In previous Reshoring articles, we introduced the power of value stream cost accounting to improve performance, profitability and teamwork. Our case example promised a second article on demystifying cost accounting. I struggled with this commitment due to the events of the past few weeks. As of November 3, US companies may be able to move forward with Reshoring bringing manufacturing and jobs back to the US, improving our self-sufficiency, as well as the quality and delivery of products and services, or not, depending on which candidate prevails. Trump will promote American industry with fair tariffs and incentives to Reshore, as he has already accomplished. Biden will promote China and we will be back to offshoring. Which is better for your family, company, and nation?
The choice is clear, but not to all, which leads to GEMBA. Genba (or gemba) is a Japanese term meaning “the actual place” or going to the place something happened to discover the facts and truth. As in corporate cost accounting, we sit in our office or home, listen to what others say instead of doing the research, or going to the real place.
Research means reading reliable sources. It is sometimes difficult to discern which is a reliable source or source document or not. Some individuals do not know the meaning or value of a primary or secondary source document. Some, like business leaders, either do not know how or want to research information, no matter the risks, threats and returns on the investment in looking.
In value stream costing, we simply go to where the activity is being or was performed, observe, and ask questions. Focusing on the issue, problem, risk or opportunity we ask, how much is this costing in labor and direct expenses? Most of the time, those costs are attributed to overhead and admin and not to the cost of goods sold but should be. For example, in the receiving department 25% of the products or components are defective due to supplier process controls. Labor and direct costs to rework, repair, scrap, ship, and manage the problem are calculated. Wasted tariffs and taxes paid for the import from China, and time and direct costs (including air or water transportation) to replace the product or component are added. Using this approach, the appropriate solution to the problem is also identified. By going to GEMBA the need for tighter controls at or a change in the supplier is uncovered. Reworking, scrapping, and falling on the sword stops. Using this approach over the entire value stream enables the company to improve profitability and performance, thrive and perhaps Reshore part or all its supply chain.
The latest threat and casualty for business is not new. Over 100 years ago, Anarchists infiltrated the US, rioting and burning. After assassinating or attempting assassinations of a half-dozen officials and members of European royal houses and leaders they finally assassinate President McKinley in 1901. Reference The Anarchists: The Men who Shocked an Era. A few Presidents, such as Calvin Coolidge, counteracted these forces and providing businesses and individuals opportunities for freedom and success. You can argue about who those presidents were or were not. Go to GEMBA and find out. Yet here we are again, and the situation is worse.
Why believe the latest propaganda instead of going to GEMBA? The answer to this question is wrapped up in root causes including the decimation of the US public education system and the media. Still I wondered. An amazing piece of the puzzle and explanation for the public’s recent acquiescence to the Anarchist’s, State and the Church can be found in Carl G. Jung’s The Undiscovered Self.
“Both the dictator State and denominational religion lay quite particular emphasis on the idea of community. This is the basic ideal of “communism,” and it is thrust down the throats of people so much that it has the exact opposite of the desired effect: it inspires mistrust…..Naturally, society has an indisputable right to protect itself against arrant subjectivism, but, in so far as society itself is composed of de- individualized persons, it is completely at the mercy of ruthless individuals. Let it band together into groups and organizations as much as it like- it is just this banding together and resultant extinction of the individual personality that makes it succumb so readily to a dictator (state).”
What does this have to do with value stream cost accounting and Reshoring? Lots. The future of business, industry and independence hangs in the balance of understanding the collective versus the value of the individual.
The Mervyn Group is ready to help you
- Evaluate cost of goods/ services sold in a comprehensive way (Value Stream Cost Accounting) along with opportunities for improvement,
- Optimize processes and maximize efficiency (Operations Excellence, LEAN, SIOP, Technology and Automation), and
- Identify new suppliers and supply chains.
- Enable your organization to rebound, survive and grow, and perhaps ride the momentum to our shore.
Contact Debra Mervyn Debra@MervynGroup.com to learn more.
