"Cell Manufacturing," ME Online Web Exclusive, June 6, 2003

for 6/06/03

Cellular Manufacturing

The hard part is to get the soft side in step with program.

by Nancy Hyer and
Urban Wemmerlöv

After reviewing both benchmarking data and plant performance, management at a plant that manufactures electronic test equipment had decided new ways of operating were needed. To stay competitive, the plant had to produce products more quickly, at lower costs, and with higher reliability. And so it came to be that Dale, a mechanical engineer working in manufacturing, became part of a task force charged with reorganizing and improving his plant's test and assembly activities.

Sound familiar? Today's manufacturing organizations clearly face a new competitive landscape. Globalization, increasingly diverse and sophisticated customer markets, and the rapid pace of technological change have all contributed to a turbulent business environment. Today, if you are satisfied with the status quo, you are flirting with extinction. For organizations like Dale's, this means reconsidering the fundamental ways in which work gets done. Technology, in the form of equipment and information systems, has always been a route to higher efficiency and improvement. However, an equally—and, in some cases, more important—avenue for competitiveness is the way we organize and manage production.

Many companies have chosen to design and implement cellular manufacturing. A cell is an organizational unit designed to exploit similarities in how a company processes information, makes products, and serves customers. Cells closely locate people and equipment required for processing families of like products. Component parts and subassemblies may previously have traveled miles to visit all the equipment and labor needed for their fabrication and assembly. And items with very different manufacturing requirements and market characteristics may have shared the same equipment and the same workforce.

After reorganizing into cells, companies produce families of similar parts together within the physical confines of cells that house most or all of the required people and equipment. This product-focused arrangement facilitates the rapid flow and efficient processing of material and information. Cell operators can be cross-trained on several tasks, engage in job rotation, and assume responsibility for jobs that previously belonged to supervisors and support staff. Local control fosters employee involvement and creates a platform for improvement.

Gelman Sciences, a Michigan manufacturer of membrane filtering products, faced problems that can drive firms out of business: poor delivery performance despite high inventories, heavy reliance on inspection and testing, high scrap rates, supplier quality problems, and equipment downtime. The company has implemented cells to reduce lead times and inventories while improving quality and delivery performance.

The focus on product families and the complete value stream, close clustering of cell equipment, the ability to efficiently produce one unit at a time, and the ease of moving material and labor between process steps made rapid production possible and reduced the need to hold inventories. It has also had the impact of engaging cell operators in improvement activities.

Likewise, the Mine Safety Appliances Corp. in Pittsburgh, a producer of gas masks and other safety equipment, faced similar problems. At this company, cells have reduced paperwork, materials handling efforts, and inspection, and doubled the revenues per worker over the past decade.

BUILDING CAPABILITIES

As you may already know from experience, seemingly simple ideas are not always easy to implement. Cellular manufacturing can be a case in point. Putting cells to work often requires wide-reaching changes to the firm.

A company like Dale's typically changes because it discovers performance gaps it wants to close. Firms searching for remedies often begin by conducting an enterprise analysis, which takes a hard look at what the firm can do well and what not so well. Companies considering change also look at the industry and the economy at large. Doing so helps identify the capabilities the company needs to achieve the desired outcomes, and a strategy for achieving those outcomes.

It is at this stage that companies often determine that manufacturing cells represent the strategy to acquire necessary capabilities. Now the company can analyze how it makes products, find similarities in process steps, group products into families, and assign required resources to produce these families.

Benchmarking data and customer interviews convinced the management team at Dale's plant that emerging lower-cost competitors represented a significant threat. Without sweeping changes to assembly and test activities, this area would be unable to contribute to the division's goal of reducing production cost by 20 percent over the next five years. The strategy selected was to reorganize assembly and test into a cellular system. The manufacturing manager at the facility knew that giving everyone a clear picture of what the cells were intended to accomplish was critical to making the change. He was fond of saying, "It's easier to put a puzzle together if you can see the box cover. Therefore, we need to paint the box cover."

CHANGING THE ORGANIZATION

At Dale's plant, a test analysis team and an assembly analysis team took a critical look at current processing steps. Then, working together, they agreed on initial product families and equipment for each cell. A metrics analysis team and social analysis team worked in parallel with these two teams to develop recommendations regarding performance measurement and human resource management.

Dale's organization paid considerable attention to developing a supportive infrastructure, i.e., the numerous subsystems used to plan, manage, and control operations. Creating or revising these management systems—measurement, compensation, planning and control, cost accounting, and so on—represents a critical step in successful cell implementations. For example, during cell start-up, several teams (called "councils") redesigned systems involving materials, finance, process, training, and performance measures in order to best support the new work arrangement.

THE MATCHING GAME

There is a lot of matching and adjusting that must occur to ensure that all building blocks fit together and support the vision for the cell system. Most of this "matching game" is under the control of management. However, some important aspects of the organization are informal and intangible, and therefore much harder to manage. Specifically, people's motivations, attitudes, and behavior ultimately dictate what changes and what does not, and therefore determine how efficient and effective a cell becomes.

Furthermore, perhaps the most powerful aspect of what is called a company's informal organization is its culture, i.e., the norms, values, and beliefs that the employees as a group have adopted and which influence their behavior and actions.

Dale's plant used involvement (about one-third of the workforce was directly involved in developing the initial design, and all workers had a say in the design of the cells to which they were assigned) and intensive communication to successfully influence the informal organization to "think cellular." The planning team recognized that cells represent a fairly radical change to the way work is organized and the way employees are supposed to behave. They expected resistance and took strong action to influence the organization's culture.

THE HARD AND SOFT SIDES OF CELLS

Technology and processes represent the hard side of cells, while people, management systems, organizational structure, and the informal organization represent the soft side. Companies that understand all these elements must fit together have a good chance of realizing the full benefits of cells.

As you probably can imagine, the soft-side factors are far more difficult to change than the hard-side factors. As Dale commented, "We knew pretty quickly what equipment and parts made sense to assign to each cell. It was assigning people to cells and then getting everyone to transition to new roles that gave us the headaches." Most firms implementing cells find that they spend most of their time struggling with the soft issues.

In short, achieving the full potential of cells means modifying and aligning all key elements of the organization in order to make them work together and support each other. Specifically, this means thinking well beyond just rearranging equipment on the floor to include all the hard and soft changes necessary to successfully build capabilities via cells.

So, are cells worth the effort? Consider the cell system at Dale's plant. By the second year of operation, production per employee had nearly doubled, lead times had been cut in half, quality had improved dramatically, and ESD (electrostatic discharge) damage had fallen precipitously. Putting cells in place takes a lot of work, but the payoff can be substantial.

Nancy Hyer is an associate professor at the Owen Graduate School of Management at Vanderbilt University in Nashville, Tenn. Urban Wemmerlöv directs the Manufacturing and Technology Management graduate program at the School of Business at the University of Wisconsin in Madison. They are the authors of 'Reorganizing the Factory: Competing through Cellular Manufacturing" (Productivity Press, Shelton, Conn., 2002) on which this article is based. They can be reached at nancy.lea.hyer@owen.vanderbilt.edu and uwemmerlov@bus.wisc.edu.