Re: Update 4: Moral dilemma at work....

I hate bloody mindedness wherever it is. Folks were wondering why the Japanese handed us our lunch in the late 60s and 70s. Whenever I see Sigma 6 and lean manufacturing, I cringe. It usually is a strong indicator that the firm has problems in keeping it's manufacturing under control. Easier to do TQM seminars than FIX the problems. Consultants make a killing.

F. George McDuffee wrote:
On Sun, 17 Jun 2007 10:25:15 -0500, Louis Ohland
<ohland@xxxxxxxxxxx> wrote:

This is the bottom line. To make one (bonehead) customer happy (sort of), extra time and parts were added to this job. This happens in other machine shops. I hope someone from sales _learned_ about profitability.
==============
In all likelihood they did not.

In general this is not because of evil intent or boneheadedness
on the part of sales, but a deliberate management effort to
restrict information on a "need to know" basis.

This policy of information restriction appears to have three
major causes: (1) We have always done it this way; (2) If
everyone knew they might not need [so many] managers, and I might
be one of the ones to go; and (3) People ask less questions this
way, and its easier to cook the books.

At one of the corporations where I worked the corporate
executives continually screamed about low profitability and
ranted on about how the production arm wasn't doing its job. As
a relatively new hire/transferee at one of their major production
facilities I was tasked to see where we were screwing up.

I had discovered by that time that the first thing to do was to
talk to the older employees, as they tended to know "where [at
lease some of] the bodies were buried."

They identified several products, which were very difficult to
produce, involving considerable rework and scrap, mainly because
of defective materials and worn-out fixturing/tooling and
machines.

I also talked with our accounts receivable people to determine
why we had such slow paying customers and never seemed to make
any late charges.

After considerable digging, and quite frankly managerial
obstruction, I determined that we were indeed losing money on not
only the identified products, but several others, all of which
used components that were being manufactured using
obsolete/defective die-cast [zinc] and/or compression molding
[phenolic] dies. Not only were the die-cast dies severely heat
checked in critical [seal] areas, these had been modified over
time to add features which should have resulted in a new die, but
to limit the die cost, the die was simply modified which resulted
in serious venting and flow problems producing considerable
porosity and cold-shuts. The phenolic compression die was
simply worn out, producing oversized parts and gross amounts of
flash. In conversation with the supplier I discovered that this
was to the point they had to increase the weight of the preform
to compensate for the flash as otherwise insufficient compression
during molding was resulting.

The cost accounting system was carefully set-up to keep the
standard cost as low as possible, and scrap/rework were not
charged to specific products but as general shop scrap and
rework. Purchasing was judged on how low they could keep [or
reduce] the initial in-the-door part cost.

The result of this was that basically scrap materials had been
purchased for years, and the production people were expected to
make "a silk purse out of a sow's ear."

Even worse, was the use of worn-out machines, fixtures and
tooling to process this "scrap."

As I submitted interim/progress reports the continual management
Greek chorus was "we know that - we know that." [Which p****d me
off no end - if they knew that why didn't they act to correct the
situation?)

My first suggestion was to stop selling and producing the
non-profitable products. This was greeted with horror, as this
would reduce the sales and production volumes, and increase
(paper) burden rates. - Recommendation Rejected.

My next suggestion was to update the tooling, fixtures and
machines. Even bigger uproar resulted because of the "excessive"
capital expense and low return. - Recommendation Rejected. [I
found out later that the required funds were being used to
acquired other businesses, most of which had been run into the
ground, and that all of the (paper) growth in sales and profits
of the parent corporation were the result of the M&A game and
currency speculation.]

My last suggestion was to replace some of the problem parts, for
example changing the compression molded part to a screw machined
part. As this was a relatively low volume part, it would be
cheaper to machine from a polymer rod than buy and rework, and
then scrap a considerable fraction. Recommendation Rejected
because this would increase the "standard cost" of the purchase
part. [Actually a new single cavity compression mold [original
was a six cavity] could have been machined and hard chrome plated
and the cost amortized in about 90 days if rework, scrap/yield
costs were included, but these were not tracked by part.]

I also determined that the reason our dated accounts receivables
were so high and no interest was being charged was the
proliferation of the so called "dating programs" by sales whereby
the customer could buy "90 days same as cash" (and frequently
even longer). Indeed, I later discovered that a major customer
[OEM HD truck manufacturer] was doing business with the
corporation only because we were in effect making them large zero
interest loans at a time when the prime rate was 18 to 20
percent.

My last suggestion, which may well have resulted in my getting
fired two years later, was that these costs which, by and large,
were being imposed by sales/marketing, for the benefit of
sales/marketing should be tracked and charged to the cost of
sales. For example, the cash to cover the extend payment
(dating) sales programs should be charged at full corporate
short-term paper rates. Needless to say this was not acted on.

FWIW - although this was a Fortune 500 corporation, they are no
longer in business. The bulk of the machines, tooling, fixtures,
etc. are now in India, the money losing parts no longer in
production, and the zero interest loans [aka "dating" program] is
no longer available. Several thousand American jobs are also
missing. In conversation with people from the other divisions
and visits, in my remaining two years with this corporation I
discovered this was the pervasive condition at all divisions and
branches. This company committed suicide by the self-inflicted
"death of a thousand cuts."

If no one in sales, other than the top management, is aware of
the costs, there will be no change, as warnings from other
departments/functions will simply be regarded as the usual
inter-departmental whining and complaints.

Unka' George [George McDuffee]
============
Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.

Thomas Jefferson (1743-1826), U.S. president. Letter, 17 March 1814.
.

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