In Detroit, Idle is a Four Letter Word

by Thomas Hall

Realtor, Rabble-Rouser

Author website

In a prior life, before becoming a licensed real estate professional, I was responsible for implementing supply chain technology in the discrete manufacturing arena – more specifically – the auto industry.

Over a 7 month period, between 1998 and 1999, I made a temporary home in Sterling Heights, Michigan – 16 mile and Mound Road to be exact – home to Ford Motor Company’s largest real axle and transmission manufacturing and assembly facility – one million square feet of real estate, generating roughly $1.7B of product.  The plant was as vertical an operation as I have seen, short of a foundry.  From raw forged metal, UAW workers machined gears and assembled rear wheel drive transmissions for Ford’s cars and trucks – the Mustang, Lincoln Town Car, Explorer and the Ranger pickup – at the time, some of Ford’s hottest products – the Explorer was selling like crazy.

Before setting foot in Sterling Heights, I was tasked with creating a new sales methodology, tools and implementation plan that calculated the ROI of our supply chain technology solution once implemented.  The sales methodology walked a senior executive through the hard dollar, tangible savings and return to bottom-line profit contribution our technology solution would deliver.

Process created – tools developed – mission accomplished.

Or so I thought.  Now go prove that it actually works.

My first – and my team’s feat was to sell our solution to the VP of Operations.  We walked through the process and learned from our discussions that the VP of Operations was given the directive to reduce Work In Process inventory – WIP had grown disproportionately to end-unit assembled transmissions.  This particular problem was a no-brainer – our sweet spot.  Our solution optimized the flow of WIP and synchronized the flow of raw material to end-unit assembled transmissions via planning and scheduling algorithms.  Cake.

Unique to our solution was our commitment to reduce WIP over a 12 month period.  Our proposition – Ford would pay our travel expenses and small overhead expenses for our 12 month assignment – nothing more UNLESS we delivered results over and above the $20M goal.  Any additional savings above and beyond the $20M savings, Ford would pay us a percentage of the savings – a rather sizable one.

They took our deal – hook, line and sinker.  We thought we had really pulled one off.  They thought we were nuts.

While we knew our technology would easily address the problem, we learned quickly that the problem was not one solved solely through technology.  I understand discrete manufacturing well, however, prior to tackling this problem, I thought I knew it better than I did.  I also now have a deep and profound appreciation for the complexity surrounding the manufacturing of automobiles.

Once we had the process modeled in our tool, the problem would solve itself – again, or so we thought.  In fact, in order to show some quick “wins”, we decided to model only a portion of the process – the cutting and turning of gears.  It was complex, most time consuming and possibly the most difficult aspect of the problem.  In addition to modeling the process, we had to determine our benchmark for measuring on-hand inventory so we knew whether or not we were making progress.

Over a three month period, we successfully modeled the process, created hooks to the demand management system, inputted the correct process constraints into the tool and developed the necessary reports to make sure our metrics were consistent.

It was time to turn it on.

We began creating schedules – and they made sense.  The schedules went to the floor supervisors so their workers would know what to make for their shifts.  Now we just needed to sit back and watch WIP disappear and collect our check.

Problem was, however – WIP didn’t disappear.  In fact, it remained relatively consistent.  What was going wrong?

My team and I decided to investigate by walking through the process – each step, step by step.  We wanted to see how each station was executing to plan.   Each station was executing – but not to the schedule – moreover, to full capacity.

It was at this point in time that we became enlightened.

Idle is not a good word in automobile manufacturing.  In fact, when you are creating gears for one of your hottest vehicles on the market, one does not idle anything.  To use an automotive term, you go full throttle.  In fact, the UAW contract provided incentives for workers to maximize throughput.  In order to bleed the WIP out of the process, our schedule required that certain processes remain idle – sometimes for one or two shifts in order for the already completed inventory to be consumed down the line.

It became abundantly clear that there was no way we could achieve either of our goals unless Ford changed their paradigm.  They needed to believe that idle was not a dirty word.  In fact, in our case, we could only achieve significant reductions of WIP by acting counter to the financial incentives in place.  While counter intuitive to automotive management beliefs, sometimes idle employees reduce costs even if they are still on the clock.

Here was I, a snot-nosed 34 year-old kid telling the plant manager, a 30-year automotive veteran who runs one of largest plants in Ford’s operations, that he was wasting my time and his money.  It was only through an impassioned speech stating “this shit works” in front of my boss and the plant manager’s team did we make some headway.

Three months later, my assignment ended – at the end of 7 months, not 12 – having delivered $42M in inventory reductions.  The plant manager retired and our experiment ended.

This experience has taught me alot about how technology can transform a business.  More importantly, it isn’t just technology that changes the business.  In fact, deploying technology to a process does not necessarily or inherently provide value.

In order for technology to provide true value, the people, processes and products need to be transformational.  If the financial metrics – and ultimately compensation – are not in line with the desired results, the model is not sustainable.

If people think that it will take another 5 or 10 years for the real estate business to change due to the advent of new technology – those who cling to our current business model – they may as well be like the 30-year veteran of the auto industry and just retire.