ZF: Learning the Rules…Playing to Win

"You have to learn the rules of the game. And then you have to play better than anyone else." Albert Einstein said it. And the 200 champions of lean at ZF Sales and Service North America believe it, especially given the extremely competitive nature of today's economy. Guided by fundamental rules of lean, they are setting the pace for achieving -- and sustaining --significant performance improvement.

Established in 1979, the ZF Sales and Service Organization (ZF SSO) provides technical support and service for ZF products in North America, including spare part sales, repair, remanufacturing and warranty administration. Located in Vernon Hills, Illinois, ZF SSO is a regional business of ZF Friedrichshafen AG, a global manufacturer of chassis and driveline technology for the automotive, heavy duty and marine industries.

ZF SSO's search for an improvement initiative began in 1999. As Tim Corcoran, Vice President of the Sales and Service Organization recalls, "One of the things that prompted the search was our inability to keep pace with pockets of improvement year over year. A customer suggested lean and trained us on using a few tools. There was good acceptance of this and later initiatives, but nothing sank in." In 2002, ZF SSO decided it was time for a different course of action. Enter the Lean Learning Center in Novi, Michigan.

"What we liked about the Center", explains Corcoran, " was that they were more than consultants. They had lived through lean transformation and could share real world experience. That was important to us, especially since we had gotten off to some false starts."

In late 2002, Corcoran attended the Center's two-day Lean Leadership program that focuses on lean thinking and developing the skills necessary to design, manage and improve business at all levels. "The Center's approach coincided well with the business excellence and quality programs we were already working on," says Corcoran. "It helped us understand that we were missing important pieces, without which we couldn't see the big picture. Lean tools are just the beginning. You also have to know how and why to use them."

Leading the way

"For many companies, lean leadership remains elusive," says Lean Learning Center partner and co-founder Andy Carlino. "The capacity for leadership exists in everyone, but most people never take the time to develop it." Fortunately, ZF SSO did. "After returning from Novi, It became clear that lean transformation was going to be a top down kind of effort," explains Corcoran. "We decided to send management and supervisory members to the Center's five-day Lean Experience so they could see for themselves what it was all about."

Here participants internalize lean through personal experience and application. As Carlino explains, "Our form of instruction is not the norm. Lean concepts are taught through discussion and hands-on discovery, not lectures." A popular part of the experience involves various simulation exercises including the beer game, which teaches that poorly organized systems will defeat the best of people, and the airplane simulation exercise, where student groups work together to build model airplanes. On the first try at this simulation, typically one airplane is completed in the allotted time. At the end of the weeklong session -- using lean methods, tools and applications - the number of completed models usually jumps to 10.

During the next 14 months, as people began deploying what they had learned in Lean Experience, ZF had some success. Something, though, was still missing. That something was an integrated approach and the leadership it takes to direct it. "This is when things really started taking off for us," admits Corcoran.

ZF's building management team became 'the leadership team'. Corcoran explains, "This was not just a subtle name change. It gave us all the sense that we were officially moving in the right direction - from our current state to a more ideal state."

"Using a business excellence process to identify areas with the greatest opportunities," adds ZF's first designated lean leader, Norbert Schmelz, "the team prioritized projects, identified goals and set up yearly implementation plans, with full support of our president who attended every meeting."

This marked a major step forward in ZF's ability to 'manage the tension' as they call it. Case in point, after a 2004 waste walk, the leadership team came up with a plan to reorganize and optimize its building. The staff said it would take six or seven months. Much to their surprise, the ZF team pushed hard and smarter to get it done faster. Three months later, both plant and warehouse were reconfigured to a lean layout. "Ahead of schedule, perfect execution and on budget," explains current lean leader Tony Price. "The natural tendency is to build extra time into an activity as a safety net. But if you understand a process, you can simplify it and get rid of that cushion."

It was the success of projects like this that helped impact and change the culture of the entire plant. Although lean principles were initiated from the leadership team, the acceptance by the entire plant to make a cultural shift to lean thinking was critical. By mastering smaller projects and showing significant results, acceptance of lean spread throughout the facility allowing for larger projects to be left in the hands of the people doing the work with minimal leadership team guidance. This shift has led to a pro-active employee approach to business where plant floor personnel become leaders in suggesting and organizing improvement projects where, at times, even the lean coordinator has little involvement.

Standardization, simplification and integration

What started as an improvement initiative and the formation of a lean team evolved into something huge at ZF -- the Vernon Hills Business Management System or VHBMS. Fully implemented in 2005, VHBMS was established to define procedures and processes and to identify the relationship between them. "Previously called the Quality System," says Alex Kurzeder, IT/Business Process Manager, "VHBMS is the backbone of the way we operate our company, representing the combination of all the efforts we've put into ISO/TS 16949, Lean and our ERP system called Navision."

Adds Corcoran, "In the past those would have been three independent chimneys of activity, which is why VHBMS is such a big change for us. It's become a major part of our commitment to continuous improvement and I don't think there's any way we could have done this without lean thinking." Driven by customer requirements, VHBMS encompasses ZF's quality operating system, quarterly strategic planning, business planning and goal-setting as well as monthly business management review and team-building.

A key component of VHBMS is the Vernon Hills Operating Process or VHOP, which details activities performed on a daily, weekly and monthly basis. Available to employees online in an easy-to-use spreadsheet format, each activity is color-coded and grouped by like needs. An employee can click on a certain process, go to a flow chart that describes how it works and then by clicking blue hypertext can view step-by-step instructions. VHOP was organized by what ZF calls key process owners who were assigned the responsibility of coordinating all process tasks. Teams underneath integrated quality policies, lean processes and work instructions into the various tasks.

"The rules of lean were used extensively in putting VHOP together," says Corcoran. "By structuring our activities; clearly connecting customers and suppliers; understanding and simplifying flows and improving upon them by experimenting at the lowest possible levels, we cut about 1000 different processes down to about 300."

The glue that binds lean efforts

"Perhaps the biggest contributor to the success of ZF's improvement - and another key component of VHBMS - is the Self-Assessment and Optimization Process or SOP. SOP, based on internationally recognized criteria, has been the driving force for improvement at ZF for seven years," Says Carlino. "The one thing that binds all ZF's lean efforts together is its ability to connect every goal of the organization with a lean activity. SOP is their process for achieving this."

SOP includes a lean assessment provided by the Lean Learning Center on a yearly basis. The Center scores ZF in 13 lean categories. Assessment findings and the Center's recommendations are fed into SOP and then cross-functional and cross-level teams are assembled to self-assess and score each process. As a group, ZF then prioritizes strategies for the coming year to improve weak spots and to reinforce strengths. The SOP analysis covers all spheres of the company - management, policy, staff, partnerships and resources.

"It was through the SOP process that we found lean in the first place," explains Corcoran, "and it has become very important for increasing customer satisfaction, motivating staff and optimizing our work. In 2005, we identified 122 areas for improvement in nine major target areas."

Implementation of SOP, VHOP and the entire VHBMS has helped ZF standardize activities across the board and drive out complexity, making it easier for employees to do a better job. Kurzeder adds a final exclamation point about VHBMS. "You only need to look at where we came from to see how far we've come. Our quality policy used to be 50 pages long and was cryptic at best. Today, it is easy to read, meets all ISO requirements, is fully integrated into our operating system and fits on four pages."

Lean learning never ends

"Learning and internalizing the fundamental principles of lean," says Lean Learning Center partner and co-founder Jamie Flinchbaugh, "is what creates the shared thinking that is so critical to long-term success. And, learning never ends in a lean thinking organization."

Many companies find that the small-group setting of the Lean Learning Laboratory is ideal for this. Particularly because so many subjects -- such as Scoreboards; Waste Walks; Five S's; Standardized Work; Process Mapping; Visual Management and Problem Solving - can be covered in such an easy-to-digest fashion.

In 2004, Carlino launched the first lab in ZF SSO's automatic transmission re-manufacturing area. "The labs have been great ways for us to realize and sustain lean success," says Tony Price. "What's really great is that as each small group learns and perfects, they spread their knowledge to more people to reap even more rewards."

Kaizen events have also been effective at ZF. In early 2006, a warehouse team achieved success by improving the time it takes to pick parts for customers' orders. According to team leader Mark Gephardt, "Everyone on the team was enthusiastic and eager. First process maps were created. Goals were established and barriers preventing their achievement were identified. As the project evolved, the team put a lot of effort into creating solutions to those barriers so that improvements could be made."

"We did another kaizen recently on building utilization," says Gebhardt. "The Center helped us in the beginning with facilitation but then let us take over and sort of run things from there. That's one of the things we really like about working with them - they support us early on but their goal is for us to learn to become self-sufficient."

Real success … lasting change

Despite the early twists and turns, ZF's journey to lean has been paved with real success. Thanks to integrated lean thinking and a totally new way of looking at things. As Tim Corcoran says, "When it came to evaluating concepts and tasks, we had to shake ourselves free of the past habits and start completely from scratch." But, it's paying off on many fronts.

2005, for instance was very productive at ZF in Vernon Hills. The VHBMS was implemented. TS16949 was achieved. The plant and warehouse were optimized. And the office was redone in a lean footprint using remanufactured furniture. The facility won ZF AG's TQM award. And, the organization improved its Lean Assessment score by 40%.

"We've come a long way in a relatively short amount of time," says Corcoran. Making lean a part of everything we do has changed everything here at ZF SSO. We're an organization with a shared vision, working within a structure of simple, yet optimized activities and processes. For us, lean is the only game in town."