Strategy Before Technology

Dec. 21, 2004
ATC's turnaround put customer relations, operations improvements before technology investments.

Technology can play a vital role in turning around a company, but should it be the No. 1 priority? Perhaps not. "First build a strategy for customers, then update the manufacturing processes and technology," says Michael T. DuBose, chairman, president and CEO of Aftermarket Technology Corp. (ATC), which main businesses are drivetrain remanufacturing and logistics services. "Technological solutions were the last thing on my list when I joined." When DuBose came to ATC in December 1998, the Westmont, Ill., business made only 47 cents a share, and improvements were called for. This year, the company's target is $1.90 per share. "I believe any turnaround plan for a company has to have a three-step sequence: reconnect with customer expectations, evolve the right manufacturing strategy, and then look at process solutions. To be successful, technological solutions need a strong strategy." After strengthening customer strategy, ATC set out to improve all aspects of the company through a lean and continuous-improvement initiative built on the Toyota Production System and Six Sigma capabilities. "And finally, before considering technology-based solutions, we began leveraging our most important asset, our fellow employees," DuBose says. "We put in place more robust management processes, reshaped the management team, and over the last 3 1/2 years, ATC has been able to show growing performance improvements. The first 18 months built credibility with investors, which became apparent at the end of 2000. They've seen what we've accomplished and understand that there is additional potential." The company's gross profits increased from $76.1 million in 1997 to $137.8 million in 2001. Internally, success has been measured in the elimination of waste and improvements in delivery time. "We initiated our formal lean and continuous improvement initiative in 2000, and since then we have eliminated 40% of our floor space, reduced labor costs by 50% and improved on-time delivery to our customers from about 60% to 100%. For some customers, that marked the first time they experienced on-time deliveries." The company eliminated a half-mile long conveyor in one building by switching to manufacturing cells. Also, employee surveys were begun with a goal of evaluating employee communication and empowerment processes. Getting employee feedback was especially important because ATC's two major businesses evolved from more than 20 mergers and acquisitions. "Our lean and continuous improvement initiatives helped us conclude the integration process. We now have Six Sigma black belts at all business units helping us to transfer and share best practices."

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