Braced For The Future: IW Best Plants Profile - 2004

World-class operational performance at dj Orthopedics speeds customer responsiveness and supports market success.

dj Orthopedics de Mexico, S.A. de C.V., Tijuana

At a Glance

In addition to an identification card, management team members at the dj Orthopedics facility in Tijuana carry another card on the string around their necks. John Yots, vice president of manufacturing, handed them out in the spring of 2003 when the company began to ramp up its Mexican operations. It's a backhoe driver's license. Among other motivational phrases, the card says that backhoe drivers see roadblocks as invitations, drive through obstacles (not around them), and clear the road so others can follow.

Such statements exemplify the can-do attitude at all levels of this manufacturer of orthopedic devices. That attitude has been tested as the company has transferred more and more production to the Mexico plant from its facility in Vista, Calif., which is also the location of corporate headquarters. From about 100 employees in 1999, dj Orthopedic's Mexican workforce has ballooned to 752 employees today. The number of different products manufactured and assembled in Tijuana has increased fourfold to 9,500 SKUs over the past three years.

Perhaps the biggest challenge to the backhoe-driver attitude was the planning and construction of a brand-new factory a few miles down the road from its three current plants. In addition to more room to grow, the new building has a clean room and features transparent ceiling panels that bathe the plant floor in natural light. All of the walls and beams have been painted white to draw attention to dirt and disorder that could accumulate when operations are consolidated here by early October.

Designing and building the new facility was one of many challenges the staff faced during a year when organic growth, acquisitions and vertical integration of products previously sourced from China all combined to boost unit volume 25% in Tijuana in 2003.

"We all work for money, but this is fun," says Yots, the white-haired elder statesman and head cheerleader on the management team. "I can't wait to get to work in the morning."

The growth reflects and supports the strong market performance of the company -- performance that placed dj Orthopedics as the No. 2 performing stock on the New York Stock Exchange (NYSE: DJO) in 2003 with an annual stock price appreciation of more than 600%. Such an accomplishment would have been impossible under the old batch production mode that the company followed only four years ago.

Accelerated by frequent kaizen events -- two- to three-day, cross-functional improvement initiatives focused on a particular workcell or department -- the production floors of the three facilities have been transformed into 69 flexible cells. Each day the cell teams sew, glue and assemble the pieces of fabric, straps, metal stampings and plastic parts -- many of which are injection molded in house -- into 16,000 wrist braces, arm slings, back and abdominal supports, rigid knee braces and other products. (dj Orthopedics is the official knee-brace provider to the U.S. Ski and Snowboard Teams.)

Cell leaders determine what each shift produces based on SKU demand data that is updated every two hours and easily accessed via computer terminals within each workcell. In addition to output numbers, the teams track target and actual labor costs per unit. Kanban replenishment signals trigger all material movement, including supplier deliveries. As a result of these and a host of other initiatives, manufacturing cycle time has been cut 95% on average during the past three years. Order-to-shipment lead time has been slashed 98% to 24 hours.

dj Orthopedics' mastery of lean manufacturing is nowhere more evident than in the Durakold workcell. Here, a seven-person team assembles cold-therapy pads and wraps, including filling the removable plastic sleeves with a gel mixture that the end user chills in a freezer. The company acquired the product line in late 2003 and moved production to Tijuana. Occupying a scant 395 square feet, the cell makes 500 pieces per 10-hour shift, out-producing the previous owner's 12,000-square-foot facility.

As lean manufacturing concepts have become ingrained, formal kaizen events have tapered off, from as many as one per week down to 24 events per year, but that doesn't mean the improvements have slowed.

"You don't have to have a kaizen to apply lean concepts. Once it's learned, just do it," advises Nick Hernandez, production manager.

That's exactly the attitude of the empowered work teams. Taping out equipment positions and setting up the workcells in the new building this past August, they were taking advantage of the move as one more opportunity to eliminate waste and improve work flow.

Perhaps the area where dj Orthopedics' streamlined operations have had the most dramatic impact is on customer backorders. The increased responsiveness of the demand-based scheduling system has reduced the average number of backorders from 40,000 to 50,000 four years ago to 200 to 1,000 today.

This system also has allowed the plant to assemble and ship a growing number of orders (30% currently) directly to customers, primarily major medical device distributors. No trivial feat when each order may contain hundreds of different SKUs. Each of the cell leaders works these line items into the regular production schedule. The plant ships the remaining output -- taking advantage of the tax savings and preferential customs processing afforded to maquiladoras -- to distribution centers in California and Michigan.

At its most basic level, as described by one manager, the core purpose of dj Orthopedics de Mexico is "to put good units in boxes to go north." To do that, two shifts per day, six days per week requires a team effort. In a city where job openings have been plentiful in the recent past, and where "Vacantes" ("Help Wanted") signs are beginning to reappear on factory fences, it takes more than competitive wages to maintain that team culture. (The average hourly pay here is $2.86 per hour.)

Of course the company's growth opens up opportunities at all levels. The work-cell setup itself promotes job variety; everyone is cross-trained, moving among jobs within the cells, and among cells depending on the workload. In addition to assorted benefits and performance bonuses, the company also hosts regular social events, picnics and dances, and even a women's health fair on Mother's Day. The new factory contains a full-service, 300-person cafeteria, an expanded training facility, basketball and volleyball courts, and reserved openings at the government-funded daycare center next door. All help the company to attract and retain the area's most talented and motivated people.

Another factor in employee retention is the clarity employees have, through dj Orthopedic's "strategic line-of-site" approach, of company goals and how daily results at the workcell level impact those goals.

"When people get a close connection with the result of their work, when they every day know what they are supposed to do and how they achieved the goals, that makes a strong connection with the company and their job," states Joaquin Samaniego, human resource manager. Of course the more difficult the challenge or objective, the harder the backhoe drivers of dj Orthopedics push to make it happen.

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