Business Strategy Execution · Project Management · Supply Chain Management · Trump · Trust

Lessons learned – Plant Transfer

Each business, large or small, has to periodically evaluate its own manufacturing/operations footprint if it’s is properly positioned to serve its customers and market. Some business have a methodical approach to this periodic assessment. Others are driven by internal factors such as productivity or financial goals. Then there are some that are driven by external factor such as geopolitical changes (i.e. war, nuclear threat) or change in rules and regulations (i.e. import taxes, transnational treaties). The current considerations of the Trump administration to cancel the NAFTA treaty is another vivid example that could drive the need to evaluate your manufacturing footprint.

If the outcome of your evaluation is to close down, or to move a plant from its origin location A to a new location Destination B, here are some lessons learned I like to share that could be beneficial to board of directors, project managers and team members. This lessons learned is a summary and collection out of three experiences in the last 8 years. The solid foundation is based upon a strong project management, realistic business leadership, proper team structure and open communication. All with all, the customers needs to stay the compass amidst the transition.

For this summary of lessons learned, assume that we are transferring a manufacturing footprint from one country “Origin A” to another country “Destination B”. Thus, there is a language and cultural transition embedded in the process. How do you cross the bridge from the one side to the other side? Here it comes:

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Commercial / Sales

  • What went well
    • We got very serious about product quality. We got many audits from customers and we took it serious and therefore made improvements to the manufacturing processes.
    • We created multi functional teams and sales and marketing team had the same voice/vote in the decisions made.
    • The transfer forced us to get closer to our customers and prioritize our focus on the vital ones. Transfer is planned around customer priority and complexity. Complexity is based upon customer requirement for change management and process verification and validation.
  • What needs improvement
    • We need to request firm commitments in forecast and demand planning in return for product cost concessions.
    • We need to dedicate a key commercial Single-Point-Of-Contact (SPOC) to monitor and manage the customer satisfaction during the process.
    • Don’t forget the smaller customers, less vital customers. We need to create a customer account portfolio and set periodic checks with B and C accounts/customer. The B and C accounts are the free promoter and ambassador of your brand in the market.

Finance

  • What went well
    • We had a detailed business case with ROI and Payback Period. This is mainly used to explain to higher management and manage certain expectations. We hired an external financial consultant to build the business case.
  • What needs improvement
    • You can let the numbers work towards a certain hypothesis, or you can let the number speak for itself. Next transfer will be important to reconcile detailed level finance information for the business case with project plan. More importantly, if higher management requires a Payback Period of 1 year but the bottom-up plan realistically shows 1.8 years Payback Period, then it is key for the business leader to “defend” the realistic Payback Period.
    • Pure labour cost comparison is not always correct for building a business case. Labour cost is linked to productivity, or output per hour. We calculates $12.49/hr in USA vs $3.49/hr in Mexico. However, we needed about 2 – 3 more Mexican operators to perform the same job 1 American used to do. Productivity is better measurement for a business case.

Quality Assurance / QMS Integration

  • What went well
    • Customer Engagement & Review Process
    • Preparation process helped us to reduce quality escapes.
    • Incorporating customer supplier relocation Process Tool Kit.
    • Video Documentation/Training on Manufacturing Processes.
    • We used standard work for the duplication of assembly lines.
  • What needs improvement
    • With the language translation, it was difficult for the Origin A side to validate standard work to ensure continuity. Built more time in the plan for the learning curve of new operators.
    • Trying to make process enhancements during the move created delay and customer dissatisfaction. If the play is a pure transfer, do not incorporate process improvement changes.
    • The Destination B plant was mainly mechanical components assembly environment. We transferred Electronics sensitive assemblies. There was a lack of awareness or knowledge about ESD environment, ESD compliancy and safety. YES, we had hired a 3rd party consultant to assess the Destination B facility, and made improvement in the assembly area. However, the material handling at receiving inspection (outside of the assembly area) was not compliant to the IPC JEDEC JST-033 and ESD standards.

Human Resources

  • What went well
    • Employee retention process with Origin A associates. A clear bonus and severance package for each individual.
    • There was a backup plan for key employees. We identified the trigger points and reactive action points.
  • What needs improvement
    • Productivity levels could not be achieved as was in Origin A. Additional headcounts were required. These additional headcounts were added late and created larger late backlog to overcome.
    • Technical expertise in the Destination B area was limited. It’s an industrial manufacturing area. Thus, the competition for high qualified technical expertise is high. This leads to high employee turnover. The time to hire and re-hire was not calculated which led to delay.
    • Too many directions and changes on leadership during the project affected the performance of the team.

Information Technology + ERP

  • What went well
    • All equipment received in Destination B was working properly. The connectivity and network ports worked well.
    • No big changes required in the IT infrastructure to accommodate the transfer of the assembly lines.
  • What needs improvement
    • At Origin A we had only one Master Production Scheduler (“MPS”) for both end-level and sub-assembly lines. At Destination B there was two MPS. Tribal knowledge about the ERP was not transferred properly or sufficiently.
    • Bill Of Material (“BOM”) & Routing in the ERP needs verification prior to the move. This needs to be Pre-Work. In most cases, the routing in the ERP system is not the same as the real world situation. This does depends on the discipline of the team to maintain ERP in line with the shopfloor. A gap-analysis needs to take place and tackled before transfer.

 

Supply, Logistics and Procurement

  • What went well
    • We permitted NO change of supplier at the same time that we are doing the transfer of the production line.
    • Supplier notification and PO transfer was fairly smooth.
    • We quickly established a way to package and transport assembly lines from Origin A to Destination B.
  • What needs improvement
    • Understand core process of each assembly line is essential to duplicate the shipping, packaging and supply requirements of customers.
    • Supplier PPAP process for suppliers and for assembly lines requires a dedicated resource. This was identified late in the project and caused delay in our submission of quality plans back to key customers.
    • Inventory needs to be accounted for the transfer plan. The business needs to agree and approve any pre-build inventory and take that into account in the financial plan. Finance is a key stakeholder.
    • Before kicking off the transfer, it should be clear which assembly line or sub-assembly lines are remaining MAKE (in-house) and which are change to BUY (outsourced). In our case, the circuit sub-assembly process remained vague, no one knew exactly if it remained MAKE or BUY. This led to confusion and delay in shipments. In our case, we had not accounted or planned for the ESD packaging of circuit assemblies. The additional contract hire of Manufacturing Engineering for packaging specialist caused delay.
    • Production planning process is a long learning curve. The master production scheduler is a key role in manufacturing environment. He or she knows how the complete plant with all final and sub-assembly levels are connected. Intuitively, he or she knows the takt time and consequently the bottlenecks. I’ve learned that this training has to start as early as possible in the project.

Equipment/Assets Maintenance

  • What went well
    • A last review maintenance performed before transfer.
  • What needs improvement
    • Preventive maintenance program and documented training is needed before doing the transfer.
    • Technical expertise in Destination B was lacking. Mostly due to the perspective about maintenance. Maintenance is sometimes considered less important and less urgent. However, improper and incomplete maintenance will effect manufacturing and operations output later on.

Design / Engineering

  • What went well
    • There was a clear engagement from the Engineering Manager and his team.
    • Technical liaison identified for each customer. This helped to clarify any technical questions from the customers.
  • What needs improvement
    • Complete Engineering Change Notification (ECN) changing Bill Of Materials (BOM) prior to physical moves of the individual assembly lines.
    • Despite declaring design freezes, we had numerous significant engineering changes occur inside this project. It’s impossible to have 100% design freeze, therefore a clear process and procedure is necessary to communicate changes via the Change Control Board (CBB).

Operations / Manufacturing

  • What went well
    • Pre-work on facility layout was a positive.
    • Operations/Manufacturing were consolidated in one roof.
    • The pre-work and execution created the opportunity to uncover some weaknesses in the manufacturing processes.
    • After adjustment in the planning, we have sent Origin A primary operators to Destination B to train the new operators and validate line setup.
  • What needs improvement
    • We need to have experts from Origin A providing training to operators at Destination B. Majority of operators are not high educated and the best way of learning is ‘on the job’.
    • Bring one line at the time and respect the dates and prebuilds.
    • Constraints of technical knowledge on the Destination B side (Maintenance and Manufacturing Engineering).
    • Preventive maintenance program and documented training is needed before doing the transfer.

Communication

  • What went well
    • When the team get together, this allowed for better communication (all team members under one roof).
    • Bi-weekly calls, constant communication with team members (Commercial/Operations/Engineering).
    • We’ve built a community site for the project on the intranet (MS SharePoint) so relevant documentation is accessed anywhere at anytime by team members.
  • What needs improvement
    • Transparency of the communication (bad news/good news) was lacking. Out of fear or out of pride, crucial relevant was withheld from project management.
    • There was no communication plan which identifies the stakeholders and each of their personal need regarding information detail and frequency.

Project Management

  • What went well
    • Robust Toll Gate Reviews on the Origin A side.
  • What needs improvement
    • Ownership from the leadership team (Destination B)
    • Scope management: changes to scope, requirements or budget are only allowed if approved by Steering Committee, that should include the executive sponsor. There was no formal Change Management plan, or Change Control Board (CBB).
    • Planning: need to spend more time on planning before execution. The business case for was approved, and we had to hurry to execute. The project manager had little time to plan the project. That does not work.
    • Control: somewhere we failed miserably in the control function. The project manager should have mechanism to control that the Assembly Line was sitting in Destination B for 3 weeks and no one was doing anything. There was no trigger point that after one week, nothing was being done with the Assembly Line.
    • Discipline to follow/use the Project Management Tools
    • Project Manager was unable to balance production management and project leadership once phase 1 & 2 were implemented. Practically, a transfer project needs its own dedicated project manager.

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I see project management as the linking pin between plan and execution. The driver that will steer the transfer to success. Project management is 90% of the time communication. The project manager is responsible and accountable for setting realistic and achievable boundaries for the project and to accomplish the project within approved baselines: scope, time, budget, quality, resources, and risks.

Looking back, it may look obvious to adhere to all the best practices and lessons learned from the past. However, the reality is that the team is under time pressure. The pressure may be driven by internal goals (year-end closure or quarter closure) or external factors. The more experienced the team, the better they are able to discern key issues from the “smoke” caused by other issues. The experienced team knows what it takes to keep serving the customer. Lastly, as John Maxwell says and I agree: “Everything rises or falls with leadership.” The business leader makes the tough decisions and continuously communicates the reason for the transfer.

I hope you can take these lessons learned in your business and apply them in order to achieve your goals. If you have questions or comments, feel free to share your thoughts.

 

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