The Wall Street Journal had an article yesterday about a plan for General Motors to move their remaining plants from a 2-shift to 3-shift operation (subscription may be required for the full article). Putting aside the horrible reporting job on the story (I think a headline “Obama mandated make-work program doomed to failure” would have been less biased than the naysaying tone throughout the whole article), the comments made by the sources for the story gave some insight into how corporate practices fossilize, and how a change-resistant mindset affects how data is reported and reviewed.
The specifics of this change are that currently GM is running their plants with two shifts of production, and leaving the graveyard shift for maintenance and restocking, but will switch to three shifts of production. The GM representatives cited in the article claim this will help the efficiency and productivity of the assets, while the third party sources claim that there is no way that this could be beneficial due to the unique nature of auto manufacturing.
I’ve never worked in an auto plant, and I don’t have access to their current cost structure or manufacturing KPIs, so I don’t know if this is a good decision or not, but the reasons given for why this will fail seem to be specious at first glance.
Going by the numbers in the article, GM is looking to add a third shift of production, and increase budgeted downtime (not clear if this is scheduled or unscheduled downtime) during the production by 20%, while still leaving 115 days a year down for larger maintenance or product line changes.
The three big reasons given for why this will fail:
1) The third shift is needed for needed maintenance and cleaning. “If running three shifts means you’re [producing] at only 60% of capacity, then you haven’t gained anything,” said Ron Harbour, publisher of an auto-plant efficiency report. (All quotes from the WSJ article linked to above)
But this calculation assumes that they are currently running at 100% of capacity whenever they are scheduled to run, and that nothing breaks down or works less than optimally during the scheduled production shifts. And since the change had an expected increase in downtime up front, I have to assume that the increase was accounted for in the cost-benefit analysis.
2) The third shift is prone to more job errors, leading to quality problems.
I hope to hell that GM already has measures in place to take care of that, since they are currently doing their maintenance on the third shift. This is a perfect example of that midlevel department manager that shows up at every meeting (and if you are real unfortunate, writes the report that heads up the chain of command) that only reports the details that support maintaining the status quo. If moving production to the third shift increases their errors, doesn’t moving some of the maintenance to first and second shift reduce their errors? (Not saying I buy that shift-to-shift error disparities have to be accepted and lived with, but you can’t say that the one has to be true without the contra-positive also being accepted)
3) Adding a third shift means making more cars, which means that if a model is a market bust, this will be a bigger problem for the company.
I can’t even follow this claim, which was touted as the biggest risk for the change. Reducing the idle time for equipment only increases the asset utility for each line, it doesn’t affect the product range for each line. And inventory management is what will drive the impact on the company in the event of any model losing sales, not the available rate of production for any model. The article acted like it was a big coup to get the GM representative to admit that if sales couldn’t support production then eventually downsizing of the workforce would have to take place, but that is already true and is a completely separate issue from this change.
The whole article just seemed to be the manifestation in print of the guy who has been around for 45 years and says “That will never work” to every proposal being made, not realizing that what is currently being done already isn’t working. If the options are between continuing to follow the current practices that are losing money and failing, and trying something that has both positive and negative affects that may work – yes, go ahead and see if there is a better, third way to do things, but eventually you have to take the leap and try something. Don’t let those with golden parachutes who only have to get the ship to hold together for a couple of more years before they can escape comfortably prevent the company from making the changes they need to make to remain viable in the long term.