This article focuses on a US motor manufacturer who keeps its products out of the commodities competition. Motors consist of a variety of stock parts, like cast metal housings, shafts, bearings, end plates, rotors, and stators. The size of the components and the winding of the stator determine specifications. Most manufacturers keep an inventory of parts on hand. For most companies, it is not efficient to set up tools to make only one or two motors at a time and then switch to another set of parts and tools. To keep plants operating efficiently, manufacturers essentially stockpile orders for similar motors until they reach an economical order quantity. Flex Flow makes extensive use of information technology. Each factory work cell has its own computer. As parts move through the system, the computer provides each operator with a list of materials and instructions for the component that will be built next. Baldor invests heavily in training, and this is where it really pays off, since workers can shift effortlessly from one type of motor to another.
At first glance, the end of the assembly line in Baldor Electric Co.'s industrial motor plant looks like any other factory. A second glance shows one very big difference: None of the motors coming off the line is like another. Nor have any of them been in the plant very long.
Baldor's goal is to deliver a motor within two weeks of receiving an order. To do that, it must move the motor through its Fort Smith, Ark., plant within four days or less.
Last year, Baldor acquired Reliance Electric Motors and Dodge Power Transmissions from Rockwell Automation Inc. for $1.8 billion. Baldor is now rolling out its manufacturing methodologies in those plants. But it is also getting something back in exchange. Reliance and Dodge have invested heavily in a combination of lean manufacturing, Six Sigma quality improvement, and maintenance excellence. They are bringing Baldor their experience with waste reduction.
How Baldor plans to combine its approach with that of Reliant and Dodge says a lot about manufacturing today, and suggests why some American products are likely to remain competitive anywhere in the world.
Motors consist of a variety of stock parts, like cast metal housings, shafts, bearings, end plates, rotors, and stators. The size of the components and the winding of the stator determine specifications.
Most manufacturers keep an inventory of parts on hand. For most companies, it is not efficient to set up tools to make only one or two motors at a time and then switch to another set of parts and tools. To keep plants operating efficiently, manufacturers essentially stockpile orders for similar motors until they reach an economical order quantity. This is the point where they have enough orders to justify the time it takes to pull parts from inventory and set up tools. That point might come at 10 or 20 or even hundreds of motors. This is how the Fort Smith plant once operated. "We'd take orders over one or two weeks, look for common parts, group those parts together, and then make them in groups," engineering vice president R. Wayne Thurman said. "We had tons and tons of in-progress inventory that we had to move through the plant. We needed six to eight weeks' lead time from start to finish."
Now the entire process-from engineering (half of Baldor's and Reliance's motors are custom designed) and parts ordering to completed motor-takes only two weeks. Once the order reaches the [factory floor, the plant usually completes the motor with in four days. Baldor claims its manufacturing system, Flex Flow, enables it to make motors in economical order quantities of just one unit.
As Baldor's vice president of marketing, Randy Breaux, explained, "Once the order is in the system, the plant should be producing that motor by 9 a.m. the next day. Sales schedules when a part gets built, not manufacturing, and we only build what we sell." The factory handles about 400 orders per day, and the order size might range from 100 motors or more down to a single motor. The average order is for 20 to 25 motors.
Flex Flow optimizes daily production schedules by grouping similar parts with one another, Breaux said. Yet the system is perfectly capable of moving a single motor through the plant. Machining, winding, and subassembly take place on parallel machines, then the components come together at the same time for assembly. The factory can make motors by ones and twos, and has no in-progress inventory to buffer manufacturing glitches.
According to Thurman, Flex Flow has forced Baldor to become a better manufacturer. "It forces you to minimize machine setup time," he said. Baldor first began to implement Flex Flow in the late 1980s, when it also adopted computer numerically controlled machining on a large scale. The computer- driven machines gave the company far more flexibility to change tooling setups quickly.
Over the years, the company kept adding automation. During a walk through the plant, it is easy to spot machine fixtures that pop in and out, and automated winding cells that shuttle quickly between different stator configurations.
Baldor has also put a lot of time into developing common parts, such as castings and shafts. It machines parts, such as end plates, with extra features so it can use the same component in several different designs. Even windings, which are essentially unique to a motor, have evolved common elements over time.
Flex Flow makes extensive use of information technology. Each factory work cell has its own computer. As parts move through the system, the computer provides each operator with a list of materials and instructions for the component that will be built next. Baldor invests heavily in training, and this is where it really pays off, since workers can shift effortlessly from one type of motor to another.
In the late 1990s, Baldor integrated its factory-level Flex Flow system with an enterprise resource planning system from SAP, a software company based in Walldorf, Germany. The SAP system replaced dozens of different programs. It enabled Baldor to enter information once and use the same data all the way down to the factory floor. The system processes orders, buys supplies, and handles engineering changes and documentation. It also lets customers use the system to track order status.
"We brought in 60 or 70 programmers and really customized the heck out of SAP," Breaux said. "We wanted to make sure the system worked for us, and that we didn't work for the system."
Banking on Time
The emphasis on time grows out of one of Baldor's key strategies.
Until the Reliance/Dodge acquisition, Baldor was best known as a manufacturer of fractional and low-horse-power motors, although it made motors up to 60 hp. Motors made up nearly 80 percent of its business, and they went into everything from pumps and blowers to fans and compressors. Baldor sold to 160 distinct industries, and even its largest customers accounted for only a minuscule portion of total sales.
Yet selling to such a diverse customer base has pitfl11s. Baldor is too large and broad to specialize in anyone niche. Instead, it decided to differentiate itself on service and time.
Baldor's chairman, John McFarland, readily admits that service can be subjective. "What you view as good service may not be what I view as good service," he said. Time, on the other hand, is strictly, accurately measurable.
"As a company, we want to create a competitive advantage by putting in place those things needed to reduce the time it takes a customer to receive an order," McFarland said. ''I'm not just referring to Flex Flow, SAP, and delivery time, but to the time it takes to engineer a custom motor or correct a problem. It's about attitude, how you're structured."
The strategy avoids head-to-head competition with manufacturers in the developing world. "Constantly chasing low-wage lab or is not a strategy for developing long-term competitive advantages," McFarland said.
"We don't compete against similar motors with similar ratings the way others do. Our quality, efficiency, and delivery times are different. We work hard to differentiate ourselves with service."
Reliance is a very different type of business with a different strategy. Reliance specializes in larger motors used by chemical, oil and gas, pulp and paper, and other process industries. Customers tend to order these motors as part of larger projects, such as new plants, expansions, and retrofits.
Since most projects are planned well in advance, motor efficiency and reliability count more than delivery time. This is especially true for industries that make highvolume, undifferentiated commodities. A motor problem can cost a plant hundreds of thousands or even millions of dollars of lost production. An inefficient motor is deadly in a commodity plant, where a cost difference of a fraction of a cent per pound can spell the difference between profit and loss.
As a result, Reliance tends to design custom motors. "As you get into higher horsepower, you're going into motors specifically designed to fit into a specific production system," said Terry Fulmer, a forn1er Reliance executive and Baldor's new vice president of eastern operations.
Transitioning to Six Sigma
Instead of concentrating on throughput, Reliance sought to improve manufacturing performance through Power Lean, a combination of Six Sigma, lean manufacturing, and maintenance excellence. Its goals: Halve inventory, reduce production space by 30 percent, and improve conformance 90 percent on a year-by-year basis.
The transition to Six Sigma proved an eye-opener. "We thought we were pretty good until we started measuring our performance in quantifiable terms," Fulmer said. "This was actually encouraging because customers viewed many of our products as high quality. We understood that we could improve costs significantly without changing that perception."
As Fulmer sees it, Six Sigma is a tool looking for a problem. "To find the right problem, you have to look at what is causing high inventories or queues at workstations or inconsistent workflows. If you want a process that is 95 percent reliable and you have six or seven machines tied together, then each machine has to achieve close to 99 percent up-time or you won't get there."
Fulmer's team used lean manufacturing principles to identify waste and simplify the manufacturing process. That made the targets for Six Sigma much easier to identify.
"One of the things we found is that we had to standardize work," Fulmer said. "It was obvious when we looked at production data that the person on the first shift was not doing the work the same way as the people on the second or third shifts. So we got all the shifts together, and went over how they prepared and fixtured their machines. Then we discussed and documented the best way to do the work and got everyone to buy into the changes."
The result was a series of best practices that improved conformance and made the causes of variance easier to spot. According to Fulmer, "Power Lean training has become a rite of passage for promotion within the organization. It says the person who has completed it has the thought processes and ability to apply this methodology anywhere in the organization. We've had people from IT, marketing, and sales all take this training."
Baldor is rolling out its Flex Flow system through Reliance and Dodge facilities, looking to speed up ordering, engineering, customer service, and production. At the same time, Reliance and Dodge's Power Lean experts see opportunities in Baldor's factories. "Baldor was really concentrating on velocity and, in some cases, there is room for streamlining and eliminating waste," Fulmer said.
Baldor's executive vice president of operations, Randy Waltman, said, "We looked at a stator welding process in depth, the amount of time operators spent setting up, looking for parts, and transporting stuff. Then we redid some of the tool carts and the shadow board that holds all the tools and fixtures needed to perform the job. We designated spots on the floor for incoming and finished material. We just organized it better. It's never been a bottleneck, but my guess is that we improved efficiency by 50 percent."
McFarland is betting that the combination of Flex Flow and Power Lean will do more than just improve margins. Simpler manufacturing processes also reduce the chance for variation to creep into products. As a result, Baldor hopes to keep raising quality while controlling costs, a must for staying ahead of offshore competitors.
Of course, McFarland will say Baldor does not really compete with commodity imports. "We don't deal in commodities," McFarland said. "I would say that any time the management of a company begins to look at its products as commodities, it begins to make mistakes about how to treat its customers."