Until the recession hit the construction industry, British Gypsum had grown its business year-on-year since 2002, applying new business processes, driving out waste and embracing change. Now it is focused on the next phase in its efficiency mission – multi-site, fully integrated business planning to join-up better sales forecasting with marketing, supply, manufacturing and super-accurate delivery. Will Stirling talks to British Gypsum’s Steve Smith.
Plaster and plasterboard maker British Gypsum has been transformed since 2002. It has improved its manufacturing processes, taken staff through a company-wide culture change programme, and has hit new heights of production efficiency.
Every year BG produces enough plasterboard to make a 1m wide path all the way to the moon and back – TWICE! (Or to London and back – every day).
Each week BG makes enough plaster that, if stacked flat, would make a pile nine times the height of Everest.
British Gypsum, owned for most of the 20th century by stock-listed British Plasterboard Ltd (BPB) and taken over by international construction materials group Saint- Gobain in 2005, has always been involved in high volume manufacturing and gypsum mining at four of its five UK factories; manufacturing the gypsum rock into a range of industry grade plasters and plasterboard (the sixth site is a standalone mine that makes product for the cement industry). Before 2002, the factories were operating at far from optimum efficiency and the opportunity to improve was high. The company began its transformation in this year.
Following an unsuccessful takeover bid by Saint-Gobain in summer 2005, BPB accepted a revised bid and was bought by the group in December 2005. The changes made in the interim period are profound, says Operations and Supply Chain Director Steve Smith. “Back then the UK factories were in the bottom half of the benchmarking league tables within Saint-Gobain Gyproc, but now plants like East Leake are considered the shining stars of the group.” The improvements at British Gypsum have been year-on-year, cross-departmental and far reaching. Steve Smith originally looked after the group operations and focused on increasing factory efficiency. This was a big task – in the early days, breakdowns, quality complaints and even accidents were thought of as inevitable, he says.
“As of November, one of our proudest achievements is that we have achieved one full year with zero accidents across BG sites,” says Smith. “And we were recently recognised as a good employer for our teams’ work with the HSE [Health & Safety Executive] and the FOILE initiative.” Pre-2002 breakdowns were accepted as the day to day norm, he says, and most people had been rewarded as good fire-fighters, that is, just to get plant up and running again as soon as possible. Now it’s more about lengthening the time between two failures.
“Maintenance is an investment; it is core to our business.
How many accidents, quality failures, productivity, and delivery precision problems can be attributed to breakdowns and unplanned stops?”.
Simple objective, complex delivery
Maintenance is just one component of the complex story behind this new look manufacturing business.
Smith crystallises British Gypsum’s Operations mission statement simply as this: “We have five factories and a big asset base; how do we manage the factories across BG to get the lowest delivered cost possible?” Smith and his team – which covers all manufacturing operations, supply chain, planning and the customer service team at the East Leake Head Office – are leading a multi-strand business improvement plan, coordinated by a customised version of Oliver Wight’s Integrated Business Management method, with the objective of joining-up the activities of five factories to better serve the real-time needs of the market with targeted delivery performance of 98% accuracy. British Gypsum’s vision is simple in essence, but devilishly complex to achieve: to deliver the correct product to the customer inside 24-hours within the UK. An order placed before 4pm for a next day item – which is 85% of their stock keeping units – with British Gypsum guaranteed next day delivery anywhere in the UK, a promise that has been pledged for some time, and most of these are timed deliveries.
British Gypsum sells about 800 SKUs (stock keeping units). While just 300 are manufactured in-house, some items are locally sourced, others from sister factories across Europe, China and the Middle East. Part of the IBM’s goals, says Smith, are to dovetail lead times of up to eight weeks for parts like screws from China with this next day delivery guarantee.
Factory planning teams schedule production in a five day window. Central Planning plan the factories from five days to three months at a SKU level and three years at a family level.
Capex is planned out to five to 10 years and mining and geological exploration out to a 25-year time frame.
All this is synchronised with greatly improved sales forecasting, using Integrated Business Management. It is also dovetailed to an extraordinarily demanding delivery schedule which manages approximately 400 plus deliveries a day from British Gypsum’s five surface factories.
British Gypsum uses four haulage contractors and it now forecasts deliveries by post code at least three months in advance. Like sales, delivery forecasting is getting more scientific. “On a disaggregated level we’re going down into minute detail, on an aggregated level we’re trying to give them the same forecast as for the factories,” says Smith.
“Targets for our hauliers are very hard, 99.5 per cent OTD (On Time Deliveries). That is higher than the national retailers.” As an overview, the following list summarises the most important processes the company is implementing to achieve its aims:
Integrated Business Management British Gypsum’s Integrated Business Management structure comprises five departmental reviews that are synchronised by the IBM method.
● Product Review – led by the Marketing Director. It defines the strategic road map for British Gypsum’s brands, products and services as well as the introduction of new products and services.
“The most critical aspect for us in BG relates to ‘insight’, i.e. understanding what it is the customer really wants so that we can then ensure we have those new products available in the market place for them. This is fed into the Demand Review as a key input,” Smith says.
● Demand Review – led by the Sales Director. This is about delivering the Strategic Marketing and Sales Plans on a tactical level. A key aspect of this is gathering a wide set of inputs to formalise the forecast assumptions. These assumptions together with statistical techniques are used to create the forecast. “We don’t expect the Sales team to get the forecast exactly right but we do expect them to get it right within set limits,” says Smith. “Currently some of our limits for plaster are +/-2 per cent, plasterboard +/-5 per cent. A key aspect of forecasting is getting the phasing correct. In our experience, variations to forecast are generally caused by us and not the customer e.g. rebate offers, sales incentives and commercial projects which produce responses different from our expectations. As we learn we get better at forecasting and better forecasting means fewer surprises!” he adds.
● Supply Review – led by the Supply Chain and Operations Director. This is about ensuring BG’s factories have the manufacturing capacity to meet demand forecasts and product launches or deletions.
“We also plan the procurement of materials and external services,” says Steve Smith. “With an accurate sales forecast, the right amount of manufacturing capacity, inventory and transport can be made available to ensure we have the lowest cost (the sum of Total Product Cost, Inventory, Capex and Transport). As we are planning over a 36-month period, we have a much better view of Capex requirements over the long term.
One of the most important activities is Network Planning for supply, this involves making sure that we have the lowest delivered cost to the customer, i.e. low Total Product Cost and Transport costs. This is driven by World Class Manufacturing and the 30*20*6 F Matrix.” This matrix derives the significant cost savings year-on-year.
● Integrated Reconciliation Review (IRR) – led by the Finance Director. This takes the outputs from the Product, Demand and Supply Reviews as well as any decision requests and ‘quality checks’ them before taking them to the Executive Managers.
They have to present recommendations with costings and impacts and cannot present unresolved problems. If there are any conflicts between the reviews they either resolve them at the IRR or ask the Executive to decide if conflict still exists. The IRR also adds all of the financial calculations from the previous steps together to present the overall financial impact to the executive.
Additionally, the IRR is responsible for managing cross-business improvement projects.
● Management Business Review – led by the Managing Director.
The focus of the MBR is longer term strategic decisions, rather than what happened last month or short term decisions. This Executive meeting takes the decision requests, key information and unresolved conflicts from the IRR and makes decisions on those recommendations. The MBR also agrees the plans put forward by previous meetings.
● World Class Manufacturing – The process British Gypsum uses to drive out waste. Smith is rolling this out from manufacturing operations into the supply chain division.
British Gypsum factories continue to hit significant savings year-on-year. “The WCM toolkit is being rolled out to all of BG within the next 18-months,” says Smith.
People and Leadership
● Project leadership – BG operates a maximum “2 and 5 rule” for taking on projects. Employees are capped on the number of projects they can lead and or be a part of. “This is about choosing what we do but more importantly what we do not do,” says Smith. “As managers it is our job to prioritise based on facts. To lead a project you have to be formally trained and it may be that you are leading a project in a different area or department.”
● Behaviours – Systems are great but without people who have the right skills, knowledge and behaviour they are a waste of money. Smith says: “Systems in themselves solve nothing – you have to make sure the team understand how to use them. We have invested heavily in making sure we understand ourselves. We acquire knowledge on the subject matter and put in place our own knowledge transfer processes, and we only buy-in where we want to understand in a new area or subject.
At the moment one of our Plant Logistics managers is putting together a knowledge package to make sure the planning teams really understand the principle of “time fences” in detail. He will deliver this to all of the teams around British Gypsum.”
● SAP – IT systems are being upgraded and synchronised across several divisions.
British Gypsum implemented SAP across the group in 2007 and is currently implementing SAP Advanced Planning and Optimisation (APO) (Demand Management and Strategic Network Planning). On planned maintenance, the company is implementing SAP Computer Maintenance Management System (CMMS), where it currently uses Inform EAM, and is also implementing SAP WMS. BG also has a rolling programme of PLC and WINCC upgrades across all mines and surface factories. “We are also implementing airport screen technology and EPOD to improve our customer satisfaction further,” says Smith.
Summary – Priorities define business planning
So much is happening at British Gypsum in all departments that it is difficult to summarise the new business activities succinctly. The World Class Manufacturing Process (see TM March 2009, p29) is another story and the roll-out of WCM from operations to the whole enterprise will be the subject of a forthcoming feature. For now, IBM and the various business process tools being deployed at BG are on track to achieve the company’s top goal; to synchronise production at five regional sites with a more accurate sales forecast plan to consistently hit 98% on time delivery.
Steve Smith also summarises the top three priorities for the British Gypsum Supply Organisation: Safety, Product quality and Delivery precision. Following these is the ability to deliver British Gypsum’s new product introduction programme.
To this end, British Gypsum is investing heavily in its people, the company’s core asset, says Smith. “The lead time for the people asset is the longest. We are investing heavily in apprentices, generally we have about 35 in BG Operations at any one time – and are also investing in business processes. For example, group-wide, British Gypsum is spending in excess of £1m this year on IT systems, from SAP Advanced Planning and Optimisation, WMS and SAP PM to its new airport screen delivery scheduling technology.
Over the last eight years, direct labour at the company has become very lean and the manufacturing processes are about as automated as they can be to achieve target productivity. The next chapter in British Gypsum’s book will be for this rock steady business to harness IBM, the Supply Review’s work and these investments to maintain ongoing cost reduction in 2011 and uncover even greater efficiencies.