The invention of the automobile wasn’t as significant as the invention of the modern factory to produce it. That’s according to experienced automaker Elon Musk.
In an interview with podcaster Joe Rogan, Musk called Henry Ford a “next-level genius” for reimagining the way factories operate. In 1913, he famously installed the first conveyor-belt assembly line for cars at a Michigan factory, creating a new form of mass production that proved revolutionary.
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“Ford deserves a tremendous amount of credit,” Musk said. “In fact, Ford is really responsible for the entire mass manufacturing industry because he actually founded Cadillac, which was the heart of General Motors. Then he got kicked out and started Ford.”
To be clear, Cadillac was founded in 1902 with the remnants of Ford’s first automobile venture five months after he left the company. The brand was based on a single-cylinder engine developed by Henry M. Leland. It would go on to become a part of General Motors in 1909.
Nevertheless, Ford was clearly the pioneer of lean manufacturing, which revolutionized automaking and made his third venture, Ford Motor Company, a massive success.
Ford’s lean manufacturing technique inspired Toyota's (TM) Kiichiro Toyoda and Taiichi Ohno to implement similar cost-saving strategies and ramp up production. The duo used Ford’s ideas to create their “Just-in-Time” philosophy, which was yet another revolutionary change for global manufacturing.
To cut costs and eliminate waste, Toyota focuses on manufacturing only "what is needed, when it is needed, and in the amount needed." That means all the parts and equipment needed to manufacture a vehicle on the factory floor are arranged in a way to minimize the time it takes to get from order to delivery.
These innovative manufacturing techniques have helped the company boost production while maintaining quality. Today, Toyota is the largest car maker in the world, producing nearly 10 million vehicles every year. In terms of revenue, it’s the second-largest auto company in the world. Toyota generated $275.2 billion in revenue in the fiscal year that ended in March 2023.
Athletic footwear might not be the first thing you associate with cutting-edge manufacturing, but Nike (NKE) proves that you should.
Researchers studied the audits of more than 300 factories in Nike’s supply chain across 11 countries and discovered lean manufacturing processes throughout the system. They say this not only reduced costs and boosted efficiency but also led to better compliance with labor standards in different countries.
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Nike’s efficient factory floors reduce costs while its excellent marketing bolsters premium pricing. This is reflected in its wide profit margins. The company’s gross margin has always been above 42% for the past decade, with the exception of the quarter ended May 2020. Meanwhile, the stock is trading at 32.9 times earnings per share.
Investors looking for a lean manufacturing machine with a robust brand should certainly add Nike to their list.
Deere & Company
The maker of tractors, diesel engines and lawn care equipment invested $100 million in 2003 to move from mass manufacturing to lean manufacturing. The process allowed the company to significantly reduce the size of its factory floors and boost output. Deere & Company (DE) is a market leader with 37% market share in the tractors and agricultural machinery manufacturing industry, according to IBISWorld.
The stock is up almost 134% over the past five years, outperforming the S&P 500, which has delivered about 65% over the same period. It’s now trading at just 10.9 times earnings per share.
The firm's iron grip on this market, coupled with a strong brand and lean manufacturing, should put it on every investor’s radar.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.