People-Powered Change Customer-focused production teams propel rapid growth at Porter-Cable. By David Drickhamer In early 1992, wary of alienating the industrial-tool distributors whose loyalty had saved the company only 10 years earlier, Porter-Cable Corp. began selling its professional-quality power tools through home centers. A team of company executives, which included current Porter-Cable President Jack Garlock, toured the country to personally break the news to the distributors. "We went in and explained why we were doing it, why we felt we had to do it, and how it was going to benefit them in the long run," Garlock recalls. He also remembers the not-so-nice names and company catalogs frequently hurled his way in angry response. It was an unavoidable decision. The market had shifted. More and more end-customers were buying their tools at home centers. To continue to grow -- sales had been flat since the late 1980s -- Porter-Cable had to do something. Its executives had debated the home-center move for years. Could Porter-Cable compete with the giants of the power-tool industry in terms of price and quality? If sales did take off, could the factory handle the volume requirements and strict "100% or cancel" order-fill policies of the new customers? Could the company continue to take care of its core customers, the industrial-tool distributors? It would be a challenge for sure, but no bigger than the one the company had faced a decade before. The rebirth of Porter-Cable officially began in 1981 when Rockwell International Corp., after years of losses, pulled out of the power-tool business and sold its Jackson, Tenn., facility to Pentair Inc., St. Paul. The new owner and management team promptly resurrected the Porter-Cable name and abandoned the consumer tool market. They refocused the company on the high-quality professional power tools for which the company had built a solid reputation in the first half of the century. (Some of these tools are now on display at the Smithsonian Institution's National Museum of American History in recognition of how Porter-Cable innovations, which include the first belt sander, portable band saw, and router, helped propel the nation's productivity.) Pentair began investing capital in the plant as the sales force rebuilt relationships with industrial tool distributors. Through sheer hard work, sales slowly grew, and profitability returned. Within the neglected factory, quality and productivity dramatically improved as managers made relatively simple process improvements. But by 1988 it became clear that something major had to be done to push the plant forward. "We thought we had a good thing going from where we'd started out," recalls Gary Gately, vice president-operations. "But we'd plateaued. We needed something to help us break out and carry us to the next level." Operations managers attended seminars, read books, and got together to discuss where they were, where they needed to be, and how they could get there. Borrowing from a variety of sources -- just-in-time (JIT), quality circles, total quality management (TQM), and the Toyota Production System -- they integrated these ideas into a program that would fit Porter-Cable. They named it the "American Integrated Manufacturing System" (AIMS). "It's not just one thing. It's not just JIT. It's not just cellular manufacturing. It's not just TQM. It's not just teams. It's a whole manufacturing system," emphasizes John Hodges, quality engineering manager. The program focuses on employee involvement, a commitment to quality, and an all-out war on waste. Hence the AIMS slogan: People, Productivity, Quality. "The first step was to organize the factory into cells," recalls Hodges. "We moved every piece of equipment in this plant at least once, and some [we moved] three, four, five times, trying to take this massive organism and break it down, to get out of this batch mode to where we could flow parts." The initial AIMS effort also opened lines of communication between the plant floor and management. Information about overall company performance began to filter down to plant-floor workers, whose ideas and opinions were more actively sought and listened to. From a plant-floor perspective, this flow of information is the biggest change. "It used to be nobody knew anything. We didn't even know what was going on in assembly," recalls Kevin Rouse, team leader of the Cordset & Lead Dept. "Since AIMS, everything is out in the open and everybody knows the direction [in which] the company wants to go. We've got a goal, and if we don't make the goal, neither does the company." Today the Porter-Cable production floor is broadly split into two divisions, components and assembly, plus the support departments. Components consists of 27 teams that build motors and machine gears, shafts, and motor housings. "At the heart of a quality power tool are good gears and a good motor. That's what gives it life," states Hodges. Porter-Cable keeps both of these core competencies in-house, relying on speedy communication between components and assembly to quickly resolve any quality issues. There are seven support teams and 18 assembly teams. The assembly teams handle more than 300 core products and more than 1,200 accessories annually, with about 30 new-product introductions per year. "The lifeblood of our differentiation in the market is new products," asserts Garlock. "Retailers need something new to talk about. We need to continually generate interest in the product offering." In 1998, 52% of Porter-Cable's sales came from products less than five years old. Many were of the cordless variety, the fastest-growing power-tool market. On the production floor, each team area is bounded by a painted yellow line. The teams are responsible for everything inside their box. They know the production targets they must hit, and they schedule their own work assignments. The teams receive monthly reports on how they're doing in relation to their goals, which are evaluated and reset every six months. "We told them we wanted them to run their box like it was their business," Hodges recalls. "And we gave them as much freedom as we felt we could. The more they developed, the more freedom we gave them." Each team has goals, derived from overall plant goals, in safety and housekeeping, quality, costs, inventory, delivery, and special projects. One team's six-month goals might include zero OSHA-recordable injuries, no ISO nonconformances, 1% absenteeism, 0.7% or less scrap, inventory reductions to 16 days, specific productivity targets, and $10,500 in cost improvements. Four management-support teams monitor the day-to-day performance of the teams in direct relation to these goals. These support teams work with the production teams to set goals, track performance, and grade goals every six months. The goals they set dovetail with the overall objectives of the plant. When the company decided to pursue ISO 9001 certification, which it achieved in 1997, the requirements became the team goals. "We had no problems with ISO on the factory floor," Hodges observes. "All the problems we had were in other areas that we didn't have as much control over. For anything we want to do on the floor, all we have to do is communicate what needs to be done to the hourly folks, put it in their goals, and it's going to happen." Scoring is straightforward. There are few excuses. If a supplier, internal or external, causes a team's scores to slip, it's up to that team to meet with the supplier and fix the problem. "That was a big culture shock for the teams," recalls Hodges. "It's our job in manufacturing to respond to the customer. If our environment changes, we've got to figure out a way to respond." Team membership crosses shift boundaries, further deterring finger-pointing and encouraging cooperation. Behind this complex goal and scoring system lie some very real rewards. How well the teams score accounts for a portion of their annual achievement-sharing bonuses, which averaged 8.7% of gross pay in 1998. The majority of this bonus depends on overall company performance. Teams also receive a percentage of any cost improvements they implement in their areas. "If you push long enough, and talk about ownership, and talk about customer-supplier relationships, if you say it over a period of years, then it starts to become the way you operate," Hodges comments. Several other management teams round out the AIMS package. A steering team, led by Gately, establishes overall plant goals and evaluates the teams' goals and progress. Another cross-functional management team, dubbed the AIMS Action team, has the mission of taking the AIMS program forward. This team looks to the future and makes recommendations so that the whole program continues to drive improvements and doesn't get stale. Porter-Cable managers were counting on AIMS' ability to evolve to meet new customer demands when they made the fateful move into home centers. In 1992 Porter-Cable eased into the new business through a regional chain. As the company learned the home-center business and production capacity ramped up, it pursued new and larger customers, such as Lowe's and later Home Depot. During the last seven years Porter-Cable sales have increased 300%, about half of the total coming through home centers. "If we had not put in the AIMS program, we would never have been able to do it, because we wouldn't have had the right quality. We certainly wouldn't have had the right delivery mentality. And we would've been eaten alive as far as cost is concerned," says Jim White, former Porter-Cable president and current executive vice president of Pentair. Capacity at the Jackson facility, evident in some narrow walkways and cramped team areas, is maxed out. By tracking performance, Porter-Cable managers have found that the most effective team size ranges from 10 to 15 people. Some of the teams today are considerably larger than that. Plant managers want to break them down, but there isn't any space. To continue to make productivity gains and meet aggressive sales targets, a 650,000-sq-ft expansion is under way. The new structures will house a new distribution center and a new corporate headquarters for Porter-Cable and its sister company, Delta International Machinery Corp., freeing up 125,000 sq ft for production. Through all of this growth the company has not forsaken its original customers. Since the early '90s, sales have grown through all outlets, which include local hardware stores and mail order. Industrial distributors have benefited from increased brand exposure as they've supported customer demand for enhanced service, product accessories, and specialty power tools. Porter-Cable still takes a great deal of pride in making these low-volume, specialty tools. They may sell only a few thousand per year, but these tools mean the world to the people who need them for a particular task. And taking care of customers is what Porter-Cable is all about.
At A Glance
- Annual sales per employee up 69.1% in last five years
- Zero nonconformances during ISO-9001 recertification audits in 1998 and 1999
- Home Depot supplier of the year in 1996, 1997, and 1998 (only three-time winner)
- Lowe's supplier of the year in 1998
- Sales from products less than five years old in 1998 -- 52%
- $13 million in plantwide cost savings in 1998