Physiognomy & Phrenology vs. Root Cause Analysis & Kaizen

For 27 years the Harbour Report has been measuring and comparing the performance of automobile companies, using metrics such as productivity defined as vehicles per man hour. This reminded me of a pair of dead sciences called physiognomy and phrenology. The former judged your human worth by what your face looked like, and the latter judged you based on the bumps on your head.
In the news today the productivity at Toyota dropped and their profits soared. The most productive automotive plant is belonged to Ford, and it is being closed. The Chinese automobiles you will see driving down the streets of the U.S.A. in a few years will have terrible productivity ratings in the Harbour Report, yet will cost half of Detroit’s cars.
The Harbour Report tells us productivity isn’t keeping GM and Ford factories open. Maybe their capacity utilization wasn’t high enough? Toyota, at 106% utilization, is 27 points higher than Ford. But at 106% either this is a silly metric, somebody lied sometime, or Toyota is breaking the laws of physics.
These numbers reminded me of a recent late-night telephone conversation with an engineering director at a European telecom giant. We’ll call him Olaf.
“I don’t like OEE.” Olaf said. I listened. He thought the focus on global capacity utilization and OEE improvement was driving the company away from Lean manufacturing.
According to Olaf, his company’s emphasis on utilization results in a “running the machine even when there are no orders”. Further, to keep OEE high, process are separated and optimized to minimize disruption due to capacity imbalances. This de-synchronization creates work in process, which results in greater lead-times, higher obsolescence, etc.
It’s the first time I’ve heard of OEE being used to drive batch & queue manufacturing, but it can happen.
Paul Jarvis from our Shanghai office has stories from the front lines of Chinese manufacturing, both harrowing and hilarious. One of these stories from his previous career as a supplier development guy for an American OEM involves asking a supplier to see “the other set of books” in order to get their quality and costs under control. Soon Paul learned to ask the Chinese suppliers to show him “the other, other set of books”.
The savvy Chinese manufacturers kept separate sets of books because one was needed for the tax authorities, another to do business with their customers and suppliers, and yet another to truly understand their business.
Interestingly, as we understand human biology and the cause and effect of hormones on both human growth and behavior, some are suggesting that there is validity to physiognomy. Because it has been used in the past to prop up racism in the past, this is controversial. I’ve not read anywhere that researchers are recommending giving people bumps on the head or plastic surgery to fix their personalities, however. If anything, it’s hormone therapy or gene therapy they recommend based on root cause analysis and the scientific method.
The only two things that will tell you if kaizen is working are more cash collected and costs reduced. The rest of it is just bumps on the head. The point is that whatever you measure, it should be as close to costs and cash collected as possible. The root cause behaviors or actions that result in costs or cash collected need to be understood through direct observation in order for kaizen to succeed. We might all need an extra sets of books to see the true picture.

---