Monday, November 14, 2011

American Manufacturing Basics

By Al Norval

It’s hard to believe but in 1979, the US Manufacturing workforce peaked at 19.5 million jobs. Since then US Manufacturing jobs have declined by about 40% to 11.7 million jobs with much of the job loss occurring in the last decade. About half the job loss is due to jobs displaced by Chinese manufacturing and much of the rest due to improved labor productivity. Yet with productivity up substantially, the US is still the world’s manufacturing leader producing 19% of the world’s goods compared to China’s 15.6%.

This is quite a dilemma. Labor productivity must go up to enable US Manufacturers to compete with off shore manufacturers who often have lower labor rates. Yet as labor productivity goes up, we face having unused labor.

How do we deal with this in the Lean world? We want labor productivity yet this can often mean job losses as fewer people are required to maintain the same output.

Let’s go back to the basics of Lean and remember the principle of “Respect for Humanity”. This is very deep and can have multiple interpretations but in this case it means that improvements in labor productivity must never result in lay-offs or people being let go to “cash out the gains”. Instead Lean views the unused labor as unused capacity to produce more goods and produce more improvement. Rather than overproduce goods (one of the biggest causes of waste), people are used to drive out waste and solve problems resulting in stronger processes. This allows Manufacturing to work with Sales and Marketing to open new markets and launch new products, both of which drive up volume and use up the excess capacity that was generated.

Organizations that do this are on an upward spiral. The more improvement they get, the more people can be freed up to drive more improvement. At each loop, costs go down allowing volume to go up driving a need to use some people to produce the additional goods.

Sometimes this is short term pain for long term gain as it takes time to develop new markets and launch new products but isn’t that just another opportunity to apply Lean?

This all becomes possible if we view Lean as a growth strategy, rather than a cost reduction strategy and we stay true to the basic principles of Lean including “Respect for Humanity”.

For more on this and other Lean principles see the Lean Manifesto at


Alistair Norval


  1. Great description of "respect for humanity." Remember also, even if your core strategy isn't necessarily focused on growth, the focus on delivering greater value for you customer will bring growth. When a business out performs their competitors the growth comes. In the meantime use the opportunity to invest even more in your greatest asset, people.

  2. Agreed. 'Respect for Humanity' should mean that our systems and processes serve US, not the other way around. During my tenure at Toyota there were lots of examples where processes reductions led to manpower surplus and this surplus was then turned into additional Kaizen force. Very powerful mechanism to drive further change yet something that seems very counterintuitive to North American business.

  3. Excellent article. When Delphi Corporation, a well established Lean company filed for Chapter 11 in 2005, many were concerned about the impact on the Lean movement in American manufacturing. James Womack commented about Delphi that Lean was a "necessary,but not a sufficient" condition for survival. Lean can help a company be more productive and competitive, but it alone cannot assure survival in the global marketplace. Having said that, I have observed that surplus manpower can be utilized in many creative ways to avoid layoffs and promote improvement and positive change and growth. In one case, a consumer goods manufacturer used their manufacturing associates during a slow period to assist the field sales people in restocking the retailer displays thereby allowing more daily deliveries and increasing customer demand for the product.

  4. Excellent examples of how excess labor can be used to strengthen processes and deliver more value to customers. Why don't more companies see the value in this? I believe it's because of silo thinking and optimizing the silos instead of looking across the entire value strea. Thoughts?

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