Case study

Turnround at the Preston plant

Introduction

"Before the crisis, production monitoring was done to please the client, not for

problem solving. Data readouts were brought to Production meetings, we would all

look at it, but none of us were looking behind it". (Chief operating officer (COO),

Preston Plant)

The Preston plant was located in Preston, Vancouver. Precision-coated papers for

specialist printing uses accounted for the majority of the plant's output. The plant

used state-of-the-art coating machines that allowed very precise coatings to be

applied to bought-in rolls of paper. After coating, the coated rolls were cut into

standard sizes.

The curl problem

In the spring of 2008, Hewlett Packard (the plant's main customer) informed the plant

of problems it had encountered with paper curling under conditions of low humidity.

There had been no customer complaints. HP's own personnel had noticed the

problem, but they took the problem seriously. Over the next eight months, the plant's

production staff worked to isolate the cause of the problem and improve systems that

monitored processing metrics. By January 2009, the process was producing

acceptable product, yet it had not been a good year for the plant. Although volumes

were buoyant, the plant was making a loss of around $10 million a year. In October

2008, Tom Branton was appointed as COO.

Slipping out of control

Although the curl project was solved, productivity, scrap and re-work levels were

poor. In response to this, operations managers increased the speed of the line in

order to raise productivity. "Looking back, changes were made without any proper

discipline, there was no real concept of control and the process was allowed to drift.

Our culture said, "If it's within specification then it's OK", and we were very diligent in

making sure that the product which was shipped was in specification. However,

Hewlett Packard gets 'process data' which enables them to see exactly what is

happening right inside your operation. We were also getting all the data but none of it

was being internalised. By contrast, HP has a 'capability mentality'. They say, "You

might be capable of making this product but we are thinking two or three product

generations forward and asking ourselves, do we want to invest in this relationship

for the future?" (Tom Branton)

The spring of 2009 was eventful. First, Hewlett Packard asked the plant to carry out

preliminary work for a new paper to supply its next generation of printers, known as

the Viper project. Second, the plant was acquired by the Rendall Group, which was

not impressed by what it found. The plant had been making a loss for two years and

had incurred HP's disapproval over the curl issue. They made it clear that if the plant

did not get the Viper contract, its future looked bleak. Meanwhile, in the plant, the

chief concern was plant productivity, but also HP was starting to make complaints

about quality levels. Yet HP's attitude caused bewilderment in the Production team.

"When HP asked questions about our process the operations guys would say, "Look

we're making roll after roll of paper, it's within specification and we've got 97 per cent

up-time. What's the problem?" (COO, Preston Plant). But it was not until summer that

the full extent of HP's disquiet was made clear. "I will never forget that day in June of

2009. I was with HP in Chicago, and during the meeting one of their engineers

handed me some of the process data that we had to supply with every batch of

product, and said "Here's your latest data. We think you're out of control and you

don't know that you're out of control and we think that HP is looking at this data more

than you are." He was absolutely right. (Tom Branton)

The crisis

Tom immediately set about the task of bringing the plant back under control. They

first of all decided to go back to the conditions which the monitoring system indicated

had prevailed in January, when the curl problem had been solved and before

productivity pressures had caused the process to be adjusted. At the same time,

Production worked on ways of implementing unambiguous 'shut-down rules' which

would indicate to operators when a line should be halted if they were in doubt about

operating quality. "At one point in May of 2009, we had to throw away 64 jumbo rolls

of out-of-specification product. That's over $400,000 of product scrapped in one run.

That was because operators had been afraid to shut the line down. Either that or they

had tried to tweak the line while it was running to get rid of the defect. The shut-down

system says, "We are not going to operate when we are not in a state of control".

Prior to that, our operators just couldn't win. If they failed to keep the process running

we would say, "You've got to keep productivity up". If they kept the machines running

but had quality problems as a result, we criticised them for making garbage. Now you

get into far more trouble for violating process procedures than for not meeting

productivity targets". "We did two further things. First, each production team started

holding daily reviews of processing data and some 'first pass' analysis of the data.

Second, one day a month we brought all three shifts together, looked at the

processing data and debated the implications of production data. Some people got

nervous because we were not producing anything. But for the first time you got

operators from the three shifts, together with the Production team, talking about

operating issues. We also invited HP up to attend these meetings. Remember, these

weren't staged meetings; it was the first time these guys had met together and there

was plenty of heated discussion, all of which the Hewlett Packard representatives

witnessed". (Engineer, Preston Plant)

In spite of the changes, morale on the shop floor was good. At last something

positive was happening. By September 2009, the process was coming under control

and the efficiency of the plant was improving, as was its outgoing quality level, its ontime

delivery, its responsiveness to customer orders and its inventory levels. Yet the

Preston team did not have time to enjoy their emerging success. In September of

2009, Hewlett Packard announced that the plant would not get the Viper project

because of their discomfort about quality levels, and Rendall formally made their

decision on the future of the plant. "We lost ten million dollars in 2009. We had also

lost the Viper project. It was no surprise when they made the decision to shut the

plant down. I told the senior management team that we would announce it in April of

2010. The irony was that we knew that we had already turned the corner. It would

take perhaps three or four months, but we were convinced that we would become

profitable". (Tom Branton)

Convincing the rest of the world

Notwithstanding the closure decision, the management team in Preston set about the

task of convincing both HP and Rendall that the plant could be viable. They figured

that it would take three things. First, it was vital that they continue to improve quality.

Second, costs had to be brought down further. Third, the plant had to create

portfolio of new product ideas.

Improving quality further involved establishing full statistical process analysis into the

process monitoring system. It also meant establishing quality consciousness and

problem-solving tools throughout the plant. "We had people out there, technologists

and managers, who saw themselves as concerned with investment projects rather

than the processes that were affected. But taking time out and discussing process

performance and improvement, we got used to discussing the basic capabilities that

we needed to improve". (Tom Branton)

Working on cost reduction was inevitably going to be painful. The first task was to get

an understanding of what should be an appropriate level of operating costs. "We

went through a zero-based assessment to decide what an ideal process would look

like. By the way, in hindsight, cutting numbers had a greater impact on cost than the

payroll saving figures seems to suggest. If you really understand your process, when

you cut people it cuts complexity and makes things clearer to understand. Although

most staff had not been told about the closure decision, they were left in no doubt

that the plant had its back to the wall. We were careful to be very transparent. We

made sure that everyone knew whether they would be affected or not. I did lots of

walking around explaining the company's position. There were tensions and some

negative reactions from the people who had to leave. Yet most accepted the

business logic of what we were doing." (Tom Branton)

By December of 2009, there were 40 per cent fewer people in the plant than two

months earlier. All departments were affected. Surprisingly, the quality department

shrank more than most, moving from 22 people down to nine. "When the plant was

considering down-sizing, they asked me, "How can we run a lab with six

technicians?" Remember that at this time we had 22 technicians. I said, "Easy. We

get production to make good product in the first place, and then we don't have to

control all the garbage". (Quality Manager, Preston Plant)

Several new product ideas were investigated, including some that were only possible

because of the plant's enhanced capability. The most important of these became

known as "Ecowrap", a recyclable protective wrap, aimed at the Japanese market. It

was technically difficult, but the plant's new capabilities allowed it to develop

appropriate coatings at a cost that made the product attractive.

Out of the crisis

In spite of their trauma in the autumn, the plant's management team faced Christmas

of 2009 with increasing satisfaction, if not optimism, for the plant's future. In

December, they made an operational profit for the first time for over two years. By

spring of 2010, even HP, at a corporate level, was starting to look more favourably on

the Preston plant. More significantly, HP had asked the plant to start work on trials for

a new product - 'heavyweight' paper. April 2010 was a good month for the plant. It

had chalked up three months of profitability, and HP formally gave the heavyweight

ink-jet paper contract to Preston, and were generally more up-beat about the future.

At the end of April, Rendall reversed their decision to close the plant.

The future

2010 was a profitable year for the plant - by the end, they had captured 75 per cent

of Hewlett Packard's US printing paper business and were being asked to work on

several other large projects. "Hewlett Packard now seems very keen to work with us.

It has helped us with our own suppliers also. We have already given considerable

assistance to our main paper supplier to improve their own internal process control

procedures. Recently we were in a meeting with people from all different parts of HP.

There was all kinds of confidential information going around. But you could never tell

that there was an outsider (us) in the room. They were having arguments amongst

themselves about certain issues and no one could have been there without feeling

that basically we were a part of that company. In the past they've always been very

close with some information. Basically the change is all down to their new-found trust

in our capabilities". (Tom Branton)

Questions

1. What are the most significant events in the story of how the plant survived because of its adoption of quality-based principles? 250 Word

2. The plant's processes eventually were brought under control. 250 Word