The Manufacturer.com – Merck to cut jobs, close plants, get lean
Merck was in the news quite a bit today, but this is the first article I've seen that mentions any claim to a “lean” strategy. If Merck thinks they are going to cut 7,000 jobs over the next two years AND implement lean, they've stumbled across a lean strategy nobody else has ever made successful.
They've “announced” the layoff number, but not who is going to be laid off. Leave that hanging over people's heads and then expect them to contribute to continuous improvement efforts, or any sort of true lean effort? Good luck! Why would people make improvements that are going to possibly lead to their job going away? Merck might be able to do some things to cut cycle time or inventory, probably because the starting point is so “non-lean.” But, will they have a sustainable lean model? I doubt it, with the layoffs hanging overhead.
It also sounds like Merck management is grasping for a strategy and credibility, after the Vioxx problems. The Wall St. Journal this morning said the Merck CEO made mention of wanting to be like Dell…. so do they want to be Toyota or Dell? The analyst reaction was curious, to say the least:
In the private meetings, Mr. Clark, whose experience is mostly in Merck manufacturing, has talked about his admiration for the low-cost manufacturing process at computer maker Dell Inc. That left “a couple of people scratching their heads,” said David Risinger, an analyst at Merrill Lynch who attended one of Mr. Clark's sessions. Dell makes a low-margin product with a short life cycle, while Merck makes a high-margin product with a long life cycle, said Mr. Risinger.
It's strange, but this afternoon the WSJ updated the article, removing the references to Dell and adding the lean story. I wonder if Merck was embarrassed that the analysts were “scratching their heads”??
Toyota learned from Ford and others, but they invented their own system. Dell didn't really have anyone to copy in the PC industry either (they didn't copy Toyota). Will Merck be successful trying to copy them, or do they have to find their own way? I'd suggest Merck should develop a business system that works for Merck's business, then stick with it. For now, it sounds like a desperate attempt to convince Wall Street that they're getting better.
Updated in January 2006
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See the interview below with Seizo Okamato for a discussion about what is “true TPS”….
“Q. What are the biggest misconceptions about the Toyota Production System?
A. Sometimes it’s misunderstood as a management tool to bring cost down. Or that it’s effective even if only a portion of TPS is introduced, such as kanban. (Kanban is inventory replenishment.) That’s not the Toyota Production System.
Kanban is easy to introduce as a logistics system, but its purpose is not to reduce logistics costs. It’s a tool to bring problems to the surface. Not many people understand that. As we reduce inventory, all problems come to the surface, and that way you solve problems and your system gets stronger.”
I agree copying doesn’t work. You can learn from other organizations and then apply that knowledge to your organization to bring about improvement. But simple copying doesn’t work. And you can pretty much assume if an american manager is explaining what they are doing to the press (especially the wall street journal and the like) they are “attempt to convince Wall Street.” Some don’t, like Warren Buffet and Google (though we will have to wait for Google to have actual bad news to see if they try to spin it for Wall Street when that happens. It is pretty easy to ignore Wall Steet when the news is as good as it has been for Google.
It appears once again that a company which is “implementing a global rollout of lean manufacturing principles, which are guidelines for reducing the time from customer order to manufacturing, and streamlining the production system to reduce manufacturing costs, inventory and cycle time significantly throughout its network” has left the respect for people principle behind. This appears to be another company which is promoting the ‘lean things’ which sound good to stockholders, the press, etc.
Yeah, there is lean and then there is Lean. Little lean is also mean, linked to less stuff, less people, no system.
Big Lean is focused on customer and productivity and respect for people. With a strong system.
If Merck chose to move to a strong emphasis on operational excellence, using Lean as a strategy, they could probably do it. But that is a huge jump from their current emphasis.
Here is a recent article by somebody who used to work at Merck, he is highly critical of their lean/six sigma program:
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