Setting The Pace: IW Best Plants Profile - 2004

New medical devices and formal continuous improvement drive growth at Guidant Puerto Rico.

Guidant Puerto Rico, Dorado, Puerto Rico

At a Glance

Living under the microscope takes on new meaning at a sparkling, clean-room manufacturing facility just a mile or two from the beach on this sunny Caribbean isle.

Decked out in lab coats, booties, and hair and beard nets, the workforce of Guidant Puerto Rico B.V. (GPR) makes medical devices, including a variety of pacemaker leads. Appearing as simple insulated wires, leads are actually a complex bundle of as many as 46 tiny, precision components. One end of the lead plugs into the pacemaker, while the other end is implanted directly into the heart muscle to deliver small electrical impulses that help control the rhythm of a malfunctioning organ.

In addition to managing this complex and evolving product line -- 80% of current revenues are derived from devices introduced in the last year -- the company's manufacturing operations in the city of Dorado, just west of San Juan, are under continuing scrutiny by the British Science Institute (BSI) and the U.S. Food and Drug Administration (FDA), which make unannounced audits. Any changes or enhancements must meet the regulators' compliance guidelines to statistically validate process reliability. Nonetheless, GPR has been able to implement lean manufacturing and Six Sigma initiatives to support a stunning seven-fold increase in volume over the last three years, while increasing productivity by 30% or more.

The company is literally bursting at the seams. Since 2000, GPR has doubled in size and grew taller with a second-story expansion to accommodate new manufacturing and future support functions. Nearly 450 new jobs, a 77% increase, have been added over the last three years, and revenues are up 106% in the last two years alone. Through lean and Six Sigma initiatives some manufacturing lines have experienced productivity gains of 75% and cycle time reductions of 50%. Cost savings resulting from improvement initiatives topped $5 million in 2003. It's no wonder GPR was named Puerto Rico's 2003 Manufacturer of the Year.

One of the first things one is told when entering the GPR parking lot is to back your car into your parking space, so you can make a quick getaway in case of a hurricane warning. That's one of the few worries for manufacturers in this bustling paradise, unless you have something against white sand, coconut palms and tax breaks. In fact, many U.S. medical device and pharmaceutical companies -- light manufacturing operations -- once located production in Puerto Rico to exploit Federal income tax exemptions. These exemptions expired in 1997 (though they extend until 2005 for U.S. companies established in Puerto Rico prior to that year), but the companies remain because of Puerto Rico's skilled and educated workforce. For instance, almost half of Guidant employees, including operators, have an associate's degree, and nearly one-quarter have a master's degree.

The Guidant Dorado facility opened in 1989 to make pacemakers, defibrillators and leads. In 1993 it focused on leads and now is the sole manufacturer for these devices within Guidant Corp., headquartered in St. Paul, Minn. In 2000, based on its record of high quality and a low cost structure, the plant was awarded business from other divisions, and today also manufactures products for vascular intervention (guide wires that facilitate delivery of stents and catheters) and cardiac surgery (tools used to harvest veins from small incisions in the arms or legs of patients undergoing heart by-pass operations).

The addition of these products unleashed a flood of new growth and expansion, but also carried subtle challenges that allowed GPR to demonstrate its leadership capability. Each of the new divisions had its own quality system and validation approach for BSI and FDA compliance. GPR was able to pick and choose among best practices from the new businesses, add their own, enhance the results and come up with an improved, standardized system. The streamlined validation procedure has been adopted throughout the corporation. "Implementing best practices enhanced our flexibility and diversity," comments Ricardo Gonzalez, manufacturing manager.

GPR's manufacturing has always been based on modern methodologies. Production lines were cellular from the get-go, suppliers replenish via kanban, and the company delivers just-in-time to its three customers, which are Guidant distribution centers in Minnesota, California and Ireland. GPR also has a long history of continuous improvement and lean thinking, but until recently, the efforts have focused on trouble pockets rather than the entire operation. "If we found a problem on a line we would gather a group of people together and fix the problem, then move on to another one," says Heriberto Diaz, general manager. "As a result, you had a small subset of operators on the line that experienced lean thinking, but we didn't extend it to the entire line. Sometimes the benefits didn't stick and we had to come back after a year or two and do it again"

Road to World-Class

In January 2003, the company rolled out World Class 2006, an initiative designed to formalize and make systemic its lean manufacturing and Six Sigma programs. GPR hired a consultant specializing in lean to set up the program, established a steering committee to coordinate activities and make sure there was no conflict among initiatives, and trumpeted upper management's sponsorship and total support of the effort. "We want the reason to be in Puerto Rico to be the highest quality, highest reliability and highest compliance level, not tax benefit," says Diaz. "And we told our employees to focus on what adds value to the customer. We impressed upon them that when we say 'I work for a world-class company,' that that is synonymous with job satisfaction."

The link between Diaz's world-class vision and lean manufacturing reality on the plant floor is provided by a case study on one of GPR's most significant manufacturing lines. Lean waste-reduction techniques and principles were applied, and the line experienced a 40% increase in productivity, a 60% decrease in cycle time and a 25% increase in yield. A formal presentation was prepared to demonstrate the lean methodology, and other operators and supervisors were invited to come and marvel at the line's newfound success. "Originally some of the people from the line didn't believe in lean," says Diaz. "But now they are going around and spreading the word. They are ambassadors. Changing the culture is something I'm feeling really good about."

While the company has a number of financial incentives and recognition awards, including on-the-spot bonuses of up to $2,500, you need look no further than GPR's annual Quality Day for real motivation. On this day, the plant shuts down. As part of the presentation, physicians talk about their procedures using Guidant devices, giving employees a chance to see, for example, how the flexibility of a lead affects the doctor's ability to implant it. But the real impact comes when patients testify to the life-altering impact of these devices. One employee actually built the lead implanted in his mother that saved her life. "Every day I feel like I'm here to keep a life going," says operator Joel Vallejo. "That's the pride I feel about working here."

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