How the Winners Keep Winning
Everyone has heard the saying, "It's a poor mechanic who blames his tools." That is certainly a dangerous attitude for a manufacturer to have during good economic times. It's even more fatal during recessions, because everyone knows that during weak economic periods, the manufacturing industry suffers the most. However, certain companies come through relatively unscathed and sometimes end up stronger than before. These are world-class manufacturers.
But what does it mean to be a world-class manufacturer? Being in this category means that your company is successful in its market-regardless of size or resources. World-class manufacturers match or exceed their competitors' quality, lead time, flexibility, pricing, customer service and innovation.
But how does a company become a world-class manufacturer? The keys to becoming a top manufacturer are not profound.
The Keys to Success
• Solutions. Instead of focusing on making products, today's successful manufacturers have to focus on "solutions." "Manufacturersneed to know about their product and how they can best provide a solution to their client that includes the product now that it may be commoditized," says Jim Maurer, national managing partner for the consumer and industrial products industry group at Grant Thornton LLP (Chicago). "In the big picture, you have to take a look at your manufacturing solution on a global basis. Where does it make sense to make the product? Where are we distributing it? Where are our customers? And what is the unique asset inside our company that we are trying to leverage to our customers?" It's not just the product anymore. Manufacturers need to understand how their product is being used by customers.
• Customers. The ultimate key to success in manufacturing is to please the customer. We all know that customers help pay the bills. We also know we will not be successful if we do not deliver excellent service to our paying customers.
Successful companies consistently exceed customer expectations, and they manage the entire customer relationship-from prospect to post-sales service and support.
Manufacturers must keep the customer's needs in mind as they carry out day-to-day operations.
However, a manufacturer's internal customers must also be kept happy. A manufacturer's internal customers are the employees. This concept is not always clearly understood by employers and employees. Many times, the companywide attitude is that a mistake will be caught and rectified somewhere else down the assembly line. Ultimately, this lessens product quality.
Successful manufacturers ensure that all employees understand the concept of the internal customer and its importance in the overall quality effort. Manufacturers not only have to provide parts that satisfy the paying customer, they also have to ensure that what is produced at the beginning of the assembly line satisfies those workers at the end of the line.
• Quality. Quality is integral to successful manufacturers. Quality is everyone's job, and successful plants understand that defects are caused by processes gone wrong. "To be a world-class manufacturer, you have to embrace Six Sigma. You have to embrace lean concepts," says Maurer. "But probably less than 50 percent of plants out there use it. The reason is that the immediate benefit from it is something that they typically aren't seeing."
Lean principles focus on value-added flow and the efficiency of the overall system. Lean principles allow manufacturers to boost throughput, reduce time to market and quickly increase capacity. Implementing a lean philosophy also has the potential to lower costs and improve product quality.
Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven methodology for eliminating defects in any process-from manufacturing to transactional and from product to service.
• Change. Why would a successful company want to change the way its does things? Because it has to in order to stay even. World-class manufacturers embrace change. They change their manufacturing processes, and they will try to accommodate whatever their customers need. Successful plants create flexible production systems. Flexible manufacturing is critical to allow manufacturers to respond quickly to changes in customer demand and adjust products according to market trends. They often also use pull-type production systems that build goods based on demand.
• Employees. Full participation of a well-trained workforce is key to maintaining successful manufacturing practices. But training can take employees off of the assembly line, and it's expensive. The solution is to develop innovative and cost-effective ways to train. Some ways include: audio or phone courses; courses at community colleges; online courses; or assigning an employee to attend training workshops or seminars and then having that employee teach everyone else.
The successful companies recognize that training employees does provide long-term benefits and that time and money must be invested to see the benefits. Training is a continuous process, and learning is viewed as a lifelong pursuit. On-the-job learning is a key to staying competitive.
• Supply Chain. Successful plants adopt supply management strategies that evaluate purchased materials and goods in terms of their total cost of procurement. This fosters just-in-time production systems, faster product development cycles and continuous reduction in costs and defects.
• Product Development. Successful plants take an active role in the design, planning and creation of the products that they are manufacturing. Maintaining a lead depends on being able to quickly develop cost-effective and customer-focused goods. "You invest in R&D during a recession. It makes sense for you to do it now, because no one else is. But you have to have your cost model in good shape. The first thing that you have to do is shore up the cost model and cut the extras out . . . then you can afford to look for opportunities to stay a step ahead," says Maurer.
Advice From Shingo Winners
Affordable Interior Systems Inc. (Hudson, MA) manufactures midmarket office furniture products. The company quickly recognized that the opportunity for a lower-cost alternative in the market was real. Recognizing this need, Affordable Interior Systems invested in comprehensive redesign and retooling. Now, three state-of-the-art facilities in Hudson enable the company to bring alternatives to market at a lower cost to consumers. "Our whole story is about quality and value. We can be down in the lower prices while still maintaining quality and shorter lead times, and really great customer service where customers don't have to wait for weeks to get products. If there are special requirements that are necessary we can handle it," says Steve Savage, vice president of operations.
Lean practices have resulted in productivity gains up to 88 percent and lead times of less than 8 days. In addition, the company maintains a 100 percent on-time delivery rate, even though it promises to deliver the order on the day the customer wants it, and not the week. "We are definitely a lean manufacturer, and if you're not doing it, you're probably not going to be in business in 3 or 4 years. We understand that everything could be improved. We are constantly taking these little bites out of the system. That affects your lead times; your productivity improves, and your cost of goods drops," says Savage.
While most manufacturers in the contract furniture market have seen sales decline by as much as 60 percent, Affordable Interior Systems has seen its business grow. "We've seen competitors take a nose dive-sales down 30 or 40 percent. Our big competitors are shutting factories. I think the big guys just move a little bit slower," explains Savage. "No one can sit back today and say ‘We're doing good enough' or ‘There's no way that we can improve that.'"
Autoliv ASP is a "big guy" incorporating lean principles. Its manufacturing plants in Brigham City and Ogden, UT, were awarded the Shingo Prize in 2003. These facilities produce more than 30 million inflators for driver, passenger and side impact air bags each year. The plants supply inflators to virtually every automaker in North America, Europe and the Pacific Rim. Having embraced the concept of continuous improvement through the Autoliv Production System (APS), the company strives to manufacture smaller and lighter inflator designs.
The tenets of APS include:
• Continuous flow of materials and information through connected processes.
• Systematic waste identification and elimination through empowered people.
• Environment where change is expected, embraced and rewarded.
• Organizational flexibility.
• Profitability resulting from cost reductions.
By following these principles, Autoliv maintains a stable and profitable work environment.
By incorporating lean manufacturing principles, the company consistently wins patent approvals for pyrotechnic and stored-gas inflator designs. "Our employees have worked tirelessly to implement lean manufacturing principles into all areas of our business," says Lars Westerberg, president. "It is our commitment to continuously set new standards in world-class manufacturing."
Since implementing lean manufacturing principles, Autoliv has reduced defects by 90 percent, reduced production space by 66 percent, and increased inventory turns by 80 percent. Scrap costs have been reduced by 52 percent, and productivity has improved 36 percent. By reducing cost through waste elimination, the company has remained competitive in an environment of declining prices and fluctuating volumes.