The Comeback Plant On the brink of closing, Beiersdorf Inc.'s plant in Cincinnati reversed its fate.
Peter Strozniak The Beiersdorf Inc. plant in Cincinnati nearly became a manufacturing statistic three years ago when it was on the verge of being closed and moved to Mexico. But through tenacious communication, employee empowerment, and continuous improvement, Beiersdorf changed that fate and today stands as one of America's Best Plants. Beiersdorf's extraordinary comeback from its near-death experience was launched, oddly enough, in a meeting held in a minivan owned by plant manager Larry N. Kessler. There, he presented a Beiersdorf senior executive with a simple but bold plan to save the plant. Essentially, it was Kessler's exceptional ability to communicate this plan that launched the plant's journey to future success. In just three years, Beiersdorf's 160 self-directed, unionized employees have achieved impressive results:
- Manufacturing cycle time cut by 78%.
- Total inventory decreased by 53%.
- A 97% reduction in lot size.
- Only 16 consumer complaints from the 6.8 million units manufactured last year.
- Implemented Total System Solutions (TSS), a lean-manufacturing process from the Toyota Production System that increased productivity by 75% per employee.
Every day the 211,000-sq-ft plant, tucked in the Cincinnati suburb of Mariemont, consumes 25,000 yards of woven cotton fabric and neoprene (synthetic rubber) to manufacture 50 types of braces and supports for millions of consumers who suffer from minor aches and pains. Under the Futuro brand name, these products are sold in 15,000 retail businesses throughout the U.S. The factory also makes canes, walkers, crutches, shower safety stools, and bedpans. Beiersdorf AG, a publicly held German global manufacturer best known for its Nivea line of lotions, was evaluating proposals to move its Cincinnati plant to Mexico, Ireland, or China. Though the factory was making money, its high operational costs cut profit margins that didn't meet corporate expectations. In September 1996 Hans H. Meyer-Burgdorf, director of medical products worldwide for Beiersdorf AG, Hamburg, flew to Cincinnati to hear senior executive presentations to relocate the plant. As a middle manager, Kessler wasn't allowed to attend this meeting. He was the only one who believed, however, that the factory could make a dramatic turnaround. Kessler knew securing Beiersdorf 's backing would open the door to more global markets. Moreover, Kessler also saw opportunities to expand sales in the huge marketplace of the aging-but-active consumers who would inevitably need braces and supports. Kessler developed a three-point plan that would cut costs by $6.7 million over six years and improve the plant's profit margins to satisfy corporate expectations. Hearing that the senior executive presentations did not go over well, Kessler saw a chance to make his pitch. Time was short. The next day Burgdorf was flying back to Germany. So through his boss, Jim Kenton, president of Beiersdorf USA, Kessler arranged to pick up Burgdorf at his hotel and take him to the airport. In his minivan at a Holiday Inn parking lot, Kessler outlined his plan to Burgdorf before driving him to the airport. "What I was banking on was that the German culture and companies are much more employee-oriented than U.S. companies," recalls Kessler. "I told Hans we haven't taken this issue before the employees; the employees have not been involved in allowing them to save their jobs. And to be truly successful and have a clear conscience we must take it before the employees." When the two-hour minivan meeting concluded, Kessler and Burgdorf shook hands, forging an agreement that gave Kessler 90 days to implement his plan. If successful, the Cincinnati plant would secure its future. "Jim Kenton didn't think we could do it, and most of the management staff felt it was one hellacious stretch," Kessler says. "But the secret to it all was creating small wins, starting out with the greatest probability of a win and scoring and then very quickly scoring again, building up to labor negotiations." Again, relying on his communications skills, Kessler negotiated favorable lease terms with the plant's landlords who happen to be the family of the company's founder, George Henry Jung Jr. "I knew that they still had their hearts and souls in this business. Even though they sold it, they still wanted to be part of it," Kessler remembers. Kessler received an immediate 30% reduction in the plant's annual lease payment, secured subleasing rights for space Beiersdorf was not utilizing, and got the owners to invest $250,000 to begin renovation of a 60-year-old plant that was falling apart. One result of the plant's condition was compromised safety. Slipping and tripping mishaps were common. After a heavy rain, large garbage cans were rolled out to catch the water dripping from the plant's leaky roof. The floor and walls were black from layers of dirt and dust. When a piece of material fell on the floor it had to be thrown away. The second phase of Kessler's plan involved asking the plant's top 25 suppliers to cut prices by 3%. After hearing Kessler talk about the plant's possible relocation, some suppliers slashed prices by as much as 16%. In exchange, suppliers would have the opportunity to sell more raw materials for future products and have access to sell to other Beiersdorf plants in the U.S. Finally, Kessler got wage and benefit concessions that affected both management and production workers who were members of the Union of Needletrades, Industrial & Textile Employees. Even though Kessler informed employees about the plant's bleak future without labor concessions, some employees didn't believe him. Mistrust emerged between labor and management. "I had a terrible attitude. But the more Larry talked about what had to be given up in order to keep the place here . . . I realized what was going on to save [it]," says Louise Cole, the union president and an employee with the company for 32 years. "Years ago there was hardly any communication between the employees and management. It's exciting to see the changes we've had." Once again, Kessler's communication skills prevailed, which set the stage for the Cincinnati plant to achieve major milestones. It is no surprise that communication flourishes now in the plant's light and airy environment. Managers, clad in the casual company shirts that production employees wear, walk the floor daily with a simple objective: Talk to employees. "What we find is that a lot of people, [many of whom] have been doing this work for 20 years, know a heck of a lot more about this than we do," says Tim Knisley, Beiersdorf's financial manager. "That's a great resource if you can tap it. And part of being able to tap it is not having the suit and tie on. I've worked in four factories, and [nowhere] else [can you] walk up and talk to people. They don't look at you as if to say, 'Here is the management guy coming to give me grief or adding more work.' " Even the production lines are equipped with devices to communicate and improve work flow. Performance boards keep track of production goals and efficiency ratings. The boards also allow employees to alert supervisors to production bottlenecks. And red, yellow, and blue warning lights posted at each line are turned on by employees when a major production roadblock needs immediate attention from a supervisor, engineer, or material handler. Beiersdorf's manufacturing system runs on the principles and techniques of TSS, which was implemented in April 1998 and cost the company about $1 million. The estimated annual payback is $1.5 million. Les Anderson, Beiersdorf's production manager, remembers what the floor looked like before TSS. "There was an array of power lines hanging from the ceiling. It looked like an enormous cobweb," Anderson says. "Everyone was sitting at a sewing machine, and there were large gray bins of work-in-process inventory everywhere. The plant was so crowded that sometimes employees had to walk sideways between machines to get to other work areas." Beiersdorf's TSS production lines are set up in U-shaped or L-shaped cells depending on the number of employees and machines. Each cell is manned by teams, some of which have as many as four employees, while others have just one. The TSS single-piece flow-manufacturing process allows employees to make products from start to finish including packaging. In each cell, the cross-trained workers handle a section of machines and walk the product through each operation. "The big savings with TSS is that you are eliminating the double handling of the material," says Anderson. "The old method required employees to do one operation at one machine while they were sitting down. The TSS requires employees to stand up and do three or four procedures utilizing three or four machines on a product until it is handed to the next team employee who does other operations to finish the manufacturing process." Moreover, the TSS operation-based layout and manufacturing procedures eliminated those ubiquitous large gray tubs of WIP inventory, as well as the multiple cable drops from the ceiling and the plant's crowded conditions. The machines in each cell are mounted on mobile adjustable tables, an arrangement that fuels productivity because it allows for a quick replacement when a machine breaks down and facilitates fast plant-layout changes. In addition, the tables can be adjusted to fit the specific height and angle of every team member, providing optimum ergonomic benefits. The agility and speed of TSS was put to the test last year when Beiersdorf's largest customer, national drugstore chain CVS, made an urgent request for a new product, wrist and elbow bands that hold ceramic magnets. This product was in demand because of reports that magnets relieve muscle and joint pain. Within three months Beiersdorf employees designed, developed, manufactured, packaged, and delivered a 25,000-piece order of magnetic bands. Expediting the new-product development project involved employees at all levels. TSS, which requires extensive training in team empowerment, prepared employees for this company-wide collaboration. Engineers and production employees, for example, were making prototypes to get early-stage ideas on how to improve the design and production processes. And weekly meetings reviewed what had been accomplished and what needed to be done to get the new products out the door.
At A Glance
The only major manufacturer of brace and support products still operating domestically
Customer reject rate 2.8 ppm
Operating equipment efficiency for major production lines 94.3%
Reduction in new-product cycle time during last five years 50%
Increase in export volume during last five years 70 %
First-pass yield for all finished products 98.9%
Standard order-to-shipment leadtime for a typical product 24 hours