But talking to each other has been a key German weakness. As one looks at the educational system, at every level the emphasis is on deep but narrow skills for technical operations rather than horizontal systems thinking to pull all operations together. And this is reflected in career paths which have been up narrow chimneys. It is equally reflected in organization charts full of tiny departments (a term which in German literally means “separate”) reporting upward through many layers to the point where cross-departmental conflicts can be resolved.

Meanwhile, on the factory floor, the meister system of a large group of twenty-five workers reporting directly to the shop head, who refers prob­lems up the hierarchy for solution, runs directly contrary to small-scale work teams. These workers should be focused horizontally on a linked set of activities along the value stream and perform many of the indirect tasks associated with managing their work, including quality assurance, machine maintenance, tool changes, development of standard work, and continuous improvement.

A second German weakness has been a fondness for monster machines which produce large batches. For example, we’ve often looked at gigantic paint booths—classic monuments—painting massive racks of tiny parts and justified on grounds of flexibility. “We never know when we might need to paint something much larger, so we’ve built in the flexibility to do so.” The costs of the initial machine and the continuing costs of keeping it continu­ously fed (which always requires inventories before the machine and after it) are lost in a narrow calculation of the cost to paint each part and the comfort German managers seem to derive from the belief that their equip­ment can respond to shifts in the market.

A third German weakness has been the tendency to substitute the voice of the product engineer for the voice of the customer in making trade-offs between product refinement and variety on the one hand and cost as re­flected in product price on the other. While quality may be free, variety and refinement almost always entail costs, particularly when products are designed without much attention to manufacturability. Good hearing is therefore needed to ensure that product designs contain what customers want rather than what designers enjoy making.

For example, one of us recently observed a “tear down” of automotive exterior rear view mirrors and discovered that the Nissan mirror design for the Micra model assembled at Sunderland in the U.K. has four parts and is offered in four colors. The Volkswagen Golf, by contrast, offers four com­pletely different exterior mirror designs each containing eighteen or nine­teen parts specified by product engineers seeking a high degree of refinement. Each mirror is available in seventeen colors. As a result, Nissan’s production system deals with four mirror specifications while VW struggles with sixty-eight, each with more than four times as many parts.”

German thinking about the cost/variety cost/refinement trade-offs has long foreshadowed the recent popularization of “mass customization” in North America. The problem as we see it is that minor options like color and trim, and even major options like tiny increments in auto wheelbase, often exceed the ability of the customer to notice them. Additional refine­ment is always potentially a good thing, but only if the customer notices it and thinks the cost is worth it. The desire to listen to the voice of the customer can create a one-way conversation if the real cost of variety and refinement are hidden, even from the product engineer.

Nevertheless, the German system was highly competitive until recently because each weakness was offset by a strength:

• Because skill levels were so high on the plant floor it was possible to fix each problem as it arose rather than fix the system which created the prob­lems in the first place. The finished product handed to the customer was usually of superlative quality, even if also of high cost.

• Because the skill level of product development engineers was so high, they could reengineer designs coming from upstream rather than talk to upstream specialists about the problems their designs were creating. Again, the end product reaching the customer was superlative in achieving the promised performance, but at high cost.

• Because of the technical depth of a firm’s functions, it was often possible to add performance features to products which offset their inherently high development and production costs. In some cases this led to rapid segment retreat (for example, in machine tools), but growth in the remaining high-end segments (for tools like the blade grinders described in the Pratt exam­ple) was sufficient to keep German firms busy and profitable.

• Because the German machine tool industry was so advanced, there seemed for many years to be a real prospect that high German wages could be offset by Computer Integrated Manufacturing breakthroughs which would couple highly flexible production operations with automated materi­als handling to practically eliminate direct labor. The objective of eliminat­ing jobs created friction with the labor unions who responded by bargaining to continually reduce the workweek to offset potential job losses. However, this seemed to be a transitional problem because the eventual outcome was to be a German workforce consisting only of highly skilled technicians making products with performance features foreign competitors could not match.

In the 1990s, these offsetting strengths have been overwhelmed by world conditions. Wages have risen behind a soaring mark, East Asian firms have attacked traditional German market niches, and the limits of the current generation of factory automation have become painfully apparent.” Across the board, German products have become too expensive for either foreign­ers or Germans to afford.

Excerpted from page numbers 215-217 of ‘Lean Thinking’ by Womack and Jones