Time hasn't tarnished the luster of quality and continuous improvement as drivers of change.
The good news is that American manufacturing is not standing still, and, for the most part, its performance appears to be improving rather than declining. So indicate the results compiled in the Third Annual IndustryWeek Census of Manufacturers. For example, almost 80% of the plant-survey respondents to the IW Census say their finished-product first-pass quality yields have improved during the last five years. During that same period, productivity (as a value of annual plant shipments per employee) has increased for 82% of those survey respondents, while 58% declare that per-unit manufacturing costs, excluding purchased materials, have declined. Complacency does not seem to be a factor hampering many manufacturers. All IW Census signals indicate that manufacturers are actively seeking to improve and are using a variety of methods toward that end. A majority of corporate and plant-level executives alike claim that initiatives that promote quality and continuous improvement are critical to their success and that they are implementing such programs. The emphasis they place on initiatives such as lean manufacturing and the introduction of new products indicates that executives recognize that beating the competition means bringing new and better products to market faster and keeping costs down at the same time. But the picture painted by the results of the Third Annual IW Census is not entirely rosy. It shows plenty of room for improvement. More than a handful of U.S. manufacturers admit that their manufacturing performance has taken a negative turn in the last five years or has stayed the same, or they say that improvements are so incremental that they continue to lose ground to their competitors even while improving their own performances. For example, while 68% of plant-level respondents say they have managed to reduce their customer leadtime during the last five years, the percentage who report reductions of more than 20% drops dramatically, to slightly less than one-third of the total plant survey. When it comes to customer service, some 22% of the plant-level managers report that their facilities' on-time delivery rate is less than 90%, and at least 70 plants say they don't manage to deliver product to customers by the date specified even 70% of the time. If those are improved numbers, the need for more improvement seems undeniable. On the upside, 4.2% of plant-survey respondents say they manage to deliver on time, every time. So the question becomes, is all the effort expended on quality-management and continuous-improvement programs worth the time well-planned and -deployed programs require? And why are some manufacturers less than pleased with the results of their improvement efforts? Quality + continuous improvement = marketplace survival For three years, the IW Census of Manufacturers has documented the differences between the ways corporate-level manufacturing executives and their plant-level counterparts perceive the U.S. manufacturing landscape. However, in two important areas the shop floor and the corporate suite share similar views -- that quality-management and continuous-improvement efforts are the driving forces behind any endeavor to achieve manufacturing excellence. Says Sid Davis, vice president and general manager of Bettis Corp., Waller, Tex.: "I am a believer that you cannot afford not to [focus on quality]. You're just going to pay the price when something bad happens." Davis' plant manufactures pneumatic and hydraulic valve actuators, and he says a failure in the quality of his product could shut down a customer's plant. And he notes that continuous improvement "is something we have to do to survive in the marketplace." IW Census data suggest, however, that implementing such programs presents challenges. For example, about two-thirds of the corporate-level executives surveyed were adamant as to the importance of quality-management programs and formal-continuous improvement programs, describing them as critically important. Yet on the plant level, while approximately 90% of survey respondents report having implemented these initiatives, only about one-third say they have extensively implemented such programs. (Rather unnerving is the handful of corporate executives who rate quality-management and formal continuous-improvement programs as of no consequence, and the 175 to 200 plants that have made no efforts to incorporate such programs into their operations.) By all accounts such programs work. Quality metrics -- such as first-pass quality yield, scrap and rework costs (as a percentage of sales), and warranty costs -- are better for plants that have implemented quality programs. Additionally, plant-survey respondents who say their plants have extensively implemented such programs have a median productivity of $160,000 per person versus $137,000 for plants that haven't implemented such programs and $154,000 for plants that have implemented the programs to a lesser degree. The same improved metrics are reported for plants that have adopted formal continuous-improvement programs, only on a more widespread scale. Not only do plants that extensively implement formal continuous-improvement programs produce better quality metrics, their performance across the board makes one wonder why more manufacturing facilities haven't embraced this initiative wholeheartedly. For these manufacturers quality metrics improved as well as measurements related to speed (such as cycle times, inventory turns, and leadtimes), productivity, and improvements over time. The better-performing plants have made this connection. For example, plant-level respondents who report that they have achieved world-class status are twice as likely as the total plant survey to have extensively implemented a formal continuous-improvement program and nearly twice as likely to have extensively implemented quality-management programs. When it comes to a specific quality management program -- total quality management (TQM) -- the discrepancy is even larger. Nearly 59% of the self-assessed world-class plants say they have extensively implemented TQM versus 27% of the total plant survey and just 8% of plant-survey respondents who say they have made no progress to world-class status. In fact, the best-performing plants have implemented more extensively all best practices tied to continuous improvement than the plant survey as a whole. For example:
- Flexible, cross-functional workforce -- More than half of the corporate-level-survey pool report that flexible, cross-functional workforces are critical to their organization reaching world-class status. Yet less than a quarter (23.2%) of the plant-survey sample say they have extensively implemented such measures. Among world-class plants, more than half (54.7%) report extensively incorporating a flexible, cross-functional workforce in their plant. Additionally, these respondents rank it among the most effective means by which they achieve their goals. Oddly, two tools that seemingly drive the creation of a cross-functional workforce -- training and employee empowerment -- receive remarkably little attention from many manufacturers despite repeated examples of better performance tied their use.
- Customer-satisfaction surveys -- Continuous improvement certainly entails nonstop attention to the processes under way within a plant. Improving partner relationships, in this instance the customer, is equally important. An obvious method for improving such relationships is conducting regular surveys to quantify customers' pleasure and displeasure with the cost and quality of a product and its attendant service -- and, of course, to act on the information. While certainly much of this activity is conducted at the corporate level, the better-performing plants interact directly with their customers to understand their needs. To better illustrate: Nearly 60% of IW Census plant-level survey respondents who report having made no progress toward achieving world-class status say they never conduct customer-satisfaction surveys. Just 16% of the self-assessed world-class plants admit the same. And while a direct comparison cannot be drawn between the use of customer-satisfaction surveys by IW Census respondents and the winners and other finalists in IW's 1999 America's Best Plants program, it bears mentioning that among those Best Plants in North America, 96% are regularly conducting customer-satisfaction surveys.
- New-product development with customers and suppliers -- Among customer and supplier best practices covered in the IW Census, new-product-development efforts that include value-chain partners are most favored by IW Census plant-survey respondents. Clearly many plants recognize the gains to be made and the headaches avoided when issues that invariably affect customers and suppliers are addressed before a product is readied for manufacture.
Percentage of total survey sample reporting level of implementation.
|Initiative||No implementation||Some implementation||Extensive implementation|
|Formal continuous-improvement programs||13.3%||55.0%||31.6%|
|New information technologies||21.5%||53.8%||24.7%|
|Flexible, cross-functional workforce||18.2%||58.7%||23.2%|
|Planning and scheduling strategies||18.4%||58.5%||23.1%|
|New process equipment or technologies||18.1%||60.3%||21.7%|
|Self-directed or empowered work teams||34.9%||47.4%||17.7%|
|Reengineered production processes||19.7%||62.9%||17.4%|
|Performance median||Total plant survey||No implementation||Extensive implementation|
|Finished-product first-pass yield||95.0%||95.0%||96.0%|
|Scrap and rework costs as a percentage of sales||2.0%||3.0%||2.0%|
|Warranty costs as a percentage of sales||1.0%||1.0%||1.0%|
|Manufacturing cycle time||29.0 hrs||36.0 hrs||24.0 hrs|
|Standard customer leadtime||14.0 days||15.0 days||12.0 days|
|On-time delivery rate||95.0%||94.0%||95.0%|
|Annual raw-materials inventory turns||10.1 turns||9.0 turns||12.0 turns|
|Annual work-in-progress inventory turns||13.0 turns||12.9 turns||16.5 turns|
|Annual finished-goods inventory turns||12.0 turns||10.0 turns||12.6 turns|
|Annual total inventory turns||8.0 turns||7.0 turns||9.0 turns|
|Productivity as dollar value of annual shipments per employee||$150,000||$130,000||$175,000|
|Percentage of plants reporting performance|
|Five-year cycle-time reduction of more than 20%||21.9%||15.5%||27.3%|
|Five-year productivity improvement of more than 20%||28.2%||18.1%||35.6%|
|Five-year decrease in manufacturing costs of more than 10%||26.3%||19.4%||32.9%|
|Initiative||Total plant survey||Fully achieved world-class|
|1. Quality-management programs||25.3%||59.6%|
|2. Flexible, cross-functional workforce||26.6%||51.1%|
|3. New process equipment or technologies||32.6%||51.1%|
|4. Formal continuous-improvement program||21.5%||42.6%|
|5. Cycle-time reductions||28.8%||34.1%|