Lessons From The Best

Focus on people, communicate, and have common goals.

In a fast-paced global world where technology and products transcend borders, it's not surprising that companies are finding that the path to world-class excellence in manufacturing increasingly depends on how well -- and how often -- they communicate and whether they recognize people as their most important asset. Those two themes turned up repeatedly when IndustryWeek asked the winners of its 1997 America's Best Plants competition what lessons they learned en route to striving for world-class competitiveness. "The cornerstone of all our improvement efforts is people," says plant manager Mark Hogan as he begins to explain the success of Cooper Industries' Cooper Automotive-Wagner Lighting Products plant in Hampton, Va. "Only through the efforts of each individual on the team working toward a common goal can the goals be achieved." Steve McGowen, plant manager for Halliburton Energy Services Inc.'s Carrollton, Tex., plant (part of its Dallas Manufacturing Center) that makes equipment for the oil and gas industries, agrees. "Empowered work teams positively impact machine utilization and prioritization of work flow and create an atmosphere favorable to constructive interaction and innovative ideas. Our most important asset is our people." The other building block: communication. "We believe communication is the cornerstone in executing our company's vision and values," says Darryl Miller, plant manager for Aeroquip Corp.'s New Haven, Ind., air-conditioning component plant. "If every employee does not understand the company direction, how can you get there? Communication -- both formal and informal -- is the key to ingraining your company philosophy and goals into each and every employee." Whatever form communication takes within your company, make sure it is "multidirectional" -- that is, up, down, and through all levels of the organization, says McGowen. "Open . . . lines of communication develop trust, encourage new ideas, eliminate intimidation and skepticism, and aid in building a brighter future for employees and the company." And the Best Plants winners agree: They can never communicate too much. "Communicate frequently, personally, and through multiple vehicles to ensure that the message gets across and that you obtain understanding," says Gary W. Bushman, manager of quality assurance and manufacturing engineering at Alcatel Network Systems Inc.'s Alcatel Telecom telecommunication- equipment plant in Raleigh, N.C. Don't forget, he adds, that "listening is the more important part of communication." Adds John R. Dew, manager of mission success at Lockheed Martin Utility Services' enriched-uranium plant in Paducah, Ky., "We use group meetings, required readings, a shift newsletter, a monthly newspaper, daily electronic and hard-copy news sheets, all-hands meetings, team meetings, and even public-address announcements to keep people informed. Communication is like dairy farming -- you milk the cows but they never stayed milked. It has to be a process the organization uses constantly." The 10 Best Plants winners also did more benchmarking than the other 15 finalists. The winners conducted an average of 24.4 benchmarking studies (with a median of 22.5) compared with an average of 17.84 for all 25 finalists (and a median of 10). The highest number of benchmarking studies: 58 by Aeroquip. But what do the 25 finalists from 1997 all have in common? Each of them places a major emphasis on cycle-time reduction, continuous improvement, employee cross-training, reduction of inventory, problem-solving teams, and creating opportunities for employees to have contact with customers. In addition, all 25 have production employees inspect their own work, give suppliers long-term contracts, and invite suppliers to contribute to cost-reduction and quality-improvement efforts. And each one uses an enterprise-integration strategy to link manufacturing and engineering to their other functional and geographical locations. In 1996 only 80% had that type of information-technology link. Here's a sampling of their accomplishments, culled from the data in IW's 1997 Best Plants Statistical Profile, a detailed composite analysis of last year's winners and other finalists. (The 40-page document includes data on a variety of performance indicators that measure, among other things, quality, the efficiency of manufacturing operations, supplier partnerships, customer focus, and employee involvement.)

  • Sales per employee increased, on average, by 80.43% during the last five years, with a median increase of 51.6%. In hard dollars, that lifted the median level of sales per employee from $169,466 to $260,184.50. Three companies had five-year gains of 188% or better, led by a manufacturer of automotive seat assemblies and seat cushions.
  • The median reduction in manufacturing cost per unit shipped was 23.7%, excluding the cost of purchased materials -- a two-percentage-point increase from the previous year's group of finalists.
  • The current median first-pass yield for all finished products for the 25 finalists is 98% with 14 of the 25 finalists at or above that threshold and all but five over 95%. Such yields go hand-in-hand with very little scrap. The current median point for scrap/rework as a percentage of sales is 0.5% with three of the finalists under one-hundredth of one percentage point. What's more, the median reductions since 1992 in scrap/rework (as a percentage of sales), in-plant product defect rates, product reject rate, and warranty costs (as a percentage of sales) ranged between 40% and 47%.
  • Since 1992 the 25 finalists have had a median reduction in work-in-process inventories of 37.9%. One reason: a dramatic reduction in manufacturing cycle time for the two main products at each company. The median five-year reduction since 1992 is between 70% and 71%, compared with reductions in the 50% range for the 1996 finalists. In addition, the 25 finalists store an average of 75.3% of their total parts numbers at the point of use.
Most important, these productivity and efficiency gains have reaped enormous dividends for the finalists in terms of market share and profitability gains. Of the 25 finalists in IW's 1997 competition, 21 achieved gains in domestic market share since 1992, with a median gain of seven percentage points. Six had increases of nearly or more than 20% and 10 had double-digit market-share growth. Twenty of the finalists had gains in worldwide market share, translating into a median percentage increase in export dollar volume of 96.15%. With those types of gains, it's not surprising that the average five-year productivity increase for the 25 finalists -- based on total annual sales per employee -- was 80.43%, with a median increase at 51.6%. In addition, 17 of the plants can boast of the No. 1 ranking in their primary-product markets. Eleven can brag about a 100% customer retention rate the last five years, and five more of a retention rate that's 95% or higher. The plant-level return on assets (ROA)? Nothing short of sensational. The median ROA of the 25 finalists was 47.35%, twice as high as the 1996 group, with seven plants over 94%. And the median five-year increase in return-on-assets was 60.5%, with seven plants having a five-year ROA increase of more than 200%. Where to start? Each of the 10 winners took its own unique path toward world-class manufacturing excellence. After all, there are as many roads to success as there are companies. But it's imperative that companies remember that whatever process they use, the process is not a program. "There is no end to this journey," says Jane Song, director of operations for the EG&G Astrophysics, Long Beach, Calif., plant that makes security X-ray screening systems and food X-ray inspection systems. "As improvements are achieved, you will be lucky to savor those achievements for a day before the journey continues." That's why it's important to begin, as renowned management expert Stephen Covey suggests, "with the end in mind," says Aeroquip's Miller. "That is the key in understanding the desired results you wish to attain. A road map must be developed in order to achieve the results. Growth and profitability do not happen by chance." And when beginning the journey, says Alcatel's Bushman, make sure you "focus with great urgency on critical performance issues that must be improved." "If you don't know where to start or if you're satisfied with your performance," advises Bushman, "go ask your customer if everything is perfect. Internal and external assessments . . . can provide an unbiased evaluation of progress, reveal weaknesses, and raise the targets of what you must achieve. Constantly seek and respond to your customer's input -- both positive and negative." Walk the talk Best Plants winners have also found that manufacturing excellence and business success require a commitment from all workers, including those in senior and middle management. But it is still up to top management to set the stage for success, they add. "Before beginning an endeavor of such magnitude," says EG&G's Song, "ensure that top management is totally committed to the success. If top management does not walk the talk, it will be very difficult to win the confidence and commitment from all of your employees." "Management must live up to its commitment," says Clifton Ritter, environmental and facilities manager for Tenneco Automotive's Paragould, Ark., Monroe shock absorbers and struts plant. "Employees listen to management, but they are also watching them [management] to see what they are doing." Indeed, Alcatel's Bushman says it is "vital" that top management set the example "by doing what they say they will do. Culture change is obtained from repeated shared experiences and must be reinforced daily." "Change happens only when supported by the level of leadership that has the power to effect those changes," declares Cooper's Hogan. "The production employees are the easiest sell to the improvement process. But without the complete cooperation and buy-in of the supervisory/management personnel, all improvements will fail for lack of support." Unified goals Above all, Hogan adds, make sure everyone is aligned to the same goals. "Alignment of common goals throughout the organization," he says, "stops turf wars, and [lets] all departments and levels of the organization focus on what is truly important to the success of the operation." Without common goals, he says, "people find themselves concentrating their efforts on the project, not the goal of the organization." And it becomes very easy to "become entrapped in the actions required to accomplish [a task]." That's why Tenneco Automotive formed three business centers at its Paragould, Ark., plant. Each area of a business center -- production, engineering, and maintenance -- share the business center's goals, which, in turn, support the plant's goals and the company's goals. "This allowed for a common direction among all employees and fostered a teamwork environment," says Ritter. In a similar fashion, Halliburton Energy Services' Dallas Center has a "6 Key" performance-measurement system that "provides us with a consistent method to drive performance at all levels of the organization," says McGowen. "These measurements must have balance . . . and goals must remain consistent and complement the company vision statement in order to succeed. [It] has resulted in more employee involvement and motivation as well as employee, department, and management 'ownership' [of issues]." Make sure goals are understood and can be measured. "A goal not readily understood will be ignored," says Hogan. "Measure those items that are tangible and do not change without performance improvements." But IW's Best Plants winners advise not viewing tools for performance improvements as ends in themselves. "Total quality management [TQM], problem-solving teams, kaizen events, statistical process control, just-in-time [JIT], Taguchi experiments, etc. . . . are strictly tools of the performance improvement process," says Cooper's Hogan. "Without integrating each of them into the total plant, each will yield only marginal results." Alcatel's Bushman agrees. "Concepts such as TQM and JIT must be integrated into day-to-day business processes and structures to achieve meaningful goals. [They] must be pursued in a disciplined and intentional fashion." Customers and suppliers Involvement and empowerment also are trademarks at IW's Best Plants. All cross-train production employees, and more than 90% have nonmanagement team leaders, use a kaizen approach to continuous improvement, and have production workers involved in concurrent engineering and process development. Perhaps equally important, they involve their entire value chain. "We invite major suppliers . . . and major customers to become part of our team," says Dennis R. Smith, plant manager at Lockheed Martin's Pike County missile operations, Troy, Ala. What's the value in that? "Supplier [and customer] partnerships create more value and competitive advantage than would have been possible by either the supplier or the customer [or us] standing alone," explains Halliburton's McGowen. All but one of the 25 finalists involves customers in product-development efforts, and 21 have formal customer-satisfaction programs -- complete with surveys -- and share those results with all employees. In addition, 18 of the 25 have suppliers evaluate their performance as a customer. All but two involve suppliers early in the product-development process. "It is very easy to focus on only the activities within the four walls of your facility for improvement and not the entire value chain," says Aeroquip's Miller. "We have driven out waste . . . and have driven improvement through the entire value chain" with everything from "partnering initiatives with our supply base to value-added product design and proactive 50/50 cost sharing with our customers." Senco Products Inc.'s fastener manufacturing plant in Cincinnati has had similar success. "We have worked with all of our key suppliers on the front end of any development program in order to maximize the value proposition," says James Cauhorn, project manager for North American Manufacturing. "These savings have exceeded millions of dollars for both Senco and supplier alike and, in the process, solidified the relationships between the companies [involved]." Working with customers upfront can also simplify manufacturing and design efforts. A case in point: A Voice of the Customer (VOC) process for new-product development has made the design process easier at Varian Vacuum Products Lexington in Lexington, Mass. "We now have a way to find out what the customers want and then translate those needs into design requirements," says Michael Blanchette, quality assurance engineer. Besides, he says, "If customers are involved in the design process, they feel a sense of ownership and are more willing to accept a product they have developed. Without any customer input, new products will have features that customers don't want." The net effect: Varian Vacuum's sales of vacuum pumps, leak detectors, gauges and controllers, valves, and other hardware have doubled since VOC went into effect as part of its customer-satisfaction process in 1992.
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