IW Best Plants Profile - 1999

Thriving Under Pressure Scroll Technologies' continuous improvement lifts compressor producer to elite status. By Glenn Hasek Standing outside Scroll Technologies' Arkadelphia, Ark., plant, where the temperature stands at 102 F, not one bead of sweat rolls down the face of Randy Jacoby. The bearded manager of manufacturing for the 575-employee company mentions something about playing tennis as a visitor melts faster than the Wicked Witch of the West in The Wizard of Oz. Tolerating heat is not a problem at Scroll. In fact, management just loves it. That is not surprising, considering the plant manufactures scroll compressors that are used to power residential and light-commercial heat and cooling systems. The hotter the temperature, the hotter the sales. Inside Scroll's 342,000-sq-ft facility, where the climate is comfortable and controlled, employees in six shifts work to build compressors for two customers who also are competitors: Carlyle Holdings Inc. and Bristol Compressor Inc. Carlyle is a division of Carrier Corp., which in turn is owned by United Technologies Corp., and Bristol is a division of York International Corp. In a unique arrangement, Scroll also is a joint venture of Carlyle and Bristol. Because of that structure, Scroll can manufacture its compressors for only those two firms. In other words, Scroll's two main customers also happen to be its owners. The joint venture was formed in April 1995. Rick Izor, general manager of Scroll, says the deal has paid big dividends for both partners. For Carlyle, which owned the plant before Bristol came in, it was an opportunity to help fill the plant's capacity. For Bristol, a producer of reciprocating compressors, it was an opportunity to get into the scroll business. For Scroll, says Izor, it has been an opportunity to latch onto both companies' expertise. Ed Tomayko, quality manager, agrees that Scroll's good relationship with its owners has been integral to its success. The two owners allow Scroll to operate in an autonomous fashion, he says. "It also offers us a lot larger market and more technical expertise to draw from." If there is a downside to such an ownership structure, says Carlos Zamudio, manager manufacturing engineering, it is that reaching a consensus is sometimes a challenge. Besides its unusual partnership, what separates Scroll from its competitors, as well as plants in other industries, is its attention to continuous improvement. In fact, it is because it has come so far in so little time that it has been recognized as a world-class facility. At the beginning of the partnership, employee turnover was high, product quality was lacking, and processes were inefficient. "In 1995 and 1996 people [were] not secure about the longevity of this business," says Izor. "There was a lot of turnover in leadership. Customers were not satisfied. There was always some nervousness. People now have the confidence that we are in this for the long run." Since 1996, in a county where the unemployment rate now stands at 2.9%, employee turnover has been reduced by 57%. During the last five years, productivity has increased by 119%, return on net assets has increased by 148%, and manufacturing costs per unit shipped excluding purchased materials have decreased by 64%. "In 1994 and 1995 we had huge issues with customer line rejects," says Izor. During the last five years the number of such rejects has been sliced by 95%. There are several reasons for the improvements. Pride in performance is one. "[Our team members] did not like the idea that we were not where we wanted to be," says Izor. Understanding problem areas, developing a plan to deal with the problems, and measuring to make sure the problem has been solved also have driven the gains in quality. Every compressor that is returned to the plant goes through a wide variety of tests and, if necessary, is torn apart to isolate the problem. Because each compressor's performance history is tracked by computers throughout its production, the source of a defective part or process can be easily traced. "We've had a very aggressive program on reliability," says Gene Fields, manager product design engineering. "When we have a reliability problem, we have to fix the problem and then convince our customers that the problem is fixed." A reliability report that explains why models fail is issued every quarter. Scroll also uses kaizen or team events to solve problems. A Leak Busters team's efforts that began two years ago have resulted in a reduction in the compressors' leak rate at the first welding operation from 6.5% to its current rate of less than 2%. Jacoby says teams consistently come together to work on such issues as safety, quality, reliability, sound reduction, new-product implementation, design efficiency, and employee recognition. "With any company, you have to believe in empowerment," says Jacoby. "In the beginning we had a rocky start because employees were not empowered. We've invested a lot of resources on training. We also offer leadership courses to teach them how to lead. Improvements are driven, in large measure, by the people doing the work." Employees at Scroll are reimbursed 100% for tuition and books if they choose to seek a degree. Within the plant, 20 hours of training are mandatory annually. Ninety percent of Scroll's team members, all of whom are salaried, have 40 hours of training in 5S (sort, store, shine, standardize, sustain), total productive maintenance, and quality control production control. "Training prepares us for growth," says Jacoby. All of Scroll's employees participate in empowered natural work teams while 49% participate in self-directed natural work teams. A relatively new plant, Scroll has improved as its workforce has matured. Forty percent of the company's employees now have five years' experience. "You get better as you gain experience," says Tomayko. "That allows us to push accountability down to much lower levels." Benchmarking also has helped Scroll to continuously improve. Its close relationship with its owners provides myriad learning opportunities. "We can benchmark against our owners who have manufactured compressors for many years," says Izor. "They also are now [benchmarking] us against their own plants. We benchmark based on the design and perform-ance of the products themselves." Scroll has conducted 57 benchmarking studies in the last three years. Because of its emphasis on improving supplier relations, Scroll has been able to establish long-term purchase agreements. These have resulted in shared cost savings. Finished goods are turned at least 29 times annually. This is a 55% improvement over the last five years, with delivery leadtimes as short as eight hours. At Scroll, 56% of total annual manufacturing cost is associated with purchased materials and components. Black, domed, and shiny, Scroll's compressors are the result of four main production processes that allow no room for error. In machining, the first process, nine components are made in cells. Parts made there hold average tolerances of 10 microns, a measurement smaller than the average thickness of a human hair. In the second stage, the compressor's three shell components are fabricated. In the third stage, all machined, fabricated, and purchased parts are assembled. In the final stage, the compressor is painted, charged, tested, and packaged for shipment. The plant produced its two-millionth compressor on June 30 of this year. Because it is Scroll's mission to provide its customers with the lowest-cost/highest-quality product, it consistently seeks to reduce its own costs and improve production processes. Reducing the number of parts needed for each compressor is one goal. "In the last few years, we have really worked to improve the manufacturability of the product," says Fields. Innovation has been key to that progress. Twenty-five new patents have been issued to Scroll and its parent companies in the last five years. Without the use of sophisticated technology, Scroll's improvements would not have been possible. Computerized statistical process control, automated quality-data-acquisition systems, finite-element analysis, and computerized maintenance management systems (CMMS) all have helped to improve efficiency. Thanks to CMMS, maintenance costs have been reduced by 67% during the last three years. Just as Scroll has made significant progress in productivity, it also has done so in the area of environmental protection. While risks are minimal in the manufacturing of compressors, they do exist. To minimize those risks, Scroll designs products and processes that are clean and energy efficient. Water-based paints in a coating process are used to cover the compressors. Because Scroll's emissions have been so low, it has been granted an exemption from federal air-permit requirements. "One of our values is community," says Jacoby. "This plant wants to be as green a plant as possible. We are extremely careful when it comes to environmental impact." While already a small waste generator, Scroll still is trying to get closer to zero waste. From 1997 to 1998 the company reduced the amount of hazardous waste generated by almost 50%. Because it has found a source to recycle fluorescent light bulbs, its hazardous-waste total soon will be axed again by 50%. In addition to protecting the environment, protecting employees is a high priority at Scroll. This year the plant reached a record of 2.3 million hours without a lost-time injury. For that accomplishment it was presented with the Arkansas Dept. of Labor's Two Million Work Hours Award. Last year the plant's incident rate of reportable injuries was 79% less than the industry average. "Safety comes first," says Jacoby. "It's everyone's first objective. Every project gets a very thorough safety review." Carol Johnson, environmental health and safety manager, says Scroll rewarded its team members for its safety accomplishments this year with a steak dinner and jackets. Pins also were distributed for team members to wear. Besides statistics on productivity and safety, Scroll's community spirit helps to make it one of America's Best Plants. On Mar. 1, 1997, more than any other day since, that spirit was tested. It was then that a powerful tornado swept through Arkadelphia. Six people were killed, more than 100 people were injured, 117 homes were destroyed, and 256 more were damaged. In response to the disaster, Scroll employees collected food and clothing and also volunteered to help clean and rebuild the town. Johnson says some even helped to take care of the animals that were refugees from the storm. "There's nothing that will bring a community together faster than a disaster," says Jacoby. At A Glance

  • On-time delivery to customers -- 100%
  • First-pass yield on all models of compressors -- 98.8%
  • Reduction in scrap/rework as a percentage of sales last five years -- 67%
  • Reduction in warranty costs as a percentage of sales last five years -- 68%
  • Reduced manufacturing cycle time -- 30% in last five years
  • Decreased energy consumption per unit of production -- 47% in last five years
  • Percentage reduction in lost-workday rate last five years -- 100%
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