When I buy a Tesla put option, am I a jerk who wants to die – or maybe Mr. Elon Musk needs a lesson in Lean Manufacturing?
When I buy a Tesla put option, am I a jerk who wants to die – or maybe Mr. Elon Musk needs a lesson in Lean Manufacturing?
When I buy a Tesla put option, aIt plays out like this: the successful company wants to scale production;
The CEO, VP of operations and VP of Marketing head out to a big manufacturing trade show They are enamored with the big robots and the automatic machinery;
They fall in love with the curved white lines, the huge arms and the sleek user interface.
And especially– the manpower reduction – they won’t need those pesky low wage employees anymore.
And the VP adds, this would make them a global player and they could take on the pending RFP for the Burmese government.
And so, like all love in first sight, they write the check for five million dollars and sleep well that
night knowing they are on the right track to automation – and ‘hey’ aren’t robots the coolest thing ever?
Lean manufacturing – big robots die hard
Back at the plant the senior production director is somewhat tenacious; haven’t we been in this game before?
Haven’t we tried the robotic automation path just 3 years ago and we are still paying the price for it?
Not to forget the legions of highly skilled engineers required to program it.
It will be different this time – rest assured they tell the production director – this new robot is a game changer.
The technology has advanced so much; and in any case that previous machine was the decision of the previous management team, and we all know what incompetent fools they were.
Lean manufacturing – robots die with a vengeance
But, as things have it, the production director was right all along. She was an avid learner of lean manufacturing.
She knows the truth about big inflexible machines; she know that big investment in automation usually don’t produce the expected results:
A recurring pattern has already been uncovered years ago.
In Lean Thinking: Banish Waste and Create Wealth in Your Corporation, authors Womack and Jones, traveling across the US and Europe showed how big investments in automation usually provide mediocre results.
While automation looks nice on paper, once it is installed in production lines it:
- Limits manufacturing flexibility – reduces ability to tweak the product to the consumers preference
- Require constant feeding of raw material so it doesn’t stand ideal (making the books look nice) – leading to waste and over production
- Require armies of highly skilled engineers to configure
- Require ongoing maintenance completed in house or by paying expensive third party vendors
- Limits the adaptability of the production area, constrains the layout of the production plant
- Requires construction and maintenance of feeder conveyor systems
In other words, it becomes a liability rather than an asset.
It falls short of the high hopes of faster production and meeting consumer demand;
It becomes a ‘white elephant’ usually a step in a long series of failures of leadership, not understanding that flexibility and adaptability in today’s market place trumps utilization and capacity.
Lean manufacturing – the Toyota way
Surely, people investing millions of dollars in automation of production line already read the book. Why then did Elon Musk fall in this trap? It has to do with our being enamored with technology.
The reason I believe is that his error stems from the framing of Tesla as a Silicon Valley startup that leads to the next transportation revolution as software companies brought the communication revolution.
This frame might work in people’s minds however it fails on the manufacturing floor.
There’s a big difference between agile and lean the way it is done in software and the painful lessons learned by car manufacturers – producing tangible products in the real world.
While the lean agile principles hold across industries, the practices are different.
Automation in software development is a holy grail.
Automation in manufacturing is a tricky compromise between speed, capacity and flexibility.
Scaling software follow other rules than scaling production.
It behooves Silicon Valley to assume they know it all.
However sometimes the experts in Detroit can teach Silicon Valley geniuses a thing or two.
In the meantime, Tesla invests in automation, while Toyota downscales robotics.
When it comes to car production, I’d hedge my bets and go with Toyota.
The information contained herein is personal opinion and experience and should not be considered professional financial investment advice
Michael Nir
www.michaelnir.com
Author of The Pragmatist Guide to Corporate Lean Strategy
