{"id":16347,"date":"2020-11-24T09:14:07","date_gmt":"2020-11-24T09:14:07","guid":{"rendered":"http:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/wausau-equipment-company-a-lean-journey-a-history-and-business-background\/"},"modified":"2020-11-24T09:14:07","modified_gmt":"2020-11-24T09:14:07","slug":"wausau-equipment-company-a-lean-journey-a-history-and-business-background","status":"publish","type":"post","link":"https:\/\/onlineclassesguru.com\/index.php\/2020\/11\/24\/wausau-equipment-company-a-lean-journey-a-history-and-business-background\/","title":{"rendered":"WAUSAU EQUIPMENT COMPANY: A LEAN JOURNEY (A) History and Business Background"},"content":{"rendered":"<style type=\"text\/css\"><\/style><p>UV1079 Rev. Mar. 1, 2010<\/p>\n<p>This case was prepared by Sorin Gruia of Resource Dynamics International, and Robert D. Landel, Henry E. McWane Professor of Business Administration. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. All names and data in this case have been disguised. Copyright 2008 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to\u00a0sales@dardenbusinesspublishing.com.\u00a0No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means\u2014 electronic, mechanical, photocopying, recording, or otherwise\u2014without the permission of the Darden School Foundation. Rev. 3\/10.<\/p>\n<p>WAUSAU EQUIPMENT COMPANY: A LEAN JOURNEY (A) History and Business Background<\/p>\n<p>Ashford Elevator Company was founded in 1946 in a small midwestern town. Its first products were grain elevators, sold to local co-ops and farms. Started as a small shop with five workers, the company, which quickly grew to include 50 employees, began engineering, manufacturing, and servicing a variety of machinery and equipment for the agribusiness industry. The company changed its name to Wausau Equipment Company (WECO), and continued to expand through the 1960s and 1970s and, in the process, gained a solid reputation for the performance, quality, and reliability of its products, matched with its superior customer service and dependable field technicians.<\/p>\n<p>By the early 1980s, WECO was recognized as a national brand and began extending the scope of its business into foreign markets with its machinery and equipment. In 1981, it opened sales and service centers in Western Canada, followed by operations in South America and later Western Europe. Manufacturing plants were built or acquired in Brazil, Spain, and France, adding significant competitive advantage in delivered costs while maintaining the company\u2019s reputation for excellent service and quality. In the mid-1990s, WECO undertook a major international-expansion campaign by opening two new plants in the Middle East and China to serve the growing agricultural markets in Asia and Africa. In 1993, WECO renamed its main division the machinery and systems division (MSD). At about the same time, it began implementing an active growth strategy whose focus was diversification from the cyclical and often uncertain agribusiness industry. Several acquisitions took place throughout the United States and Europe; the acquired companies had established histories and reputations and served the transportation and telecommunications infrastructure markets.<\/p>\n<p>This document is authorized for use only by AJ Roberto (aj.roberto23@gmail.com). Copying or posting is an infringement of copyright. Please contact\u00a0customerservice@harvardbusiness.org\u00a0or 800-988-0886 for additional copies.<\/p>\n<div>\n<div>Nur Demir<\/div>\n<div><\/div>\n<\/div>\n<div>\n<p>-2- UV1079<\/p>\n<p>Organizational Culture and Climate<\/p>\n<p>From the beginning and throughout its 50-year history, the WECO culture fit what was generally known as the traditional mold; its main characteristic was a command-and-control style of management with little communication across the organization. At the same time, a strong work ethic prevailed, along with rugged individualism and self-reliance. It was a culture generally suspicious of change and viewed any initiatives associated with the latest fads and buzzwords with equal skepticism caused in part by past failures when changes did not stick and improvements quickly disappeared. Because of slow growth, MSD\u2019s main plant had a large number of older workers who were close to retirement, and new hires were rare. There was a clear sense that a lot of experience was about to be lost.<\/p>\n<p>Management tried to figure out a way to retain all of that valuable experience as on-the- job training was weak; also, the equipment base was getting older, and with many machines becoming obsolete, spare-parts shortages were frequent. Most breakdowns received the short- term, band-aid treatment; so consequently, equipment downtime continued to increase, contributing to the run-to-failure mentality. At times, labor management relations were strained, and union organizers met strong resistance. Leadership at the top was also slow in recruiting younger executives; there was little interest in succession planning and other career-development processes. The Lean Journey Beginning<\/p>\n<p>Late in 2000, WECO\u2019s executive board gathered for its annual business-strategy meeting at a nearby lake resort. The last year had seen a 10% decline in operating profits due to the high cost of labor and materials, flat revenues because of resistance to price increases, and increased competition in both domestic and foreign markets. In addition, work-in-process and finished goods totaled almost 30 million, a five-year high. There was considerable concern that, for the first time in memory, company market share could drop from 35% as its principal competitive advantage\u2014although a highly engineered and reliable system, it was no longer the key factor driving sales. Other factors had become important, among them shorter lead times (a steady decrease during five years, from between 16 and 22 weeks to 10 and 12 weeks), superior customer service, and lower prices; the competition was perceived to be better in those areas.<\/p>\n<p>During discussions, it was widely agreed that a process-step change in operational performance improvement was necessary for the company to meet the challenges ahead. All areas\u2014sales and marketing and engineering and operations\u2014were tasked to develop detailed performance-improvement plans focused on achieving specific tactical goals. Operations was clearly the area with the greatest leverage as well as where performance was lagging the most, so it was not surprising when the executive board asked MSD President John Steiger to develop a comprehensive action plan and implementation timetable to meet the $2.925 million in improvement goals (Figure 1). The action plan had to be ready for launch by the end of January 2001, a relatively short amount of time, so everyone at MSD felt a sense of urgency.<\/p>\n<p>This document is authorized for use only by AJ Roberto (aj.roberto23@gmail.com). Copying or posting is an infringement of copyright. Please contact customerservice@harvardbusiness.org\u00a0or 800-988-0886 for additional copies.<\/p>\n<div>\n<div>Nur Demir<\/div>\n<div><\/div>\n<\/div>\n<div>\n<p>-3- UV1079<\/p>\n<p>Figure 1. Timetable for meeting improvement goals.<\/p>\n<p>Source: Lean Dynamics. Used with permission. Champion at MSD<\/p>\n<p>Prior to joining WECO in 1999, Steiger had worked in the aerospace industry in executive positions in engineering and operations. During those years, he learned about the lean philosophy from firsthand experience with the division-wide successful implementations of demand-pull manufacturing cells, Total Process Management (TPM), and other lean initiatives. Most of all, Steiger learned that to sustain any improvements, each and every employee in a company\u2019s work force had to be involved and actively participating in the lean process.<\/p>\n<p>Steiger also knew he would have significant implementation start-up problems when he brought out the lean-thinking philosophy and tools.<\/p>\n<p>I have no doubt that there are top-to-bottom skeptics including members of the executive board, our Vice President of operations Jim Patterson, and on down the line in our three plants. Most of our key players have occasionally voiced concerns about \u201cthe lean fad and many of the tools\u201d\u2026but in particular, the emphasis on employee participation and self-directed teamwork seems to raise the energy of the skeptics in the plants\u2026In order to succeed, I need to change some old paradigms and break apart many of the management practices.<\/p>\n<p>CEO Everett Walsh had recruited Steiger as president of MSD mainly because of his<\/p>\n<p>strong leadership and business skills. Walsh saw Steiger as the archetype of the future WECO leader, and he had remained a constant supporter throughout his short tenure as MSD president. Still, Steiger was convinced that mapping a lean strategy and implementing at least the initial steps required outside help, and he needed some quick successes in order to gain acceptance and<\/p>\n<p>MSD Operations Performance Improvement Goals<\/p>\n<p>($ in Millions)<\/p>\n<p>\u2022 Productivity 1.900<\/p>\n<p>\u2022 OT Premium 0.250<\/p>\n<p>\u2022 Scrap 0.300<\/p>\n<p>\u2022 Inventory 0.325<\/p>\n<p>\u2022 Warranty 0.150<\/p>\n<p>Total : 2.925<\/p>\n<p>This document is authorized for use only by AJ Roberto (aj.roberto23@gmail.com). Copying or posting is an infringement of copyright. Please contact\u00a0customerservice@harvardbusiness.org\u00a0or 800-988-0886 for additional copies.<\/p>\n<div>\n<div>Nur Demir<\/div>\n<div><\/div>\n<\/div>\n<div>\n<p>-4- UV1079<\/p>\n<p>time. Afterward, he envisioned continuing the lean process by relying solely on selected internal resources and training to build a sustainable continuous-improvement culture. Asking for Help<\/p>\n<p>Steiger had worked previously with Lean Dynamics, a management-consulting group specializing in lean-implementation initiatives. Its project leaders were experienced operations managers, who thoroughly understood the Toyota production system and had implemented numerous lean initiatives in both operations managerial positions and as consultants. In addition, the project leaders from Lean Dynamics were highly effective and skilled in team building and coaching processes. Steiger felt confident that, with the assistance of Lean Dynamics, the MSD units could deliver the $2.925 million performance target within 18 months. He invited the CEO of Lean Dynamics, along with two of the company\u2019s senior consultants, for an exploratory visit and discussion. Upon arrival, they were joined by Jim Patterson, vice president of operations, and one of the manufacturing managers for the one-day session. Together these men reviewed MSD challenges and the performance objectives that had to be achieved by the MSD operations group in order to maintain and improve WECO\u2019s market position and financial results. Exploring the Opportunity<\/p>\n<p>The one-day meeting was divided into two sections: the round table discussion and the in-the-plant observation. During the round table discussion, a senior consultant from Lean Dynamics led a general review of its lean process, implementation approach, and various tools and techniques. Both consultants emphasized that MSD senior leadership should assume active roles and continue in them throughout the entire process. The CEO from Lean Dynamics emphasized that life as WECO knew it before lean had ceased. Various operational data were reviewed, including performance reports in the following Key Results Areas (KRAs):<\/p>\n<p>o On-time delivery o Productivity o Quality o Asset utilization o Inventory (WIP and FGs) o Inventory days<\/p>\n<p>The operational data reflected a troubling trend that confirmed Steiger\u2019s worst fears:<\/p>\n<p>Labor productivity was slipping, scrap and rework costs were rising, and equipment breakdowns\/unplanned downtimes were more frequent and lasted longer. And the days of inventory on hand, another critical performance indicator, was at 120 days\u2014an all-time high\u2014 and rising (Figure 2).<\/p>\n<p>This document is authorized for use only by AJ Roberto (aj.roberto23@gmail.com). Copying or posting is an infringement of copyright. Please contact\u00a0customerservice@harvardbusiness.org\u00a0or 800-988-0886 for additional copies.<\/p>\n<div>\n<div>Nur Demir<\/div>\n<div><\/div>\n<\/div>\n<div>\n<p>-5- UV1079<\/p>\n<p>Figure 2. Days of inventory on hand.<\/p>\n<p>0<\/p>\n<p>20<\/p>\n<p>40<\/p>\n<p>60<\/p>\n<p>80<\/p>\n<p>100<\/p>\n<p>120<\/p>\n<p>140<\/p>\n<p>Ja n<\/p>\n<p>FY 99 M ar<\/p>\n<p>M ay<\/p>\n<p>Ju ly<\/p>\n<p>Se p<\/p>\n<p>N ov<\/p>\n<p>Ja n<\/p>\n<p>FY 00 M ar<\/p>\n<p>M ay<\/p>\n<p>Ju ly<\/p>\n<p>Se p<\/p>\n<p>N ov<\/p>\n<p>Source: Lean Dynamics. Used with permission.<\/p>\n<p>In fact, the performance of on-time shipments was so bad that equipment dealers complained on a daily basis, threatened to cancel orders, and even stopped doing business altogether with WECO\/MSD.<\/p>\n<p>During the floor observations and informal interviews included in the manufacturing personnel phase, the consultants learned about additional issues and challenges that had a significant bearing on the results they had obtained: poor equipment maintenance and raw- material shortages, as well as the poor quality of raw materials, long setup\/changeover cycles, and conflicting management policies and work rules.<\/p>\n<p>Another important operational indicator was employee morale. Although interaction time was relatively short, the consultants came away feeling that the organization faced widespread low employee morale. When the consultants addressed the issues of lean waste reduction and eliminating non-value-added tasks with employees, they generally got an unenthusiastic reception on the shop floor. MSD had implemented Quality Circles during the late 1980s; unfortunately, owing to a variety of reasons\u2014among them poor understanding and lack of communications\u2014that initiative ended and several rounds of layoffs followed. Since then, the reaction from employees was cynicism and resistance when approached by management with new team-oriented initiatives, whether they were TQM, JIT, cost-savings campaigns, or, more recently, the lean initiative. Still the lean initiative, in particular, seemed to produce the most defensive and fearful attitude, as WECO employees associated the lean process with layoffs and a reduction in the workforce.<\/p>\n<p>MSD and Lean Dynamics consultants agreed that the employees\u2019 resistance was natural; therefore, it was important to recognize it. Steiger commented: \u201cIf lean was going to succeed at<\/p>\n<p>This document is authorized for use only by AJ Roberto (aj.roberto23@gmail.com). Copying or posting is an infringement of copyright. Please contact\u00a0customerservice@harvardbusiness.org\u00a0or 800-988-0886 for additional copies.<\/p>\n<div>\n<div>Nur Demir<\/div>\n<div><\/div>\n<\/div>\n<div>\n<p>-6- UV1079<\/p>\n<p>all, the morale\/attitude issue and observable behaviors had to be addressed effectively as the active interest and participation of all employees were essential.\u201d<\/p>\n<p>At the end of the one-day meeting, the participants agreed to follow up with a proposal for an Operations Assessment and Recommendations Plan that focused on the most effective process with which to achieve WECO\/MSD operational-excellence goals. Figures 3 and 4 illustrate the general approach Lean Dynamics took with the Gap Analysis and Improvement Process.<\/p>\n<p>Figure 3. Approach with the Gap Analysis Process.<\/p>\n<p>Pre-Assessment and Gap Analysis Process<\/p>\n<p>Review Qualifications<\/p>\n<p>Define Requirements<\/p>\n<p>Present Proposal<\/p>\n<p>Conduct Phase 1<\/p>\n<p>Quantify Benefits<\/p>\n<p>Identify Opportunities<\/p>\n<p>Determine Strategy<\/p>\n<p>Implement Phase 2<\/p>\n<p>Develop Action Plan<\/p>\n<p>Recommend Solutions<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p><center><a href=\"http:\/\/onlineclassesguru.com\/orders\/ordernow\"><img decoding=\"async\" src=\"https:\/\/encrypted-tbn0.gstatic.com\/images?q=tbn:ANd9GcTyj99p60XCLyLk1htB7-1neRt8-2QdnenNlQ&usqp=CAU\"target=\"_http:\/\/onlineclassesguru.com\/orders\/ordernow\"\/><\/center><p>","protected":false},"excerpt":{"rendered":"<p>UV1079 Rev. Mar. 1, 2010 This case was prepared by Sorin Gruia of Resource Dynamics International, and Robert D. Landel, Henry E. McWane Professor of Business Administration. 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