Always Lessons To Learn

Dec. 21, 2004
1998's America's Best Plants finalists share words of wisdom for other manufacturers in search of excellence.

The 1998 crop of America's Best Plants winners and finalists may be models of efficiency, productivity, and quality, but it was not always thus. For many, the bottom had to nearly drop out from under their enterprises before anyone took a clear-eyed look around and said, "Hey, we need to make some changes here if we want to continue to be here." In a movie, that bolt of enlightenment would be followed by a nearly magical sequence of events, in which workers who had previously butted heads now met in perfect harmony, and, suddenly, golden ideas for improvements would flow and be flawlessly implemented with a smile. However, the reality is that a manufacturing plant is not a celluloid dream, and none of the Best Plants winners or finalists suggests that becoming the best was accomplished without a hitch. Just the opposite, in fact. "Many companies and their leadership are looking for that one change or implementation to give them the strategic and competitive advantage," reports Lockheed Martin Tactical Aircraft Systems, Ft. Worth maker of military aircraft. "Experience has demonstrated that there are no 'silver bullets' and there is no 'one-size-fits-all' solution." But experience, along with success, has put the 1998 Best Plants winners and finalists in a position to offer advice to the up-and-comers -- while acknowledging that their own quest for excellence is an ongoing process. The biggest lesson? Like a Boy Scout, manufacturers must be prepared -- in their case, for mistakes. It's inevitable that mistakes will occur during the improvement process. Indeed, among the lessons most frequently cited by Best Plants winners and finalists when asked by IndustryWeek to provide such tidbits is "expect mistakes." Dana Corp. Parish Light Vehicle Structures Div. in Hopkinsville, Ky., which makes car and truck structures, says it's important to make everyone understand that "no one will be punished for making a mistake as long as we learn from that mistake." In fact, suggests Lockheed Martin, "[Mistakes] are a source of learning and will improve operations in the long run. . . . [They] foster the concept that no question is dumb, no idea too wild, and no task or activity is irrelevant." Given that mistakes are a valuable source of learning, according to the experts, learning from others' mistakes -- and triumphs -- is equally valuable, particularly if those others are IW's Best Plants finalists and winners. In fact, scrutinizing the activities of others is paramount to improvement, says Best Plants winner Quaker Oats Co., Danville, Ill. "Most of us do not recognize the improvement potential that exists in our operations," writes Steve Brunner, team leader. "Remember that most profound learning comes from the outside." IW's 1998 America's Best Plants winners and finalists certainly post numbers that suggest they are worthy of emulation. For example, the 25 finalists achieved:

  • An average first-pass yield of 97% for a typical finished product.
  • Average scrap and rework -- as a percentage of sales -- of 1%. (The median figure was an astounding 0%.)
  • Median reduction in scrap and rework in the last five years of 35%.
  • Median on-time delivery of 98% (and nearly two-thirds of the 25 finalists identified their on-time delivery-rate calculation as the date requested by the customer, not the date promised by the supplier).
Further, the average productivity (defined as annual sales per employee) improvement in the last five years among the 25 finalists is 60%, while manufacturing costs, excluding purchased materials, dropped an average of 35% in the same time frame. Including purchased materials, the average cost reduction was 22%. And all of the Best Plants finalists apparently subscribe to cereal and snack-food maker Quaker Oats' philosophy of looking beyond their own four walls for improvement ideas. On average they conducted 18.6 benchmarking studies during the last three years. Best Plants winner Baxter Healthcare Corp., Mountain Home, Ark., cites benchmarking as an important tool to continuous improvement and suggests that manufacturers think beyond traditional benchmarking activities. "We have discovered that award processes are an excellent method of benchmarking total systems or processes. It's nice to win the prize, but the real benefit comes from understanding where we have opportunities to improve our processes to be among the best," writes Baxter Healthcare production manager Larry Baker. The metrics achieved by 1998's Best Plants finalists result from excelling across all areas of manufacturing -- human resources, information technology, manufacturing processes, quality, and customer and supplier relations. But addressing the internal "people" factor appears to be paramount among Best Plants finalists. Put People First If there is one lesson to be learned from 1998's Best Plants winners and finalists, it's that they believe employees are the critical component of their companies' success. As such they have implemented innumerable efforts to communicate with employees, encourage employees, train employees, financially reward employees, and empower employees. "We put people first. We believe our people are special, and we expect them to deliver special results," asserts Stryker Osteonics Corp., Allendale, N.J. maker of orthopedic implants. Cross-training and a skill-based pay system are key elements of Stryker Osteonics' training philosophy. Team members are required to complete at least two skill blocks each year to be eligible for annual merit increases and bonuses. (Twenty-four of the 25 finalists say they emphasize cross-training in their plant.) Says Allegiance Healthcare Corp., El Paso, Tex., which produces surgical gowns and drapes: "A system . . . that continuously fosters employee involvement in all aspects of the business . . . is a key element in driving success." In fact, Allegiance says, "our ABM [activity-based management] process, which involves all employees in continuously identifying cost-savings projects, is a key element in driving cost-reduction goals." In 1997 more than 20 ABM projects were implemented for an annual cost savings of $400,000. Navistar International Transportation Corp., Indianapolis, preaches a similar style, asserting, "It is critical to manage our culture as well as our processes. Although we have always communicated business conditions and expectations to our workforce, we now emphasize employees' roles in achieving success. Accordingly, we must provide them with a 'big picture' of our business and all its facets, such as finance, sales, new-product development, etc." Suggests Dana Corp., "Make sure everyone knows what is expected of them." The diesel engine manufacturer offers an additional workforce lesson: "Reducing the number of production classifications is critical for a stabilized workforce. At one time, more than 60 production classifications existed. Now we have one production classification, which has resulted in job enrichment for our workforce." Reward measures? Borg-Warner Automotive, Automatic Transmission Systems Corp. in Frankfort, Ill., is among several of IW's Best Plants that offer their employees a profit-sharing plan. Among the financial incentives offered by Quaker Oats are bonuses for outstanding employee performance, achieving key performance indicators, and completing 100 hours of annual training. At TRW Canada Ltd., Linkage & Suspension Div., Tillsonburg, Ont., the plant's Continuous Improvement Incentive Plan rewards the achievement of five specific continuous-improvement indicators. "Special attention has been given to the indicators to ensure that they are areas in which employees have a direct impact," notes the TRW entry. However, the hallmark of America's Best Plants winners and finalists on the employee front is their reliance on empowered employees. In 1998 all 25 finalists reported that self-directed or empowered natural work teams make daily decisions on production operations. More specifically, an average of 88% of the finalists' production workforce participates in empowered work teams. An average 39% of the finalists' production workforce participates in self-directed teams. (Self-directed teams frequently take on many traditional supervisory roles, such as job assignments, production scheduling, and performance appraisals.) TRW Canada attributes its increasing productivity (up 79% in the last five years based on annual sales per employee) and labor efficiency, as well as low absenteeism and improved quality measures, to its employee-empowerment practices (100% of the production workforce participates in self-directed teams). And lest you believe Best Plants winners are creating employee teams as an objective in themselves, think again. "Teams are a strategy to improve performance," says Stryker Osteonics. "If we thought there was a better organ-izational structure to move to, we would." Both Stryker Osteonics and TRW Canada cite measurements as a key component of teams. "Teams need to be focused on a few key measurements," asserts Stryker Osteonics. "The right measurements let your management team step out of the day-to-day decisions and issues within the team. . . . The hardest decision the management team must face is when to get involved." An emphasis on employee involvement does not excuse management, however. Fundamental to Lockheed Martin's "lean manufacturing" culture is the corporate leadership team. "Commitment, not merely 'buy-in,' to lean manufacturing is critical to success in maximizing process performance. Leaders in lean-improvement activities must be visionary, empowered to challenge norms and standard practices, knowledgeable of industrial best practices, and oriented to advanced concepts," Lockheed Martin says. For the 1998 Best Plants top 25, the focus on the people aspect extends beyond the internal organization. Attention to excellence up and down the value chain is vital. Tightly knit relationships with customers and suppliers are the norm. For example, Lockheed Martin has extended its emphasis on lean manufacturing to its suppliers. That emphasis includes instituting long-term agreements with suppliers, using a preferred supplier base, and the incorporation of a Supplier Product & Process Improvements program. This partnership program, the company explains, looks for ways to reduce waste in suppliers' processes. Ultimately, Lockheed Martin says it benefits with improved supplier quality, reduced leadtimes, and lower costs. Twenty-three of the 25 1998 Best Plants finalists subscribe to the practice of long-term purchase agreements with suppliers. And 100% say they work with their suppliers to improve supplier cost, quality, or delivery performance. In return, all expect their major suppliers to contribute to cost-reduction and quality-improvement efforts. With such emphasis on improving all supplier processes, it should come as no surprise that 1998's Best Plants finalists (all of them) evaluate suppliers on a total-cost basis rather than by unit price. For example, Borg-Warner Automotive reports that product life, quality, and deliverability are important considerations to their supplier selection process. In addition to those measures, Lucent Technologies Inc., Columbus, reports that it also evaluates suppliers' financial stability. Best Plants finalists also appear to favor suppliers with the ability to deliver on a just-in-time basis. Indeed, 24 of the 1998 Best Plants finalists report that their key suppliers provide JIT delivery. At Timken Co.'s Asheboro Plant, Randleman, N.C., use of this supplier practice has helped reduce steel and packing inventory by 20% from the previous year. A measure that may best demonstrate the trust that has developed between Best Plants finalists and their suppliers is the amount of purchased material that does not require incoming inspection -- an average of 76%. More compelling is the median figure -- an astonishing 95%. Total Integration Nowhere is the integration of the value chain more apparent among 1998's Best Plants than in their new-product-development efforts. All 25 finalists emphasize early supplier involvement and customer participation in product development. Additionally, all report that their production workers participate in concurrent engineering activities to improve manufacturability or reduce product-development cycle times. Milpitas, Calif.-based Solectron Corp.'s new-product introduction process provides a fine illustration of a value chain that is tightly integrated both physically and electronically. Unabashedly customer-focused, the contract electronics manufacturer identifies supplier input early on as a key component in product development. "We involve our key suppliers in the new-product-introduction [NPI] process, which provides timely and cost-effective solutions to our customers. The NPI process provides for early engineering and materials involvement with customers in design, supply-base planning, prototype build, production, and manufacturing release in order to best design the product for manufacturability," reports Solectron. Information technology also binds suppliers, customers, and Solectron via an enterprise-wide computing system that facilitates the exchange of engineering and other relevant data. "Staying connected with everyone in the supply chain is the key," asserts Solectron. Technology at Work "Staying connected" appears to be a theme among IW's Best Plants. Some 84% of the 25 finalists say they have enterprise-integration links with customers and suppliers. Another 84% say they extensively use EDI links to suppliers, and 80% use customer EDI links. The Internet is a resounding success, with 24 finalists making extensive use of this relatively new technology. Less popular are extranets: Ten finalists report using extranets extensively. Other technologies that garnered praise include MRP II, which Lockheed Martin says has "facilitated many improvements throughout the plant, including reduced inventory levels, lower procurement costs, and increased efficiency." The Ft. Worth manufacturer gives the nod to this technology as a major reason for its tremendous improvement in productivity in the last five years. On the manufacturing-processes front, Lockheed Martin relies on "lean" tools such value-stream analysis, kanban flow regulators, cellular manufacturing, Six Sigma problem-solving techniques, and visual factory practices. Borg Warner Automotive is a strong proponent of constraint management: "Constraint management has been invaluable as a method of controlling our inventory through the use of kanbans and visual controls. We have been able to increase throughput, decrease quality defects, and lower costs. Focusing on a few operations that are constraints has enabled us to make more efficient use of our people, time, and money." Baxter Healthcare, in addition to 19 other Best Plants finalists, is a proponent of JIT/continuous-flow production methods. Not only has this manufacturing method reduced its work-in-process and finished-goods inventory, but it allows for "more rapid feedback . . . when a problem occurs, which reduces the potential for rework or scrap." Like Lockheed Martin, Allegiance Healthcare promotes cellular manufacturing and cites it, as well as computer-controlled automated production equipment, as a major reason for its improved productivity in the last five years. "The plant has invested in work-cell education and implementation over the last four years," Allegiance remarks. "The work-cell initiative has been a major focus in the plant's education program and has driven productivity improvements through empowering workers to make business decisions for their work cell and educating them to utilize the plants' systems." And like Baxter Healthcare, Allegiance has adopted JIT/continuous-flow manufacturing -- with improved results. These include a reduction in total inventory, quicker customer-response time, and a decline in material losses and material-handling costs.

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