Sunday, December 2, 2012

Focus and Leverage Part 172

This will probably be the final posting in this series on my Kentucky plant simply because I’ve talked enough about it.  This final episode will be about one of our other customers (the GM Corvette facility) which was situated within 2 miles from our plant.  Even though we were in close proximity, we really didn’t produce much for them and when I arrived there I wondered why.  I decided that it was time to make an unscheduled visit to see if I could get to the bottom of this.  As I drove that short distance to Corvette, I kept imagining to myself why they didn’t use us as a major supplier.  I knew we had experienced quality problems in the past, so I thought maybe that was the major reason.

When I pulled into the Corvette plant’s parking lot there was a line of these sleek vehicles parked in a line in most of the executive’s parking slots.  I got out of my car and started walking past each one, but their allure made me stop and admired each one.  I had always wanted a Corvette but could never afford to buy one.  I had never even driven one before.  As I continued stopping and looking at each one, I heard a voice behind me say, “You like these?”  I responded immediately without looking back, “You bet I do!”  He then floored me and asked, “Would you like to drive one?”  I immediately turned and looked him in the eye and smiled.  He said, “I’m serious, would you like to drive one?”  Knowing he was serious, I said, “Sure, but who are you?”  He said, “I’m the plant manager here in Bowling Green.”  I told him that I was actually coming to meet him and chat a bit about my plant’s lack of business with Corvette.  He said, “Let’s chat while we drive,” and with that he opened the driver’s side door for me and then walked around to the passenger side and crawled in.

The Corvette facility had a mile-long test track built around it so off we went.  The ride was so fast, smooth and the handling was excellent.  I was driving about 65 mph when he said, “Do you always drive this slow?”  With that I punched it and soon we were at 110 mph and it felt so good and natural.  He eventually asked me what I wanted to talk with him about, so there we were traveling at 100+ miles per hour talking shop.  I had trouble concentrating going at these speeds, but he seemed perfectly comfortable as though he had all of his business meetings like this.  I got right to the point and asked him what my plant had to do in order to do more business with his plant.  He went on to explain parts of the sorted history between the two facilities.  It seems as though even though we were the closest of all supplier plants, we were unable to ship anything on time.  And when we did, our quality wasn’t always stellar.

As I was driving and listening to him, I was thinking about what kind of an offer I would have to make to him that he simply couldn’t refuse?  “It would have to include a guaranteed on-time delivery provision,” I thought.  “It would also have to include a provision for a high enough quality level that would differentiate us from his other suppliers,” I continued.  I didn’t know it at the time, back then, but what I was considering was something we call a mafia offer these days.  He told me that he would love to do business with us again if we could show him that our facility was capable of being a reliable supplier.  With that, I invited him to come visit our plant to which he agreed.

As I drove back to my plant I had a vision of an offer that I wanted to make to him.  If he would give us exclusive business for specific fiberglass parts, I would offer him 100% on-time delivery or the order would be free.  I also decided that our quality levels we would offer would be based upon a running average that must be greater than 98% compliance to specs.  I knew we had excess capacity because of all the throughput improvements we had made, so I was confident in our ability to assure flawless delivery of parts.  And since we had a very well defined SPC initiative in place, I felt confident that we could meet the quality requirements as well.

My next thought was about the price of our products that we would offer.  I decided that we would match our competitor’s price minus 10%.  Since we had excess capacity in our fiberglass process, I knew that as long as we covered the totally variable costs which were quite low, nearly all of what we charged would flow directly to the bottom line.  I knew this because we would not be adding any additional operating expenses beyond what we already had.  The beauty of Throughput Accounting is how easy it is to make real time decisions.  Since we had set his visit for the day after tomorrow, I had plenty of time to create my mafia offer.

Right on schedule the Corvette plant manager showed up on our doorstep.  Because we had done multiple 5S events he was quite impressed with not on the cleanliness of our plant, but also with how organized it was.  He told me that the last time he was in my plant there was inventory everywhere, but since we had applied TOC to our facility, there were no longer any piles of WIP like before.  We had also done a lot of work with visual buffer management and Drum Buffer Rope concepts and techniques, so that we knew at a glance the status of all of our orders.  He was clearly impressed!  What amazed him the most was how little our raw material and finished goods inventories we had at our site.  But the one thing that impressed him the most or should I say the biggest difference to him was the obvious uptick in the morale of our workforce.

When he had seen enough of our improvements, he simply said, “Let’s go to your office and talk.”  He told me how impressed he was with all of the changes since his last visit here, but that he wasn’t sure if we could do business.  He told me that he thought it would take a while for me to generate an offer that would turn heads at Corvette.  With that, I handed him my single page mafia offer which told him that we would generate a specific SKU at 100% on time delivery, at best cost minus 10% with a greater than or equal to quality level of 98% or the entire order would be free!  He asked me if this was a real offer or simply one to make me laugh.  I assured him that it was genuine and that if he was in agreement, that my accountant could contact his accountant that day and we could deliver our first shipment within 24 hours.  He was flabbergasted to say the least and said that in all of his years he had never seen an offer like this and that he simply couldn’t refuse it!

The next day we delivered our first order and after a lengthy inspection, it was deemed 100% compliant.  A week passed by with the same results every time.  And then a month and six months with the same results each time.  In fact the only quality issues we experienced in that time period we labeling issues.  Our plant’s revenue and profitability skyrocketed as did our orders from Corvette and BMW and even the Chrysler Viper body and quarter panels were added to our mix of products.  It was an exciting time for our plant and our plant which had been scheduled to shut down when I assumed leadership of it ended up becoming the model for the entire corporation.

In my next posting I’ll be moving on to a new subject, but my memories of those days in Kentucky will remain with me forever.

Bob Sproull

1 comment:

Alex Mantiev said...

Good testament. I visited that plant about 10 years many plants are holding too much inventory????