17 September 2010
This ultra-lean star performer is seeing off rivals from low-cost economies using an impressive blend of manufacturing innovation, capability and agility… the shining light among UK factories
The next time you are sat in your car waiting for the traffic lights to change, or when you next stand at the pelican crossing looking for the 'little green man', it's likely you are interacting with technology designed and built by Siemens Traffic Solutions. Siemens Traffic Solutions (STS) is part of the Mobility Division within the Industry Sector of Siemens plc. Housed within an impressive 6,000 sq m factory at Poole, Dorset, the company has made giant strides in the past couple of years to ensure its range of traffic controllers, modules, motorway equipment and street furniture occupy a commanding position within global markets.
'Solutions' is very much the word that reflects a recent market shift away from products to fully integrated traffic systems with intelligent communications that are linked to a central control system.
It's part of the drive that has witnessed turnover at STS leap to £21 million from £15 million just 24 months ago, without increasing the workforce. This impressive 29% improvement is no mean feat considering that the company has over 300 live line products at any time (48 different traffic controllers alone), and that the 150,000 PCBs it manufactures every year comprise a staggering 690 different types.
By the company's own admission, such manufacturing agility is not normally associated with OEM-type corporate organisations. But STS bucks this stereotype, typically adopting one new PCB every week and continually fine-tuning the factory layout to aid better processes and help offset stiff competition from China, where it says labour is around eight times cheaper.
Lean manufacturing, instigated officially at STS in 2006, is at the core of the company's success. Key elements deployed include barcode-driven line side kanban, value stream mapping, TPM, 5S workplace organisation, one-piece flow, line balancing, an employee suggestion scheme and cellular manufacturing. While some of the line flows are straight in orientation, others remain U-shaped due to building restrictions. Given a blank canvas, the company says the shape of its building is the one thing it would change.
And yet this fails to detract from the impressive nature of the shopfloor at Poole, which today consists of 12 manufacturing cells. Just two years ago there were only three, and the company openly admits it probably "wouldn't be around without the impact made by lean".
A modular and flexible workbench system forms the focus of the company's assembly-based processes, while a two-bin kanban typically allows around 48 hours of throughput. Commodity items such as fasteners are delivered to the line by suppliers on a consignment stock basis.
The two surface mount PCB lines differ in that they are technology-based, rather than labour-based. The lines are segregated for lead-based and lead-free solder, with PCBs grouped into logical families wherever possible to minimise changeovers. The automatic placement machines have software that can determine component commonality. Surface mount components are supplied on reels offering barcodes that feed stock level information into the company's modified version of SAP, so that re-order points are determined automatically.
Once populated, machine-vision inspection stations are used before and after the PCBs enter heat/flow ovens.
Of all the lean initiatives at STS, its 3i (ideas, innovations, impulses) suggestion scheme has proved particularly successful, offering up some 3,500 potential improvements in the past three or four years alone. In the 09/10 financial year, the suggestions put forward generated savings of £1 million against running costs of approximately £6 million. Employees are rewarded, with money accumulating in a 'treasure chest' that goes towards teambuilding events.
Among the latest lean initiatives to be implemented is a new forecast tool with min/max controls for sales stock. STS uses best intelligence from the company's traffic business as a whole to forecast on a three-monthly basis. The min/max system then determines build quantity, with 'max' set at four weeks' worth of average demand, and 'min' set at two weeks.
STS selects production strategies according to demand volumes, distinguishing runners (where demand is present for at least eight months of the year) from repeaters. Around half of runners are classed as 'make for stock' where the business requires standard products to be available at all times. This is controlled by a master production schedule. The other half is defined by 'finish to order'. Because all traffic controllers are sold as bespoke units with variable hardware options, shorter lead times are achieved by taking a made-for-stock item and adding customer-specific options. Repeaters are all classified as make to order. Ultimately the aim is to become almost self-managing where kanbans dictate the run rate.
To keep tabs on its performance the company uses a balanced scorecard suite of KPIs as a business-wide tool to identify the root causes of any failures and implement corrective actions. It's a strategy that has helped STS provide a boost to important areas. For example, in the past two years, first time pass rates (yield) are up to 99%, while labour coverage has now hit the magic 100%.
The huge purchasing power of Siemens plc also contributes significantly to STS's competitiveness, a factor that rival firms in China, for example, have little hope of matching.
"We can buy PCB components for less than our Chinese competitors even though many of them are actually manufactured in China," explains Gary Winstanley, supply chain director. "Cost is still king for many of our customers such as Transport for London, the Highways Agency and local authorities. All of these organisations are governed by best-value initiatives with lifetime product costs as the central focus."
STS's supply chain is all about relationships. The company holds annual supplier days on site to improve understanding and performance. In terms of the latter, STS publishes a league table that is sent to suppliers to show their position (without revealing other companies). But rather than penalise or persecute, STS prefers to offer help if things are not going to plan. For example, it can provide IT systems and hardware upgrade support, as well as the provision of technical support engineers to work at supplier sites to help develop new processes.
In the long run it all helps STS become even more competitive, a fact that it is fortunately able to cross-reference on a fairly regular basis. How? Well, although the company has a good spread of customers, as part of Siemens plc it often has the opportunity to tender for contracts being offered by other businesses in the group. Although these can only be secured by providing the most competitive quote, one post-tender advantage is that STS gets to see the benchmarking results of the submitted quotations. In one recent e-RFQ for PCBs required by a Siemens company based in the US, STS outperformed rivals in China and Mexico, offering the customer productivity savings in the region of 25%.
Of course none of this is possible without a workforce prepared to demonstrate the right mindset. But here, STS has got things just right. For instance, in terms of its youngsters the company supports the group-wide 'Generation 21' initiative via two local schools. The company also has 14 'Stemnet' ambassadors. These are employees from STEM (science, technology, engineering, mathematics) backgrounds who volunteer as inspiring role models for young people. They contribute both to regular lessons or participate in extra-curricular activities such as STEM clubs, career days and visits.
STS also runs a manufacturing apprenticeship scheme where participants can attain HNC-level qualifications. The company has employed three apprentices in each of the past two years – a decent percentage for a 120-employee organisation. NVQs are also exploited to good effect. In fact, 100% of the manufacturing management team are trained in Business Improvement Techniques and Lean Awareness, while 50% of manufacturing staff have volunteered to attain relevant NVQs in production techniques, helping boost the company's skills matrix.
To identify training needs, STS uses the Siemens leadership framework, whereby every employee has a dialogue that is discussed at a cross-discipline management round table – the framework is also linked into succession planning.
Another factor providing differentiating advantage for STS is its commitment to energy-saving products through ELV (extra low voltage) technologies. Not so many years ago, traffic light systems were 240V; today only 36V is required. And where there were once 24 LEDs in a signal head (the days of bulbs are long gone), modern STS units require only eight LEDs, with the next generation likely to need four.
From an environmental perspective, a recent 'lights out' initiative led to a £70,000 rebate from STS's electricity supplier, while recycling levels are also impressive – currently 72% of waste produced by STS avoids landfill.
The site of the Poole factory enjoys a reputation of some legend in the local area, largely due to its long history of innovation. In previous incarnations it was the discovery ground for the technology behind ERNIE, the machine that randomly draws the winning premium bond numbers. Hawk-Eye technology, used so successfully in sports such as tennis and cricket, also has its origins here.
Today, Siemens is continuing the ethos of innovation through its products, its manufacturing initiatives, and the management techniques it uses to deploy them: as a company – a genuine world beater; as a manufacturer – a factory of distinction; and as a benchmark – the one to aim at. STS's intentions are clearly signalled, a green light for go, go, go…
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