Thursday, May 27, 2010

Labor Productivity – 1992 vs. 2010; Motown Now vs. Then

General Motors’ PDC network is tied with Volkswagen for being the most efficient in North America **. The North American Service Parts Conference has been in operation for the past 19 years with the objective to hyper-accurately measure performance in motor vehicle aftersales operations, and document why these performance numbers change year after year. Twenty eight companies in North America participate in the NASPC, spread across all relevant motor vehicle sectors: automotive, motorcycle, motor sports, construction, agricultural, mining, and heavy truck.

Back in 1992 General Motors’ parts distribution centers ranked among the least productive in the industry. In fact, 80% of the GM PDCs were in the “toilet” – the dreaded 5th Quintile. Back in 1992, Toyota was the king of aftersales supply chain … they still have princely status. A lot has happened since 1992. If we just focus on General Motors’ PDC productivity for their US facilities (we only benchmarked Toyota Motor Sales’ US facilities) it looks like GM’s UAW workforce productivity will surpass Toyota’s largely non-union productivity in 2011.

It’s not just General Motors that is ringing the bell. Chrysler’s Mopar had 5 of the top 10 most improved warehouses in the 2010 NASPC. This included the top most improved warehouse in North America – top gun of about 180 competing warehouses across 28 different companies. Ford – another UAW shop - was instrumental in the dazzling roll out of Ford’s Daily Parts Advantage (DPA). DPA is the benchmark used by all others in a brilliant integrated re-engineering of warehouse network strategy, facility roles and responsibilities, dealer terms and conditions, customer order cycles, and wrap-around supporting information technology. Ford’s DPA strategy is a radical departure from typical auto warehousing networks, which makes PDC productivity comparisons very challenging – you have to look at the entire network (PDCs and RDCs).

That takes care of 1992 through 2010. What about the future?

We took a shot at that and are willing to stick our necks out a bit. Based on a linear regression forecast, VWGoA should surpass Toyota’s network PDC productivity this year; GM should be passing Toyota in 2011. Stunning. Stunning when looking from the perspective of how fast Volkswagen will be able to do it. And stunning that a Detroit-based UAW shop will surpass Toyota’s vaulted efficiency status.

Lessons Learned:
  1. Look at the VWGoA and GM lines – you can improve productivity rapidly…
  2. ... If, you are metrics driven – nobody changes much if they don’t know where they are and where they want to go.
  3. It is not just all about lean. Just look at Hyundai, Mitsubishi, and VWGoA. It is about lean principles coupled with management commitment to change.
  4. The UAW is not an inferior workforce and Toyota does not have a secret ingredient that sets them apart from all others.
  5. An ageing workforce is not an impediment to productivity improvement.
  6. Quality is less than free – it is an enabler of efficiency.

**
Ford is not included in this analysis due to their uniqueness and lack of PDC productivity comparability.

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