Indumet reaps benefits of home-grown quality system.

Experiencing problems following a new product start-up and modernization, this gray iron foundry invented its own approach to quality improvement - 'Strategic Quality Management.'

Located in the Venezuelan province of Maracay, Indumet is a 35-year-old company that specializes in producing

Due to continuous variations in the building construction market, the company searched for additional products to cast in 1989. Indumet officials selected gray iron automotive rotors and drums, both of which are now exported to the U.S. and Canada.

At the time of the expansion to rotors and drams, the cupola-melt, DISA green sand, centrifugal cast and permanent mold foundry needed modernization, and a new layout and equipment were added. This involved adding two 6-ton induction furnaces with a 5000 kW power supply, two 28-ton channel furnaces, rotary shakeout drums and a sand cooling drum, core machines and lab instruments such as spectrometers and hardness testers, as well as reshaping the high-volume molding and sand systems.

In addition, two machine shops were built with new equipment, including machining lathes, drills, presses, and measuring equipment and instruments - all laid out in 10 manufacturing cells.

The modernizations bumped foundry capacity to 45,000 metric tons per year and the machine shop volume to 840,000 units a year. The two operations are currently running at 27% and 35% capacity, respectively.

Serious Problems

The installations and modifications were finished in the summer of '93. Following the concept of the "focused factory," cost centers were established for the foundry and the two machine shops. New managers, supervisors, engineers and workers were hired for all three cost centers.

Rotor production began with many problems due to the lack of production experience as well as sales obstacles. After various efforts to produce the rotors and drums, production wasn't picking up, and scrap (18.5% on the rotors due to foundry defects, 14.5% on the pipe and 7.5% machine shop scrap) and costs were high.

At the same time, the construction market collapsed due to economic and government policies. Through financial problems and a decreasing market share of our main product, we weren't able to realize our problems and how to correct them.

We concluded a different approach to managing the company was required. We needed to develop a system in which our managers and supervisors would know where we wanted the company to go. And it had to be simple enough so they would understand the dire financial situation and how they could help improve on it.

Program Shortcomings

Faced with our quality programs we constantly read improvement stories, and quality and management philosophies and techniques. From 1990-94, we also attended many courses and seminars on quality and productivity improvement, cost control, and sales and marketing.

We always thought most quality and management philosophies were incomplete, however. We weren't sure an existing program would bring the company back to profits, and we needed more than just quality. With our soil and pipe fittings, we had excellent quality and good service, but we weren't selling properly. And with our new products, we could deliver quality castings, but had high internal costs.

We liked the fundamentals extolled by quality and business experts like Harold S. Geneen, Lee Iaccoca, Tom Peters, Shigeo Shingo, Philip Crosby, Sam Walton, Seiichi Nakajima, W. Edwards Deming, Roy Harmon and Arthur D. Little. We also gained practical insight in TQM and ISO 9000 following a course taught by David Scrimshire.

Coupling these fundamentals with the drive, hard work and 35 years of foundry experience by my father, Ricardo Viloria, my brother, Gonzalo Egana, and I initiated an improvement process we call Strategic Quality Management (SQM) in February '94. The program was aided by Victor Gonzalez, information systems manager, who handled SQM's software, hardware and systems changes.

SQM

This system is based on reengineering and total quality management (TQM) with the support of ISO 9000, zero quality control, total productive maintenance (TPM) and our foundry and computer systems experience. The underlying objective of SQM approach is that an organization must improve only what it needs to improve. Once the most serious problems are determined, the company must focus all its resources on those needs.

Strategic - This means to solve the problems that are most important. An organization should work on what requires the most attention. It should first attack the priority problems - the ones that give the biggest return on investment, either in short-, mid- or long-term. It isn't a program, but a process. A working system makes an organization end up doing what it does best.

Quality - Everything we do must be done well. Everything that one does is for one or more customers, and they demand a quality product or service that meets their expectations.

Management - This means making things happen through people. Problems should be viewed as opportunities for improvement. Attack them, seek the possible causes, identify the real causes, propose solutions and solve them. It is an ongoing process of solving problems. If something doesn't work one way, try another until it's solved.

Methodology

The first step in SQM is change, and it starts by reengineering. Before the organization can change for the better, it must define where it wants to go and what it should do. Then, set the objectives and goals for this new organization.

SQM isn't doing better what you already do, it is defining what you must do and how to organize to get it done.

1. SWOT Analysis - The first step is to analyze your company's Strengths-Weaknesses-Opportunities-Threats (SWOT). Simply ask "What are the strengths of the actual organization? What are its weaknesses? What are the threats to the company, now and in the future? What are the opportunities? Table 1 lists the results of Indumet's foundry SWOT analysis.

2. Mission - In most organizations, most of the workers - including management - don't know what their organization's goals are. If they don't know why the company was created, they can't understand why they're there and how they can contribute to accomplishing the firm's goals.

Table 1. Results of Indumet's Foundry Strengths-Weakness-Opportunities-Threats (SWOT) Analysis

Strengths:

modern foundry equipment

very high production capacity

employees and workers with technical skills

machinery and tooling to manufacture all rotors and drums required for the local market plus the fastest-moving numbers in the U.S.

machinery and tooling to manufacture cast iron soil pipe and fittings

appropriate lab instruments

international product certification approvals

more than 30 years experience in the foundry business

Weaknesses:

intermittent plant stops from running out of raw materials because of financial problems

high scrap iin rotors and drums

low productivity

lack of rules and procedures

hourly workers insufficiently trained for new equipment and products

supervisors with scarce abilities in supervision and human relations

managers with low management abilities

several pieces of machinery in poor shape

low morale in workers who don't understand the financial problems

high financial debt with high interest rates

Threats:

increasing strength of main competitors

continuous increase in costs of raw materials due to high inflation rate - more than 50% a year

environmental compliance

other companies offering higher wages to our technical workers

financial crisis in Venezuela

Opportunities:

increasing demand for rotors and drums in U.S. and Canada as raw castings and as machined-basis rotors (demand for the machine shop which in turn would demand more castings from the foundry)

increasing demand of cast iron soil pipe and fittings from U.S. and Canada

increasing demand for raw castings from the machine shop to supply the local aftermarket

lower interest rates for debt

increasing conscience of the general public about the harm of using PVC products in environmental and public health

So, based on the SWOT analysis, a new mission is established. It defines where the organization wants to go. It should be simple and easily understood by all the people inside the organization and those who relate to it. The mission should allow the organization to simultaneously satisfy five basic groups. These are: owners, workers, clients, suppliers and the environment.

Following the SWOT analysis, Indumet defined its mission statement as "Continuously increase profits by manufacturing cast iron soil pipe and fittings, rotors and drums for automobiles and juice extractors - all of excellent quality - for the local market and for export."

After that, the mission statement was defined separately for the foundry and machine shop. For the foundry, it was "Continuously increase profits of cast iron soil pipe and fittings, rotors and drums for automobiles of world class quality." For the machine shop, it was "Continuously increase profits machining rotors and drums for automobiles of world class quality."

3. Strategic Objectives - Strategic objectives are established to determine how to move toward achieving the mission. As they are met, you get closer to completing the mission. The strategic objectives should be set for 1-3 years. They might be directed at market share, production targets, certifications, streamlining, or new products or markets.

For the foundry, we established four strategic objectives - produce 600 metric tons per month of cast iron soil pipe and fittings; produce 100,000 rotors and drums per month; reduce production costs; and meet environmental requirements.

For the machine shop, two strategic objectives were established - machine 50,000 rotors and drums monthly; and reduce production costs.

Besides these goals, we also wanted to achieve a strategic alliance with an American manufacturer/distributor of rotors and drams; become the leader in the building construction market above three floors; and achieve 3% of the U.S. market share of cast iron soil pipe and fittings.

4. Teams - For each strategic objective, you must set projects and synergy teams. These teams are formed by workers from different departments and levels of the organization. Meeting regularly, they establish goals and a way to measure them. Every synergy team has a leader that drives the meetings and has the final word.

These projects and synergy teams are [TABULAR DATA FOR TABLE 2 OMITTED] set to meet the strategic objectives and thus, the mission. These team members are the ones who'll make the organization's required improvements. And these improvements must take place very quickly.

The first synergy team to create is the profits team. This team is responsible for the profits of the organization and steering and monitoring other teams. It determines if a team requires help, support and aid. It determines if a team is no longer necessary or creates new teams. It also aids the top manager in identifying weak areas and organization changes, and becomes in of and itself a staff arm of the top manager.

Progress must be measured. This way, you keep up a constant pressure and motivation for improvement. We like to use the visible management approach to numbers. In different parts of the plant are big boards that show the goals, numbers and graphs of progress.

A total of 10 different synergy teams were established to meet the foundry's four strategic objectives. These are quality pipe, ISO 9000, preventive maintenance, delivery, order and discipline, training and selection, quality rotors, power electricity, costs of raw materials, and safety and environmental. In addition to these, six synergy teams were also set up for the machine shop.

SQM Results

Indumet is using many commonly-known improvement tools, such as Taguchi Methods, quality design, Poka-Yoke, Pareto analysis, computer programs, histograms, statistical process control, capability studies, cause and effect diagrams, management by objectives, setup time reduction and ISO 9000 to guide the definition of rules and procedures.

Table 2 lists a brief description of the accomplishments of SQM. The initial values are from February '94, and the actual value is where the foundry and machine shop are operating today.

As seen from Table 2, initial foundry rotor scrap was at 18.5%. Today, it is at 4.2%. It was cut back by:

* changing the core sand mixture;

* changing from a pressurized feeding system to a combination of pressurized and nonpressurized;

* changing the metal composition;

* changing molding sand parameters;

* using lid covers to transfer ladles;

* improving pouring ladles;

* training operators;

* following basic rules in process control, including product parameters, process parameters, materials usage parameters and preventive maintenance routines that affect quality;

* changes in raw materials specifications;

* implementing visual boards throughout the plant that show hourly metal and sand compositions.

In addition, a synergy team is working to achieve a strategic alliance with an American manufacturer/distributor of rotors and drums. We are about to obtain other product quality certifications that would allow us to go to other markets. The local OEM automotive manufacturers are happy with the changes and the quality of the products. Soon production will start for one of them.

Inventory is reducing and customer satisfaction has improved. Part of the debt has been refinanced. The knowledge of their work environment and responsibility to analyze, plan and decide have made our employees more and more empowered.

ISO 9000

We believe in ISO 9000 as a set of principals, rules and procedures that are applied in the organization to improve productivity and quality and reduce costs. We're applying it aggressively, similar to the General Accepted Accounting Principals (GAPP) followed by accountants and comptrollers.

There is a synergy team working on ISO 9000. Of the 19 elements in ISO 9000, we are concentrating on seven areas of weakness in our quality system in which we most needed to advance. These are: management responsibility, process control, inspection and testing, inspection measuring and test equipment, corrective and preventive action, internal quality audits and training. The ISO 9000 synergy team, consisting of three foreman with 61 years of collective experience, were dedicated to aid in writing the work instructions and quality system audits.

While ISO 9000 certification gives you fewer market restrictions, it shouldn't be seen as a marketing tool. While it can be helpful, its biggest benefit is providing stability to the organization, and as you apply it you know more accurately what happened when you get a defective casting back from a customer.

Advancing SQM

There are more changes to come. Just last August, we changed the organization structure of production and maintenance in the foundry. Production was divided into two sectors. Basic production includes the melt shop and coreroom, and production includes the mold lines and finishing. Maintenance was divided in the same way, plus another change - the preventive maintenance planning and control function was moved upward to report directly to the operations manager of the foundry. This change is to coordinate the complementation of TPM in the foundry.

Also, the rotors quality synergy team was divided into four smaller teams. This is because now that we have reduced the scrap, the problems are concentrated in four defects. These smaller teams now tackle individual defects.

Another synergy team, "New Products," is being formed. With members of the machine shop and the foundry's tooling shop and quality departments and suppliers, it is responsible for the development of nearly 50 new rotor patterns and machine tooling.

This is a continuous improvement process. As the organization changes, it can adapt to new realities.

Lessons Learned

In today's world, countries and markets change continuously and very rapidly. This new working system gives the organization the flexibility to change faster whenever called upon to do so.

It develops a team spirit with commitment, identification and loyalty toward the organization.

Big improvements are accomplished when you give the synergy teams responsibility and authority to analyze problems and implement corrective and preventive actions. As your company advances, improves and accomplishes goals, motivation and morale rises and people get more and more involved with the new system.

Improvement processes like SQM require more than the approval and support of top management. SQM requires the implementation and participation by top management. Remember, the organization as a whole changes for the better with this new working system.

Before you start an improvement program or process, or resize, downsize, streamline or rightsize, call a consultant or enter the quest for ISO 9000, stop and ask, "What are your problems? Where do you want to go? Where should your organization go? What do you do best? How is the competition comparing to you? Where is the market going? Do your products have opportunities to grow or are they becoming obsolete? How do new technologies affect your business? Where is your product in its lifecycle?"

Use the SWOT technique. It helps you understand what is going on in your organization.

Then, take a step forward for change. Remember, focus on what needs improving. Don't start a quality program if your product and service is great. Don't try to downsize your company and do less and less if your costs are similar to your competitions. Don't start making new products if your products are great and sell well.

Your organization is unique. You must only improve what you need to improve.

RELATED ARTICLE: Training: A Top Priority of SQM

Indumet has its own small Training Center in which courses are provided - and required - for all levels of employees.

A synergy team plans and controls the training and different courses, and defined a curriculum for every operational job in the foundry and in the machine shop. The foundry courses include citizenship, foundry basics, mathematics, quality basics and others depending on duties in the workplace, such as melt operation, DISA operation, core production and melt power supply maintenance.

Training in team participation and problem solving is also provided, even though this is mostly learned by example. Each member of a synergy team has a notebook to write the action he or she should take to improve. At the beginning of each notebook are several pages that describe the methods of the synergy teams and their basic rules. Improvement tools are taught to different people from different teams, depending on each one's specific job requirements.

Most of the specialized courses, dictated by managers, engineers and supervisors. are taught by Indumet staff. And for the outside courses on general skills, we use a local government institution called INCE and a private institution called Fundamental, sponsored by Dana Corp. and Sivensa.

While only two years ago, the firm provided only 10 hours per month of training, 450 hours per month are now conducted. The company's goal is 700 hours of training per month.