DECISION TIME: ARE WE REALLY MANUFACTURERS?
published Newsday June 12, 2000

RICHARD JOSEPH
GENERAL MANAGER,
CARIBBEAN BUSINESS SERVICES LIMITED

Many small and medium sized manufacturers (SME's), which to a large extent in Trinidad and Tobago covers most manufacturers outside of the petrochemical sector, seem blissfully unaware of the changes in manufacturing technology taking place internationally.

Though much of the thinking is not new and has been outlined in various books and articles over time, most of it tends to be dismissed as temporary fads and of little practical use to SME's, especially in an environment like ours.

This is a very shortsighted view which if not changed will result in the loss of markets to extra regional manufacturers who have become competitive by adopting the technologies which are becoming widely known as Lean Manufacturing.

Lean Manufacturing practices seek to place companies on a path of continuous improvement through the elimination of waste in their operations. Waste is defined as any process or output which does not add value to the product in the eyes of the customer.

The implementation of a Lean Manufacturing approach does not require a large financial investment in new technology. Though it is based on many of the Japanese manufacturing concepts developed at Toyota, one of the world's most sophisticated manufacturers, it speaks more to a change of culture and a change in processes rather than the implementation of complex procedures. It requires a brutally honest examination of the way operations are carried out to identify unnecessary activities, and once identified, continual efforts to eliminate them.

Companies on the road to Lean Manufacturing have found that many activities previously considered essential, can be discarded without any negative impact on the Company. The cost accounting function has been particularly hard hit with activities such as variance reporting and analysis being consigned to the dustbin.

Another key element of Lean Manufacturing is that production is driven by customer demand, not by the requirement to optimize plant utilization or to hold inventory in finished goods. Adopting this approach has allowed companies to reduce investment in raw materials and work in progress as well.

Though not capital intensive the new approaches are skill intensive and require continuous development of human resources. The culture of the organization and the quality of its people makes all the difference, and compensates for the relatively lower investment in high speed plant and equipment.

Many Trinidadians now have direct experience with the impact of these practices through ordering Dell Computers on the internet. Dell does not maintain an inventory of finished goods and only makes computers to satisfy orders received. The computer is normally shipped the next day after receiving the order.

In his book titled "Implementing a Lean Management System" author Thomas Jackson noted that " So powerful is lean production that even low-wage producers in developing countries find it difficult to compete because their quality is often not up to the new standard. The competitive advantages enjoyed by mass-producers - even technically proficient mass producers - have been undermined completely. In rich and poor countries alike, mastering lean production is the only option for companies that hope to be players in the next millennium."

The Government of the USA has clearly bought into this idea and is financing the development of this approach by SME's through 400 offices employing 2000 consultants in all 50 states and Puerto Rico.

What does this mean to manufacturers in Trinidad and Tobago? First of all, we need to find out where we stand in relation to the top international competitors in our markets. With the evaporation of trade barriers and the use of technologies which enable small batches of goods to be manufactured economically, no market, ours included, is too small or not worth the trouble.

Second, we need to recognize our weakness and commit ourselves to eliminating them. What may have been acceptable levels of rejection and spoilage in the past when our competitors were local and regional, may be unacceptable loses when competing with players from outside of the region.

Third, we need to acquire and develop the resources to implement the necessary changes. These resources will be found both externally and internally. It was interesting to note that attendees at the 2000 Manufacturing Extension Partnership Conference in Orlando, Florida, included delegates from Japan who were there to see if there was anything new that they could learn. With regard to our internal resources, local manufacturers clearly do not appreciate the potential contributions of the industrial engineers and food technologists being trained by the University. If they did these graduates would not be forced to accept jobs in the $2,500 - $5,000 per month range to practice their training and avoid unemployment. If we continue to pay in that range, nobody will invest in the qualification and we will have to import all the expertise we need.

Fourth, we need to implement the changes which are necessary to meet international competitiveness and to develop systems for continuous improvement which will ensure that our competitive edge is maintained.

Many of our manufacturers will soon have to decide whether or not they will be remaining in manufacturing. If they are, it will be well to keep in mind the well-used fable: "Every morning in Africa a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning the lion wakes up. It knows that it must outrun the slowest gazelle or it will starve to death.

It does not matter whether you are a lion or a gazelle - when the sun comes up, you had better be running."