike and I2. Nike was sent down 19.5% to $39.60, while I2 took a 22.3% pounding, falling to $27.56.

More 2: Hmm, it's too bad "Joe Herrick of Gutterman Research" wasn't on that call.

An Awesome Honor For The 'Wart

Last night I linked to Evolving Excellence's lean manufacturing year in review. I honestly didn't realize that down at the bottom, I was mentioned as being part of the community of lean bloggers. Tres cool. It's probably undeserved given how little I know, but whatever. Also, there are some links there to other bloggers that I'll have to check out and put in my reader.

You can take your techmemes and other clubs of web 2.0 coolness. I'll happily roll with the manufacto-bloggers any day.

Lean Manufacturing

2007 in review

$4.6 Million for Lean Boxes

It'd be truly great if all packages shrank to the size of the items they contained. Like if a carton of milk or yogurt or a box of cereal got smaller and smaller as its items diminished, you'd have a major quality of life improvement on your hands. Anyway, I'm not sure what the prospects are for this in the retail space, but on the industrial end, there's work being done on lean packaging. Came across this VC funding the other day:

Headquartered in Salt Lake City, Utah, Packsize is the world's leading provider of lean packaging solutions for businesses with complex corrugated packaging needs. Packsize was founded in Northern Europe and first introduced the concept of Right-Sized Packaging On Demand. The Packsize system delivers an alternative to the existing corrugated supply chain by eliminating the need for large inventories of pre-ordered cardboard boxes, reducing the "footprint" of the packaging process, and trimming labor required for boxing and shipping.

I wonder if there are any lean VC funds out there -- as in, funds specifically focused on investments in lean manufacturing.

Manufacturing India

The Coming Indian Manufacturing Boom:

Quick, from a Spend Management perspective, what's the biggest difference between India and China? If you guessed that India was largely services focused and China had more of an industrial bent, you'd be wrong. India, in fact, is headed down the manufacturing path as well. A recent summary of a CGE&Y paper in Supply Chain Management Review captured some anecdotes that show why. According to the story, "A survey of more than 340 manufacturing companies around the world confirms that India could rival China as the most sought-after location for manufacturing within five years."

This seems like it would be a key development for the Indian economy. After all (as has been noted several times elsewhere), it's a lot easier to train factory workers than to train folks to become IT consultants.

When Even The Dominican Republic Is Too Expensive...

This post is for my friends over at the blog Evolving Excellence, which has been getting some well-deserved attention lately from a range of blogs (some of it from me over at Techdirt).

Anyway, this morning I saw the news that Hanes is planning to move 5300 jobs to lower cost markets.   Typical?  Sort of:

The underwear and apparel maker said Wednesday it will close plants affecting nearly 5,000 employees, mostly in Mexico and the Dominican Republic. Positions in Canada, the United States and Puerto Rico also will be eliminated.

Going forward, the company will open up more plants in lower-cost South American and Asian countries.  The stock is up on the news, because Wall Street, of course loves the idea:

"The math works," Morgan Stanley analyst Brian McGough wrote in a research note. "This is completely in line with the longer-term plan to right-size the cost structure of this business."

Hey Brian, did you know that the word gullible isn't in the dictionary? 

What are we to make of any company that finds the Dominican Republic labor market too expensive?  According to the CIA, the GDP per capita is about $8,400 in that country.  And seeing as the company seems set on jumping on whatever country has the lowest labor costs, how long can we expect it to stay in the countries that it's going to?  How long before the next round of labor cuts (and attendant "one-time" charges).

Look, none of this rant is motivated by any bleeding heart or anti-globalization sympathies.  It's never nice when someone loses their job, but that's not my main beef . I'm just wondering why people would think that the company is exhibiting sound practices by getting on this treadmill, rather than, say, pursuing more efficient industrial practices.

(disclosure: Given the runup in shares, I may take out a small, speculative short position in the company.  If nothing else, this will force me to pay attention to it and test my sense that Wall Street's love of moves like this is misguided).