Anyone walking into Ford's Kentucky Truck Plant for the first time in 10 years probably wouldn't recognize the facility. That's because no automotive plant has changed more - both physically and culturally - during the last two years than the Ford facility in Louisville.
Physically, the assembly plant has gone from low-volume, heavy commercial trucks to high-volume mass production of some of Ford's most popular light trucks. In addition, a 240,000-square-foot contiguous stamping facility was added in 1999, with space provided to add new press lines in the future.
But equally important was how Ford managed the cultural changes that accompanied the physical changes - and the willingness of the workers to adapt to make the plant successful.
KTP began producing low-volume heavy-duty trucks for Ford in 1969. In those days, worker pride centered around building Ford's biggest vehicle, although at a very slow line rate. With more than 10 workers for each vehicle built, it also was one of the most labor-intensive plants in North America.
But some big changes started occurring in 1992, when the plant added 900,000 square feet to accommodate assembly of F-series trucks. A new paint shop - Ford's first waterborne paint shop - was added in 1995.
The biggest change took place in 1997, when Ford sold its heavy-duty truck business to Freight-liner. With the addition of the all-new F-series Super Duty trucks in 1998 and the Excursion in 1999, Kentucky Truck no longer was building the biggest vehicles; instead, it became the biggest producer of light- and medium-duty trucks, as well as one of the highest-volume plants around. In 1999, Kentucky Truck produced more than 390,000 F-series pickups and Excursions, and the plant operated at 136 percent capacity utilization.
At nearly 5.5 million square feet, Kentucky Truck is the largest assembly plant in The Harbour Report. Two of the most popular vehicles in the Ford lineup, the F-series pickup and the Excursion, are built at KTP. Because Ford can sell every vehicle - every highly profitable vehicle - built at KTP, the plant converted to a three-crew, two-shift operation in May 1998 to maximize production volumes. Historically, Ford has not implemented many alternative shift operations, but this arrangement has worked successfully at KTP.
To accommodate the increase in volume, the work force has doubled, and now includes many employees from Ford's partially closed facility in Lorain, Ohio, and various other Ford locations. Training was a challenge for the melting pot of people, but KTP management has a good working relationship with the union - of course, it helps that so many new jobs have been added to the facility.
NEW STAMPING STRATEGY
Overall, the launches of the new F series in late 1998 and the Excursion in May 1999 were very successful and brought these very important and highly profitable vehicles to market quickly. This is even more amazing because only months earlier, Kentucky Truck built large trucks at a very slow rate.
KTP also reflects the direction Ford is taking at its assembly operations, most notably with a new on-site stamping operation that supplies sheet metal components for the vehicles built at KTP and Louisville Assembly; and by bringing the assembly of closure panels (doors, hoods, etc.) into the plant.
At KTP, Ford has placed a priority on production of the high-demand vehicles, though opportunities still exist for improving the overall operation.
In many ways Kentucky Truck is representative of the challenges facing most Ford assembly plants. Kentucky Truck by most measures is similar to other Ford plants in terms of layout, equipment, processing and degree of automation. For example, the plant has done a good job of standardizing line operations. However, utilization of visual controls and simple, low-cost error-proofing still lags behind Ford's competitors.
Lean manufacturing and implementation of some elements of the Ford Production System also are moving at a slower than desired pace. The plant reasons that improvement opportunities are limited because production schedules simply won't permit the downtime needed to redesign workstations and to make other changes. But some of these small but significant improvements could make a good plant even better.
Like most Ford plants, Kentucky Truck's principal focus continues to be labor efficiency. The plant has many automation projects in hand to improve productivity, which, under terms of the union contract, coincides with the 120-day window that takes place each year during model changeover.
Material strategy is another area of great opportunity. KTP has significant quantities of line-side inventory because materials are delivered to workstations direct from receiving and typically in the same quantities and containers they were delivered to the plant. With the high degree of complexity in the plant - KTP has 44 build combinations on the F series alone - and the many variations of supplier parts, such a system makes it very difficult for the plant to reduce workstation size and improve the value-added work of each employee. Ford would benefit greatly from smaller quantities of line-side inventory in small returnable containers.
In addition, workstations are very large, which is especially noticeable because of the sizable line-side inventory and the size of the parts. Unlike most plants, KTP has a doors-on process through general assembly, which means parts and materials are even farther from the workers' reach.
Body, paint, trim and pre-delivery are handled separately for the Excursion and the F-series trucks, though the Excursion and the Super Duty share final assembly. One of Ford's biggest strengths is keeping body shops up and running, and that is no exception at KTP. The plant has a low rate of downtime and continues to focus on breaking bottlenecks to increase production.
Since launching the new F series in January 1998 and the Excursion in May 1999, the plant has been working hard to install automation, to improve uptime and quality, and to produce more units than were originally scheduled to be put into the plant. One such piece of equipment is the compact, low-cost framing automation installed for the new Excursion, which enables the plant to have the flexibility to build the relatively low-volume Excursion alongside the higher volume F-Series pickup.
KTP's hours per vehicle including launch was 31.15 in 1999, which was an improvement over its 34.34 HPV figure from 1998 but still 41 percent behind Ford Norfolk, the benchmark plant in the full-size pickup category. (However, in fairness to KTP, its products are much different than the ones produced at Norfolk.) Excluding launch, the plant's 28.22 HPV is nearly three hours behind its 1998 HPV excluding launch of 25.36.
Overall, KTP is very typical of many Ford operations. There is a very traditional approach to layout and productivity performance, and many opportunities exist in the areas of lean manufacturing and complexity reduction. Because of the profitability of its products, this plant is a gold mine for Ford. Yet, it could generate even greater profit with more focused implementation of the Ford Production System.
Still, the management and work force at KTP deserve praise for their excellent union-management relationship, their efforts to implement and adapt to major cultural changes, and for their ability to launch products quickly - all while continuing to produce complex but highly profitable vehicles for Ford.
HERMOSILLO: `SHINING STAR'
Ford's operation in Hermosillo is not like most other automotive operations in Mexico. With its original ties to Mazda, the plant was located about 50 miles from the West Coast for easy delivery of parts that mostly came from Japan.
Most of the other auto manufacturers and suppliers located their plants closer to the natural distribution centers created along the Texas-Mexico border cities and in central Mexico.
For its production of the Escort, Ford Hermosillo has a higher level of automation than other assembly operations in Mexico, with 159 robots operating in the Escort and ZX2 body shop alone. In fact, its level of automation in that area is nearly similar to many U.S. plants.
But Hermosillo does share something with DaimlerChrysler's facility in Saltillo, which was spotlighted in last year's Harbour Report, and General Motors' operation in Silao, which was featured in The Harbour Report 1998. And that is, Hermosillo, like the other operations, is one of the most competitive plants in North America and eclipses the performance of other Ford plants in most areas.
Hermosillo's emergence may come as a shock to some, but not to anyone who has watched the development of the automotive industry in Mexico over the past five years. In the past, Mexico presented automakers with a dual-edged sword. Yes, Mexico provided a much cheaper labor force. But that had to be weighed against the high cost of shipping materials in and product out of the country; a work force that seemed to specialize in high absenteeism and turnover; and producing a product that was likely to be poor in quality.
Well, that image is no longer a reality. Today, many suppliers have their own operations in Mexico, so shipping costs are dramatically reduced. Turnover and absentee rates are down because automakers are paying workers a better-than-average rate that is increasing over 20 percent each year.
What's more, these workers - who are better educated than many people would like to believe - are embracing their companies' lean manufacturing and other ideas designed to produce higher quality vehicles at lower costs.
Since 1994, when plunging oil prices helped cause the country's economic collapse, Mexico has been building an infrastructure that is less dependent on oil exports and more diversified in manufacturing. Automotive manufacturing, in particular, brought a lot of relatively good paying jobs to a country that desperately needed them.
When the North American Free Trade Agreement was signed, many of the import duties that had been in place were gone or diminished. Suddenly, Mexico became an important part of a company's growth strategy. And Mexico has rewarded that faith. Working in clean, modern plants, Mexico's automotive employees have shown a high level of initiative and participation in making their country home to some of the most competitive plants anywhere in the world.
Ford's operation in Hermosillo is one such plant. Hermosillo originally was designed and set up by Mazda with a Mazda-designed product. Today, however, with the launch of the Focus three-door in October 1999, most of the components come from Europe and the United States, which has created logistic difficulties.
The plant is not close to its suppliers, so more inventory is on hand. And with production of both the Escort and Focus taking place, material handling is more difficult because parts are coming from the United States, Europe and Japan in various types of packaging with many different delivery schedules.
It's no wonder that while Hermosillo enjoys a significant wage rate advantage over U.S. plants, that edge is lost because of the high import/export shipping rates. Though the plant works hard to control material delivery costs, it has no control over its biggest issue - location.
MAZDA INFLUENCE FADES
After starting out some 15 years ago under Mazda's direction, Hermosillo today has only a few Mazda engineers left in the plant. However, Mazda's lean manufacturing influence may have helped the plant's efforts to implement the Ford Production System. In fact, implementation of FPS is probably better at Hermosillo than at any other Ford assembly or stamping plant in North America.
Standard measurements are used throughout the plant, and visual boards are in use in every section and are consistently updated with elements of FPS. There is ample evidence of error-proofing, as well as good application of moving platforms an assembly aids. And the plant's quality levels speak highly about the processes in place - and the people working there. Hermosillo's work force of nearly 2,500 hourly and 265 salaried people all go through eight weeks of training before starting their jobs. They currently work in groups of 30 to 40, with plans to reduce work groups to eight to 15 people as part of FPS.
Though the plant's productivity results declined in 1999, the reasons are easy to explain:
The plant was to balance out production of the Escort wagon in July and run the ZX2 at a lower line rate until October while keeping the same work force.
The Focus was launched in October.
The plant was in preparation for launch for the four-door Escort from Wayne, Mich., which took place in February 2000.
THREE DIFFERENT MODELS
As a result of these activities, the plant is now producing three vastly different models instead of one.
In the past, the plant produced the Escort, which was designed and engineered in Japan and used lots of Japanese parts. The Focus was designed in Germany, with much different processes, parts and build sequence. The Focus welding line is almost a completely manual process, while the Escort line features a great deal of automation. Still, Hermosillo had the Focus assembly line up and running at full-line rate in four weeks.
Another reason for Hermosillo's degradation in numbers is the increase of insourced work at the plant. For example, Hermosillo has taken on some metal assembly work for the Focus that was being done at Ford Europe's plant in Saarlouis, Germany. While this work impacts that plant's productivity numbers, from a cost standpoint it's clearly the right total cost decision for Ford.
It's easy to see why Ford is planning to expand the plant to produce the Focus five-door beginning in 2001. Despite a less than desirable location, the work force, implementation of FPA and quality numbers have made Hermosillo a shining star among Ford's assembly operations.