IW Best Plants Profile - 1996

Feb. 14, 2005
Pulp and paper manufacturers represent a major market for ABB Industrial Systems' process-control products. By John Teresko At A Glance Total costs reduced by 23%, overhead cost by 58%. Manufacturing cycle time reduced by 71% from 1991 to 1995. ...

Pulp and paper manufacturers represent a major market for ABB Industrial Systems' process-control products. By John Teresko At A Glance

  • Total costs reduced by 23%, overhead cost by 58%.
  • Manufacturing cycle time reduced by 71% from 1991 to 1995.
  • On-time to promised delivery date improved from 36% to 95.3%.
  • All 19 teams self-directed, making decisions within their charters without seeking management approval.
  • Warranty cost reduction of 74%.
  • 100% self-inspection.
  • Revenue per employee up 160%.
  • Inventory turns improved 222%.
  • WIP turns increased by 415%.
  • Physical space usage decreased by 62%; all stockrooms and warehouses eliminated.
  • Employees evaluated by peers, customers, and suppliers.
  • Eight benchmarking studies conducted in last three years.
  • Suggestions by employees in 1995: 1,471.
In 1988 Percy Barnevik put together what was known as the biggest crossborder merger ever made up to that time. The result is ABB Asea Brown Boveri Ltd., a holding company of ABB Group, with approximately 1,000 companies around the world. Part of his vision was to avoid the stigma of being a big company with large headquarters and stifling bureaucracy, countless volumes of instructions, turf defenders, and people working far from their customers. He wanted to create a small-company culture with its huge advantages of flexibility, speed, and the power to free up the creative potential of each employee. That vision is at the root of the accomplishments of the ABB Industrial Systems plant in Columbus. Has it proved effective? First consider the holding company's 1995 results. ABB Asea Brown Boveri Ltd., Zurich, Switzerland, reported the best results since it was founded. In the same annual report, Barnevik cites the superior performance of its Industrial & Building System segment, "which increased orders by 20% and earnings by 35%. Over two years, orders are up 40% and earnings by 35%." As the largest of 12 companies in that U.S. segment, ABB Industrial Systems and its Columbus plant played a positive role in that winning performance. But that was not the case in 1990 when George (Ken) Morris was appointed vice president-manufacturing and supply management. At that time, ABB's pulp and paper customers, as well as other industrial sectors, were coping with a downturn. ABB and other makers of process-control equipment such as Foxboro, Rosemount, and Honeywell were suffering from a ripple effect that accompanied the decreasing demand for process-control products. Moreover, manufacturing performance at the Columbus facility had not kept pace with competitive conditions in the global market. Overhead costs were too high, and quality of product from suppliers was low, resulting in a net loss for the plant for four straight years. Operations in Columbus began in 1950 with the formation of Industrial Nucleonics, and the current site opened in 1958. The new company was a leader in measurement technology using radioactive isotopes and sold its products primarily to the paper and metals industries. In 1986 Combustion Engineering acquired AccuRay (the company had changed its name in 1980) and four years later, Combustion Engineering was acquired by ABB. The Columbus plant is part of ABB Inc., Norwalk, Conn., the U.S. unit of the Zurich-based conglomerate. In 1990 Morris' mission was to bring the organization into line with Barnevik's vision of winning performance. As a leader of a team effort, Morris displays a flair for minimalism. The resulting organization no longer has supervisors, team leaders, inspectors, a quality department, a warehouse, a stockroom, dedicated material-handling people, receiving inspection, shop-floor planning/control people, job descriptions, or an organization chart. "Our overriding intent is to have an organization that is committed to the strategic alignment of our suppliers, our teams, and our customers," says Morris. The plant adopted a philosophy of organizing around the process, not the task, and began emphasizing a flattening of the hierarchy. A basic tenet was adopted to use teams to manage everything and to reward teams for their performance. Teri Bahnick, who is both an assembler and a team time-coordinator for sensors, says what she likes best about all the changes is the ability to take charge of the process. A 12-year veteran, Bahnick says that once equipped with the process knowledge, having the broad decision-making responsibility assures quality, facilitates work flow, and enhances job satisfaction and self-esteem. "Is it any wonder that I like the idea of teaming?" she asserts. Adds Dan Dudley, laser-alignment technician and a member of the scanner team, "Being in control is a powerful tool for those closest to the process. It enables us to act and prevent problems that we see coming. It is only possible with training, communication, and commitment." "In addition to maximizing supplier and customer contact, our concept was to let our customers drive performance," explains Morris. "Basic to everything was informing and training all employees." The idea was to embark on a six-year plan to turn performance around and establish process improvements that would create greater profits. He says the key improvement initiatives were a combination of demand-flow technology/just-in-time (DFT/JIT) and high-performance work systems (HPWS). One measure of success is that Clemson University recognized ABB's implementation of HPWS at a conference dedicated to benchmarking high-performance work systems. The process-improvement strategy was a five-step process. Morris says the first was simply to share information about the plant's performance with all employees. "It was during this step that most employees discovered that ABB Industrial Systems was operating at a loss!" To get the process under control ABB introduced ISO 9001 metrics. The next step was to develop information and prepare to redesign the organization. Key issues included the implementation of an integrated MIS network (with e-mail), the use of ISO 9001 as the basis for quality management, initiation of mistake-proofing, and formation of HPWS design and JIT steering teams. "After the employees had the information framework, we moved into step three -- providing the essential skill training." All employees received extensive training on DFT/JIT, and the commitment to empowerment began. "With our employees relying on their recent training, process teams, aligned by customer rather than function, were created. The position of supervisor was eliminated, and teams integrated the roles and responsibilities of the prior managers. At this point process owners began focusing equally on process teams, customers, and suppliers. Production flow was radically redesigned using DFT/JIT." Morris says the fourth step was to focus on improvement roles. Cross-functional process-improvement teams were formed with subject-matter experts as leaders. The new supply-management specialists started cultivating supplier relations, and ownership of material quality was moved to suppliers with the idea of eliminating the need for incoming inspections. Inventory was sent to the point of use. All teams focused on preventing defects caused by internal failures. By the end of this phase, teams began performing as self-managed operations, says Morris. "The final step is process maturity and continuous improvement," he says. "All teams became self-managed and implemented self-audits. We provided additional DFT/JIT training and began planning JIT II implementation." (Morris applies the term JIT II to the concept of having supplier personnel at his site, full- or part-time, to work with ABB people.) Although the teams have reached the fifth step, Morris says there is much to accomplish before the ABB plant reaches the goal of total customer satisfaction. A variety of initiatives are now underway. One is 360-degree reviews. "Rather than a manager conducting a traditional performance review, we have implemented a process where an employee is evaluated by peers, customers, and suppliers. The results of these reviews are used by the employee to form a personal development plan and are factors in determining compensation adjustments." Another initiative is ZED! (zero escaping defects). Morris explains that as long as defects escape, there will always be customers who are not totally satisfied. "Teams are emphasizing continuous improvement to eliminate that source of customer dissatisfaction." ABB has also changed the way it looks at "on-time" performance -- making a paradigm shift from an on-time metric to percentage late. The point, says Morris, is to emphasize that "95% on-time is not good enough. We still have 5% of our customers who did not get their product by the promised date. Our teams are now more focused on the root causes of late deliveries rather than congratulating themselves for reaching 95% on-time." He also emphasizes extending supplier partnerships with JIT II. An example is Hamilton-Hallmark. Since the beginning of ABB's outsourcing of a PC-board program, that supplier has maintained a full-time employee at the Columbus plant. "The individual has access to nearly all of our material-control/planning records, and she has responsibility for interpreting forecasts and material requirements," Morris says. "That includes planning, scheduling, and expediting materials and maintaining JIT inventories in our plant." The facility currently has representatives from six key suppliers on site, and 10 receive a material-requirements-planning (MRP) report on a weekly basis. Morris says the report is generated by the facility's integrated business system and includes firm requirements for the next four weeks and a forecast for the following six months. Those suppliers determine requirements week-by-week and ship according to the report. Participating companies include Metro Industries, Central Ohio Welding, Ryerson, and Graybar Electric. (A project now being implemented will give suppliers online access to MRP data, and they will be granted the ability to enter purchase orders for their products.) Morris says ABB has benefited with lower total costs, reduced cycle time, improved trust and openness, plus the mutual sharing of costs, margins, and product information. He says suppliers are happy to participate because of the competitive edge it gives them in maintaining ABB's business. Besides, the on-site representation doesn't really add to their people cost, because in most cases it simply represents a recasting of the role of the supplier account person. ABB's supplier partners also participate in partnership teams. For example, the goal of the kanban-consignment team is total inventory reduction while the quality-action team convenes to initiate corrective procedures. Last December ABB formally recognized the quality-action team for reducing escaping defects by 80% since 1993. "We want fewer suppliers, but with stronger bonds," Morris emphasizes. ABB currently has 28 major suppliers, down from 38 three years ago. Employee education is also evolving with what he terms "one up/one down" skill training. "One of our goals is for all employees to learn the skills of the person who gives them the work-in-process product and those of their immediate customer. That will help prevent escaping defects and provide us with more production flexibility." Morris says the two most significant management practices in ABB's change process are the HPWS and the DFT/JIT techniques. "Without these closely related and interdependent techniques, our impressive results would not have been possible. We feel they are indispensable in our goal of creating an organization centered around the customer." At ABB, supervised functional groups have been replaced by HPWS process teams that have no traditional organizational charts or job descriptions. The organization's intent is to "create a caring, learning environment where all teams think, act, and participate as owners in a successful, ongoing business," says Morris. To help with the change process, an HPWS implementation team was formed to assist in transforming the managers into coaches and to transfer authority, responsibility, and accountability for decision-making to the teams. Those efforts were reinforced by special programs intended to define team roles and objectives. One of the key responsibilities of ABB's process teams is to cultivate and enhance customer relationships. Instead of measuring customer satisfaction, ABB now focuses on discovering all expressions of dissatisfaction. Morris says previous attempts to do that with customer surveys were flawed because they answered only the questions ABB posed. "With our new customer-complaint-resolution process, we learn about every customer complaint and identify root causes and prevent recurrence," he explains. "Also, an incentive program was instituted to recognize on-time delivery." That performance measurement improved from 36% in 1991 to 95.3% in 1995, Morris reports. ABB also ties its DFT/JIT program to the improvements in key cost, time, quality, and other performance measures. Teams successfully completing key elements of DFT such as sequence of events, small-group improvement activities, and level-load and balanced-load flow received "Star Awards." Morris says those activities resulted in a cycle-time reduction of 71%, an escaping-defect decline of 72%, and a WIP reduction of 81%, as well as the improvements in on-time delivery. For those embarking on a similar journey, Morris has some caveats. "In a change process of this magnitude, company executives must understand the need for change and that results will not be achieved overnight. Our culture change took more time than we expected. It can't be done over a weekend. . . . And everyone must participate." The plant managers/supervisors must also support change -- but for a very different reason: Their jobs will be totally redesigned. They will no longer be autocratic managers within a well-defined environment. The managers will be under great stress when they shift to the unknown world of coaching.

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