To Outfox the Chicken Tax, Ford Strips Its Own Vans – WSJ.com
If people and organizations are good at anything, it's gaming a system or finding workarounds.
From a recent WSJ article comes a tale of how Ford works around import tariffs:
Several times a month, Transit Connect vans from a Ford Motor Co. factory in Turkey roll off a ship here shiny and new, rear side windows gleaming, back seats firmly bolted to the floor.
Their first stop in America is a low-slung, brick warehouse where those same windows, never squeegeed at a gas station, and seats, never touched by human backsides, are promptly ripped out.
Muda muda muda. Adding features just so the van can technically be categorized differently, features that will never be used by the customer, just to avoid taxes.
What happens to this material?
The fabric is shredded, the steel parts are broken down, and everything is sent off along with the glass to be recycled.
It least Ford can claim this as a “Green” initiative? What a waste. The article details some of the wasted motion (muda) that does nothing to benefit the customer.
The tax is supposed to protect U.S. truck production, but Ford can import these vehicles (whatever you call them) from Turkey by jumping through hoops:
The company's wiggle room comes from the process of defining a delivery van. Customs officials check a bunch of features to determine whether a vehicle's primary purpose might be to move people instead. Since cargo doesn't need seats with seat belts or to look out the window, those items are on the list. So Ford ships all its Transit Connects with both, calls them “wagons” instead of “commercial vans.” Installing and removing unneeded seats and windows costs the company hundreds of dollars per van, but the import tax falls dramatically, to 2.5 percent, saving thousands.
Where there's a will to avoid a tax, there's a way!
This detail made me laugh, that Ford basically could have REALLY recycled the seats, re-using the same seats over and over:
Rob Stevens, chief engineer for Ford's commercial vehicles, says the auto maker decided against shipping the seats back to Turkey for use in the next wave of vans for the U.S.
“We thought going through the recycling process was best,” he said. “The steel is valuable.”
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Mark,
While it does seem very wasteful from a labor and materials perspective, one could argue that all of this does deliver value to the customer…in the form of a lower price. How the glass and seats are re-used and recycled is another debate.
Ford, like any business, is trying to survive. While I certainly don't think their approach makes sense for the long-term, it's a smart workaround (for now) to keep the price tag competitve, and this ultimately delivers value to the customer. Most businesses, large or small, would spend hundreds to save thousands.
Jason – I see what you're saying. I'm not blaming Ford or saying they are being dumb. What they are doing is more a "gaming of the system" than a workaround (a classic workaround being actions taken in the short-term without fixing the underlying system, such as a nurse running and "stealing" meds from another unit and doing that repeatedly instead of helping fix the system so her unit never runs out).
But back to Ford, what they are going is rational. I think fault lies at the government's feet, where these efforts to "protect jobs" do very little (except for the minor job of removing the content added in Turkey).
Ford is definitely lowering its costs and is probably able to offer a lower price to the consumer, but I wouldn't call this "value" in a Lean sense. Customers might like a lower price, but doing work and then undoing it is a classic example of waste in the lean terminology, I believe.
Hmmm…I think that's the ultimate question that can be debated for a long time (maybe a good one for a blog posting). Can something prima facie that is wasteful and non-value add (like the labor and materials for the Ford van) deliver value to the customer? Isn't everything supposed to be viewed through the eyes of the customer? If a customer chooses to buy a Ford van because of the competitve price, does it matter that seats were installed and then ripped out in order to achieve that competitive price?
Yes it does.
The installing and ripping out does not add value as it doesn't deliver anything the customer will experience.
It might be one of the 'necessary evils' at the moment, but it's waste that Ford should try to banish.
I wonder wether the costs of installing and rippping out are seen as just more transportation costs ?
Maybe they can switch to the most rudimentary seats still accepted by the government for a start.
It's MUDA. We can't say muda is non-muda when it's expedient.
2nd: it's probably illegal.
3. Let's consider: what would Toyota do?
4. Also, the seats, glass, etc INTACT could be given to a charity.
Mike Davis (18 years with Toyota sub)
It's waste: the customer is willing to pay for it (apparently), but it does not ADD value (technically it removes some and replaces it with something else = rework). It does however seem to be neccessary in order to deliver value to the customer, and therefore should be minimized or ideally eliminated (agreeing with earlier suggestions).
Seeing as it is not likely that Ford will get the Gov to change the tax, maybe they should be filling some of their plant capacity problems in the US by adding in these these cargo vans (which are car-based?). If they have a business case to build a Focus in the US, it can't be too far of a stretch to be building these vans here too.
"Build it where you sell it"
Great feedback to my question. All the responses seem to agree that it's muda and it doesn't deliver value. But it helps Ford to lower the price and sell more vehicles, therefore one must conclude that "lowering price" is not the same as "adding value" or "enhancing the customer experience", even though the customer values low price. Am I getting this right?
And to re-iterate, I do agree that they need a better long-term strategy. We're just debating the merits of their short-term workaround.
Yes, I think we're on the same page, Jason. Lower price <> "value" in the lean definition.