1998 IW Best Plants: Quaker Oats Co.

Oct. 14, 1998
Workers at the Quaker Oats Co. plant in Danville, Ill., prefer to be predator rather than prey, the hunters, not the hunted.

Workers at the Quaker Oats Co. plant in Danville, Ill., prefer to be predator rather than prey, the hunters, not the hunted. Those images may seem somewhat bloodthirsty, given that the facility manufactures ready-to-eat breakfast cereals and granola snacks. But the cereal wars are a cutthroat business, and the Danville plant plans to flourish, not founder.

It is plant leader Steve Brunner who likens the semiautonomous teams that drive the business to "predators instinctively hunting in a pack. [They] see the strategic significance of relying on each other to compete in the world. . . . They enjoy being strong competitors and helping to run the business."

Their business operates from a six-story, 425,000-sq-ft brick structure built in 1969. Some 550 workers produce boxed and bagged cereals, such as Fruitangy Oh!s, and Quaker Chewy Granola Bars.

There is ample evidence that these strong competitors are making inroads into world-class manufacturing status. In the last five years, manufacturing costs per case have dropped 37%, first-pass yields for snack products have improved 37% (and now average 99.6%), standard order-to-shipment leadtimes have been reduced by 30%, and the plants total production is two times greater than it was in 1990. The Danville plant has become the low-cost producer for many co-manufactured products within the Quaker Oats organization.

The plant is reaching its goals with teamwork as the backbone of all of its efforts. Plant reliability, quality control, customer service, and leadership optimization are all focuses of its continuous-improvement efforts. Its labor-management relationship may be unparalleled.

Such was not always the case, however, and the plants former woes are as recent as the late 1980s. Not only was the Danville facility among the high-cost producers for the Quaker Oats organization, but the state of labor-management relations also was less than amicable, punctuated by grievances and occasional strikes. In fact, the American Federation of Grain Millers Local 347, which represents the plants workers, filed charges of unfair labor practices with the National Labor Relations Board during that time.

Today's union leadership does not hesitate to say that the union attitude then was, "I don't care what it costs the company, it's what we want." That is not the attitude today, labor and management alike say.

"Were not here to take advantage of one another," says John Pigg, recording secretary for AFGM Local 347. Far from it. "We have cultivated an unquestioned seamless level of trust in our labor/management team," Pigg writes in the nomination form he submitted asking that the Danville plant be considered for recognition as one of Americas Best Plants.

Plant leader Brunner says the Danville plant has been transformed from a control-oriented facility to a commitment-based culture where management and union work toward the same goals and rely on a mutually developed set of guiding principles. It took near disaster, however, to set the Danville plant on its current course.

The red alert for the plant sounded in 1990 in the wake of a comprehensive manufacturing study completed by consulting firm Booz Allen & Hamilton Inc., McLean, Va., for Chicago-based Quaker Oats. The study concluded that only one manufacturing site was needed in the Midwest. Danville was one of three plants in this geographical area and the smallest. It was an obvious choice for closure. For Danville, the only bright spot in this study was the conclusion it reached about the viability of a near-term plant shutdown: It would be more costly than keeping the plant open.

What was left unsaid was that a Danville closure in the future was likely.

But the Danville leadership heard another message, which was, "We have time to turn things around," explains Brunner. And so they did. It wasn't easy, it didn't happen overnight, and by no means is the Danville plant resting on its laurels.

It would be impossible to fully describe the degree to which the plants leadership dedicated itself to transforming the Danville facility into a leading performer within Quaker Oats; or how, from the start, employee input, employee commitment, and employee involvement was sought, encouraged, and touted as necessary to the transformation. (It should be mentioned that Brunner joined the Danville Quaker Oats team after the Booz Allen report was released.)

Both union officials and plant management waded into the task of creating a vision, mission, and guiding principles that the entire plant could and would support. Meetings with some 250 employee volunteers (on company time and with pay) resulted in nearly 650 flip charts filled with information on the values and concerns of the Danville employees. (Job security was the biggest issue.)

The vision that evolved from these meetings begins, "Our future, in a global marketplace, will be secured by inspired employees who instinctively respond to the needs of the consumers, customers, business owners, community, and each other."

A benchmarking trip by the plant leadership helped illustrate just where Danville stood in relation to its global competitors. Their Mexico site visits provided some shocking insights.

"We expected to see dirty, dingy plants," says Pigg. "We had a whole different mind-set when we came back. We saw very clean, very good plants, with workers making less than $2 an hour."

Definitely thought-provoking, the trip presented yet another compelling reason for the Danville plant to change its method of doing business. Today high-performance, semiautonomous work teams lead Danville's improvement efforts.

How well ingrained is the idea of employee commitment and empowerment? Asked merely for the number of engineers involved in facility management at the plant, engineering leader Warren Freese offers an unsolicited yet telling description. "Really," says the 25-year veteran of the Danville plant, "we have 550 engineers." Five hundred and fifty? Every employee must be an engineer in that case since that figure encompasses the entire employee population, which is Freese's point -- everybody contributes.

Production associates (hourly workers) take on and in many cases lead engineering projects. In fact, about 130 small engineering projects (under $25,000 budget) are completed annually by non-engineers to the tune of $1 million. Those projects include finding remedies for dust control, researching and purchasing new equipment, and restructuring a warehouse layout for better space utilization.

A production associate is heading up a pilot program to assess the potential of cellular-phone technology to improve communications at a plant in which members of a single line may be located on separate floors. And, notably, the project involvement is not in response to directives from unseen but controlling management; it is driven by workers who see an opportunity to improve their business and act on it.

The labor-management relationship is no less committed. It has evolved into a true partnership that operates with an enviable level of trust. Like traditional union organizations, there was a time when the Danville local brought 130 to 150 proposals to the table during contract negotiations, knowing that a vast majority were merely bargaining tools. Management, of course, did the same, and thus much time-consuming posturing occurred before any agreement was hammered out.

The 1997 contract negotiations show how far the union-management relationship has progressed. The bargaining sessions are now "collaborations" instead of "negotiations," and the word "proposals" has been dropped, along with the associated posturing. In 1997 the union brought 11 "interests" to the table, seven of which were identical to the interests presented by the company. Joint discussions resolved the remaining issues.

The contract language itself reflects the change in attitude. The words "union" and "company" were eliminated (those two words previously appeared 76 times, Pigg estimates) and replaced by "plantwide steering committee." The plantwide steering committee is comprised of the union executive board, the plant leader, and those who report directly to the plant leader.

In addition, the contract dropped the word "may" from its language and replaced it with "will." "We're not here to take advantage of one another," Pigg says, but to get everyone's needs met.

This collaborative effort by management and union is actually more difficult than a traditional union effort, which generally is seeking a "short-term fix," says Local 347 President Sam Rhea. In contrast, the nontraditional union at Danville says, "Lets look at the business into the future." In short, a proactive approach replaced a reactive approach.

"Its what unions have been asking for," adds Fred Mikalik, vice president of AFGM Local 347. "Its having a voice."

It also can be looked at as union-busting, and certainly that cry went up in the early stages of empowerment building. But it did not prevail. Pigg, who says he initially was elected to union leadership on the strength of writing the most grievances, was reelected while touting empowerment "as the right thing to do." Indeed, it was the union executive leaders who developed the semiautonomous team plan, and they work full-time at its implementation.

The development of semiautonomous teams is just one of the goals cited in the Danville plant's "Breakthrough Book," a strategic plan developed in 1996 by the joint plant-leadership team. The goals incorporate the findings of three consulting studies completed for Quaker Oats. Among the goals: implement seamlessly operating semiautonomous teams, achieve overall plant reliability of 88%, minimize nonoperating hours to less than 6% of total hours in a 120-hour week, achieve first-run quality of 99.9% or better, have key management and union leaders spend more than 40% of their time looking into the future and preparing teams to meet its challenge, and achieve overall plant reliability of 88%.

Not all of the breakthrough goals have been achieved, but others have been exceeded, and new opportunities continue to appear on the horizon. One example of numerous initiatives underway to help the Danville plant reach its goals is the implementation of methods to improve process quality; more than $250,000 is being invested annually in developing this capability. Cpk improvements are averaging 18% a year. Again, an empowered team was deployed to develop and implement the process.

Plant leaders believe that the facility's transformation to a commitment-oriented organization lies at the heart of its achievements. "We agreed we wouldn't get to breakthrough thinking with a traditional organization," explains Pigg.

On the other hand, "The only difference between a pipe dream and achieving a breakthrough goal is the [location of] the wall of disbelief," plant leader Brunner says. "Committed people will always position the wall of disbelief way down the pike."

At A Glance
  • First-pass yield for all finished products 99.6%.
  • 86% of production workforce in empowered natural work teams.
  • Production employees average 12.5 days of formal training annually.
  • On-time delivery rate 99%, based on date customer requested.
  • Product-development cycle time reduced 75% in last five years.
About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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