Productivity Improvements

[Richard Danjin <102104.1751@compuserve.com>]

  Something I took away from my studies of Ackhoff ... "never attempt to
solve a problem 


other than in the largest system in which it exists."

  Working in manufacturing, you must certainly be aware that in any
corporate system a given plant division or group is not allowed to keep any
profits resulting from productivity (efficiency) increases.  Gains at their
locations, all the excess productivity dollars, are the property of the
corporate center.

  If you read the Wall Street Journal (WSJ) article from the perspective of
the global economy, more specifically what Kenichi Ohmae in his book THE
INVISIBLE CONTINENT describes, there can be no surprise or question as to
what subsequent WSJ reports will bring.
  
  A new term is appearing in the literature, "offshoring," along with its
procedural term "offshore business process" or OBP.

  Automakers and Tier One suppliers are offshoring numerous process that
extend beyond IT processes to business intelligence, applications
maintenance, web applications, embedded software development, product
design and engineering, and plant automation.  Many of the business
processes that bog down human resources departments are being sent offshore
as well.

  Some of the companies known to all are GM, Ford, DaimlerChrysler, Johnson
Controls, Caterpillar, Mazda Motor Corp., Visteon, TRW and Delphi.  The Big
3 auto companies have more than 200 people in offshore centers performing
back office operations.

  Over the past 10 years offshoring is estimated to reach $142 billion (US)
by 2008.  India has emerged as a prominent offshoring center, currently
employing 150,000 and expected to balloon to 600,000 by 2007.  Other
countries are such as the Phillipines and now emerging Dominican Republic,
Puerto Rico, Panama and South Africa.

  In an era where competitive advantage is every thing, typical labor cost
savings of 40-50% over US based cost, with a potential savings of 70% with
improvements through OBP ARE irresistable to corporations.

  The manufacturing jobs have gone to China and Eastern Europe.  All this
offshoring is financed by increased productivity in the US and the
increased corporate profit resulting from offshoring, and in the case of
the US auto industry, "outsourcing" to the lowest wage "cost."

  What did Deming say, "If you buy cheap parts that's what you will get"? 
Look at the recalls in the US auto industry, starting with the Ford
Firestone debacle.

Dick Danjin
Making Things Run Well