ROI Case File No.228 | 'The Wandering of Western European Automaker'

Chapter 1: The Proud Brand — Tradition as a Burden

The week following the resolution of Africa Education Bridge's EMPATHY empathetic support case, a serious consultation arrived from Western Europe concerning a veteran manufacturing company. The eighth case of Volume XVII "The Challenge of Reproducibility" was about a company whose traditional strengths had become shackles in modern times.

"Detective, we are a luxury automobile manufacturer with 120 years of history, but recently our profit margins have rapidly deteriorated. We maintain the highest quality standards, yet somehow profitability isn't improving."

PremiumMotor Europe Manufacturing Director Wolfgang Schmidt visited 221B Baker Street with undeniable confusion. In his hands were brilliant award histories alongside contrasting financial deterioration data.

"We are one of Western Europe's most prestigious luxury car brands. Through fusion of traditional craftsmanship and cutting-edge technology, we are beloved by wealthy customers worldwide."

PremiumMotor Europe's Brilliant Record: - Established: 1904 (120 years of tradition) - Brand value: World luxury car division 3rd place - Annual production: 450,000 units (large scale for luxury cars) - Customer satisfaction: 4.8/5 (industry's highest level) - Quality evaluation: International quality awards for 15 consecutive years

The numbers certainly showed an excellent brand. However, Wolfgang's expression was marked with deep concern.

"The problem is that despite our product quality and customer satisfaction being industry-leading, our operating profit margin deteriorates annually. We have a higher cost structure than competitors and question sustainability."

Financial Performance Deterioration: - Operating profit margin: 8.5% → 2.1% (significant deterioration over past 5 years) - Manufacturing cost: +35% higher than competitors (significantly above industry average) - Development period: Average 7 years (competitors 4 years) - Productivity per employee: -28% lower than competitors

"Most confusing is that our attitude of pursuing 'highest quality' hasn't changed, yet it's not translating to profits. Our quality improvement efforts seem to be causing cost increases instead."

Chapter 2: Expanding Costs — The Price of Perfectionism

"Mr. Wolfgang, what specific problems are occurring in your manufacturing processes?"

Holmes inquired quietly.

Wolfgang spread out detailed process materials while answering.

"We pursue 'perfect automobiles,' striving for the highest standards in every process. However, this has created complex and inefficient manufacturing processes."

Manufacturing Process Complexity Examples:

Engine Manufacturing Process: - Inspection stages: 27 stages (competitors have 12 stages) - Quality checks: 5 times per component - Manual work ratio: 65% (precise work difficult to automate) - Rework rate: 8% (due to high quality standards) - Manufacturing time: 45 hours per unit (competitors 18 hours)

Interior Assembly Process: - Materials used: 15 types of luxury materials (competitors 6 types) - Assembly steps: 185 steps (competitors 78 steps) - Craftsmen: 45 specialized technicians handle manual work - Customization options: 4,500 combinations - Quality adjustment: 3 days of fine-tuning after completion

Painting Process: - Paint layers: 12 layers (competitors 6 layers) - Drying time: 72 hours per layer (competitors 24 hours) - Quality inspection: 8 hours detailed check per unit - Correction work: 30% of vehicles require additional work

I focused on the complexity and inefficiency of processes.

"Quality is certainly at the highest level, but processes are so complex that much waste seems to be occurring."

Wolfgang showed a bitter expression.

"Exactly. We've cherished the culture of 'sparing no effort for quality,' but as a result, we've significantly sacrificed efficiency."

Specific Waste Occurrence:

Waste from Excessive Quality: - Quality improvement work at levels customers can't perceive - Additional inspections despite already sufficient quality - Inspection work at statistically meaningless frequency

Waiting Time Occurrence: - Impact on subsequent processes due to previous process delays - Work time variations due to craftsmen's skill level differences - Machine downtime due to complex setup changes

Transportation and Movement Waste: - Long-distance movement of parts and vehicles within factory - Movement for multiple quality checks - Wasteful traffic flow due to inefficient layout

"Our factory is called a 'sanctuary of quality,' but it may have become a 'hotbed of waste.'"

Chapter 3: LEAN Reveals Waste — Truth Hidden in the Sanctuary

⬜️ ChatGPT | Catalyst of Concepts

"Improvement starts not from 'adding' but from 'subtracting'"

🟧 Claude | Alchemist of Narratives

"The story of eliminating waste is like a trial of shedding past glory"

🟦 Gemini | Compass of Logic

"Reducing activities that don't create value revives competitiveness"

The three members began analysis. Gemini deployed the "LEAN Methodology" framework on the whiteboard.

LEAN's 7 Types of Waste (MUDA): 1. Overproduction: Waste of making more than necessary 2. Waiting: Waste of waiting time 3. Transportation: Waste of unnecessary movement and transport 4. Processing: Waste of excessive quality and features 5. Inventory: Waste of excessive materials and work-in-progress 6. Motion: Waste of unnecessary human movement 7. Defects: Waste of mistakes and rework

"Mr. Wolfgang, let's analyze PremiumMotor's manufacturing processes in detail from a LEAN perspective."

PremiumMotor Europe LEAN Analysis:

1. Overproduction Waste: - Parts manufacturing: 3x safety stock of demand forecast - Custom parts: Pre-production before orders - Prototypes: Excessive prototype iterations due to perfectionism - Waste time: 12 hours out of 40-hour week (30%)

2. Waiting Waste: - Quality inspection wait: Average 2.5 hours waiting per process - Craftsman work wait: Schedule coordination for specialized technicians - Approval wait: Manager confirmation needed for quality standard decisions - Waste time: 8 hours out of 40-hour week (20%)

3. Transportation Waste: - In-factory movement: Long-distance movement for quality checks - Parts retrieval: Inefficient procurement due to distributed placement - Finished car movement: Multiple movements between inspection locations - Waste time: 6 hours out of 40-hour week (15%)

4. Processing Waste: - Excessive quality: Quality improvement work not contributing to customer value - Duplicate inspections: Repeated checks of same items - Manual work obsession: Manual implementation of automatable work - Waste time: 10 hours out of 40-hour week (25%)

5. Inventory Waste: - Luxury parts: Quality deterioration risk from long-term storage - Work-in-progress: Large accumulation between processes - Finished cars: Long-term storage before shipment - Inventory cost: ¥3.5 billion annually (12% of revenue)

6. Motion Waste: - Craftsman movement: Inefficient work layout - Tool preparation: Setup time every time - Paperwork: Excessive recording and reporting - Waste time: 4 hours out of 40-hour week (10%)

7. Defects Waste: - Rework: High 8% correction rate - Quality excess: Rebuilding with quality exceeding standards - Inspection errors: False positives due to human judgment - Waste cost: ¥1.8 billion annually (materials and labor)

Claude presented shocking analysis results.

"This is serious. In PremiumMotor's manufacturing processes, 70% of total work time is spent on 'waste' that doesn't create added value."

LEAN Analysis Waste Structuring:

Added Value Analysis: - Value-adding work: 30% (work customers pay for) - Necessary non-value-adding work: 20% (necessary for quality assurance but no customer value) - Waste (pure non-value-adding work): 50% (completely unnecessary)

Comparison with Competitors:

Efficient Competitor A (Germany): - Value-adding work: 65% - Necessary non-value-adding work: 25% - Waste: 10% - Operating profit margin: 12% (6x PremiumMotor's)

Efficient Competitor B (Japan): - Value-adding work: 70% - Necessary non-value-adding work: 25% - Waste: 5% - Operating profit margin: 15% (7x PremiumMotor's)

PremiumMotor's Current State: - Value-adding work: 30% - Necessary non-value-adding work: 20% - Waste: 50% - Operating profit margin: 2.1%

Most Serious Discovery: "Waste in the Name of Quality"

PremiumMotor was performing massive amounts of wasteful work that didn't contribute to customer value, justified as "high quality." This wasn't true quality improvement but self-satisfaction through work complexity.

Chapter 4: Hidden Waste — Inefficiency Borrowing Tradition's Name

Detailed LEAN analysis and process observation revealed PremiumMotor's fundamental problem structure.

Structural Waste in the Name of "Traditional Quality":

Root Problem: Confusing Quality with Waste

PremiumMotor had long held the false belief that "putting in effort = quality improvement," actually mistaking wasteful work for quality improvement.

Detailed Analysis of Specific Waste Structure:

Engine Manufacturing Waste Structure: - 27-stage inspection: Only 12 stages statistically meaningful - 5 quality checks: 2 times sufficient for required precision - 45-hour manufacturing time: Reducible to 18 hours through automation - Waste loss: ¥250,000 extra cost per unit

Interior Assembly Waste Structure: - 185 steps: Only 78 steps contribute to customer value - 15 material types: Quality differences recognizable only up to 6 types - 4,500 customization options: Actual orders concentrated in 150 patterns - Waste loss: ¥180,000 extra cost per unit

Painting Process Waste Structure: - 12-layer painting: 6 layers sufficient for quality and durability - 72-hour drying: Reducible to 24 hours through technical improvement - 8-hour quality inspection: Reducible to 1 hour through automation - Waste loss: ¥120,000 extra cost per unit

Annual Waste Cost Calculation: - Waste cost per unit: ¥550,000 - Annual production: 450,000 units - Annual waste cost: ¥247.5 billion (about 30% of revenue)

Cultural Factors Creating Waste:

Perfectionism Trap: - Infinite pursuit of "making good things even better" - Neglect of statistical quality management - Engineers' self-satisfaction ignoring customer value - Conservative reaction to improvement proposals

Authority Damage: - Veteran craftsmen's judgment considered absolute - Experience and intuition valued over data - Efficiency proposals seen as "blasphemy against tradition" - Young people's improvement opinions dismissed

Departmental Silos: - Independence of manufacturing, quality, and design departments - Departmental optimization prioritized over overall optimization - Insufficient information sharing - Unclear responsibility locations

Industry Expert Analysis: "Companies successful in luxury car manufacturing clearly distinguish between 'truly valuable quality' and 'wasteful work.' Quality improvements that customers don't value are economically meaningless no matter how technically excellent."

Chapter 5: Detective's LEAN Diagnosis — Solving the Waste Labyrinth

Holmes summarized the comprehensive analysis.

"Mr. Wolfgang, LEAN's essence is 'maximizing customer value.' No matter how technically excellent, work that customers don't value is just waste. True quality means efficiently providing value that customers seek."

LEAN Transformation Strategy: Achieving "Quality Without Waste"

Strategic Direction: Value-Driven Manufacturing Excellence

Phase 1: Waste Visualization and Emergency Elimination (3 months)

Systematic Elimination of 7 Types of Waste:

1. Overproduction Reduction - Demand forecast accuracy improvement: AI prediction system introduction - JIT (Just In Time) production: Only necessary amounts when needed - Inventory optimization: 50% reduction in safety stock - Reduction effect: ¥1.5 billion annually

2. Waiting Time Reduction - Inter-process balance adjustment: Bottleneck resolution - Quality inspection automation: High-speed inspection through AI image recognition - Approval process simplification: Rapid response through authority delegation - Reduction effect: ¥2.5 billion annually

3. Transportation Optimization - Layout improvement: 50% reduction in inter-process distances - Automated transport system: AGV introduction for efficiency - One-stop inspection: Quality confirmation without movement - Reduction effect: ¥1.2 billion annually

4. Processing Optimization - Quality standard review: Optimal quality setting based on customer value - Inspection process integration: Elimination of duplicate inspections - Automation promotion: Mechanization of non-value-adding manual work - Reduction effect: ¥4.5 billion annually

Phase 2: Value Creation Process Reconstruction (6 months)

Customer Value-Centered Quality Definition:

Identification of Valuable Quality Elements: - Durability: Quality for 20-year use (current 30-year spec → optimization) - Comfort: Ride comfort improvement that customers can experience - Safety: Highest level safety functions (maintain) - Design: Beauty that evokes customer emotion (strengthen)

Reduction of Wasteful Quality Elements: - Excessive precision: Reducing precision levels customers can't recognize - Surplus functions: Standardization of low-frequency-use functions - Over-inspection: Elimination of statistically unnecessary inspections

Phase 3: Continuous Improvement Culture Establishment (Ongoing)

LEAN Culture Penetration into Organization: - All-employee LEAN education: Acquisition of waste discovery and improvement skills - Improvement proposal system: Collection and implementation of field improvement ideas - Data-driven decision making: Emphasis on statistical evidence over experience and intuition - Continuous improvement (KAIZEN): Culture of small improvement accumulation

Expected Effects: - Operating profit margin: 2.1% → 12% (achieving competitor level) - Manufacturing cost: 35% reduction (equivalent to competitors) - Development period: 7 years → 4 years (equivalent to competitors) - Employee productivity: +40% improvement

Investment Plan: - LEAN transformation investment: ¥4.5 billion (3 years) - Annual reduction effect: ¥9.7 billion - Investment recovery period: 6 months - 5-year ROI: 650%

"The key is that traditional technology and efficiency can coexist. LEAN doesn't sacrifice quality but regains competitiveness by focusing on truly valuable quality."

Chapter 6: Revival of Quality Without Waste — Fusion of Tradition and Efficiency

Fourteen months later, a report arrived from PremiumMotor Europe.

Dramatic Efficiency Results through LEAN Transformation:

Financial Performance Improvement: - Operating profit margin: 2.1% → 11.8% (5.6x improvement) - Manufacturing cost: Competitor +35% → Competitor -5% (reversal achieved) - Annual cost reduction: Total ¥10.5 billion (exceeding targets) - Investment recovery: Completed in 4 months (significantly ahead of 6-month target)

Specific Results of 7 Waste Elimination:

Overproduction Reduction: - Inventory turnover: 3 times/year → 12 times/year (4x improvement) - Safety stock: 50% reduction achieved - Inventory cost: ¥3.5 billion → ¥1.2 billion (66% reduction)

Waiting Time Reduction: - Inter-process waiting: Average 2.5 hours → 0.3 hours (88% reduction) - Quality inspection time: 8 hours → 45 minutes (90% reduction) - Production lead time: 45 hours → 18 hours (60% reduction)

Transportation Optimization: - In-factory movement distance: 50% reduction achieved - AGV operation rate: 95% (high-efficiency operation) - Movement time reduction: 6 hours/week → 1.5 hours/week

Processing Optimization: - Inspection processes: 27 stages → 14 stages (consolidated to important processes) - Manual work ratio: 65% → 35% (automation promotion) - Rework rate: 8% → 2% (process improvement effect)

Quality Impact: - Customer satisfaction: 4.8/5 → 4.9/5 (actually improved) - Quality evaluation: Continued to receive international quality awards - Durability: Sufficient performance at practical optimal level - Brand value: Gained price competitiveness through efficiency

Organizational Culture Transformation:

LEAN Culture Penetration: - Improvement proposals: 250 monthly (active employee participation) - LEAN education: All employees acquired basic knowledge - Data utilization: 90% of decisions use data evidence - Continuous improvement: Daily implementation of small improvements

Employee Changes: - Productivity improvement: +45% (exceeding 40% target) - Job satisfaction improvement: Concentration on essential work through waste elimination - Skill improvement: Opportunities to acquire advanced technology through automation - Youth utilization: Young ideas active in improvement proposals

Market Evaluation: - Price competitiveness: Achieved both high quality and appropriate pricing - Delivery time reduction: Accelerated market introduction through 4-year development period - New car introduction: Increased development resources through efficiency - Customer base expansion: Customer base expansion through price optimization

Employee Voices:

Veteran Craftsman (60 years old): "I initially opposed LEAN. However, eliminating wasteful work allowed me to focus on truly important technology. Quality didn't decline but actually improved."

Mid-level Engineer (35 years old): "Data-based improvement changed our 'somehow' to 'certainly.' Efficiency reduced overtime and increased time with family."

Young Technician (28 years old): "In an environment where improvement proposals are evaluated, I feel rewarded. Learning both traditional technology and cutting-edge efficiency methods makes me feel growth."

Wolfgang's letter contained deep gratitude and conviction:

"Through LEAN transformation, we shifted from 'opposition between tradition and efficiency' to 'fusion of tradition and efficiency.' Most important was clearly distinguishing between truly valuable quality and mere wasteful work. While preserving 120 years of traditional technology, we regained competitiveness by eliminating waste. LEAN doesn't destroy tradition but makes tradition shine more beautifully."

Detective's Perspective — Harmony of Tradition and Innovation

That night, I pondered deeply about the essential relationship between quality and efficiency.

PremiumMotor's case clearly demonstrated the trap of "excessive fixation on tradition" and "beautification of waste" that many veteran companies fall into. True quality means focusing on elements that customers value, unrelated to work complexity or effort intensity.

LEAN methodology's true value lies not in being a mere cost-reduction tool but in being a philosophical system that realizes "true value creation." By eliminating waste, management resources can be concentrated on truly important value creation activities.

In the context of Volume XVII "The Challenge of Reproducibility," PremiumMotor's transformation provided important insights. For sustainable competitive advantage reproduction, acquiring efficiency adapted to the times while maintaining traditional strengths is essential.

"True tradition means inheriting essential value while discarding formal waste"

Through the modern tool of LEAN methodology, traditional companies can acquire new competitiveness. The next case will also explore possibilities for value creation through harmony of old and new.

"Eliminating waste doesn't lower quality. It highlights true value and makes it shine in its most beautiful form. LEAN is the compass for regaining that brilliance." — From the Detective's Notes