IW Best Plants Profile - 1997

By John S. McClenahen At A Glance

  • Productivity increased 208% over five years.
  • Manufacturing cycle time reduced 73% on pumps and 90% on vacuum valves and flanges in last five years.
  • Order leadtimes reduced as much as 83%.
  • Scrap and rework reduced 66% in last five years.
  • 100% of production workers on empowered teams.
  • Leadtime on Class A purchased materials cut 83%.
  • Weighted average first-pass yield 99%.
  • Labor-turnover rate only 1.2%.
  • $6.7 million in production costs cut since 1991.
  • Customer-retention rate 95% for the last five years.
Walk through the 100,000-sq-ft production facility of Varian Vacuum Products (VVP) in Lexington, Mass., and you see men and women working -- at computer-aided-design terminals, with high-tech machine tools, in pump-repair bays, and in assembly rooms that look like advanced physics labs. And you can't help but sense that, in a purposeful way, each person is having some fun. Talk to virtually any of the 250 men and women who work at the suburban Boston unit of Varian Associates Inc., and that feeling is confirmed. People tell you about turning tinker toys into vacuum systems. About building trust by the salami method -- one slice at a time. And one person even makes the point that, despite what the company's name might suggest, it really doesn't make vacuum cleaners. "Having fun is part of the work environment," states Peter Frasso, VVP-Lexington's vice president and general manager since June 1992. "The employees really know their jobs. They know what has to be done. They don't have someone standing over them. They've taken the responsibility that makes them feel good about themselves." At VVP-Lexington 100% of the workforce participates in empowered natural work teams and 33% are involved in self-directed natural work teams. Significantly, when he talks about employee involvement, he is not reading from a corporate script or repeating a management-textbook principle. At one time a machine operator at VVP-Lexington, Frasso observes, "I know you want respect when you are a machine operator. And I know you want to participate in solving the problems." Frasso, for instance, speaks with respect and great appreciation of an operator who in five minutes solved a thermocouple-tube leakage problem that an engineer had failed to solve. "My basic philosophy is to use the power of the entire factory," says Frasso. "The whole factory is just a big manufacturing engine, and you want to get all those spark plugs firing." VVP-Lexington, a nonunion plant with about 40,000 customers worldwide, manufactures vacuum pumps, leak detectors, vacuum gauges and controllers, and vacuum valves and hardware. But the sense of fun, the empowerment, the self-assurance, and the commitment to customers so evident now at VVP-Lexington haven't always existed. Indeed, nearly a decade ago, VVP-Lexington was in serious trouble, a period of poor performance that Frasso refers to as the Dark Days. Its parent company twice tried to sell VVP-Lexington -- and couldn't. Business was dropping 10% to 20% a year. VVP-Lexington was within two to three years of being out of business, estimates Frasso. The journey out of darkness began in 1989. It was then that a total quality management (TQM) system centered on the principles of quality and productivity consultant Philip Crosby was put into place. Employees were trained in all aspects of that 12-step process -- with additional attention to root-cause analysis and corrective action. VVP established an employee committee for each of the dozen TQM steps -- and employees were held responsible for performing the duties specified in the committee charters. Some dramatic results followed. Scrap and rework costs, for example, fell from 15% of sales to less than 1%. Warranty costs were cut to less than 1% of sales. Inventory turns spiraled to 3.9 from 0.6. On-time delivery reached 90%, up from 22%. Profitability improved. Sales, however, continued to decline. And with an economic recession gathering momentum in the U.S. by late 1991, declining sales started to erode the profits being generated from VVP-Lexington's quality initiatives. The plant was inner-directed -- an orientation that was being reinforced by its parent in Palo Alto, Calif., which had committed to pursuing a Malcolm Baldrige National Quality Award. Varian had also suggested that VVP-Lexington and every other business unit should go for ISO 9001 certification. By management's own admission, precious little time at VVP-Lexington was being spent on serving customers. In 1992 the plant launched its Customer Satisfaction Process. Embracing elements of the Crosby quality process, ISO 9001 certification, quality function deployment (QFD), the Baldrige criteria, and TQM, it featured a steering committee and eight subcommittees: customer focus, recognition, process improvement, corrective action, employee development, strategic planning, internal auditing, and measurement. VVP-Lexington flattened itself, eliminating several layers of middle management. Product teams were formed, drawing their members from engineering, marketing, and production. These focused teams were empowered to run their product lines as semi-independent businesses and to make the decisions necessary to satisfy customers. In 1993 VVP-Lexington distributed its first detailed customer survey, asking what customers thought about it as a supplier and what it should be doing to achieve total customer satisfaction. The survey results helped the plant write its first customer-driven business plan. Frasso talked more about customers during monthly meetings with employees. And so did Ronald J. Stanton, manager of customer satisfaction. Sales volume increased 23%. Shifting the paradigm 180 degrees from "We know what's best for the customer," VVP-Lexington put quality function deployment (QFD), focus groups, and direct customer input to work in defining new products. A component leak detector for the air-bag industry, the plant's first QFD-designed product, debuted in August 1993 and, management claims, "captured almost all of the market." By fiscal 1994, VVP-Lexington was operating from its second customer-driven business plan, and was posting significant increases in market share. And several QFD-driven products were released in each of its four lines. Also in 1994, VVP-Lexington received the Massachusetts state quality award. Since 1991 the plant has cut production costs by $6.7 million. Cost reductions have enabled the plant to improve its on-time delivery to a 95% average for all production lines, reduce product prices, and increase market share. But for all its achievements, VVP-Lexington is still a work in progress, as Frasso confirms. "I hate to give you the sense that this is the perfect place, because, like anything in any world, you're always a percentage of the way there," Frasso says. "But the bulk of the employees are having a good time. The bulk of the employees have control over their work environment. And they know when there are obstacles, when there are things that are wrong that have got to get fixed, [they know] that they have the power to do that." VVP-Lexington also has a set of five-year "stretch" goals -- a half-dozen targets that include a substantial increase in gross margins, a substantial decrease in time-to-market for new products, and, for components, achievement of Six Sigma quality (only 3.4 defective parts per million produced). Nevertheless, making the numbers and striving to make even better numbers in the future are only part of VVP-Lexington's story. The numbers prove the success of a continuous process of improvement in which -- it can't be stressed enough -- the people of VVP-Lexington are totally involved. A dozen self-directed natural work teams exist throughout the plant. These teams make the day-to-day decisions on job scheduling, quality-assurance initiatives, and customer-service efforts. Eight cross-functional customer-satisfaction teams are involved in activities from designing customer surveys to identifying the recipients of customer-service recognition awards. A process-improvement team, for example, works on just what its name suggests. Another team conducts internal audits for ISO 9001 compliance. Still another cross-functional group formulates an annual operating plan. Natural work teams, rather than supervisors, handle 13 different functions associated with production:
  • Production scheduling
  • Training
  • Quality assurance
  • Skills certification
  • Vacation/work scheduling
  • Daily job assignments
  • Safety review and compliance
  • Environmental compliance
  • Inter-team communications
  • Hiring team members
  • Firing team members
  • Disciplinary actions
  • Materials management
Overall, VVP-Lexington has a 25:1 employee-to-supervisor ratio now, compared with a 6:1 ratio five years ago. And this set of numbers raises an intriguing question: With empowered and self-directed work teams making daily production decisions and with nonmanagement team leaders organizing teams, setting goals and schedules, counseling team members, and promoting accomplishments, what does management do at VVP-Lexington? The simple answer: Managers don't concern themselves with the day-to-day operations of the plant. At VVP-Lexington the 10 members of the management team provide guidance and vision, help tear down barriers, and try to see that employees have the tools and training they need. They are "big-picture" people. They are coaches who mainly provide strategic direction. They are mentors and not control freaks. "We have put more control in people's hands," Stanton states. "If people need software, I tell them, 'Go buy it, and I'll sign the [requisition].'" Another example: A customer called recently, complaining that a shipment was not bubble-packed as expected. Stanton turned the problem over to the person who packed the product who, in turn, called the customer and worked out a way to prevent damage to future shipments. "We don't hide the employee from the customer," stresses Stanton. Employee empowerment has paid off in other ways at VVP-Lexington. For example, were the plant still operating under the former system of tight management control, there might be a higher attrition rate, Stanton speculates. VVP-Lexington's labor-turnover rate for fiscal 1997 is 1.2%. Five years ago, it was 3.5%. There is something else special about VVP-Lexington. It is a distinguishing human touch. "We definitely allow everyone to put their life and their family first," Stanton says. This is manifested in a variety of ways. For example, no eyebrows were raised on a Wednesday morning in late August when one manager joined a meeting a half hour after it began. He had been with his daughter on her first day of school. Likewise, general manager Frasso has never told customer-satisfaction manager Stanton not to run at lunch. "I feel more relaxed as a manager," Stanton states. "And if I feel more relaxed as a manager, guess how my work team feels." Stanton, Frasso, and Leah Barton, VVP-Lexington's human-resources manager, all leave the impression that what works for them can work elsewhere. "It can be done in a larger organization," says Barton, "but I do think it helps that we all know one another well." The critical issue, says Frasso, who every month continues to discuss strategic-plan and customer issues with workers, is that employees understand the business and that "they understand their impact on the business."
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