July 14, 2020 Human Capital Focused Supplier Development

Efforts to relentlessly tackle systemic HR problems, that we have long been experiencing in American manufacturing, pay off in Industry 4.0.

Salvador Robles, Gizay Uenal and Denis Maier

Gradually increasing manufacturing challenges

Plant Charleston in South Carolina is part of the MAHLE Group, a leading German automotive supplier with worldwide locations. The North American factory in Charleston, supplying thermal management solutions to premium car and truck manufacturers, has grown in sales by 50% over the last three years, with more products and a mix of low and high-volume variants. Eventually, the plant almost reached its breaking point, with increased severe struggles to keep up with demand, fueled by ongoing parts supply shortages, quality problems and workforce challenges.

Focus on long-term enablers instead of short-term effects

What we have seen is that our traditional approaches for performance improvement became less and less effective. Even if we had made gains towards our targets, it did not last very long before we fell back again. The inability to sustain progress – even for ordinary concepts like 5S – taught us to shift our focus from results (our primary attention in the past) to enablers. Our analysis identified three primary areas that drove our lack of stable performance across all functional areas in the plant:

1. Ineffective leadership
2. Basic workforce issues
3. Excessive employee turnover

It became evident that we needed to take a more human capital focused approach and solve some of the inherent structural issues, that have become the main culprit for not achieving the same level of performance as before. The traditional higher emphasis on technology have made it increasingly more difficult to be successful in a time when companies have the same access to technology, and when performance is more and more dependent on a stable, motivated and competent workforce.

Using a more people-centered improvement approach

a. More effective leadership

The first focus was to strengthen the organization across the plant. The current structure in many functional areas was not robust enough and aligned to absorb the challenges. A lack of effective organizational leadership units with too many direct reports did not allow Managers to focus on critical and more strategic issues. Instead they were stretched to the limit with endless operational details, that should be taken care of by their own leadership team. Introducing a more robust organization enabled a more effective performance management with clear responsibilities and accountability for achieving targets. An evaluation of the shop floor leadership team identified coaching opportunities to close any gaps at the Supervisor and Team Leader level.

b. A more resilient workforce

The second core area was to leverage employees in the same way as leadership, by involving and empowering them to a considerable higher degree. To ensure that employees can perform their tasks accordingly, a training center was created and skill levels were defined. Workers in direct areas were trained or retrained, especially in process steps for output and volume critical stations. Employees in indirect areas like Logistics needed further schooling, especially in SAP.

Excessive employee turnover, an industry wide issue, had limited these efforts in the past, so another focus was on retaining employees. The improved organizational leadership helped to instill a different culture on the shop floor to better integrate workers, and to show them a sense of belonging with a viable path forward in their career. Another source of driving turnover was a small group of distracting employees in every area that lead to great frustration. Others had to regularly witness low performance with a lack of motivation and mental absence, and asked themselves: do I want to work in this environment and compensate for them? After numerous attempts to engage with the disrupting employees and trying to steer them in a more positive direction, the majority eventually had to leave the company. People seek leadership, and tolerating these types of behavior discourages hard-working employees.

Using a more team-centered project approach

As mentioned before, improvements in the past could often not be sustained. A successful transformation has several aspects that need to be monitored simultaneously, using appropriate tools to be successful:

a. Progress Tracking – Moving the Needle

The improvement plan has to be broken down into defined implementation activities that can be monitored. This is not about documenting the exact percentage of implementation; this is about seeing the needle moving. We used a progress tracking scale for implementation measures on a weekly basis with a 20% scale, which is more than sufficient.

b. Improvement Tracking – Getting Traction

In order to see if the implemented measures actually get traction and lead to improvements, we defined a manageable set of metrics across the implementation spectrum. The metrics were initially more focused on enablers than the actual targets, and should be updated weekly. They can be very simple, e.g. ‘number of parts availability issues’ in Logistics or ‘number of problems solved’ in Quality. There should be no ongoing evaluation of target achievement, it is all about the improvement trend towards the targets.

c. Sustainability Tracking – Achieving Stable Performance

The biggest challenge was certainly to ensure that the achieved gains can be sustained. We used a roadmap to describe the target stage, that we would like to eventually see in each area with a few statements. On a monthly basis, the current state was reviewed by the team, and labeled with ‘Red’ (Major Improvements Needed), ‘Yellow’ (Improvements Needed) and ‘Green’ (Minor/No Improvements Needed). The color profile in our roadmap was a good indicator for our path towards a stable operation.

This approach is very different from traditional improvement tracking methods, where key performance indicators are directly used and outcomes are provided from central systems. Here effectiveness had to trump accuracy, and many people at the beginning were not used to this type of ambiguity. Our tracking tools were mostly relying on the improvement teams with a greater extent of subjective assessments of the status. The effect was a more involved team with higher ownership, and a desire to reach the final stage (‘Green’) in the roadmap.

Outlook: Transferring our Lessons Learned

The initial success with our chosen approach encouraged us to move forward and gradually transform the remaining areas:

• Part Shortages reduced by 90%
• Expedited Freight reduced by 83%
• Scrap reduced by 62%
• Employee Turnover reduced by 36%

We are confident that our efforts to relentlessly tackle overall and systemic HR problems, that we have long been experiencing in American manufacturing, will pay off in the era of Industry 4.0.

Salvador Alberto Robles is Operations Director of MAHLE Behr Charleston Inc. in Charleston and Duncan, SC, a manufacturing plant of the global automotive supplier MAHLE Group.

Gizay Uenal is a Partner at ConMoto Consulting Group Inc. in Charlotte, NC, an operations consultancy with focus on sustained implementation.

Dr. Denis Maier is a Professor for Operations Management at the Business School of Wake Forest University in Winston-Salem, NC and a Senior Advisor for ConMoto.

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