1998 IW Best Plants: Allegiance Healthcare Corp.

Allegiance Healthcare Corp. El Paso, Tex.

Until about five years ago Maria Karisch didnt always like coming to work. "We were stuck in one place [in manufacturing] and we didnt have the opportunity to be free to express our opinions."

But now she has a totally different view. Why? Management began to involve employees and let natural work teams improve operations when it began the switch from manual spreading and cutting to automated cutters and spreaders in 1994.

"We now can put in suggestions and talk to a supervisor about our ideas," says Karisch, who at one time or another during her 21 years with the company has operated nearly every piece of machinery that has been in the El Paso, Tex., plant of the Convertors operations of Allegiance Healthcare Corp. "Now we go to work because we want to, not because we have to. We want to help one another to improve more and more each day."

What triggered the change in management style? "Our product line had become pretty static over the years, our market share had peaked, and our competitors were making inroads," says Dan Swanberg, engineering manager.

The plant manufactures parts of single-use disposable hospital gowns, operating-room table covers, shoe covers, and surgical caps. The parts are shipped to its five Mexican maquiladora plants where they are sewn, glued, packaged, and sent back to El Paso for sterilization and shipping to customers.

"We were operating in the old-style functional way," Swanberg continues. "We had to change, or we weren't going to be as successful as we had been in the past."

Those harsh realities triggered the formation of natural work teams empowered to make changes; the establishment of plantwide initiatives that now are set annually for service, quality, cost, inventory, and employee well-being improvements; and the addition of cross-functional teams of 10 to 12 employees each (except for a 40-member safety committee) that help the plant meet its objectives.

At the same time, the plant started an $11 million capital investment program -- more than half of it for automated cutting and spreading machines -- that has contributed mightily to manufacturing improvements. The automated cutting machines, for example, have tolerances of 0.01 in. -- 50 times tighter than hand cutting.

"Our traditional cutting process had consisted of loading, spreading, and cutting 12 to 24 fabric rolls at a time," says Swanberg. "With the automated system, we now run one to six rolls."

A case in point: The switch to automated spreading wheels reduced the number of rolls used from 12 to one and reduced the cycle time from four hours to 20 minutes since the wheel can spread material at a rate of 1,600 feet per minute compared with 100 feet per minute under the previous hand-spreading method.

But while many of the dramatic changes in manufacturing efficiency come from new equipment, much of the improved quality and cost savings comes from the workers enthusiasm and their zest to make changes that reduce costs, reduce material waste, and reduce inventories. For example:

  • One suggestion to replace a white opaque bag that had a preprinted label with an insert label and a clear plastic bag saved the company $250,000 annually.
  • After a team of workers visited a hospital to discuss with surgeons the problems the doctors had with the fit of armholes in disposable gowns, the workers took the customers ideas to product development and redesigned the entire gown line.
  • A conveyor belt added to another operation at the suggestion of the work team reduced the size of the team from five to four (without a layoff) and reduced the amount of box breakage during shipping.
  • By working with suppliers, warehouse and materials teams have trimmed over $10 million from fixed costs in the last four years.

The net result: Between 80% and 90% of the Convertors product line has been redesigned, and sales per full-time employee have risen 61% in the last five years to more than $913,000 -- that's four times the typical level within Allegiance.

The enthusiasm of the workers is seen nearly everywhere in the plant. Fernando Acosta, a team member of Workcell 211 where automated spreading wheels unroll material for cutting into different lengths and fenestration (making openings in the material through which the doctor will perform an operation), is eager to explain how his team came up with a die-design change that doubled cutting efficiency. The teams solution: A double cut in the center to replace a process in which a die made a cut on one side of the fabric and moved across the table to make a second cut on the other side.

His fellow team member, Manny Garcia, proudly points out a reference book the team developed that is a handy guide to the types of cuts and dies needed to make different parts. Because the book is kept at the point of operation, "it has improved efficiency," he says.

In manufacturing where nearly everyone used to have one task -- a material spreader, cutter, unloader, or table clearer -- everyone now is multiskilled. And each team determines its own schedules including vacations, a point mentioned with pride by every team.

"We look at the customers needs, determine our own production schedule, order the material we need, bring it to our manufacturing area, and load the material on the spreader," says Hector Lamas, an autocutting team member in Workcell 205. "We go to Mexico three times a week to inspect the quality of products. If we see something we think can be improved, we talk to tech services about making the improvement."

And with each team member capable of every task, says Lamas, "we rotate, and it works better. We now realize everything we do over there will affect something over here. We rely on each other. We are no longer independent workers."

His teammate Chava Acosta adds, "I am the customer when I am cutting because I often perform the next operation as well."

The enthusiasm to excel has carried over into community service. The 460 full-time and 149 part-time El Paso employees performed more than 600,000 hours of community service work the last two years. They have refurbished homes for the elderly, worked with battered-womens shelters, and been a focal point for community environmental efforts, winning a variety of awards.

The conscience of Allegiances El Paso plant for the community doesn't end there. Since 1979, people from the El Paso Lighthouse for the Blind have worked at the El Paso plant. Currently, 28 of them make 10 different products. Indeed, the speed at which blind and visually impaired workers take a folded gown, place it in the center of a sterile wrap, fold and tuck the wrap around the gown, slip the gown into a plastic bag, insert a label, and toss the bag in front of them for others to seal is remarkable. And the department has had virtually zero defects since 1995.

What has focused the El Paso workers? Eight cross-functional groups that develop goals and objectives tied to the plant initiatives. That's known internally as the Convertors Initiatives Involvement Process (CIIP). Today it runs smoothly. But it wasnt always that way.

"This process has evolved dramatically," says Francisco Montejaro, human-resources manager. "In the beginning, it was a challenge even to define what it was that we wanted to accomplish." A key change was switching CIIP focus this year from facilitating to execution.

"We went from not very clear objectives and from facilitating things to executing objectives," says Ignacio Mejorado, plant manager.

Extending the incentive compensation plan at El Paso to all employees after Allegiance was spun off from Baxter International Inc. in October 1996 also has been a big plus. Each employee receives a fixed amount of incentive pay or a percentage of his or her base pay when the plant and corporate goals are achieved. When goals are exceeded they receive more. In 1997 each employee received 125% of his or her incentive-pay target.

"That has driven the interest by employees in initiatives such as cash flow, earnings after tax, goals, and results," says Montejaro.

For example, 20 activity-based management projects, in which teams of employees analyze a process for non-value-added actitivities that can be eliminated, reduced costs $400,000 in 1997. Awareness boards near the plants lunchroom give monthly updates on progress in recycling and in reduction of hazardous and nonhazardous waste, and updates on progress toward financial goals and other initiative objectives. With materials accounting for nearly 85% of all costs at El Paso, less waste in manufacturing, more reuse of scrap products, and supplier initiatives designed to reduce inventory levels have become a major focus .

For example, in May five companies that supply El Paso with 30% of its materials agreed to work on a consignment basis and to kit high-volume codes into single loads so they can be taken straight to manufacturing areas.

"We have freed up 300 pallet spaces, and we avoid the purchase of some 240 pallets a month -- that is a $40,000 cost savings each year," says Manny Loera, production planner in the materials department. "There also is labor savings in manufacturing and warehousing because we eliminate the need for unloaders and material handlers that together cost $58 per trailer [about $16,000 per year]. We have improved service to manufacturing -- there is no more double-handling. And we have improved inventory accuracy in both manufacturing and warehousing."

In 1996 El Paso teams reduced the suppliers' cost of producing and delivering materials to El Paso by $2.6 million by helping suppliers make improvements to their manufacturing processes, shipping processes, and inventory-management programs.

In yet another initiative, El Paso's major corrugate supplier was able to close a nearby warehouse when Allegiance gave the company space inside its warehouse. Those programs have helped reduce inventory by 39% the last five years.

The other side of the materials focus: greater recycling and more reuse of scrap materials. For example, 40 people from the Texas Life Management Center for Mental Health and Mental Retardation work at the El Paso plant resplicing and recutting waste material from cut parts into smaller sizes, salvaging $250,000 of materials a year. Indeed, the amount of materials recycled at El Paso increased from 800,000 lb in 1993 to 3.4 million lb in 1997.

Unused particle board is baled and compacted. Shrink wrap that covers incoming material is sent elsewhere to be reused. And scrap polypropylene from cornerboards is sold so that it can be recycled as base pellets for injection molding. Still, Swanberg says, the teamwork that looks effortless today didn't happen without growing pains.

"Five years ago, a lot of folks had an uncomfortable feeling and were concerned whether management would view committee and teamwork as valuable," says Swanberg. "So all of us had to learn to work together in small groups. But that is what has gotten us to where we are today."


At A Glance

  • 100% natural work teams. Since 1993:
  • Sales per employee up 61%.
  • 68% reduction in product-development cycle.
  • Yield improvements of more than 95%.
  • 91% reduction in cycle time on major processes. Nonhazardous waste disposal reduced 71%.
  • Hazardous waste disposal reduced 98%.
  • Total recycled materials increased 325%. Since 1995:
  • Number of OSHA-recordable incidents reduced 79%.
  • Lost-time accidents reduced 88%.
  • Lost-time days reduced 97%.
  • Workers compensation costs reduced 89%.
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