Event Reports
Southeastern Region
The Meaning of Customer-Led
Manufacturing
Charles O'Neal
Event Reports
The Meaning of
Customer-Led Manufacturing
38
Faster, Better, and Cheaper
42
Everyone's a Winner in
the Malcom Baldrige
Evaluation Process
44
Bill Miller explains CDC's mission simply:
"To be a world-class producer of engines,
kits, and components of the highest quality
and the lowest cost, delivered on time to
meet all customer expectations." A key
question, the general manager acknowledges, is how to transfer such a challenge to
shop floor and marketplace reality.
Asignificant clue was provided by Dan
Hughes, director of materials, during the
recent workshop at the company's
Whitakers, NC facilities. "Everything we do
begins and ends with the customer," Hughes
said. He describes "customer-led manufacturing" as aphilosophy pervading the entire
organization. What does it mean to be customer-led?
Custonulr-Led Basics
CDC employees follow general performance specifications ("We must" and "We
cannot" lists shown in Figure I) to ensure
To Be Customer Led:
We must:
• Help the customer succeed - make the customer awinner
• Provide greater value to the customer than our competitors
• Measure ourselves from the customer's viewpoint
• Make it easy and pleasant for the customer to deal with us
• Stand behind our product and services witllout fail
• Be "entrepreneurial" and aggressive in meeting customer needs
We cannot:
• Impose our products or ideas on the customer
• Ask the customer to deal with people who cannot make decisions
• Make the customer wrestle with our internal complexity
• Allow any question, issue, or awkwardness to go unattended
• Surprise our customers
• Build and maintain arelationship from our office or work place (in otller
words, closer communication directly with the customer rather than
distance is needed)
• Fail to remind our people why we are in business
• Take any customer's business for granted.
Figure 1.
38
Target
customer-led activities, according to George
Rowley, manager of the Cummins Production System. These gUidelines may seem
simple. While CDC produces "only" three
basic engines, considerabte compleXity of its
processes is shown in Figure 2.
Cummins I'roductlon System (CPS)
CDC employees rely on the facility's
own Cummins Production System (CPS) to
meet their customer-led performance objectives. It encompasses processes selected as
most appropriate for Cummins operations,
such as JIT, SPC, TQC, Kaizen, and Kanban.
A"total system" used consistently across the
company, it continues to be modified with
changing needs. Six basic CPS points are
shown in Figure 3.
The manufacturing process has five
stages: machining, assembly, testing,paintlng, and custom upfitting. Triggered by a
customer order for a finished engine, this
pull process delivers the exact number of
parts needed to the line at just the right time.
MaChining with Automation
The machining operations are transfer
lines - highly-automated lines each machine a particular commodity. Direct labor
content is low. CDC benchmarks itself as
more efficient in manning levels than certain American and European engine manufacturers, yet below efficiency levels of the
Japanese, an opportunity for continuous
improvement.
Charles O'Neal is a professor of marketing at tbe
University of Evansville (IN) witb teacbing and research involvement in strategk industrial marketing. He is engaged in an AME research project concerning customer satisfaction and time-based total
quality. Dr. O'Neal is tbe author of Developing a
WinningJIT Strategy; The Industrial Marketer's Guide,
with Kate Bertrand ofBusiness Marketing.
Event Reports
Supporting CDC's production ot
600+ engines daily:
•
•
•
•
•
•
•
•
•
1300 people
264 suppliers in seven countries
12 million components delivered monthly
8500 part numbers
2000 engine options
6680 feet oftransfer line
874 work stations in machining
2245workspindles
1400feetofassemblyline
FigureZ.
Castings and forgmgs are delivered JIT
from certified suppliers with no incoming
inspection. Chips and cuttings are captured
for recycling. This is the only "manufacturing" process in the piant, with three products: cylinder blocks, cylinder heads, and
coimecting rods.
FIIJlII Batch to Mixed Model
CDC's assembly process began as a
batch operation, but was converted to mixed
model sequence in 1989 to match customer
demand, balance the workload, and gain
production efficiencies.
An unexpected benefit: quality improvement. Miller explained that mixed model
"removes the assumption by the operator
about what went on in a particular batch."
Mixed models require greater operator
awareness of each step in an operation.
AssistancB from Customer-FriBndly
ATOMS
CDC is installing an Assembly and Test
Six Basic Points in the Cummins
Production System
1. Customer requirements are met by synchronous material flow.
2. Deliverycapability is required to meet
schedule on avariety of part numbers.
3. Process capability is required to meet quality
specifications.
4. There must be continuous improvement 10
eliminate waste.
5. We must have analytical and technical
capability to get the flow right.
6. Accomplishment ofthese points is done by
involving all of our people.
Figure 3.
Operations Management System (ATOMS).
ATOMS was developed internally by CDC utilizing cross-functional work teams. This
fully-integrated computer system operates
in a real time interactive mode at each assembly station. It administers a myriad of
processes. For example, it examines the order board, checks material availability, tests
for match of build and customer request
date, and releases a mixed-model schedule
that proVides abalanced load for the assembly line technicians. Once an order is set, it
tracks the engines, handles line stocking,
inventory control, quality control with data
collection, and proVides build and test specifications.
ATOMS eventually will provide a
paperless assembly process with clear, concise displays at each station to tell the technician the specific part number to use.
Its error-proofing capability checks accuracy and completeness of the operation at
each station. CDC has developed many poka
yoke or error-proof devices which interface
with the ATOMS system. ATOMS will prevent
an engine from leaVing the assembly station, for example, if the error proofing is
violated.
VIsual Controls
CDC would win a good housekeeping
award for the physical condition of the
plant. It is clean and uncluttered, with a
minimum of in-process inventory and tooling. Each station has a system of visual
identifiers serving several purposes. Every
operation is labeled according to its function and number. The team assigned to the
station has a number. Critical attribute SPC
charts are posted along with performance
measurement posters by each team or focused cell. Avisual counter is prominently
displayed, shOWing continuously updated
production data for the shift, the past hour,
and the current hour. It eliminates end-ofshift surprises.
Critical Characttlrlstlcs Control
Processes at certain work stations are
evaluated on four customer-oriented attributes: product safety, mission disabling
failure (a process that could create a prod-
Customer Comes First
Station Level Communication Control
Process Documentation
• Standardize Work Instructions
• Skills Requirements (Basis for training!
certification
• Quality Considerations
• Baseline for Continuous Improvement
Visual Control
• Station Idenmication
• Process Classification
<!>- 'roduct Sate~
SPC
-1' -
"V
{ <P-
}
MiSSiO.n Disabling Failure
..
EmiSSions Failure
e
R
E,rrOf,.
roo Ing
Devices
<b;>- Leak
Figure 4.
uct disabling condition), emission, and
fluid leaks. Special symbols identify such
evaluations (see Figure 4). The symbols
were developed by an internal work group in
early 1991. The evaluation criteria (product
safety, etc.) also were created by the work
group with engineering and quality/reliability input.
Selection of stations including critical
processes is based on an evaluation of process capability - what the process yields on
a Cpk basis - and product criticality. Each
characteristic is rated on a five-point scale
(I-V) ranging from IIll as acceptable to Vas
critical. Results are displayed on a productprocess compatibility matrix. They proVide
a priority system to move the process in the
direction of greater producibility.
This process generates process documentation to standardize work instructions,
documentation of reqUired skills, and quality consideration - tooling, gauges, etc. At
each station, the resulting visual control
symbols (including an error-proofing symbol when appropriate) are posted. SPC
charts are color coded to match the control
characteristic symbol.
Each assembly line operator is empowered to stop the line, take an engine out of
the line, or hold it in the station until a
problem is corrected. The objective is to
permit only defect-free engines to advance
to the next station.
39
Winter 1991
Event Reports
World-class Testing
Miller describes CDC's testmg cells as
'probably the best in the world." Comparable testing units at other Cummins locations and at competitors use a 30-minute
test of the completed engine. His plant's
original six-minute test was no major constraint in early production, but it posed
limitations for the operation's 600 unit
daily schedule.
Recognizing this constraint, CDC engineers ran a rather complex Taguchi experiment in 1988. They statistically correlated
sets of "green" (zero run hours) engine data
with mature engine data to determine
sources of variation. The engineers found
they could successfully test engines in three
minutes, doubling the capacity of the test
cells while increasing test discrimination.
In' 1991, the test cycle was reduced to two
minutes.
A30-minute statistical variation test is
run five percent of production to confirm
that product performance follows a normal
distribution within customer specifications.
In the spirit of continuous improvement,
CDC hopes to "earn the right" to some day
not even test every engine through demonstration of process control and build accuracy. Said Alan Stephenson, director of
quality, "Testing Is a non-value-added cost
of quality that we are continuing to try to
reduce."
(commodity agent, plannerlbuyer, design!
application engineer, and supplier QA representative) also work with conferees from
manufacturing, finance, and marketing as
needed.
Suppliers are expected to proVide defect-free product, since CDC has no incoming inspection. Exact quantities and precise
delivery times are reqUired. Figure 5 shows
the increasingly demanding delivery performance goals set by CDC since 1988 and how
suppliers generally meet or exceed these targets.
Suppliers as Partnsrs
With minimal internai manufacturing, CDC relies heavily on external suppliers
in its quest to satisfy customers. The
company's base (280 suppliers) is small
considering the number of part numbers
required for the final product. More than 90
percent of its products are single sourced,
and the percentage is growing. Offshore
sources are encouraged to relocate within
the United States. Miller believes that this
country is capable of becoming a manufacturing power again - especially with
today's focus on leadtime.
Planning for long-term supplier relationships, CDC has a 20-step suppliercertification process - a "quality improvement
process." Certification by commodity teams
People: Trained to Be High Performers
CDC's most impressive asset is its
people - especially their attitude and involvement. The work force has an average
four years' experience on the job, and many
joined the company with limited specific
skills.
CDC's philosophy is to "grow its own."
This process begins with careful screening
for team players followed by 40 hours of new
employee orientation for every employee regardless of the position they are hired for.
This process helps to carefully integrate new
employees into the work environment.
Intensive training is important. CDC
invested in more than 60,000 hours of classroom training for apprOXimately 1400 employees year-to-to date in 1991 and projects
Supplier Delivery Performance
100
.Goal
ActuaJ
• Top Suppliers' Average
o
80
60
40
20
o
4088
4089
4090
Jan 91
Feb 91
Mar 91
Apr 91
May 91
Figure 5. Suppliers must meet increasingly demanding quality goals, on lime.
over 100 hours per employee by the yearend.
Employees receive training in specific
skills such as machining; quality processes;
and teamwork and group problem-solVing.
Each employee team has a trainer who's
responsible for moving employees through
a progression of skill training sessions.
Training is not a voluntary activity. Although most of the workers receive training
during their regular shifts, some employees
participate in after-hours or Saturday sessions; as all employees are salaried, they do
not receive added direct compensation for
this time.
Trained to be high performers, CDC
employees are rewarded for individual and
team performance. Each worker is salaried
with equal privileges and receives an annual
performance-based appraisal keyed to a
modular progression program (after starting at a base pay rate, an employee can
receive progressively higher wages based on
skill and other performance appraisals in
this non-union shop).
The key performance measure is plant
performance in the plant bonus system
called Variable Pay. Its budget is flexed to
production volumes. If the plant does not
beat its budget, there is no money available
for a payout. The once-a-year payout in
On Time Delivery -1988-May 1991
100 • On Time
-- Goal
80 -
1: 60 -
!!
If.
40 -
20 -
o -01 88
02 88 Q388 0488 Q1 89 Q2 89 03 89 Q489 Q1 lID QUO Q390 Q490 J 91
F lt1
M 91
A91
M 91
Figure 6.
January is based on performance goals for
the prior year that were jointly defined between the plant and its corporate owners.
Each one of the performance categories
(q~ality, delivery, cost, safety, and inventory) has a scale of targets which may contribute to the Variable Pay fund. Management attempts to communicate with all employees in basic terms about Variable Pay
fund calculations and how each employee's
performance can contribute to the fund.
Charts posted throughout the plant let
employees know the fund's status each
month. Actual payout is a percentage of the
employee's base annual salary. The year
1990 saw a 1.89 percent payout, with 1991
standing at2.43 percent through the end of
June.
Performance: The Bottom Line
Underlying the philosophy of the entire
CDC organization is the spirit of Kaizen or
continuous improvement. It is evident in
goals, and the sense that "we're not there
yet" despite outstanding performance in
many areas.
CDC's increasing sales curve reflects
excellent final product acceptance by customers. Bill Miller attributes much of the
success of the Dodge Ram pickup diesel volume to the engine supplied by CDC. Dodge,
accounting for 260 engines per day, captured a third of the diesel pickup market and
features the engine in its ads. Arecent order
from Ford will result in CDC's engines going
About CDC
Consolidated Diesel Company wasformed in 1980as a$350 million jointventure between
Cummins Engine Company and J.1. Case to produce two families of advanced technology
diesel engines. CDC expands Cummins' capabil~ies in the lower-horsepower diesel
engine market and covers most of Case's range of equipment for agricultural and
construction applications. Two product families - a 4 and 6-cylinder Bseries and a 6cylinder Cseries - provide a spectrum of more than 2000 engine variations ranging
from 80-400 horsepower.
CDC shipped its first engine in 1983. The next four years were an "introduction"
period. The plant shipped 40,000 units in 1987 and celebrated shipment of its 125th
engine. Bill Miller refers to 1987 as "the year the CDC engine was discovered." After
shipping its 500,OOOth engine in May, 1991, CDC continues to experience an accelerated growth trend. The 1.1 million sq. ft. Whitakers, NC facility is producing at a 600
engine/day rate.
The plant is attractive and extremely functional. Skylights and glass wall sections
capture natural lighting. Trees in the cafeteria provide a picnic effect - a relaxing break
from work settings. Color effectively ident~ies processing areas and utility systems. A
support corridor separates manufacturing and assemblyltest areas to provide a clean
environment forthe assembly operation - further enhanced by air conditioning.
into Ford's mid-range trucks starting
1992.
CDC's on-time performance (shown in
Figure 6) is amajor factor in CDC's success.
On-time delivery is defined as "on the day
specified or one day early." The plateauing
ofdelivery performance at 90 percent during
the past 12 months is primarily caused by
new product introductions.
The continuous improvement program
has paid dividends (measured against a
1988 base level) such as:
• 77 percent improvement in before-in-service (BIS) defects (defects found before
the unit is put into service)
• 60 percent improvement in warranty (repairslhundred) claims
• 52 percent improvement in on-time production delivery.
Amajorthrust for 1991 is 8IS improvement. A8IS failure review revealed assembly
errors as the primary cause (54 percent) of
failures. Improvement actions focus on operator awareness, operator training, operator instruction improvement, and error
proofing.
The repairs per hundred (RPH) reported by customers moved from a 20 percent rate in 1986 to four percent for midyear 1991. The May actual RPH was 1.5
percent and the year-end goal is 0.5 percent.
CDC's safety record is enviable. It's apparent in the safety performance charts
posted in each of the processing sections.
Total work-in-process inventory, from
line-set to shipping, is approximately 500
engines, against a build rate of 600 engines
per day, or less than one day's inventory.
These figures are particularly impressive because CDC allows customers to make
changes in orders within leadtlmes through
a defined set of order rules, and the complexity of the diesel engine business results
in more than 2000 customer specifications.
© 1991 AME
For information on reprints, contact:
Association for Manufacturing Excellence
380 West Palatine Road
Wheeling, Illinois 6OQ9n
708/520-3282
o
41
Winter 1991