Kaizen: Japanese philosophy gives Solectron focus
Source: SiliconValley.com
By Karl Schoenberger
Mercury News
Team Penang came from Malaysia to Silicon Valley in late September wearing matching khaki jackets and ball caps to compete in a new kind of contest. Armed with spreadsheets and PowerPoint presentations -- and with the war whoop ``kaizen!'' -- they claimed victory. And they took home a $10,000 grand prize.
The battleground was an auditorium at the Milpitas campus of Solectron, the struggling electronics manufacturing contractor. The Penang gang's strategy was the same as other Solectron teams from around the world: ``thinking lean'' for efficiency. They did the best at squeezing the waste out of the production process, innovating with their own ideas instead of taking orders from managers.
If this sounds like a page out of the Japan-U.S. auto wars of the 1980s, that's no coincidence. Solectron is putting its bets on Toyota Motor's kaizen (pronounced ``kye-zen'') philosophy of perpetual improvement, believing that the discipline can be applied to the intricate supply chains of electronics manufacturing with equal success.
In the dog-eat-dog world of electronics outsourcing, anything that promises lower costs, better quality and higher speed is an advantage. These contractors make just about everything from consumer personal computers to Internet routers, all built anonymously under the brand names of their customers.
Conversations around Solectron have been laced with Japanese terms ever since Marc Onetto, executive vice president for worldwide operations, arrived on the scene. Onetto is a former protege of Jack Welch at General Electric and a true believer in Toyota's kaizen approach to manufacturing. He joined Solectron in 2002 after 15 years at GE in the medical equipment division.
``We're trying to make the supply chain responsive to the customer, which is really hard in the electronics industry,'' said Onetto, 54. ``There's a tendency to stockpile components in warehouses and write them off when they're not wanted. But kaizen is all about eliminating waste and accelerating the supply chain.''
The character compound for kaizen means ``change'' and ``good.'' But kaizen convert Ravi Ramanan, Solectron's vice president for ``functional excellence,'' thinks kaizen's zen might come from Zen Buddhism.
`Spiritual discipline'
``It's almost like a spiritual discipline,'' Ramanan said. ``We don't have brainstorming sessions anymore where you waste time sitting around and talking about the problem. You go out on the shop floor and fix it, fix it, fix it.''
There would seem to be a risk that all the Japanese jargon will remind Solectron's customers that the Japanese manufacturing juggernaut fell on its face in the early 1990s.
Not so, says industrial efficiency sensei (guru) Jim Womack of the Thin Enterprise Institute. He advised Solectron on its productivity makeover and he also served as a judge at the company's Sept. 26-27 kaizen contest, along with Chihiro Nakao, Toyota's master of kaizen.
``These are Toyota terms, not Japanese terms,'' Womack said. ``Japan's industry might have failed, but Toyota is getting ready to eat General Motors.''
At Solectron's first annual Global Kaizen Competition, the finalists took turns at the podium describing how they improved operations over the past year. The winning workers at the factory in Penang, Malaysia, fixed the glitches that were slowing down production of mother boards for high-end work stations they made for a big customer in Santa Clara.
(Solectron doesn't name customers, other than to say 18 percent of its business is making things for Cisco Systems, which was not the customer in this case.)
The line workers took matters into their own hands -- without wasting time on management approvals -- and resolved nagging quality-control problems. From 32 percent of production passing quality standards a year ago they raised the pass rate to 81.3 percent, and shortened delivery time to the customer from 18 days to seven.
Drilling down
Even if kaizen succeeds in transforming Solectron's top layer of contract manufacturing, there are questions about how far down the food chain it can go. Much of the manufacturing that goes into finished electronics products happens at small companies on the subcontractor and material supplier levels.
``The reality of this industry is that you can't be better than your customers or your suppliers,'' Womack said.
Solectron has been going lean in other ways lately. In April it announced a restructuring plan that involved cutting about 3,500 jobs in Europe and North America.
Among the major electronics contractors -- including Sanmina-SCI of San Jose and Flextronics, which is incorporated in Singapore but operates out of San Jose -- Solectron has taken the most heat from Wall Street since the technology crash of 2000.
Andrew Huang, a financial analyst with American Technology Research, scolded Solectron last week for lower-than-expected revenue and earnings in its most recent fiscal quarter. Solectron's annual revenue continues to sag, decreasing from $11.6 billion last year to $10.4 billion in fiscal 2005, which ended Aug. 31.
``Having consistently disappointed for the last six quarters,'' Huang wrote in a report, ``we believe Solectron management has very little credibility left.''
Harsh words for a company that has dedicated itself to kaizen.
But industry analyst Pamela Gordon, president of Technology Forecasters in Alameda, gives credit to Solectron for its enthusiasm for productivity reform.
``The lean-production movement isn't unique to Solectron, but it's been their calling,'' she said. ``I think any contract manufacturer is selected by the customer for its efficiency, and lean production can only help the bottom line.''
