"They certainly can," says Bill Moore, president of PEXCO (Waverly, Pa.), a joint venture between Sandvik Steel and Sumitomo Metals. PEXCO extrudes stainless steel billets into small-diameter stainless steel tubing on a made-to-order basis. Average output is 800 tons per month.

PEXCO's self-directed work teams consist of empowered technicians trained in both the basics of business management and in manufacturing stainless steel tubes. Management shares and explains operating plans to all members of the PEXCO team. The technicians assume the added responsibility of determining how the various aspects of the business plan are to be successfully achieved. Typically, this may involve team decisions on scheduling, procurement, maintenance, training, etc. At times, there are conflicts which may have to be resolved with the assistance of a support team.

In the Beginning
PEXCO was founded in early 1992 with the establishment of the joint venture. The Waverly plant construction began in 1992, and it became operational in September 1993. Recruitment of manufacturing and support personnel began nearly a year before construction completion.

Sandvik Steel United States and PEXCO personnel evaluated candidates for manufacturing jobs on a different level from the very beginning. During recruiting, PEXCO's vision was shared with the candidates, and personnel looked beyond just the candidates' technical skills.

Before the plant became operational, the new recruits got involved in assembling and setting up equipment and interpersonal/team training. In early 1993, PEXCO utilized Development Dimensions International (DDI), a management consultant, to provide training on team skills such as group meeting format and dynamics, how to achieve consensus, conflict resolution, etc. PEXCO enriched this training with the help of a 15-member support team. The support team provided coaching in process engineering, quality control, accounting, engineering maintenance, tooling, scheduling and procurement, to give technicians a well-rounded background in management skills and manufacturing.

With these initial steps, the self-directed work cells started to take shape. In September 1993, PEXCO became the second North American supplier of short-run hot extruded stainless steel tubing in specially tailored sizes. It also is the only continuous hot-melt operation deliberately organized on the basis of self-directed work teams.

Organizational Setup
The setup consists of dedicated work cells in billet, press and finishing operations representing each area of manufacturing. Cells are scheduled to operate three shifts per day, five days a week.

Twelve technicians form the billet work cell; 18 technicians form the press work cell; and 22 technicians form the finishing work cell. Each work cell has a team coordinator and five "Star Points" (employee relations, finance, maintenance, quality and safety/housekeeping). Team members rotate through these positions in six-month intervals. In addition, eight core maintenance staffers move from cell to cell as needed.

Another resource is the support team. The support team is staffed with five team managers (engineering, finance, operations, quality and technicians), nine team members and the president. Their responsibility is to ensure that the day-to-day business operations run smoothly, and to be available for coaching whenever called upon by the technicians.

Some examples of teams' daily interactions include reducing bottlenecks or determining both root cause and how to quickly remedy a quality problem. The teams may develop solutions themselves, often requiring cell technicians to move from one operation to another. Other times, cross-functional teams are created with members from the cells as well as the support teams.

PEXCO's values are quality, speed, flexibility, cost, trust and communication — all of which are continually worked on for improvement. Currently, each cell has a defined scope of authority. Most of the areas of empowerment revolve around achieving the business plan's manufacturing, financial and quality goals. There are a series of checks and balances as with any organization, but they are administered in a coaching manner rather than a top-down manner.

Peer Assessment
Technician team members utilize peer assessments as a means of providing feedback for improvement. Ten to 12 values are rated by eight different team members; the outcome has a direct impact on each employee's base compensation. In addition, all PEXCO employees are on the same incentive plan. Improvements in eight different business goals qualify them for an annual bonus. Achievement is measured by the same standards, whether the employee is a new hire or the president of the company.

Finest Hour
Informing work team members about the company's performance in the market versus the competition gives them a different perspective on their roles. At quarterly operations meetings, all employees come together over lunch and discuss PEXCO's financial and operational health.

"Financially, we had a rocky start the first couple of years," says Moore. In 1995, PEXCO's third year of operation, they had an opportunity to break even for the year or generate a slight profit. "At the third-quarter company meeting, it was emphasized that PEXCO had made great strides," he says. "Worst-case scenario, if we incurred a $200,000 loss, we didn't feel it would constitute a negative on the teams' performance. But being so close, wouldn't we always wonder if we could have made a profit?"

Team members vowed to turn a profit. And they did. They staggered themselves across shifts to provide more hours of production. Support team members worked extra hours and left nothing to chance. As a result, PEXCO attained its highest production month in history and generated its first profit of $90,000. Since then, productivity has improved to approximately 12 percent above industry average per employee, and lead times for delivery are eight to 13 weeks.

Lessons Learned
So what are the lessons for companies who want to empower their plant workers? "It doesn't come easy, but it definitely gives you a competitive advantage," asserts Moore. Compared to top-down management systems, it unleashes the natural talents of people for proactive problem-solving and motivates them to get involved. For PEXCO, it has meant shorter lead times, higher employee productivity and lower scrap rates. It has also allowed people to learn from one another and to focus not only on short-term issues, but also on long-term organizational strategies.

"There is an extraordinary bonding between the work teams that comes from cracking the tough problems together and feeling that we all make a difference," says Bertram Harris, one of the cell managers. Moore agrees. "There is no doubt PEXCO has had some advantages being a new facility and receiving the support of two successful partners," Moore says. "But what really has put us over the top is our people, our trust in each other and our ability to be flexible."

Hiram Walker was an innovator in the Canadian whisky industry. He founded his liquor company, Hiram Walker & Sons Ltd., in 1858, and was the first distiller to heat barrel warehouses to allow whisky to mature for 12 months. He was also the first person to put brand name labels on his products.

Today the company, now owned by Allied Domecq, makes products ranging in size from 50-milliliter miniature liquor bottles to three-liter jugs. In fact, the Windsor, Ontario-based distiller, which is still best known for its trademark Canadian Club whisky, produces and ships close to 5 million cases of distilled spirits each year all over the world.

Hiram Walker's manufacturing processes are models of efficiency. However, in one of its divisions — finished goods — there was a need to further improve procedures.

In addition, Hiram Walker needed to bridge a one-quarter-mile gap between the production area and the finished goods area. Because of the gap, product needed to be manually transported between the two areas, which often resulted in product breakage.

The company chose to work with Mathews Conveyer, a designer and manufacturer of material handling equipment. According to Don Clary, project coordinator of engineering services for Hiram Walker, the company already had extensive experience with Mathews; Hiram Walker has been using four Mathews automatic palletizers for 20 years in the finished goods area. Mathews also had provided Hiram Walker with a Barrel Handling System.

"We had a discussion with Mathews and explained what we hoped to achieve," says Clary. "Mathews then designed and supervised the installation of the new system, all while our operations remained up and running. Mathews achieved the goals of the project on budget and on time."

Clary explains that the project goals were to decrease product fulfillment time, decrease product breakage and reduce labor costs. In addition, there were a number of considerations that had to be taken into account.

"The project needed to be completed within a five-week period," Clary explains. "Plus, there could be no interruption in the production of the 20,000 cases that are produced each day."

To achieve the project goals, Mathews automated the production procedures by upgrading and adding to Hiram Walker's existing material handling system.

Mathews' efforts started in the receiving and bottling area of Hiram Walker's finished goods division. Originally, each of the eight bottling lines were dedicated to one of four palletizers. Because the eight lines were dedicated to specific palletizers, only certain items could be produced on certain lines. This meant that if one line was stopped, either for routine maintenance or a malfunction, production of that particular item would be stopped or delayed until the problems were resolved. When this happened, the company experienced delays in shipping.

To address these problems, Mathews upgraded the existing palletizers and added one new WR3 series palletizer and two carton accumulation lines. Mathews also reconfigured the system so that any product can be run on any line, providing much-needed flexibility. As a result, procedures in receiving and bottling run more efficiently and orders are filled more expeditiously.

The quarter-mile gap presented a different dilemma. Having to manually transport product to the packaging and shipping area was not only time-consuming and inefficient due to extensive physical handling of the product; it often resulted in product breakage. Intensifying the breakage problem was the relatively long distance between the two areas, as well as the fact that pallet loads were not shrink wrapped until they were already into the packaging and shipping area.

Furthermore, before the two areas were connected, the receiving and bottling area was extremely congested due to the huge amount of space allocated for the fork lifts to pick up and transport loads to the hydraulic lift that carried product across to the conveyor "bridge." Upon arrival in shipping and receiving, a hydraulic lift carried product down similarly. Again, fork trucks were utilized to stage finished pallet loads and transport them to trailer trucks.

Mathews provided Hiram Walker with a conveyor system that bridges the two areas. With the new system, product is not touched until the shrink-wrapped pallet loads are transported via chain-driven roller conveyors to the fork lift area and then onto trailer trucks. Since handling is reduced, breakage has almost been eliminated. Plus labor costs have accordingly decreased. Even equipment costs have been lowered, as only two fork lifts are now required instead of five.

"The entire finished goods installation has allowed us to better achieve our goals of real-time processing and decreased product breakage," Clary says.

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