Ex-Toyota exec preaches production gospel to aspiring supplier

LOUISVILLE, Ky. -- Paula Lillard gives the big second-shift factory manager a hug as she moves through the dingy metal-stamping plant. Lillard, a grandmother who raised four sons and started her career managing school cafeterias, is now the bright hope for nth/works.

She has come to help instill the Toyota Production System -- or TPS -- for a supplier that urgently wants it. Hundreds of American automotive manufacturers have adopted Toyota's operating methods over the past quarter century.

But many others, including nth/works, are still struggling to get it. Lillard is among a corps of Toyota-trained former executives and independent consultants who continue trying to help the process along.

"This plant just needs a little TLC," says Lillard, a cheerful and youthful 58-year-old who seems to light up faces around the factory as she inspects it. She also puts her arm around the operator of an enormous stamping press, who accepts the gesture like a sip of cool water in the hot plant.

"I guess I'm a hugger," says Lillard, recently appointed COO of the dowdy supplier. "I find that some others are also. I try to acknowledge people. If I don't make it to the floor for a few days, they want to know where I've been and they want to show me what improvements they have done in their area."

But don't be fooled. Lillard's outward show of teacherly encouragement and motherly support is intended to take nth/works -- a nearly 70-year-old stamper of washing machine parts -- deeper into the auto industry where it already has some business.

She has a long resume of putting automotive factories on sure footing.

She was one of Toyota Motor Corp.'s earliest employees in Kentucky in the 1980s.

She rose quickly through assignments in Toyota's North American production planning and strategic planning management, purchasing and supplier development.

She helped establish Toyota's North American manufacturing headquarters in Erlanger, Ky., and helped build and launch its engine plant in Huntsville, Ala. Lillard was recognized by Automotive News in 2005 as one of the 100 Leading Women in the North American Auto Industry.

She was recruited to oversee human resources for Mercedes-Benz in Alabama, which was trying to instill a Mercedes version of the Toyota Production System. 

A decade later, that's her mission again at this small urban manufacturer that has repeatedly failed to embrace Toyota's methods. 

The frustrating, difficult and slightly otherworldly operating philosophy has roiled U.S. manufacturing since Toyota arrived as a manufacturer in North America in the 1980s.

But it is a system that has eluded the privately owned nth/works for five years, says Tom Hudson, nth/works' 67-year-old CEO. 

"We're not a broken company that needs to be fixed," the smiling, gray-haired CEO clarifies. "We're just an old company that wants to get a lot better. And we're having trouble doing that." 

A plaque in his visitors' lobby bears the engraved names of those who have come to help the company in recent years. A large part of the plaque is still blank -- as if anticipating the addition of more people to help nth/works get it right. 

"I believe Paula and her team are what we need to get there this time."

Teachers and practitioners of TPS say a company must take on a new mind-set, and that executives and assembly line workers alike must adopt new habits.

Holding nth/works back, Hudson says, has been a five-part dilemma:

1. Nth/works is mainly a stamper of metal parts for the appliance industry, in which finished quality is less demanding than in the auto industry. Revenue last year was about $50 million, down from about $60 million 15 years ago, as major customers such as General Electric, Whirlpool and Bosch have turned to cheaper suppliers in Mexico and China.

2. Hudson knows that nth/works needs to diversify from washing machine parts and oven and TV panels and into car parts. It has snagged some auto business -- including engine mounts and chassis pieces for Toyota -- but Hudson wants more.

3. The leap from imprecise refrigerator brackets to car parts will require a big improvement in his plant's quality standards, he says. To reach that level, nth/works will need to adopt Toyota's methods for efficiency and quality control.

4. Absorbing and adopting TPS -- which its supporters within Toyota say is difficult to master -- will require a new level of skills and training for nth/works' 311 employees.

5. Nth/works is hitting the same wall as automotive manufacturers all over America: It is increasingly difficult to attract and keep workers who are up for the challenge of 21st-century manufacturing, especially the demanding practices of a system such as TPS.

A few years ago, Hudson was stunned to learn from an employee survey that one-fourth of his workers could not read or write. That is a nonstarter for a factory operating system that requires workers to read specific instructions, record quality results and describe problems and solutions each day.

Most of those illiterate workers have left the company. But nth/works still must get employees to communicate clearly with each other. The relatively small plant has workers who speak 10 non-English languages. Among them: Bulgarian, Vietnamese, Swahili, Russian, Somali and Korean.

Nth/works, launched as a family-owned stamper in 1946 by a returning World War II veteran, operates on the sparsely populated industrial south side of Louisville. It has plenty of better known neighbors competing to hire workers.

Nearby is Ford Motor Co.'s Louisville Assembly Plant. A short drive away is GE's massive Appliance Park, which recently recruited 2,000 workers. Also just down the road is Worldport, the UPS's recently expanded international airport hub that employs 9,000.

Even Toyota's big assembly plant in Georgetown, Ky., 80 miles east, which also is expanding, sends buses into Louisville every day to pick up and drop off Georgetown employees. 

Wooing promising and talented people to work for a small auto parts company is simply tough, Hudson says. 

Nth/works has been trying to fill two manager positions for two years. It has been trying to recruit a maintenance engineer for six months. 

Second-shift job slots are nearly impossible to fill, he says. Nth/works has sifted through young applicants who don't know how to use a tape measure, or who balk at the rigid hours of factory work. The company recently stopped trying to recruit employees from the local public high schools because past recruits had fallen so short of expectations.

Against this backdrop, Hudson has been trying to instill TPS at the company since 2009.

Whirlpool, an nth/works customer that follows Toyota's practices, provided help early on to convert the company. But the stamper wasn't yet ready, Hudson says.

Toyota itself provided some assistance along the way, sending a purchasing support manager to consult with Hudson's team. That inspired nth/works to improve, but failed to get the job done. Various managers tried to convert nth/works -- none of it worked. Hudson invested time and money to groom a manager to lead the conversion. But that manager then left to work elsewhere.

Last year, Hudson found Lillard working as a manufacturing consultant from her home office in northern Kentucky and asked her to lead his TPS effort.

Toyota maintains a business unit in Kentucky, the Toyota Supplier Support Center, which has worked with hundreds of U.S. companies over the past 20 years to teach the system. The center's 14 or so TPS advisers work with about 40 companies at any given time.

Toyota charges a company only for the time and expenses of its visiting personnel, says Mike Goss, Toyota's chief manufacturing spokesman.

"Our point in all this is that we want American companies to thrive," Goss says.

"Toyota strongly believes that manufacturing can work in America, and that American companies don't have to move jobs overseas to make themselves more efficient."

Gary Convis, who was chairman of Toyota's North American manufacturing business until he retired in 2007, continues to be a powerful TPS advocate. He later was CEO of supplier Dana Holding Corp. as it emerged from Chapter 11 bankruptcy, where he spent two years converting Dana's plants to TPS around the world.

Convis testifies to the challenge of instilling TPS.

"When you're inside Toyota and you attempt these things, you're surrounded by all of Toyota's resources and like-minded people," Convis says. "When I moved to Dana, I found myself on my own. It's a lot tougher to change a company that doesn't have that history."

Lillard accepted the challenge at nth/works, but she warned Hudson: The process is slow, painstaking, demanding and tedious. After years of struggling, the CEO already knew that.

She is supported by a team of eager managers, including Gary Cook, an nth/works tooling and customer-estimate engineer who has been promoted to director of operations. The first task in the transformation has been to ask employees to write and create step-by-step instructions on how to do their jobs.

That alone is taking months. But standardized, simplified, spelled-out work steps are a staple of TPS. Otherwise, quality and results can vary from work cell to work cell, and shift to shift.

It is also an example of what frustrates many American executives, who want TPS to immediately improve efficiency and quality and cut costs.

"First things first," Cook says. "We'll get there. But one little step at a time."

Cook points out stray metal rivets on the dark factory floor, slung out carelessly by an inefficient workstation. He doesn't bother to pick them up.

"Eventually, our people will see them on the floor," he says, a wry smile on his face. "When they learn more about TPS, they'll understand the importance of workspace cleanliness. And then, they'll find a way to control it without being told.

"We could come in and clean and paint everything and make it all look good," he says, pointing out the unkempt environment. "But they have to first learn why that's important."

Lillard and Cook are also establishing "quality coaches" in each work area of the plant. The coaches will train workers not simply how to spot a product imperfection, but how to solve the problem that caused it -- a key part of TPS.

Lillard says the factory will have completed several steps toward TPS by year end. Key to it, she emphasizes, will be engaging the work force in the transformation -- making people in the plant want to improve, and making them understand that they have the power, brains and the management support to do it.

Hence, the gentle encouragement and hugs.

"This process is about building a culture that makes people want to take ownership," Lillard says, working on the shop floor well into the hours of a second shift. "It's about respecting the people you work with every day."