One of the challenges of growing a business through acquisitions is how the buying firm can create added value that the acquired firm couldn’t create on its own. One possible solution is that the acquirer can bring some operational expertise that the acquired firm lacks. That, according to the Wall Street Journal, seems to be the case with Honeywell (Honeywell’s System Sensor Plant Declares War on ‘Seven Deadly Wastes’, Jul 1).
The article describes the efforts Honeywell has put in to improve operations at a plant in its System Sensors unit that it inherited when it bought Pittway Corp in 2000. So what did things look like when they bought the place?
The 1,000 workers inherited at the St. Charles plant struggled to align output with demand. The facility often produced too much, anticipating demand that didn’t materialize. Overproduction and excess inventory are two of the seven “deadly wastes.”
“You couldn’t see the plant floor because there was so much inventory stacked up,” says Karl Odegaard, System Sensor’s director of manufacturing.
Sounds like classic case of push production scheduling, right? Here are some of the steps that they took to improve the process.
In St. Charles, assembly lines were replaced with seven production cells where teams could build different detectors simultaneously. More of the production systems were automated to detect worker errors, such as failing to install or test critical components.
The overhaul also solicited ideas for improvement from employees, a reason for maintaining the U.S. workforce. “We’re paying for people’s brains and their hands,” Mr. Odegaard says. “If I just wanted hands, I could find them cheaper elsewhere.”
The plant produces four million units a year and its defect rate has fallen 80% under the improvement plan. Additional automation allowed one worker from each of the seven work cells to be reassigned.
The payoff has been pretty significant. Costs are down. Defects are down. The workforce is half what it was when the plants was acquired (accomplished mostly through attrition). And just as importantly, they are much more flexible.
The plant now can start production of any product in System Sensor’s catalog within three minutes. Orders typically are filled within four days, down from 10 days, thanks in part to the use of more common parts.
“We’re able to flip from model A to model B on a dime,” Mr. Potosnak says. “It’s largely the same device made unique in the last step of production by the software” that has been installed.
There are two things I like about this article. For one, it is yet another demonstration of the power of lean production systems. Systematically focusing on reducing waste can lead to substantive improvements in productivity and costs.
Second, this shows what it takes to compete with an American manufacturing base. Honeywell is producing sophisticated products in high variety. It is relying on automation for flexibility and high quality. Its workforce is then very productive. It is consequently not worth extending supply chains and moving production overseas in order save on labor costs. The article also shows the challenge (from a policy perspective) of reviving American manufacturing. Honeywell is supporting “good” manufacturing jobs in St. Charles. The kind that any mayor would welcome to town. But is providing far fewer jobs then it use to. That is, a rebound in US manufacturing is great for those with the capability to work in a high-tech environment but it is unlikely to create a flood of new jobs.