Hyundai’s Definition of Quality

Business Week ran an article about some of Hyundai’s recent problems. One of them seems to be a misguided quality program. Although the article says that,

In recent years, no other major automaker has boosted sales and quality as fast the the Korean company.

The article later goes on to say that Hyundai’s idea of quality is not Lean.

Rather than improving the way it makes cars to minimize defects à la Toyota Motor Corp., Hyundai stepped up inspections and testing. The result: It needs two-thirds more man-hours to build each car than Nissan and Toyota do.

This is a great example of focusing on local optima (great quality) at the expense of systematic improvements (continuous improvement of the manufacturing process and lower costs).

Leaner Carmakers = Higher Rental Car Prices

A perfect example of a locally optimized system. According to an article in Businesweek, car rental firms have benefited from a “subsidy” from car makers eager to keep workers turning wrenches.

For years, consumers and rental firms alike have benefited from the fact that Detroit has been outproducing demand. To keep plants humming, and to keep busy the union workers they were contractually forbidden from firing, Detroit’s Big Three offered huge rebates and 0% financing or sold discounted, bare-bones models to rental fleets.

The article reveals that as Ford and GM close plants to meet demand, the prices charged to rental car companies have been rising to meet market rates. Not only are rental companies paying more for cars, the Big Three no longer have to buy back the cars to entice the rental companies to buy them in the first place. As a result, more of these rental companies are having to deal with selling their retired fleet vehicles. This development is actually benefiting Ford, GM, and Chrysler, who are seeing increased purchasing of popular add-ons to help make the cars more attractive in the after-market.
As the equilibrium between supply and demand is achieved, car rental rates to consumers have been rising.

So far this year, the rental agencies have jacked up the average price at the counter for a midsize car such as the Taurus by more than $7, to $59 a day…. That follows a jump of just $2 a day during all of last year.

Amazing how balancing production to meet demand automatically turns unprofitable business into profitable business.

Calling out to all lean scientists

Are you a scientist practicing Lean in your research? Are you trying to apply Lean to your research? We need to talk. I can’t find any scientists using Lean through Google. I am looking to interview scientists using Lean. Don’t comment with your contact information. Instead, send a message to Mark using the email link to the left and it will be forwarded to me. Hope to hear from some of you soon.

Lean Outsourcing

A Bay Area-based global outsourcing expert, Mark Zetter, and HP’s former worldwide manufacturing education manager, Eric Olsen, Ph.D., have written a white paper on Lean Outsourcing. In the article, they raise a very good point. United States-based lean consultants often try to sell lean as a way to curtail the flow of manufacturing jobs offshore. As more offshore companies embrace the principles of lean, matching the quality and customer focus of their United State-based counterparts, the truly lean company may find that the most lean solution is to outsource. In graduate school, I personally experienced the benefits of Lean Outsourcing. I employed multiple computer programmers to do work for me overseas through the website. The arrangement allowed me to offer the services of a large website programming business with no fixed overhead. All my costs were variable and everything was ordered just-in-time. Another review of the article can be found at Evolving Excellence.