Either change or get killed.
A few years ago, General Electric of the United States did an experiment.
They moved water heater production from China to the United States. As a result, a miracle happened: the cost of water heaters produced in the United States is lower than that in China!
Americans were overjoyed and called it inspiring.
But for Made in China, this is not good news.
[Guangdong Enterprises Are Favoring Danaher]
For a long time, we thought that American manufacturing was in decline. Even the whole world thinks so.
The General Electric (GE) experiment reminds us that some things may not be so absolute. “The water heater produced by the headquarters can generate profits without raising the price.” The GE executive said proudly.
Despite this experiment, it ultimately failed due to weak demand in the U.S. market. But the facts reflected behind it are worth pondering, that is:
Made in the U.S. can also gain a low-cost advantage.
This is not a fantasy. In many fields, this has already happened. In 2013, when Fuyao Glass set up a factory in the United States, Cao Dewang was surprised by the low price of land and natural gas there.
Cao Dewang’s discovery is only an appearance. What really makes Americans confident in reviving domestic manufacturing is a management revolution and trend that has become popular in the United States since the 1990s:
Lean production.
That’s the secret behind the GE water heater factory. This trend has not only changed American giants such as General Electric and Intel, but also triggered global companies to follow suit.
For example, since the beginning of this year, many Chinese manufacturing companies in Foshan, Guangdong and other places have learned from an American company, Danaher , with great enthusiasm.
Fang Hongbo, chairman of Midea Group, even went to the United States to watch Danaher in person as early as 2016.
When it comes to Danaher, most people are confused, but the name is in the field of scientific instruments, and it is the second largest scientific instrument manufacturer in the world after Thermo Fisher.
However, Danaher is not only known for its scientific instrumentation products, but also for its Danaher Business System (DBS) .
Over the past few decades, Danaher has made more than 600 acquisitions around the world and has used this DBS system to integrate every business. After the transformation of the enterprise, the gross profit margin has increased significantly, and almost never misses.
This makes Danaher the undisputed king of mergers and acquisitions.
DBS system has five key points, one of the core is lean production .
Lean means eliminating waste and improving continuously. In the words of former Danaher CEO Larry Culp, there are three major concepts of lean production:
First, focus on customers.
Second, eliminate waste.
Third, ruthlessly prioritize work.
Today, lean is in Danaher’s DNA, running through every link of the value chain, even the front desk operator.
The purpose of lean production is to reduce costs. This is like a life-saving straw for many companies facing economic downturn risks and in difficult times.
This is the reason why Guangdong companies are so popular with Danaher.
“We realized the benefits of lean,” said Zeng Xueqin, vice president of Guangdong Huaxing Glass.
More than ten years ago, Huaxing was a small factory with an annual output value of only 500 million yuan. By promoting process optimization, its annual revenue has reached more than 8 billion yuan.
Since 2022, Zhou Qiren, a professor at Peking University, has researched many companies across the country, and finally came to a conclusion: In a severe environment, companies must not only have will, but also have a set of methods to survive.
This method is Lean Manufacturing.
【Lean, Reinvent Made in America】
Lean production is not only a set of tools, but also a business philosophy.
Its idea originated from Taylor’s scientific management and Henry Ford’s assembly line production.
Later, after the development of Toyota and Taiichi Ohno, it eventually became the secret weapon for Japanese cars to defeat the United States and swept the global market.
In 1950, Toyota, which was hit hard by World War II, almost went bankrupt.
In order to survive, the Japanese began to learn from the United States. They brought in the quality management guru Edwards Deming from the United States. In packed university classrooms, Deming taught the Japanese about total quality management, statistical process control, and more.
Eiji Toyoda, the nephew of Toyota’s founder, and Taiichi Ohno, Toyota’s chief production engineer, also visited Detroit several times.
Even though U.S. automakers were eight times more productive than their Japanese counterparts at the time, the pair noted that there was waste all over the Ford plant.
Americans may think it’s okay, but for resource-poor Japan, this is a fatal blow.
Toyota couldn’t afford new machines and technology, and it couldn’t afford to pile on the production line. Starting with the elimination of waste, the production line was completely rethought. A mountain of inventory. They ditched the Ford model,
Finally, a new production method, the Toyota Production System (TPS), is proposed.
TPS has two magic weapons: just-in-time production (JIT) and the Kanban system. JIT achieves the goal of reducing inventory, or even zero inventory, by producing on-demand when needed.
The Kanban system ensures defect rates, reduced variability and a rationalized production process.
These concepts were so revolutionary that in the 1980s, the Japanese auto industry, transformed by TPS, smashed its American counterparts.
Now, it’s Americans’ turn to worry.
In 1985, led by Jim Womack, the Massachusetts Institute of Technology spent five years inspecting 90 auto assembly plants in different parts of the world, and finally condensed the research results into a book:
“The Machine That Changed the World”.
In the book, the introduction of the Toyota Production System has made the term “lean production” famous all over the world.
Lean manufacturing has such a strong memory for Womack that, decades later, he still remembers the difference: Japan’s car production line is well-organized, like a hypermarket, compared to American car production lines. It’s as chaotic as a vegetable market.
This book has had a profound impact on the American manufacturing industry. Many large American companies, including Apple, Dell, and Intel, are actively practicing lean production.
Michael Dell delved into JIT and restructured the company’s production line. Bill Gates marveled at the Japanese Kanban system, saying that all business activities must be transformed to Kanban.
Of these converts, Larry Culp, then the head of Danaher, was the most positive.
During his 14 years in charge of Danaher, he not only actively practiced lean production, but also summed up more than 80 lean improvement tools on this basis, thus creating the miracle of Danaher.
In 2018, Larry Culp, 55, was named CEO of GE.
At the time, General Electric (GE), with $87 billion in debt, faced one of the biggest crises in a century.
Everyone has high hopes for Culp, hoping that he can lead GE out of the quagmire. And Culp also bears the heavy trust. One of the most important measures after taking office is to introduce lean production.
Prior to this, his predecessor Immelt had already tried his hand at the water heater product line, with good results.
This time, Culp is playing with a bigger one.
In Greenville, South Carolina, GE owns a factory that makes giant turbines. Before the renovation, the blades here had to move 4.8 kilometers on the production line, which took 85 days to complete.
After Culp took office, the production team dismantled old machines and rebuilt the production line, which not only greatly shortened the production line, but also cut the production time by nearly half.
The same changes are happening at the aero-engine plant in Lynn, Massachusetts, and even at GE’s factories around the world.
Today’s GE is getting a new lease of life.
Culp attributes the change to lean manufacturing, “I don’t know of any other way to run a business than lean principles.”
【Redefine low cost】
In the past 20 years, Chinese manufacturing has swept the world with its low-cost advantage.
According to this, many people believe that this advantage will continue, and the expensive US factories will never be able to produce cheaper products than China.
However, the practice of lean production by American companies represented by General Electric is a warning to us: the low-cost advantage of Chinese manufacturing is not unbreakable.
On the one hand, as wages rise, our advantage in labor costs is gradually being replaced by Southeast Asia.
On the other hand, the cost of resources such as land and natural gas in the United States is lower, and now it is replacing labor with robots and playing lean.
This kind of double attack is a huge pressure for Chinese manufacturing.
In fact, American manufacturing is not as fast as many people think.
By collating data from the United Nations Statistics Division over the past 50 years, we can easily draw a conclusion: US manufacturing is still strong.
The following two figures reflect the changing trend of the global manufacturing share of countries from 1970 to 2020.
As can be seen from the figure, since the 1990s, China’s share in the global manufacturing industry has continued to soar, and in 2010, it surpassed the United States and ranked first in the world.
However , the US manufacturing industry has also stabilized its position, and its global share has remained above 16%. The real laggards are Japan, Western Europe and Russia.
If broken down, we can also find that the decline of the US manufacturing share is mainly concentrated in traditional industries. This is the result of a global industrial shift over the past few decades.
In high-end manufacturing, such as semiconductors and aerospace, the U.S.-made advantage remains widespread.
The reason is, on the one hand, the technological superiority of the United States, and on the other hand, many people attribute it to the rise of lean production in the United States since the 1990s.
This is not just an American view. Many companies around the world are also learning lean production and have achieved remarkable results.
In the 1980s, Foxconn was still a little-known small factory.
In order to improve efficiency, its founder, Terry Gou, invited more than 50 experts from Japan to stick to the mold development cycle. In the end, with the fastest mold development speed in the world, it is one of the best.
In China, many excellent companies, like Foxconn, are practicing lean production principles either explicitly or implicitly, such as Huawei, Midea and Fuyao Glass.
This production model is so important to Foxconn that in Terry Gou’s view, lean production is the only way to catch up with the world-class level.
However, while we are catching up, our competitors are also improving.
For example, at the moment, General Electric, which has a history of more than 120 years, has started software in a fashion. Culp vowed to use digital technology to improve turbine technology.
A few years ago, he even ordered that employees no longer use paper samples.
A GE that understands leanness will become even more frightening once it is completely successful in digitalization. And this change is now happening in many companies in the United States.
In contrast, although Chinese enterprises are also actively embracing digitalization, many enterprises, especially small and medium-sized enterprises, have not even mastered the internal skills of lean.
In the view of Midea, who practiced lean production earlier, lean is the foundation of digitalization. “Without lean, there will be no digital.”
Renault Anjolan, a world-renowned quality expert, has visited many Chinese companies. He found that many Chinese factories were either losing money, making no money or making small profits.
In Anjolan’s view, if these companies are to survive, they must make changes.
” If they still stick to the old way of doing things in 10 years, at least half will fail .”
An important point about the change that Anjolan said is to become more lean. The reasoning is simple: if your competitors are leaning and you are not, the results waiting for you can only be:
Killed by the opponent!
Source: Chinese businessman Zhang Jingbo
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