Sunday, June 06, 1999
Beiersdorf's Mariemont plant thrives after radical changes
BY MIKE BOYER
The Cincinnati Enquirer
By most reckoning, the Beiersdorf Inc. plant in Mariemont shouldn't be in business today.
Twice in the past decade, corporate managers decided that the 170-employee plant should be shut down and its operations moved out of the country to save money.
The business makes an assortment of medical aids, primarily elastic braces for knees, ankles, wrists and elbows. It was in a World War II-era building with a leaky roof, had not introduced a new product in more than decade, and its costs were too high.
Owned by Beiersdorf AG — a German conglomerate that includes Nivea lotions and Tesa brand tapes — the company could have become another in a long line of U.S.-based cut-and-sew operations that have shut their doors and moved overseas in search of cheaper labor rates.
But thanks to a determined plant manager, the pluck of its employees and some foresight by new owners, the company is not only alive, it's thriving:
Q&A WITH KESSLER
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Larry Kessler, plant manager, on the dramatic turnaround:
Q: What prompted the turnaround at the plant?
A: We didn't want to cave in, shall we say, to the view in Corporate America that you should take cut-and-sew operations and move them abroad.
There was a series of studies done since I've been here, and all the studies basically said shut her down and move it to Mexico, or Ireland or someplace like that.
We basically asked for the chance to counter their plans. We were given that opportunity.
Q: Were you optimistic the plant's situation would improve when Beiersdorf took over?
A: I knew there would be another study, but I also knew the German culture and business climate was different.
They believe in employees. They have a different view — they're not monthly and quarterly oriented. They're looking for long-haul investment. I thought I had a good chance.
Q: With all the changes in ownership and management, how could employees believe under Beiersdorf things would be different?
A: I don't know there's any one thing that gets you over that jadedness.
It's just everyday communications and commitment. It's a trust relationship. (Beiersdorf) hasn't done anything that is unreasonable, unethical or less than professional. They've walked a very straight path for us.
Q: As plant manager, you could have accepted the plant-closing decision. What caused you to challenge the status quo?
A: I came up following a different path. I was one of 13 kids in a blue-collar family. We were taught never to give up. I went to college on the GI bill and worked a lot of second and third shifts, so I acquired a lot of the views of the man and woman on the shop floor.
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• The plant has met and exceeded its cost-cutting targets. In 1996, the plant committed to cutting its costs by $6 million over five years. To date, plant manager Larry Kessler estimates the plant has achieved savings approaching $10 million.
• The company today is turning a profit. Officials predict sales will hit $35 million — up from $31 million a year ago. The plant introduced six new products alone last year and won Beiersdorf's production innovation award a year ago.
• Production, thanks in large part to a new sewing setup based on the Toyota production system for making automobiles, is up almost 50 percent this year — to a projected 8.5 million pieces vs. an originally planned 5.7 million pieces.
• Exports, which accounted for less than 10 percent of sales a few years ago, now are at about 25 percent and moving higher.
Also, employment has increased by about 40 in the past year. The plant is still looking for 10 to 20 workers to complete a second shift.
Beiersdorf has stepped up its investment in the plant, fixing the roof, installing new lighting and making other improvements such as a new employee cafeteria.
A new chapter
The changes have marked a dramatic new chapter in the company that traces its roots back 82 years in Cincinnati.
“I"ve seen a lot of changes. But I think this has been one of the most positive and exciting,” said Mary Jean Bolton, an employee for 32 years and an officer in UNITE, Union of Needletrades Industrial & Textile Employees, which represents most of the workers.
In the past, she said, “we had been sold so many times, we didn't know a lot, but some things you could kind of figure out in your mind. Morale wasn't really good.”
Last week, in the latest sign of its dramatic turnaround, the plant was notified of its inclusion among the top 25 in Industry Week magazine's annual competition to pick the nation's 10 best manufacturing operations. The final 10, based on an evaluation of improvements in a variety of operating areas, will be announced by the magazine in September.
“If we can achieve Industry Week's top 10, we'll have gone from closure to one of the top 10 (manufacturing plants) in the country. That, for any plant inside of three or four years, is a miracle in my mind,” Mr. Kessler said.
Techniques exported
James Kenton, president of Beiersdorf's North American operations, said the company is now spreading the techniques used at the Mariemont plant to some of its more than 50 other operations worldwide.
“It's being used as an example of ways to get things done,” Mr. Kenton said. “They've done an amazing job, but not by cutting corners. They're producing better products than they were a few years ago.”
Mr. Kessler, 45, the plant's former materials manager and the architect of its rebirth, admits that he had doubts.
“I knew the problems, but when you bring people in, you can be surprised at what you can do,” he said.
Mr. Kenton, who is Mr. Kessler's boss, said he's impressed with the plant's turnaround.
“They surprised me a little bit, but Larry always delivers on his promises,” he said.
There was little promise in the Mariemont plant, then known as Kendall-Futuro, when Mr. Kessler took over as plant manager in 1994.
Mr. Kessler said he quickly realized that his job was to keep the operation “level and steady while they got ready to shut it down. That was my charter: To shut it down.
“Although I started fighting and trying different tactics with Kendall. They didn't want to hear of a way to save this plant.”
Boston-based Kendall was spun off from Colgate-Palmolive Co., which had acquired the elastic-brace business from the family of George H. Jung Jr. Mr. Jung started the business making elastic foot braces as a teen-ager in 1917.
Tim Knisley, the plant's financial manager, said closing the plant was so near “that Larry and I had a couple of discussions on offering incentive packages to management people to stay until the thing closed.”
Shutdown date set
A tentative shutdown date was set for 1996, Mr. Kessler said. In the meantime, Kendall itself was acquired by Tyco International Ltd., in 1994. Tyco subsequently sold several Kendall health-care brands including Futuro and the Mariemont plant in early 1996 to Beiersdorf AG, a German cosmetics and consumer products maker with $4 billion in revenues.
Although Beiersdorf was looking to expand its presence in the United States as well as find new products it could sell in Europe, Mr. Kessler said, “I felt there would be another study” about closing the plant.
Within a few months, his premonition proved correct. Beiersdorf executives began studying a plan that would save $6 million over five years by shutting the plant down and moving production overseas.
But in late September, Mr. Kessler took the offensive. He met Hans H. Meyer-Burgdorf, a top Beiersdorf executive, for breakfast and asked that the plant be given the chance to match the savings projected by closing it.
Plan in the van
Sitting in his van in the parking lot of the Eastgate Holiday Inn, Mr. Kessler outlined a plan for Mr. Meyer-Burgdorf to achieve the savings with concessions from the plant's landlords, vendors and employees. Mr. Kessler got 90 days to implement the plan.
The 211,000-square-foot Mariemont plant is still owned by the Jung family trust, which was interested in seeing the business stay in Cincinnati.
“They basically cut our lease rates by a third and gave us subleasing rights. That allowed us to further reduce our lease by another third. In essence, we're paying about a third of what we were paying in lease payments three years ago,” he said.
Next, Mr. Kessler brought together 25 vendors, representing $9 of every $10 the plant purchased and asked for price cuts.
“It wasn't an ultimatum,” Mr. Kessler said. “What it was was understanding: If they would support us, we'd support them and continue to seek ways to provide access to the rest of Beiersdorf's purchasing. They were part of the decision because if this plant closed, they would ultimately lose business as well.”
Twenty-four vendors agreed to price cuts averaging 4 percent, and Beiersdorf formed a corporate purchasing council to consolidate its buying.
New labor agreement
Finally, Mr. Kessler asked for changes in the labor agreement between the company and UNITE, Union of Needletrades Industrial & Textile Employees, expiring at the end of 1996.
The new agreement, approved by 79 percent of the membership, represented about half of the $6 million in projected savings. It included a reduction in wages for about a third of the workers, but the rest saw no change or an increase in their pay. The agreement, which expires at the end of this year, also made changes in insurance and other benefits.
Dennis Berkemeier, a union vice president, said the workers thought that the changes were inevitable.
“We knew we were probably going to have to do it,” he said. At the same time, the company offered senior employees a severance plan. Of the more than 40 workers eligible for the plan, only five or six accepted it, he said.
The plant's management was also streamlined. The number of line supervisors was cut from five to two, and the materials department was cut to six from 11.
“Everybody's been forced to ante up to the bar in performance with greater responsibilities,” Mr. Kessler said.
Proposal accepted
Beiersdorf executives accepted the cost-cutting plant, but Mr. Kessler didn't stop there.
“The initial push managed to secure us for three to five years,” he said. “What we needed to do was go beyond that.”
With that in mind, the plant a year ago began implementing the Toyota Sewing System. That replaced the plant's previous large batch production process with a single-piece flow.
Instead of the workers producing large batches of product at a time, small teams of two to five employees work as a unit, or cell, sewing complete products and putting them in boxes for shipment.
“It's much more efficient, because you remove a waste in the form of handling, storing and moving components,” said Leonard Egan, president of Americas 21st Inc., the Greenville, S.C., consulting firm licensed by Aisin Seiki Co., a Toyota subsidiary, to market the system in North America and South America.
“Batch manufacturing is pretty inefficient in the end,” he said. Building product in smaller units allows a company to produce closer to actual orders, reduces inventory and catches mistakes much sooner.
Freedom of movement
The system, developed by Aisin Seiki in the late 1970s to produce auto seat covers more efficiently, has other benefits as well. Instead of the workers being hunched over sewing machines all day, they stand at adjustable U-shaped work areas and have greater freedom of movement.
“I like it because you can move around,” Mrs. Bolton said. “You're more alert and have fewer aches and pains.”
With the new contract in place, the company also has implemented a new incentive-pay system, which allows the workers to earn incentives sooner.
Mr. Egan, whose company has installed the Toyota system in several hundred companies since the late 198Os, said he has been impressed with the quality of the Beiersdorf workers.
“That's a very good work force out there. They're very open and enthusiastic,” he said. “They want rewards, but they understand you have to make an effort to earn them.”
Mr. Kessler said the plant's commitment to improvement won't stop with the Industry Week competition.
“We'll just go on to another one. Any sheepskin that forces you to think about who you are and how you're going to improve is important. That's what it's all about.”
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