Case Studies: Improvement Initiative Finds Results

April 1, 2005
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The manufacturing industry is under heavy pressure. A division of Philips Lighting (the Benelux, Belgium and the Netherlands) that produces filaments and coils used in various types of electric lamps, is no exception. It must compete with low-wage nations, which puts pressure on its cost structure and prices. But a low price is not necessarily the decisive criterion. For many clients, quality, speed and reliable delivery are more important. Meeting these criteria requires not only a different approach to quality management, but simplification of the underlying processes. In this case, a "step change" was needed and members of the client senior management team of Philips were well aware of this.

Philips contacted Celerant Consulting (Lexington, MA) and, together, conducted an analysis-using a set of ratios to define the potential for improvement and also look at details. This was about setting new goals that not only would determine the success of the business, but receive support by the management. The process was not always easy. Examining what is going well at best practices, is relatively simple. Collectively examining what is not going so well is much more difficult. However, if the process is correctly supervised, it can be powerful. After all, employees are striving to deliver their best performance.

Celerant tailors improvement initiative plans to each client. In Philips' case, the firm implemented several tools and techniques, including Six Sigma. In a number of workshops Philips gained insight into areas with room for improvement such as cost savings, organizational integration and on-time deliveries.

With involvement from the managers, new, specific and measurable targets that could result in needed changes were identified. During the final week, Celerant's and Philips' managers, compiled a plan.

The objectives were ambitious,

but achievable:

• Cost savings of several million dollars-primarily through increased productivity in manufacturing and maintenance, but also in the support processes.

• A breakthrough in product quality, with the share held by top-quality items rising from 20% to 80%.

• Integration of two organizations

into one.

• Increasing on-time deliveries from 65% to 85%, based on first confirmed delivery date.

• Improvement of the innovation-to-market process: more focus, in line with customer needs, and a reduction in development throughput time.

The project was intensive and took eight months. Full-time Philips task forces, together with Celerant, worked closely where needed: on the shop floor, in the office, at night and during the day. Several management control and reporting systems were developed and implemented to ensure that the following objectives were achieved:

• There is transparency for everyone concerning current vs. target performance levels, thus fostering ongoing improvements.

• Decision-making processes based on facts rather than "gut feelings."

• Relevant actions not just being agreed on, but executed and delivered.

The improvement initiative plan has accomplished improved cooperation across the board at the Philips plant. "[This Philips business unit's] competitive position has improved considerably. The company now can move ahead independently, without external assistance," says Henk de Jong, vice president and head of manufacturing for Celerant's European sector.

The results of the collaboration between Philips and Celerant can be summarized by their measurable financial and operational benefits. The integrated organizational structure now matches the company's strategy. Share of top-quality filament production rose beyond Philip's original goals, from 20% to 90%. On-time delivery performance now exceeds 85% and the improved productivity in the manufacturing, development and support departments reduced costs by some several million dollars.

"The improvements that have been achieved are sustainable, and the knowledge and experience gained is being transferred to and shared with other divisions within Philips," de Jong says.



sidebar: Benefits

• Production rates rose from 20% to 90%.

• Improved productivity in manufacturing, development and support departments has reduced costs by some several million dollars.

• On-time delivery performance exceeds 85%.

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