Lean Leads The Way

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INDUSTRIAL ENGINEER – VOLUME 43: NUMBER 04

Two investment bank managing directors contend that state-of-the-art lean practices have helped German plants thrive even as the U.S. has lost millions of manufacturing jobs.

Writing in Manufacturing Business Technology, Robert P. Wudjtowicz of Chicago-based Inter Ocean Advisors LLC and Carsten Lehmann of German-based Lampe Corporate Finance GmbH noted that Germany has positive trade and current account balances and strong demand for its products. Its unemployment is at a 20-year low, and German manufacturers now face labor shortages.

Some of Germany’s success came because real wages declined between 2000 and 2008. But Wujtowicz and Lehman reviewed several analyses of German business models to find the basis of their success. One study identified six key factors for the German model: specialization, innovation, strong customer service, flat organizational structures, professional management and operational excellence. Many successful German companies had these factors in common.

For operational excellence, the authors report, most employed advanced lean manufacturing processes. They strove for operational effectiveness, “continuously assimilating, attaining and extending best practices.” They aggressively managed costs, even off shoring lower value-added activities. They didn’t seek strategic alliances, and few pursued large acquisitions or other game-changing strategic moves fraught with risk.