|Lot of reasons for Maytag’s failur|
|Date||June 12, 2006|
|To the Editor:
There is a lot of conjecture over how a once well managed and cash abundant Maytag corporation could have come to this end.
Amoung a lot of bad decisions lies an over riding fault.
The last group of CEOs were not willing to use the expertise of their knowledgeable staff. For some reason many CEO’s rise to the top from one area of expertise and right away think they have the same expertise in the other facets of the corporation.
As we know, profit is what is left over when the cost of sales is deducted from the sale of products. Since the vast majority of cost is generated in the manufacturing operation (labor and purchased materials), it would stand to reason that the manufacturing costs be given the highest consideration. Not so the last years at Maytag.
The biggest inefficiency in manufacturing comes from the cost of changing production rates. It generates line downtime, wasted management time, scrap, overtime, extra workers, layoff costs, etc. But instead of stabilizing the production rate, they dictated that rates be set at the highly unreliable marketing forecasts. Typically, this resulted in prodction rate changes.
In short, rates should have been set by what marketing’s feet were doing not their mouth. The CEO’s didn’t understand that the entire plant is staffed to build the given number of products each day and every time one unit doesn’t come off the end of the line the cost of everyone’s labor in the plant must be spread over the rest of production driving up the cost per unit and eroding profits.
Now, they did dictate that “lean manufacturing concepts” be adopted. They took these principles out of context from the Toyota system –just-in-time, Kaisens etc.
The authors of that system specifically state that these efforts will fail if production rates aren’t stabilized, and how right they are.
Another case in point was the decision to change all the computer systems in the corporation to the AS400. I don’t know if this made sense in financial or marketing but it was disastrous to manufacturing because it was unfriendly to the flow of materials causing line downtime and a fantastic amount of management time trying to make it work instead of working on productive endeavors. Again they wouldn’t listen to manufacturing.
In more than one instance, they threw millions at “upgrading the facilities.” These caused major interruptions in production and even if successful, wouldn’t have saved near as much as stabilizing production,which costs nothing to implement, if done right.
The litany goes on but this is where the major fault is, here and an inept board of directors. Then these same people walked away rewarded beyond belief.
Let this be a lesson to others lest it happen to them, and alas, it will.