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Viewpoints: Delphi's Troubles and the Shingo Prize

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As this article is written, Delphi, 22-time recipient of the Shingo Prize, has filed for bankruptcy. It's a bad sound bite for lean manufacturing, but decades-old commitments, not lean, caused Delphi's problems. The reference for lean is not Delphi but Toyota, whose profits in 2005 exceeded those of all US competitors combined.

The Delphi bankruptcy raises questions as to what the Shingo Prize measures, and how it relates to both leanness and economic health. Since 1988, Shingo Prizes are awarded to factories for excellence in manufacturing, based on criteria in which business results account for only 7.5% of total score. It has been given to 117 plants belonging to 56 NAFTA companies in 17 years, with 14 repeat winners accounting for 64% of the total. Recipients make auto parts, aerospace and telecommunications equipment, health care products, steel, electronics, and chemicals. They range in size from Lifeline Systems, with yearly sales of $131M, to Exxon, with $263B.

Presumably, this Nobel Prize for manufacturing reflects possession of a competitive edge in manufacturing. Shingo Prize winners should, therefore, be gaining market share and making higher profits than their competitors, as well as retaining or hiring more people. Hoovers Online provides quantitative information on this for 40 US-based public companies that own prizewinning plants, directly or through subsidiaries, and for a list of competitors for each winner. After filtering out private companies and fellow Shingo Prize winners, 401 competitors remain, or an average of 10 for each winner. The sales growth, profitability, and employment growth of each winner can be compared with its competitors.

The results are mixed. The table that accompanies this article shows yearly numbers based on the latest public reports as of October 2005. The Shingo Prize winners were 10% more profitable, but lost market share and cut jobs while their competitors did the opposite.

Of course, it's true that these numbers are for whole companies, while prizes are awarded to plants. An award received by a single Exxon plant can hardly be expected to have a visible impact on the whole company, but the impact should be more visible at smaller companies. However, the ratios for winners with under $10B/year in sales were actually worse. Winners like Autoliv, Continental Tire, or Boston Scientific outdid their competitors, but many others didn't.

Measuring manufacturing excellence across multiple industries is not straightforward. While the Shingo Prize guidelines may surprise both by what they contain and by what they omit, the real question is whether excellence consists of implementing as many tools as possible—from any list. In addition, plant visitors cannot always tell whether what they see has really been implemented, or is just for show. At one Shingo Prize winner I visited, lean tools were used in daily operations. In another plant, however, which won the Prize some years previously, and-on towers had the wrong lights on, and operator instructions had not been updated in three years.

Implementing tools for the purpose of winning a prize is like cramming for a multiple choice test. It is the way to achieve a high score, but not excellence. Instead, a company must execute a manufacturing strategy that supports its business objectives. The Kotani forging plant near Himeji, Japan, for example, would probably not score highly on Shingo Prize criteria: there are no cells, no 5S, no kanban, and no instruction sheets. Yet Kotani is a second-tier supplier to Toyota, with sales per employee over twice the US average for forging shops, and has achieved its results by focusing on technology.

Kotani describes itself as a company of highly-trained craftsmen skilled in the latest technology. They buy used presses and retrofit them with enough internally developed automation to make labor costs irrelevant. Started in 1970, this is a company that has managed to grow in one of the oldest human industries-by getting the right things done.

Michel Baudin is the author of Lean Logistics-The Nuts and Bolts of Delivering Materials and Goods (Productivity Press, 2005) and Lean Assembly-The Nuts and Bolts of Making Assembly Operations Flow (Productivity Press, 2002).

Performance In The Market

Growth (%)
  Profitability (%)     Employment Growth (%)  
All Shingo Prize Winners   13.00   6.38   -0.54
All Competitors of Winners   14.71   5.80   1.26
Shingo Prize Winners
<$10B/yr in sales
  9.14   3.63   -3.64
Competitors of Winners <$10B/yr in sales   14.09   6.10   0.84

This article was first published in the February 2006 edition of Manufacturing Engineering magazine.