World-Class Plants Perform

Dec. 21, 2004
Achieving this lofty status must involve both people and processes.

If you're seeking a foolproof formula for determining whether an enterprise is world-class, you won't find one in the Third Annual IndustryWeek Census of Manufacturers.

World-Class Performance
Percentage of plants in each world-class category reporting selected performance measures.
Measure "No" and "some" progress 'Significant" progress and "fully achieved"
Five-year yield improvement of more tha 20% 19.9% 34.6%
Five-year decrease in scrap and rework costs of more than 20% 13.3% 27.5%
Five-year cycle-time reduction of more than 20% 18.3% 29.1%
Five-year customer-leadtime decrease of more than 20% 28.0% 38.4%
Five-year productivity increase of more than 20% 22.9% 37.3%
Five-year per-unit manufacturing-costs decrease of more than 10% 21.4% 34.9%
Median productivity (annual dollar value of shipments per employee) $159,000 $176,000
One working definition asserts that world-class facilities tend to earn extremely high marks relative to all key performance indicators, and these benchmarks are driven by extensive adoption of best management practices across the board. IW Census participants tend to agree. When asked to assess their own levels of progress in pursuit of manufacturing's pinnacle, as well as to provide performance data to back up their claims, plants and organizations that say they're world-class are outpacing their less-advanced counterparts. One IW Census participant who wouldn't be surprised by the project's results is Brent Whalen, vice president of manufacturing with Mobile Tool International (MTI). He says that whether you're producing picnic tables or aerial-lifting equipment (Westminster, Colo.-based MTI makes lifting equipment for telecommunications companies and power utilities), "you're not going to be able to achieve world-class status unless you're doing the right things in the first place." For MTI, the road to world-class manufacturing starts with people. As Whalen observes, "I don't think you can be world-class without being employee-oriented, because there's no way you can get it all done without the people being involved in the business." In this area MTI enjoys the advantage of being employee-owned. For traditionally structured companies Whalen advises that workers should be taught as much as possible about how and why business decisions are made. Often, he explains, "Big corporations don't want to spend the time to get employees involved in making a decision. That's fine, but when you're dragging your employees behind the decisions you make, they usually come kicking and screaming." World-class manufacturers must pay equal attention to technical aspects of their businesses. In particular, Ron Kinnius, special products manager with Kirk & Blum, a 530-employee fabricator of sheet-metal products located in Cincinnati, says, "My philosophy has always been that if you don't keep up with the competition by putting in new equipment, you'll lose out in the long run." Granted, no IT initiative will deliver world-class dividends if a company's processes are inefficient. For this reason, it's rare to find a manufacturer that hasn't embraced the concept of continuous improvement. At San Diego-based Solar Turbines Inc. -- a subsidiary of Caterpillar Inc. a kaizen blitz held in 1995 slashed setup times in one production area by a factor of six. A maker of industrial gas turbines that are used to generate electricity, Solar Turbines relies on heavy-duty hardware such as a $4 million horizontal broach to cut exotic metal alloys with painstaking precision. Regarding this equipment, Dave Lehmann, Solar Turbines' vice president of manufacturing, states that, initially, "We thought we were doing very well in that we could do a complete setup [when switching to a differently sized part] in about 240 minutes." That opinion was supported by benchmarking studies. But one week after reconfiguring work and storage areas around the broach in a more logical fashion, Lehmann says, "we could do a setup in 40 minutes."
Implementation Of New-Product Development With Customers/Suppliers
Percentage of plants in each world-class category reporting "extensive" implementation of supplier/customer practice.
Practice Total plant survey No progress Some progress Significant progress Fully achieved
Suppliers involved early in new-product development 13.5% 4.2% 10.0% 21.3% 22.2%
Customers participate in new-product development 18.6% 12.7% 14.5% 25.6% 33.3%
"At the end of the day," says Gabriel du Toit, PricewaterhouseCoopers' principal consultant, "we'd like to say world-class manufacturing is all about performance measurement and performance management." Equally important is meeting customers' expectations. If that's not world-class, nothing is.

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