As pressure on the UK divisions of foreign companies to perform increases, Will Stirling meets a German company in the UK beating its European competition to win contracts. Its secret? Operational Excellence, yes, but also its total commitment to the professional development of its workforce. This above all, says managing director of MANN+HUMMEL UK, Ivor Ng, gives his company the edge.
Manufacturing output is in the ascendancy and one reason for this is that UK-based manufacturers are obsessed with productivity. They need to be, as the UK divisions of foreign-owned companies have to compete for work both with other companies and with the European sites of their own parent organisation.
The pressure to hit productivity metrics and delivery targets is even higher when sites across Europe are competing more fiercely than ever with OEMs who have no regional loyalty.
MANN+HUMMEL (UK) Ltd (MHUK) is a good example of such a company. The parent, original equipment supplier MANN+HUMMEL Group, employs 13,000 people at 41 locations worldwide and posted a record turnover of Eu2bn in 2010. MHUK makes filtration systems and plastic components for automotive OEMs and industrial applications and provides aftermarket distribution for the UK and Ireland.
For OEM production, Europe is the larger market – the Volkswagen Group is its biggest customer. MANN+HUMMEL has factories across Europe, where some would have a location advantage over MHUK and certainly a labour cost advantage in countries like Bosnia. Yet MHUK has won new business from European customers this year. How? “We need to prove that we are better, in terms of quality, in terms of efficiency, in terms of service and speed,” says managing director of MHUK Ivor Ng. “This year we have won major contracts with auto OEMs to secure the manufacturing base in the UK in the mid-term, even as some of our current projects are ramping down – we have secured replacement business for the existing high volume work, against European competition.” How exactly has it done this? Mr Ng distils the reasons into two main parts: corporate culture and Operational Excellence. Neither of these are unique to manufacturers, but the efforts poured into both have delivered external recognition for MHUK for people development, as well as the ultimate prize, new business.
Large companies often have their own proprietary system of business improvement, which for manufacturers can be a rebranded interpretation of ‘The Toyota Way’ or TPS.
MANN+HUMMEL Group devised the MANN+HUMMEL Management System, or MMS, as an internal business system and lean programme, aimed at achieving world class manufacturing standards. In 2003-2004, it rolled this out globally.
Putting culture at the heart MHUK has made its people a core business pillar. This costs time and money, but the decision has paid off. In 2010 MHUK was awarded the ‘Investors in People’ Gold Standard, a standard achieved by only 2% of the companies who apply. On December 10. MHUK was named Employer of the Year 2010 by The City of Wolverhampton College. It is one of six finalists in the Midlands Excellence competition in the Training and Development category. “Our entries for these awards always cover the whole approach to training and staff development, not just on one area or programme,” says chief financial officer Neil Davies.
Internal promotion is a big part of MHUK’s people focus.
“We’re proud that almost the whole management team has been internally developed and promoted,” says Ng. “Neil, who was recruited externally due to specialist expertise, is the one exception but everyone else, myself included, has held previous positions within MANN+HUMMEL UK.” This fortifies employee loyalty and focus, Davies says, with labour turnover year-to-date at just 0.66%. The company has a Management Leadership and Development Programme which appears to be working – 57 employees or 43% of the staff have been promoted at some point since they joined MHUK. Absence rates, year to date, are 1.6% while the (automotive) industry average is 2.7%. It seems that employees at MHUK are keen to come to work, put in full days and want to stay here.
Several programmes have contributed to this success.
The company has a Learning and Development (L&D) model which aims to recruit, develop and retain the right employees in the right jobs in order to achieve MANN+HUMMEL Group business objectives. Part of this is to develop MHUK into a learning organisation and an employer of choice, i.e. “a great place to work”. In 2002 the company first chose to be assessed by an external auditor against the independent ‘Investors in People’ (IIP) standard, which provides a benchmark of HR management strategies and practices. MHUK has held the IIP accreditation ever since and was awarded the IIP Gold standard in 2010. “It’s important to know, this is based on employee feedback,” says Mr Ng. “The auditor is not just talking to the directors, but 25 per cent of our workforce were interviewed for this.” It has made employee empowerment one of the pillars of its Learning & Development model. A good example of this was in 2007 when the plant layout was reconfigured following a thorough workflow analysis, comprising building several one-piece flow cells and a one-way “train track” for inventory delivery and collection. Staff at all levels of the organisation were fully involved in the planning process and in moving and locating the equipment, including at weekends, so when the finished lay out was installed they had true ownership of its design and function. By December 8th, MHUK had delivered 764 training days to staff (shop floor and administration) year to date, and it also runs an Employee of the Quarter Programme.
There are currently seven apprentices at the company.
The apprenticeships map out a clear career path which includes continuous educational and technical support throughout. MHUK has a clear business and education support mandate, where it offers factory tours to other local businesses where its work in continuous improvement in manufacturing and corporate culture are showcased to third parties. It also delivers and participates in seminars and job fairs for local universities. It has close ties with local Wolverhampton higher education, supporting Wolverhampton University Business School’s Human Resource and Development course by offering a placement within MHUK. And it partners with City of Wolverhampton College on its apprentice programme, and on the Skills for Life initiative which offers regular training sessions to operators and staff alike in Wolverhampton site. MHUK also runs incentive bonuses, occupational health courses and hosts an annual family day in the summer, all in an effort to get the best from its extremely loyal workforce.
Return on investment
How does it measure the return on this investment? For one energy consumption and saving exercise, the company tracked the hours invested to train and invested in the time spent on the project. It totalled the hours at a rough cost of £20 per hour and added the training materials cost. Savings were in cost avoidance – the measured Climate Change Levy – and in reduced energy consumption of 555,600 kWh. The net saving less costs was over £50,000 p.a. Ivor Ng says the loyalty and high promotion rates pay off also in achieving productivity targets, where staff and operators are always prepared to give that little bit extra to meet a target as they are proud to be part of the MANN+HUMMEL family.
MHUK had to lay off 45 employees during the crisis in 2009. The company is now hiring again and over a third of those redundant staff have been rehired. “It’s interesting that the ‘Investor in People’ audit, which is employee-led, was carried out just after the cutbacks and we still achieved a Gold standard,” says Ng. MHUK’s other manufacturing site in Chard, Somerset implemented short-time working to minimise redundancies, which operated on a bank system. The time not worked was banked and employees were given an opportunity to make up for those hours that were banked, as business hours recovered. This won Chard the EEF’s South West Region award.
Mr Ng emphasises that some parts of MANN+HUMMEL’s HR programme are group initiatives but several are devised within MHUK, such as the Management Leadership and Development Programme.
World Class Manufacturing – the MMS way
The second pillar for MHUK’s business after HR is Operational Excellence, the area which Ng says needs continual focus to compete at greater cost parity with Eastern European and other low cost countries.
The company has broken down the component parts of its business to achieve what it perceives to be world class manufacturing standards. MHUK’s World Class Manufacturing structure, rolled out by Group in 2010 under the name ‘Production Basics’, forms a circle with five interlinking components:
● People Development (see above)
● Safe, Organised and Clean Work Area
● Robust Processes and Equipment
● Standard Work, and
● Rapid Problem Solving
Some of the parts of this Operational Excellence model are familiar, such as targeting exemplary health and safety records and using Continuous Improvement tools. But MHUK has also created a full-time Zero Defect Team, whose job it is to scour the UK sites for any product defects, trace the source of defect and eliminates it. Filtration systems and technical components, by their nature, need to fulfil the highest technical specifications. Large orders from the auto OEMs are contingent on super-high product reliability.
For serial production of the volume items, part of MHUK’s competitive advantage lies in material flow and low inventory. “Many of the tools you’d find in the Toyota system come out in the MMS System – kaizen rules, value stream mapping, kanban systems,” says Plant Manager at Wolverhampton, Paul Chapman. “The UK needs to be ‘best cost’ – in the last six years we’ve concentrated a lot on material flow through the site, with a high emphasis on logistics and removing waste from our processes.” Mr Chapman demonstrates the U-shaped factory lay out, parts delivered in one end and smooth flow through the production zone via assembly cells into finished goods. This is fed on a simple pull-flow system, with a specific stocking profile for finished goods. “When a customer takes a single box, it sends a message to production to make another set.
When a box of parts is close to empty, it signals to the materials department to replenish – we are aiming to keep inventory to a minimum using pull flow systems to control our production.” To improve Health and Safety and reduce waste, forklifts are banned in the production zone, and are only used in finished goods. Everything is collected and delivered on a train system, where the driver has an optimum cycle takt time. “Material flow is fluid, all collections and replenishments are made on an 18-minute cycle,” says Chapman. “As long as I have the set level of stock in finished goods it will control production and allow us to meet any fluctuations in demand we get.” Low volume orders of discontinued parts, where batches can be in the 10s of units, are produced in a separate OES production cell which is isolated from the volume manufacturing lines.
MANN+HUMMEL may support parts for certain models (auto and industrial) for between 10 and 20 years after it has ceased production.
Kaizen and Value Stream Mapping have been done to the nth degree in MHUK’s production cells, to establish the best cell configuration and the optimum working position of the operators. “This considers both health and safety and lean concerns, giving good ergonomic design and reducing waste in excessive movements,” says Paul Chapman. Lean is good, but Ivor Ng acknowledges that being very Lean on inventory puts enormous pressure on the reliability of the processes and the supply chain, to ensure customer deliveries running on such low levels of stock.
Clean means lean
The Safe, Organised and Clean Work area basic is essentially 5S with some important additional parts; there is a health, safety and environment committee, each department has a qualified representative and there are regular risk assessments. Zoning demarcation within assembly cells is very heavy at MHUK, “so equipment that is out of position flags that we are running away from process,” says Chapman. It’s a fine level of analysis, but it is done to eliminate defects. MHUK also uses techniques like the 4-eye principle and 5Y and 2H approach to identify root cause. Crucially, for the staff, there is also a monthly bonus incentive to keep working areas in 5S perfection, and results are displayed clearly in the factory.
Combining, and crucially synchronising, all the components of the MANN+HUMMEL Management System, expressed as MMS Production Basics, at Wolverhampton and Chard, is a big challenge. But it is working, exemplified by new and big orders. For example, MHUK recently won the contract to provide a large European OEM with all the air filters for its new vehicle platform, launching in 2011.
Ivor Ng, Neil Davies and Paul Chapman are convinced that this success can be credited to the company’s efforts driving People Development and the Operational Excellence components like Robust Processes and Equipment and Standard Work. Is inter-site competition healthy, for M+H Group? Its part of the natural sporting culture in the UK, says Ng. “Whenever we are benchmarked against other sites, we like to win. Or if we don’t win, to know why not and where we can improve.”