Kaizen 2009 and Beyond: How to Make Things Better?

Kevin Meyer over at Evolving Excellence brought a Factory Tour to our attention: Leatherman Tools.

These are really great, high quality products, although I've always wondered why these things were so darn expensive. Some may say price gouging for desirable products, or greed, etc.

It is clear from this video that the incredible overhead needed to support the current business plan is huge!

I have to say that the coolest thing I saw was the "finger socks" on the woman's fingers as she sorted out parts. While sorting and inspecting after parts are made is a waste, I'm sure the relief a worker gets by not having sweaty gloves on all day is much appreciated. I think Mr. Leatherman could start there on his continuous improvement journey. The first improvement was making the job more tolerable. Now we have to ask if the worker "likes" sorting parts, what is the purpose of sorting parts, etc.

According to Mr. Leatherman, in his 25th anniversary letter, Leatherman Co. sold 1,000,000 units in 1993. I didn't catch the amount on the YouTube video, but on an updated video at the Leatherman website, 12,000 units are hand assembled per day. That is roughly 2.5M units per year. I don't know about you, but I wouldn't want my employees going home to tell their kids that their job for 15 years is looking for blemishes and nicks on millions of can openers. And, by the way kids, you can look forward to this job when there are millions more to sort! It is no wonder kids don't want to move towards manufacturing today! Can you imagine what goes through their mind when parents tell their children about their day?

Isn't this the heart of continuous improvement? Getting people to be proud and dignified in their work? Moving forward in 2009, we need to think about how to achieve this higher level of business performance. The people working at Leatherman can't work any faster than the competition in developing Asian countries. Well maybe they can, but what is the point in that - is that a business strategy? There are a few things we can do to help the U.S. compete:

1) Move towards a consumed income tax that is one time at one rate for both individuals and businesses. This is in stark contrast to the current progressive tax. While we are at it, let's eliminate capital gains. This will provide long term financial incentives to develop people rather than hold them hostage to current business models where they are required to simply work as fast and hard as they can. We all know what this leads to - people working hard (sorry, sorting parts) everyday, paying income tax, and then paying the corporate taxes passed onto us through higher prices. A Fairtax study suggests that the average price of goods would fall by 20% if income and capital gains taxes were eliminated. In other words, more people would buy more Leathermans and their profit margin would not change. Win-win.

2) Expensing. Allow business to expense the full amount of purchases immediately vs. holding them hostage to the additional taxes incurred through depreciation. This will encourage investment in new equipment. Judging from the video, Leatherman would likely invest in metal forming and assembly technologies that free people from being bound to machinery that is over 40 years old. On the other hand, in the new video, he is paying additional tax on that nice Trumpf laser system for ten years due to depreciation rules. Again, Asian companies have the same, or more up-to-date equipment than seen in this video. From a technology perspective we are on a level playing field, so the labor and tax advantage goes to the competition.

3) Adopt and adapt continuous improvement principles to each enterprise value stream. The need here is to use the financial leverage gained through lower taxes to invest in developing people in order to make the business better. If people were developed to be their own CI consultants, the company would be better off. If there were financial incentives to develop people because the business growth demands it, this would attract better employees. Who wants to sort parts? I thought so. Who wants to think of better ways to clean the parts? That's better.