How va...va...voom drove supplier failures down by 99%

There is not a success story in cars that cannot be linked at least to these two philosophies – housebuilders take note. Also note that the car industry hasn’t finished yet. It started to radically change 20 or more years ago and is still radically changing – except now the time frames are becoming shorter. What took seven years now takes less than three.

So for those of you reading Egan thinking that a flurry of radical change followed by regular doses of continuous improvement will keep you ticking along nicely – think again. Not one of you should put head to pillow at night without believing there are still radical improvements that can be made.

But we’re different, right?

Wrong!

One of the key differences of course between cars and houses is that the final assembly of cars is undertaken by direct labour while houses are assembled by indirect labour. This issue of labour is often cited as good reason why you cannot compare the two.

Such an argument is complete and utter drivel. Please stop using it as an excuse for poor quality and low efficiency. Think like a car man, turn the problem into an opportunity or go back to direct labour or eventually go broke!

Typically 75% of the value of a car is manufactured and assembled by partnering companies.

That quality will be delivered just-in-time to the final assembly is never in doubt, even though the manufacture of the component itself and the motivation of the indirect labour is taking place often miles away from the plant.

Now, as a housebuilder, you have your indirect labour for the most part on your site working right in front of your eyes, employed by what should be a partnering company – so what’s the problem and what’s the difference?

I asked a senior motor industry man the other day if he ever worried that people working for supplier companies might not be committed to quality. He didn’t understand the question at all.

Partnering is the key to unlocking the potential of your indirect labour and the true potential of your business.

The president of Renault in a speech at the June 1999 Berlin Automotive Conference stated the following:

“I am convinced that the future of a car manufacturer depends on its capacity to develop continually with its suppliers efficient relationships, based on the respect of the supplier’s profitability and on the necessity of the car manufacturer’s competitiveness”

He went on to talk about sharing R&D, learning from each other and finished with a review of purchase cost reductions amounting to 8.2% in 1997, 8% in 1998 and 6% in 1999. These savings being achieved as follows: 50% from purchase cost reduction and 50% mainly from working to improve supplier efficiency and working methods.

So a triple whammy – supplier develops his business, carmaker becomes more competitive, customer receives greater value and satisfaction.

Nissan in Sunderland has one of the highest product quality levels in the world. They have an intensive partnership with their suppliers, they train them, mentor them and learn from them through “relationships based on mutual trust and co-operation”. They measure partner performance in terms of quality, cost, delivery performance, development and management ability.

One of the key measures of quality is failures in parts per million. Less than 50ppm is a typical target. Imagine that – one failure in 20,000 parts.

In housebuilding this would equate to just eight central heating pump failures per year in the total new build market!

Perhaps you believe that housebuilders are starting from a different base and that these levels of improvement cannot be achieved.

Well take a look at the book “Lean Thinking” by Womak and Jones the follow up to their equally famous book, “The Machine that Changed the World” (I have never met anyone in car manufacturing who hasn’t read at least one of these books.)

In Lean Thinking there is an interesting case study on Porsche. In the early 1990s Porsche was slowly going out of business. Following radical change over six years it had achieved the following improvements:

• from welding to finished car – six weeks to three days;

• inventories – 17 days to 3.2 days;

• errors in parts supplied – 10,000 to 100 parts per million;

• errors per car – 100 to 25;

• suppliers – 950 to 300; and

• suggestions per employee per year – 0.06 to 12.

Womak and Jones devote some space in their book to homebuilding. They talk about slashing build times from six months to 15 days, of the need for builder, contractor and customer to learn to talk to each other if remedial and rework jobs are to be eliminated. But they also add a warning that implementation will not be easy.

As they say, “skilled trades in the construction industry are quite possibly the most resistant group in society to the idea of standard work”.

I believe that radical change is necessary in housebuilding but it will be very hard to achieve.

Success will only come to those people who can lead from the front and capture the hearts and minds of their employees and partners.

People like James Millar, president of Mazda Motor Corporation, who recently said publicly: “We are getting rid of three things:

• everyday thinking;

• meaningless rules; and

• the ordinary.

“Why? Because we want to move you with revolutionary ideas that stir your emotions”