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Gunmaker Shooting Itself in the Foot?
October 29, 2007

Gun Maker Ruger's Quarterly Results Are Off-Target (Sturm Ruger) | SmartMoney.com:

We read about Ruger, the gunmaker, last year (in this post). They were making a number of Lean moves, including:

• Moving away from a piecework system (which tends to drive overproduction) to hourly wages
• Moving from isolated production islands (which drive the waste of inventory) to cellular layouts
• Cross training employees for flexibility in those cells

Unfortunately, "increases in productivity have outpaced increases in consumer demand," meaning that they weren't able to grow fast enough, doing "more with the same number of employees" if you will (instead of "doing more with less."). Ruger was avoiding layoffs, trying to use buyouts and attrition instead.

Now, their Lean efforts pop up in the news again, in their quarterly report. They are losing money, their stock price fell 38%. Not looking good, right? The article says:

"'The sharp reversal was caused by management too quickly moving to introduce lean manufacturing. Once the implementation was underway, management realized it had inadequate machinery, its machine changeover times were too long and it had vendor supply issues. As a result, production problems returned and Sturm Ruger once again faced difficulty getting product out the door,' he wrote."

I hate to kick them while they're down, but implementing Lean shouldn't cause production problems. It certainly sounds like Ruger was exposing a lot of rocks as they lowered the water in the river, using the common Lean/TPS analogy. But were they fixing the problems or steering the company boat into them?

If you blindly implement certain Lean concepts (such as cellular production) without considering other factors like changeover time (which could be addressed through the Single Minute Exchange of Dies, or SMED, method), you're going to run into problems. You see similar things when companies implement "just in time" inventory and then have trouble delivering to customers, due to production and lead time variation or incapable suppliers. That's L.A.M.E. Those could all be considered examples of "Lean As Mistakenly Executed".  You can't just go reducing inventory, without first reducing cycle time and changeover times and improving quality. 

The question remains -- will Ruger learn from these challenges, making them stronger as a result? Or, will they back off and say "Lean doesn't work here?"

It's also not just a manufacturing problem. They have some "Lean Enterprise" issues to address, such as getting the right products developed and out to market, as they have struggled there:

"For decades, Ruger introduced innovative designs on a regular basis, stimulating consumer demand. That strength has waned in the past few years with the passing of Bill Ruger Sr. [who died in 2002] and a weakening of the product development resources at Ruger," Fifer wrote. "Now, some of Ruger's older product lines are less innovative than recent offerings from competitors. Moreover, Ruger does not participate in some of the fastest-growing segments of the consumer firearms market."

Kevin Meyer, at Evolving Excellence, had a faster trigger finger than me (groan, I know) and has a very good post that he got out there first (with a slightly different take than mine) while I was waiting to release this one.  Kevin is making the case that Ruger is going through normal Lean challenges and that Wall Street isn't being patient enough.  Kevin's right, Lean is hard, but you can also do yourself favors by doing things in a good sequence (such as not reducing batch sizes without first cutting changeover time).

Posted by Mark Graban on October 29, 2007 | Comments (0)