IW Best Plants Profile - 1997

ByMichael A. VerespejAt A Glance

• Cut F67 valve manufacturing cycle time by 98%.
• Return on net assets of 39% in 1996.
• $417,000 savings from redesign of flow-control distributor assembly.
• $1 million in labor costs eliminated by work-cell redesigns in 1995 and 1996 with no employee layoffs.
• On-site engineers at customer locations.
• 50-50 shared cost savings with suppliers.
• Worker-developed human resources policies.
• 505 annual work-in-process inventory turns.
• WIP inventory less than 0.1% of sales.
• On-time-or-free-delivery guarantee.

The growth of New Haven valve coupling, and flow-control plant of Aeroquip Corp. into a world-class manufacturing facility is based on a rather simple formula: old-fashioned hard work from people who strive to make improvements each day and who are willing to change things again and again even after significant improvements have been made. The New Haven plant, its employees, and its customers have all benefited. In 1992 the six-year-old greenfield plant -- which makes air-conditioning and refrigeration components, and sub-assemblies -- broke even on sales of $27 million. Since then, sales have grown more than 20% each year and are expected to approach $70 million this year, with U.S. market share up 11 percentage points. Return on net assets soared to 39% in 1996, but the best may be yet to come. A multitude of changes this year promise even greater manufacturing efficiency, lower costs, and faster-growing sales. Indeed, the New Haven plant -- in the midst of an expansion that will increase square footage by 36% -- expects $100 million in sales by 2000. For customers, the changes translate into superior service. Manufacturing cycle time for most New Haven products has been cut as much as 98% -- to 72 hours or less, and the standard leadtime is one week for valves and two weeks for couplings. New Haven's on-time delivery surpasses 96%, with an on-time -- by the date the customer has requested -- or free guarantee since 1995 for key customers. Since 1992 productivity per employee -- on a value-added basis -- has increased 72%. What's more, the all-salaried full-time workforce -- which has a manufacturing-management team comprised of just a plant manager and two production leaders -- has grown from 320 to 585 employees. An expansion that's scheduled to be completed next month is expected to add another 175 full-time workers. New Haven's sales growth and profitability have also financially benefited employees. In 1996 workers received an 8.3% cash payout from the plant's cash-incentive program on top of the 8.2% profit-sharing payout that was placed into each employee's 401(k) retirement savings account. What's more, a new pay plan that went into effect in March compresses the time it takes each worker to reach top pay within their pay classification to two years, instead of five years. What's different from six years ago? Virtually everything. Initially, manufacturing at New Haven got a boost when operations from four other sites were consolidated at the plant. That change alone reduced the manufacturing cycle time for a typical valve from 158 days to 85 days. However, no one knowledgeable about manufacturing would ever suggest that was a good cycle time. Indeed, Aeroquip now makes that same valve in just two days. And when a change in work flow that will move brass machining; copper forming, bending, and brazing; and assembly for that valve into one cell is completed later this year, manufacturing cycle time will drop to less than 30 minutes. The improvements at New Haven have come in two ways: a change in attitude and approach by management, and endless daily improvements made at the suggestion of employees throughout the plant. "In the past, we didn't look at the entire system, and we built to inventory," says David Higgs, the manufacturing production leader who oversees machining operations. "We decided to design production schedules to meet the deadlines of our customers." As a result, the plant averages 505 work-in-process (WIP) inventory turns a year, and WIP inventory has dropped by more than 90%, to a dollar amount equal to just 0.1% of sales. And now everyone -- employees, customers, and suppliers -- is involved, not just management. New Haven's workers manage their own work teams, visit customer plants, benchmark competitors, redesign work flow, and participate in the plant's strategic-plan brainstorming session. And this year employee teams developed new policies for a variety of human resources issues. New Haven has also learned "that you must drive improvements through the entire value chain, not just within your factory," says plant manager Darryl Miller. For example, there is a 50-50 shared cost savings if a supplier makes a suggestion that reduces New Haven's costs (or vice versa). In addition, New Haven personnel meet monthly with suppliers -- alternating between plant sites -- for round-table discussions on "how to improve things," says Carl Etzler, the plant's customer-service/pricing leader. New Haven also makes its training programs available to suppliers and has a supplier council that meets monthly to share best practices. That process also works when New Haven needs suppliers to do things differently. For example, New Haven's largest supplier -- Mueller Brass Co.'s Port Huron, Mich., brass rod and forging plant -- implemented New Haven's quality process, revamped its manufacturing process, and began just-in-time deliveries this past January on 50% of the raw bundles of brass that it supplies to New Haven. "We give them our order for brass at 9 a.m., and they have it to us by 7 a.m. the next day," states Etzler. New Haven also has cross-functional product-launch teams that meet with customers so the plant can design and manufacture products that meet a customer's exact needs, and it will place engineers on-site in the customer's plant to develop a new product or revamp an existing one. In much the same fashion, says Tonya Odum, who works in ball-valve assembly, employees work with team leaders to make manufacturing more efficient. "The team can decide a machine needs to be moved to eliminate a problem or a bottleneck. It is nice having a say in how work gets done." Likewise, engineers "bring us new products and ask us what we think of them," says Linda Nyffler, who works on the assembly of the plant's main valve product. "No one is afraid to say what they think. Management wants your opinions and input. It is helping us to be a customer to our customers." One worker suggested the plant recycle water in its waste-cleaning system; that improvement reduced water and sewage costs by nearly 70%. And two months ago, setup times were cut 50% for one operation by moving the workbench where gauges are stored 25 feet closer. Aeroquip has also approved costlier changes that involve new technology. For example, five electronically driven, hydrologically controlled 12-to-16-station Hydromat drill presses were added to machining at a cost of $4.5 million this year, bringing the total to 15. The machines take longer to set up, but offer tighter tolerances. In addition, work-cell redesign through process mapping -- in which work teams construct an as-is diagram of work and then a should-be diagram to identify possible improvements -- helped New Haven avoid $1 million in labor costs in 1995 and 1996. The biggest single savings -- almost $417,000 -- was achieved through a two-step process redesign of the assembly lines of four different flow-control distributors. "It took us just five weeks to go from the as-is plan to a formal two-step plan of how to convert to the new system," says Dwight Closson, manufacturing production leader who oversees the plant's assembly operations. The first step cut the average cycle time for the four products by 95%, reduced WIP by nearly 99%, and increased the number of pieces that could be made per hour by 112%. Adding automated braze-cutting stations in March 1996 further reduced cycle time by 60%, further reduced WIP by 40%, and increased product output per manhour by another 260%. That's a night-and-day difference. On just one product -- the plant's RD01 service-port assembly -- the changes reduced the amount of space needed for the operation from 2,062 sq ft to 431 sq ft and shrank the work-flow distance from 97 ft to 38 ft. The number of pieces made in one hour increased from 35 to 156, the number of WIP pieces shrank from 875 to 84, and the manufacturing cycle time dropped from 12.2 hours to 25.9 minutes. The pieces produced per manhour rose from five to 22.2. But what differentiates New Haven is its willingness to keep changing even after it has made enormous strides forward. Witness the extensive changes this year. Nine employee teams examined a variety of issues and proposed changes that were enacted in performance appraisal, job selection, pay, communication, training, overtime, strategic planning, and career growth. In addition to the pay changes, a process of peer reviews was added. At least once a year, team members will anonymously rate each other in areas such as safety, housekeeping, attitude, job knowledge, quality, integrity, reliability, and participation. Each employee then receives his or her average score and the average score for his or her work group. The plant's quality operating system -- which assesses performance in 20 different areas -- was extended into each department so that each work team could better attack its individual problems. Each work group now has a chart, updated by its team leader, that monitors daily, weekly, and monthly performance in any of 20 given areas. "We now know the first-run yield today, this week, and for the last few weeks -- not just what we did last month," says press/furnace worker Shannan Klausing. But by far the most extensive nonmanufacturing changes were made in the way information is communicated. New Haven added:

• Quarterly plantwide meetings on growth, strategy, and quality.
• A monthly round-table meeting with plant manager Miller.
• More communication boards inside the plant.
• Weekly meetings between team leaders and teams.
• Communication boards inside the walkway to the plant with information, as well as the pictures of all supervisors, team leaders, and trainers.
• Five-minute start-of-the-shift team meetings to facilitate daily communication on safety, quality, and continous improvement.

New Haven also amended the process by which team leaders are chosen to include seniority. Each applicant will also be scored, based on specific personality traits and characteristics. "The team leaders are now chosen based on who ends up with the most points when you look at the key critical traits we have selected as integral to that job," says Closson. Equally important, the New Haven workforce agreed that team size had become too large, in effect, turning team leaders into supervisors. So team size was reduced from about 35 to 15, and more team leaders added. "We wanted team leaders to work side-by-side with team members, not be supervisory leaders," Miller explains. Changes inside the plant this year include the new Hydromat drill presses, $1 million in copper-forming equipment, and numerous redesigns that have reduced setup and cycle times for products. One team reduced the setup time for a value-added base valve from 90 minutes to 30 minutes, and another team made seven changes that shortened the setup time on one Hydromat by 61%, from almost 71 minutes to just under 28 minutes. Significantly, even greater changes lie ahead. When the plant expansion is completed, New Haven plans to redesign even more work into one-piece-flow cells. That way, machining, copper work, and assembly for a product will be together, reducing further the manufacturing cycle time for products and increasing the ability to be customer-responsive.