Short Term ROI Killing America

Hello All, From Lean Blog from November, I found this great posting how short term ROI is killing America. The example provide great perspective. At 6:59 AM, November 15, 2007, Norman Bodek said... Inventory to Mr. Ohno was the biggest waste and he started a lot of his initial efforts to reduce inventory. Prior to his thinking most managers considered inventory a valuable asset for Wall Street loved it. The more inventory you produced the higher your profits. You did not have to sell your products. For example, GM made over 5 billion around three years ago and lost close to 14 billion the next - they couldn't sell what they made. To me ROI is the same. What is a reasonable expectation for your return on investments? When I went to NYU Graduate School of Business we were taught to factor in the interest cost to borrow and the expected rate of return of your capital invested. The Japanese continually look at the long term and their ROI reflects that. Too often in America we want very fast ROI¹s, which keeps us looking at this quarter. An example is Dana Corporation where every manager knew they were measured on ROI. Dana went bankrupt. Fast return on investments is good for the stockholder but can be bad for the company in the long term. I feel that is a prime reason we have lost so much business to Japan, China, Korea, etc. Cheap labor might have some factor but if Toyota can do it here, make cars in America, then so can we if we are willing to make sacrifices for the long term. Chasing cheap labor is very inviting and hard to turn down, but it is part of this short-term thinking and it is "selling America short." It is much better to wring out the wastes, get all employees empowered and trained in problem solving activities to demonstrate that we can compete internationally. Wring out this waste before you consider closing plants and going overseas. The Japanese companies are faced with fierce competition with Korea, China and other low cost countries but they don't want to sell Japan short. I believe their approaches are: 1. Automate everything possible for those machines running night and day can easily compete with cheap labor. 2. Use part time employees in the non-skilled jobs. This protects the permanent employees. I saw that at the factories where part time workers were doing the repetitive tasks and the skilled permanent employees were repairing the machines, doing the complicated assembly work, the inspection, the design engineering, etc. Part time people can only work for a maximum of three years in a company in Japan. The part time employee does not receive the same training and development as the permanent employees. It is not easy on the part time employees, at all, but it does give the companies an opportunity to automate those unskilled tasks. I believe that Toyota is still probably one of the best manufacturing companies to work for in Japan. I recommend two books: Rebirth of American Industry, which covers the first issue and my new book by Dr. Shingo Kaizen and the Art of Creative Thinking. Shingo was a great master. His new book shows you how to develop your employees from their ability to identify and solve problems. It is a jewel. Best wishes, Norman Bodek

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