The Right Mix Nichols Foods' success formula blends workplace organization, a sharp customer focus and a supercharged workforce.
David Drickhamer Nichols Foods Ltd., Haydock, Merseyside, England
At A Glance
- MX 2000 Manufacturing Excellence award winner for "People Effectiveness" from the Institute of Mechanical Engineers
- Manchester Evening News Business-of-the-Year award winner
- 1999 Cranfield University and Management Today UK Best Factory Award
A tour of the Nichols Foods Ltd. operation ostensibly begins in the "wet" blending room, where ingredients are carefully metered out according to recipe in 6,500-liter stainless steel mixing tanks. From here the soft drinks, cordials and syrups flow to the bottling area. But on the way to the blending room, operations manager Martin Lee opens a nondescript door off the side of the corridor and points inside with a bet-most-plant-managers-don't-show-you-this smile on his face. Behind this door is not some sparkling new piece of production equipment, but the cleaning storeroom. Not very glamorous perhaps, but here one sees a glimpse of the strategies that have doubled productivity at the factory over the past four years without an increase in employees. The part-time cleaners who wash the walls and floors used to be outsourced. Today they are part of a Nichols employee team and receive the same training as everyone else. In the storeroom color-coded buckets, mops and other cleaning supplies are all neatly tucked away in their designated places in accordance with 5S principles. "We show things like the mop cupboard to our visitors because it says a lot about the organization behind the scenes. It's not just skin deep," notes Lee. "If we show these things to visitors, then it's a pretty good incentive for whoever is responsible for that area to make sure it remains in tip-top condition." Located on Penny Lane in Haydock, Merseyside -- just off the M6 auto route, about halfway between Liverpool and Manchester -- Nichols Foods blends and packs not only liquids, but dry products as well: coffee whiteners, milk and chocolate powders, coffee and teas. Owned by Nichols plc, a publicly traded company, Nichols Foods accounts for more than 50% of the parent's total annual revenues of US$130 million. The site itself employs 200 people. The 100 or so in production are divided among three areas: the wet factory, dry factory and a single-portion factory, which produces small packets of ketchup and other sauces, salt, pepper and vinegar. Customers range from individual, owner-managed vending companies to mass retailers, a wide range that requires the manufacturing operation to be enormously flexible. The 22 production lines mix 1,692 raw material components into 263 unique blends and more than 600 SKUs. Packaging runs the gamut from laminate bags, bottles, plastic and glass jars, to metal tins, paper sacks, cups and sachets. A keen customer focus has driven the company's steady growth during the past 21 years. Nichols' customers want short lead times, responsiveness and a wide product range. To achieve exceptional service -- measured by the number of customer orders shipped in full -- Nichols factory managers follow the straightforward philosophy that if you take care of your people, they will take care of your customers. "To deliver really great customer service, you need really great, motivated people," states Lee. Although the average wage of US$9 per hour in the production area is above the norm for the region, most of this motivation isn't accomplished through monetary awards. To instill a fun atmosphere, the company has hired comedians to perform during lunch breaks. Employees have periodic "fancy dress" days -- on these occasions Martin himself has donned Star Trek, Canadian Mountie and Robin Hood costumes. Recognition also plays a key motivational role. The central hallway in the production area is lined with "bragging boards," where the accomplishments of the various teams are regularly updated. Monthly awards are presented to people who have been nominated by their peers for extraordinary effort on the job. These monthly award winners are then eligible for recognition at an annual off-site meeting for all employees. The annual meeting itself has expanded from a ho-hum presentation of company revenues and brand performance to include video clips and live presentations by plant-floor operators about the results of their improvement projects during the past year. Lee credits their emphasis on employee recognition to benchmarking visits to the United States. He and other company representatives visited some leading manufacturers and other exemplars of superior customer service, including Toyota Motor Co., Nordstroms department store, Stew Leonard grocery store, Ritz-Carlton and the First National Bank of North Carolina. Today Nichols welcomes customers into its factory, where the energy and enthusiasm of the equipment operators, who serve as tour guides, builds confidence that someone really cares about product quality and service. This sense of pride and ownership is no accident. Four years ago, despite a generally pleasant work culture and respectable performance, company leaders felt they needed to change if Nichols was going to continue to improve and stay ahead of the competition. Wanting to instill a sense of responsibility for performance, they instituted the current team-based work structure and a formal continuous-improvement program. In the past, people on the plant floor didn't know exactly how well their line might be performing on a given shift. Before long supervisors started posting performance within the work areas. Today, machine operators mark performance numbers on dry-erase boards attached to or adjacent to their equipment. The key measure throughout the facility is overall equipment effectiveness (OEE), which combines quality figures with machine availability and efficiency. "We have people who are really passionate, and it's just a matter of channeling that creativity and that passion and giving them the tools to do it," explains Jay McDermott, who started as a machine operator 10 years ago and now reports directly to Lee as kaizen coordinator. When the continuous improvement concepts were first introduced to the workforce in a two-day training session, managers also introduced such problem-solving tools as pareto charts and fish-bone diagrams. In hindsight, Lee admits that they taught too many tools and concepts, and didn't put enough emphasis on the basics. Significant process improvement didn't begin until they conducted some additional training in 5S, the Japanese workplace organization concepts, which Nichols defines as Sort, Set Locations and Limits, Shine and Sweep, Standardize and Sustain. It is 5S that people single out throughout the operation when asked to identify the biggest contributor to recent process improvements. In the wet blending room for example, all raw materials are labeled and neatly stowed away in rolling bins, which replaced boxes and bags and other containers haphazardly stacked on dollies and pallets. "We have schematics of every part of the plant so that every little scrap of floor space and equipment is owned by somebody, by a team or an individual," notes Lee. Because of the wet production processes, equipment locations cannot by marked with paint or tape as in most factories. Here locations are defined by bright yellow ceramic tiles set into the floor. Monthly audits and a detailed scoring system continue to drive improvement and compliance with 5S principles. "All spanners [wrenches] are in place for each line," team leader Terry Hoey assures the visitor, unconsciously nudging a sample jar that had vibrated out of its designated position at the quality-assurance station. With the production lines continually changing between packaging sizes and flavors, set-up time is the biggest cause of downtime. The application of 5S principles, workforce empowerment and the focus on OEE, have all contributed to a 50% reduction in changeover. With tool-free changeover as the ultimate goal, parts and tooling are clearly labeled and stored next to the equipment. Changeovers are guided by standard operating procedures (SOPs) developed by the production teams. The step-by-step documents list all of the keys that must be turned, guides that must be reset and conveyors that must be removed, with arrows pointing to the appropriate areas in digital photographs. To make sure they're clear and "idiot proof," the SOPs have been tested by supervisors, factory managers and even the managing director. "If you're going to have continual improvement, you can't really improve if you don't have a standard to improve from," states Lee. "And if you do make an improvement, you aren't going to keep it unless you've underpinned it with a standard operating procedure." With the SOPs as a foundation, continuous improvement is an ongoing responsibility of the 20 production teams, which at any time are working on a number of projects targeted at reducing changeover times, improving efficiency and generally cutting waste out of processes. Each Wednesday production is shut down for an hour -- no small feat for a process operation -- to allow time for teams to work on these improvement projects. Last year alone the teams completed 400 such projects with a total estimated payback of US$200,000. Every two months the production teams present the current status and results of these projects to a steering group made up of supervisors and factory managers. At these shop-floor meetings the steering group offers suggestions and congratulations, files away best practices to share with other teams and generally ensures that the improvement projects are in line with overall operation objectives. The results of all this effort have been significant. While output has almost doubled to 6.2 million cases from 1997 to 2001, and annual revenues have climbed to US$67 million, the total number of production employees has remained constant. Quality complaints are down for the fifth consecutive year. Impressive achievements, but no one at Nichols is resting on their laurels. Managers recognize that the continuous improvement process is a long journey, in Lee's words, from "John o' Groats to Lands End," from one end of the British Isle to the other. "The teams know the objectives, how they get there is up to them. It's not important if they go by Cardiff or London, as long as they don't get too far off route."
Web-Exclusive Best Practices
Benchmarking contacts: Martin Lee, operations manager,
, +44 1942 272900. Jay McDermott, kaizen coordinator,
, +44 1942 272900.
One of the programs Nichols' managers picked up on a benchmarking visit to the U.S. is the company's absentee program. Generally hovering at around 4.5%, absenteeism climbed to 6% after Nichols extended its paid sick-day policy to the factory workers. Rather than penalize everyone, to control these costs, Nichols managers adapted a program they learned from a Toyota operation in Lexington, Ky. At Nichols' annual all-hands meeting, where financial and operational performance are presented, the company now holds a drawing. Employees with one year of perfect attendance go up on stage and put a ball with their name on it into a tumbler. Those with two consecutive years of perfect attendance put two balls into the tumbler, and so on. To maintain their perfect record, employees have one opportunity to exchange vacation days for any missed day. Last year the winner of the drawing walked away with a brand-new car, a Fiat Punto. At this year's meeting in January, in order to recognize more people for their achievement, Nichols gave away a number of holiday trips. At a cost of 19 cents per person per day, the program isn't too costly, and half of the workforce now achieves perfect attendance for the year. Overall absenteeism now stands to 2.1%.
Taking Problems To The Top
Every two months the managing director of the Nichols Foods operation meets with members of staff for a "How are we doing" meeting. These get-togethers, also known as skip-level meetings, offer employees an opportunity to air grievances, which then can be resolved before they become significant issues. At one recent meeting, for example, someone brought up for discussion the quality and style of the workwear. Neil Kerr, who's been managing director for Nichols Foods for only a few months, says he finds the process stimulating and challenging, and unlike anything he's encountered in other businesses. "We're not unionized here, so this in a sense ensures that the communications are correct," Kerr says. "It's top to bottom in one go, nothing in the middle. You flush out genuine issues that you might not have picked up otherwise."
Recognizing Exceptional Performance
Nichols' Foods recognition program includes a scheme for honoring people who perform above and beyond their normal job loads. Anybody in the business can nominate someone else for a GEM award, short for "going the extra mile." Nominations are posted on a GEM board where everyone can see whose effort has been recognized. On a monthly basis a team that includes machine operators and human resources personnel meet and choose several winners. These peoples' photographs are posted in a special area along the main corridor. They also receive vouchers for shirts and other prizes emblazoned with the Nichols Foods name. For the company's annual meeting in January, the judging team picks several runners up and a single overall winner for the year. Last year the winner received an all-expense-paid trip to the company's holiday home in Florida.
Don't Take Our Word For It
Nichols Foods knows something about benchmarking. The company has devoted substantial resources to visiting companies in both near and far-off locales to learn how various role-model operations have made some of their achievements. It's no surprise then that the company is willing to open its own doors to visitors. For several years the factory has been a regular stop on the British Department of Trade and Industry's Inside UK Enterprise Scheme. This program is intended to promote best practices within the UK, allowing participants to visit various businesses, as well as host outsiders. More recently Nichols has been offering for-a-fee, in-depth tours to groups interested in learning more about 5S, TPM, kaizen and motivating employees. These "Best Practice Tours" are conducted once a week and are currently booked three months out. In total the program brought in about $67,000 last year, enough to fund the operation's entire training budget for the year. Whether for paying groups or customers, the factory tours are lead by the machine operators, a practice that gives the plant people another opportunity to develop new skills. According to operations director Martin Lee, it makes people appreciate their achievements and reinforces their success. It also ensures that the plant is always "tour ready and in tip-top shape."