Strategic Planning
Part 3 of 7

 The Lean manufacturing, PPT Plus,
"Back-to-Basics" e-Training Package 
Lean Manufacturing Solutions

Increase the effectiveness of your
Lean Manufacturing Training Program
Lean Manufacturing Simulation Game 

Return on Investment (ROI)

The primary tool of the trade for this proactive analysis was return on investment (ROI), soon to be followed by dis­counted cash flow (DCF) method, Payback method, and others. The primary focus of these tools was on short-term financial return. The vigorous application of them led to decisions based on narrow, short-term financial criteria. Corporate and manufacturing strategic criteria were given little consideration. The impact of this approach was that funds were generally available for new products and for the minimum production support needed to produce them. Funding for significant process improvement and process innovation was unlikely to be approved. Factories became a collection of systems and technologies better able to satisfy certain short-term financial criteria than to enable manufacturing to fulfill its primary missions. Corporate strategy and manufacturing strategy became disconnected.

Results of Finance and Accounting Initiatives

The result was a further deterioration of overall company performance at a time when foreign companies were be­coming a viable competitive threat. Domestic profitability, quality, and delivery lead times continued to decline and the complexity of the factory floor continued to increase.

Manufacturing in the Shadows

As we entered the 1980's, the manufacturing function was a shadow of its former self. It continued to suffer from a glut of the wrong new products, product volumes were reduced by incorrect product differentiation, and there was an inability to fund capital projects for systems and tech­nologies that could generate real improvement.

Manufacturing Forced into a Short-Term Focus

In the midst of an operational environment of growing complexity, manufacturing was increasingly unable to meet its primary goals of cost, quality, and delivery. Because of this inadequate performance, Manufacturing was forced into a short-term orientation in the hope that such a focus would significantly improve performance. It did not. Moreover, this short-term focus removed the remaining remnants of any meaningful linkages between manufacturing operations and the company's strategic goals.

'Manufacturing Is the Problem'

Manufacturing now had little status or influence. It was largely a non-participant in strategic discussions and in strategic planning processes. By now top management, which held the necessary power and influence to direct needed changes, likely had no significant manufacturing education or experience. This widened the communica­tions gulf between top management and manufacturing. To add insult to injury, manufacturing was no longer judged as unable to solve the problem(s), it was now deemed to BE THE PROBLEM. Meanwhile profitability, quality, and delivery lead times continued to decline or at least improve at rates slower than those for the competition.

Manufacturing in the 1990's Some Manufacturing Success Stories
As U.S. Manufacturing entered the 1990's, we see substan­tial improvement for a few companies in a few industries. This convinced us that a path out of the current predica­ment was possible for us. The number of success stories was not large but sufficient to illustrate that world class manufacturing was achievable.

Chaos for the Rest of Us

For the rest of us, although we are convinced a path is possible, the correct course is still unclear. We know we are in trouble. Profitability, quality, delivery lead times, and delivery reliability are unacceptable.
Some of the new systems and technologies we have at­tempted to implement in the last few years have not received approval, many have failed during the implemen­tation phase, some have been implemented but were mar­ginal performers, and some were implemented but failed to improve performance. Our employees are frustrated, overworked, and underrewarded. So in some degree of desperation, we choose the only solution we can determine. We joined the "fad of the month club."

The 'Fad of the Month Club'

The "Fad of the Month Club" is the process many companies are engaged in today. They select one or a few of the systems, technologies, and techniques from the 100 or so that are getting significant publicity. There is no shortage of those that promise to solve your problems. Each may be a viable tool worthy of serious consideration. Unfortu­nately, too often they are poorly selected, poorly under­stood, inadequately supported, and prematurely aban­doned for some other member of the list of 100. They fail during implementation, perform poorly, or backfire mak­ing things worse than they were before. Those that do not show quick results are dropped and the process is repeated over and over again in a vain attempt to find the key to the fountain of world competition.

To be Continued