Jun 182012
 

To continue my thoughts from last week’s blog regarding the article  “Putting it All Together at Harley-Davidson“, I’ve put together some additional insights below.

Keep Your Product Cost Management Promises and Don’t Force Others into Promises They Can’t Keep

I am reminded of a story about, Saint Augustine of Hippo, a brilliant theologian, who meets a young boy along the Mediterranean sea sea shore  one day.  As the story goes, Augustine had gone for a walk to clear his prodigious brain, trying to fathom the Christian mystery of the Trinity.  He sees a little boy running back and forth between the sea and a hole that the boy dug on the beach.  The boy uses a little bucket to transfer water from the sea to the hole.  Augustine asks the little boy what he is doing, and the boy replies that he is draining the ocean.  Augustine laughs at him and tells him that his goal is ludicrous, and he’ll never do it.    At this, the little boy replies to the great Doctor of the Church, “I’ll accomplish MY goal before you get to yours!”

Spiritual implications aside, the secular point is that there are goals that cannot be achieved.  In the article, Schmitz talks about his time at Honda:

“Plus, at Honda we learned to never miss a target, to never make a commitment that we couldn’t keep.”

That is a subtle, but important point.  I don’t believe the bigger problem is people not keeping realistic commitments, but forcing the team for sign up to unrealistic commitments.  The culture of US business has morphed to a state where everyone must accept “stretch” goals, some of which are ridiculous.  In addition, eager managers make assumptions about the execution of projects.  Getting a project authorized is the equivalent to assuming that that the Boston Red Sox will hit 3 home runs per inning for a whole game.  Managers who accept such ludicrous targets are “inspiring leaders with a ‘can-do’ attitude;”  while those who cry foul on silly expectations are “negative” and “not team players.”   The article on Harley seems to say that Honda has at least partially overcome this problem and is a bit more realistic in goal setting and acceptance.

Reality Cannot Be Fooled Repeatedly for Very Long

There are “stretch” goals, and then there are miracles.  For example, consider the picture below.  Boiling the ocean in Product Cost Management Hiller AssociatesThis leads us to ask, how do you know if your goal is too aggressive in Product Cost Management?   I don’t have an exact answer, but I would suggest that people think of goal setting like tolerance stack up.   Managers should remember back to the days when they were engineers.  If a design is so delicate that all parts must have extremely tight tolerances and must be heated/cooled to assemble, would you say this is a design that will ever work in the real world of production?  No.  Alright, so when you are setting your product cost targets, reduction targets, or any other target, consider what intermediate goals must be reached to accomplish the overall target.   It is a lot easier to assess the chance of accomplishing the more narrow intermediate goals than the big longer term goal.  If you need flawless execution on each intermediate goal to achieve the overall goal, you may want to consider whether or not you are boiling the ocean.

Part 3 in this series is coming soon.

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Jun 112012
 
Where's Finance and Accounting in Product Cost Management? (Part 1 of Pete Schmitz at Harley-Davidson)

I just read the article “Putting it All Together at Harley-Davidson” in the July 2012 [July??] Blue Heron Journal.   The article is a profile on Pete Schmitz, a Honda veteran in Product Cost Management, who now works at Harley-Davidson.    According to the article,: “[Schmitz] combines procurement, design, manufacturing and cost expertise in a Read More!

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May 292012
 
What's in a Product Cost Part 1 -- Grand Theft Auto [Capital]

One thing that is interesting about Product Cost Management is that people have different thoughts as to what is included in the product cost.  Is the product cost the raw material, labor, and direct  labor?  What about the capital tooling?  What about logistics and shipping?  Oh, and what about warranty cost or end of life Read More!

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May 212012
 
The Voices of Discord in Product Cost Management (Voices Series, Part 2)

In last week’s post “Do you hear the voices? (Voices Series, Part 1) ” we talked about the different voices that speak throughout the product life cycle and how they relate to Product Cost Management. This week, we’ll talk about some voices give bad advice and expectations. As the diagram to the left shows (click Read More!

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May 142012
 
Do you hear the voices?  (Voices Series, Part 1)

Lately, it’s become popular to talk about “voices” in business, e.g. the “Voice of the Customer.”  With all the voices, it is difficult not to wonder if one is listening in on a business meeting, or a group of choral composers arguing over the score’s balance, psychologists trying to diagnose a patient, or a kitschy Read More!

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May 072012
 
All That Glitters Isn't Gold... and Neither Are Product Material Cost "Multipliers"

I happened to stumble upon an article on SpendMatters from a few weeks ago by Sheena Moore: Friday Rant: What’s in a Brand? For Tiffany’s new “Rubedo” Cuff, a Preposterous Mark-Up The article about the manufacturing cost versus the price of a new bracelet at Tiffany. If you don’t know what Tiffany is, you’re probably Read More!

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May 032012
 
The Economist Joins HBS in Re-discovering Manufacturing

A friend of mine just sent me this article from the much venerated “The Economist” magazine.  Just like the Harvard Business School, the Economist is also interested in manufacturing again.  See their article here: A third industrial revolution | The Economist That is pretty encouraging, except that I think the reporters that are covering the Read More!

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Apr 302012
 
PLM, ERP, and the Effect on Product Cost Management

Michelle Boucher from Aberdeen Research just put out another nice piece of research on Product Cost Management.  (Actually, it’s not about PCM specifically.)  It’s called Product Development Single Source of Truth:  Integrating PLM and ERP.   The report delves into perennial topic of Enterprise Resource Planning (ERP) and (or versus) Product Lifecycle Management (PLM). I have Read More!

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Apr 262012
 
HBS - Starting to Promote Manufacturing Again?

I like American Manufacturing.  I know that it is critical for strategic preparation for future wars in which we may unfortunately find ourselves.  I believe that it is the single most important aspect of the US economy long term.   Politicians talk a lot about about it; the media talks a lot about it; middle Read More!

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