Book Turns CalComp Around : Anaheim Firm Profits From ‘The Lessons of Simplicity’
Three years ago, CalComp was losing ground to its competitors in the computer graphics equipment business. To fight back, the company decided to move some of its manufacturing operations--and hundreds of jobs--from Anaheim to Singapore.
But then CalComp Chairman William P. Conlin had an idea.
“I kind of laid down a challenge to the people in the factory to see if we could beat the costs of Singapore right here in Anaheim,” said Conlin, who joined CalComp as president in 1983 after a long career at Burroughs, a Detroit-based office equipment company.
CalComp sought the advice of various management consultants, finally settling on a former business school professor, Richard J. Schonberger. Schonberger, who now heads a Colorado management consulting firm, wrote a book entitled “World Class Manufacturing: The Lessons of Simplicity,” published in 1986.
The book lays out a master plan for improving manufacturing through a variety of techniques. Those techniques include “just-in-time” manufacturing (the delivery of parts from suppliers on an as-needed basis), strict quality control, finding suppliers closer to the manufacturing site and reducing their number to a minimum and establishing a program for increasing employee involvement in the production.
Japanese manufacturers have been following many of these techniques for years. More recently, a growing number of American companies have put them into practice as well.
CalComp adopted Schonberger’s book as its bible and handed out copies to each of its Anaheim workers. Late last year, CalComp began producing a new plotter on an assembly built according to Schonberger’s principles. A plotter is a computer-based device used to draw maps, charts and graphs.
Founded in 1958 in a Downey garage, CalComp has grown into a leading maker of computer graphics equipment.
The company, a subsidiary of Lockheed, employs 2,600 people--about half of those in Anaheim--and makes about 100 different products.
In a recent interview with Times staff writer David Olmos, Conlin discussed his company’s experience with the manufacturing program.
Q. How did you first hear about world class manufacturing?
A. I had read articles in magazines about the problems with American industry, and I heard about various companies that were doing a good job of it. The thing that got my attention was that one of the companies that adopted these techniques early on, and was doing a good job with it, was a competitor--Hewlett-Packard. That really got my attention. I didn’t know how to go about doing it; I just knew something had to be done. There’s an old Russian saying: “The sight of the gallows clarifies the mind.” We saw what was needed to save the company, and we went ahead and did it.
Q. What exactly is world class manufacturing?
A. Different people emphasize different things. Let me give you my impression of what it’s all about. First, it requires a total commitment on the part of the company because you really change a lot of the way you do your business, not only in manufacturing but throughout the company. For example, you don’t establish a long production schedule, you adjust your production schedule weekly, and you do it based on your order backlog. You have to work very closely with your suppliers, and you have to reduce the number of suppliers that you have. The typical way of building a new product is to look at multiple bids, select the low-price bidder and then try to screw them down another few cents a part.
World class manufacturing is just the opposite. It says that you deal with the fewest number of suppliers and give each of them the most business you can. Another important thing is we try to qualify each supplier as a certified vendor. That means we don’t inspect the parts that come in from that supplier. We assume they’re all 100% good. The parts go right on the production line when they arrive.
Q. Would you describe the circumstances that caused you to look at your manufacturing operation and decide that you wanted to do something different.
A. It was a number of factors, but I think one of the overwhelming ones was the fact that the whole computer industry was getting tremendously impacted by personal computers and lower cost work stations. We were selling plotters in the price range of $25,000 to $50,000, and we were selling them in the hundreds of units a year. Suddenly, with computer-aided design software being available on the PC, the demand was going up by orders of magnitude. Now we had to build units at a lower cost and ship thousands a year. Our manufacturing process just wasn’t adequate for that kind of volume. We did not have a system in place that would enable us to get our manufacturing costs down. So it became pretty evident that we had to do something different.
Three or four years ago, most U.S. companies were going offshore with their manufacturing. We evaluated the same alternative, and what we discovered was that it wasn’t the low-cost labor that was significant. What we learned was (that) the areas of the world that were good in manufacturing--Singapore, Hong Kong, Taiwan and Ireland--were good because they had a strong infrastructure for manufacturing. They knew how to deal with suppliers; they knew how to control the quality, and they got their costs down by studying the manufacturing process and eliminating a lot of waste. So we checked the whole world over for places to locate and we settled on Singapore.
At that time, I kind of laid down a challenge to the people in the factory to see if we could beat the costs of Singapore right here in Anaheim. We consulted with various experts in the field and settled on a guy named Dick Schonberger.
Q. What were the results?
A. We adopted all the principles in (Schonberger’s) book. We had a miraculous turnaround in our cost of manufacturing.
Q. Have you had any problems with your suppliers not providing quality products?
A. It’s been a series of challenges, and, like anything else, some suppliers rise to the occasion and others fall by the wayside. But the ones that meet our criteria are really rewarded because they get tremendous increases in the volume of business they get from CalComp, and it makes their company better.
Q. Can you describe how your relationships with suppliers have changed?
A. It’s been dramatic. Three or four years ago, we might have had 500 different suppliers of parts for our products. Today, that number is down to between 50 and 100.
Q. Have any suppliers moved into this area just to work with your company?
A. Not to my knowledge, but Orange County to begin with is one of the best locations in the world for manufacturing high-technology equipment.
Q. Why is that?
A. Well I think it’s because there’s such an infrastructure in Southern California in general for high technology. Both users, like the aerospace companies and suppliers. There’s a tremendous cross section of computer industry companies here. And that’s really what you need. You need an infrastructure that supports your industry. That’s why Singapore is attracting offshore manufacturing, because the government supports it, and if somebody commits to building a PC for you, he knows precisely where he’s going to go for his chips and boards and motors, displays, cabinets, etc. And we have that same capability right here.
Q. Do you think that you are producing things less expensively than if you had gone to the Far East?
A. Absolutely. In fact our objective is to bring all that production back to California. We have introduced new products which would have had a lot of their manufacturing done offshore if it wasn’t for this program.
Q. Bring it back from where?
A. From Singapore and Taiwan. (CalComp buys some parts for its different products from the Far East.)
Q. Have you actually brought some manufacturing back to the United States from overseas with this program? I’m told that you’ve been able to reduce the amount of equipment in your factory and, at the same time, reduce total employment.
A. Absolutely. When I got here in 1983, we had about 3,100 employees. We were doing just about $200 million a year in revenues. This year we’ll double that revenue to over $400 million a year, with about 2,700 employees. So we’re doing twice the business in revenue with about 10% fewer employees. And in unit volume, we’re shipping probably five times more products than back in 1983.
Q. How has that been possible?
A. When people think of manufacturing process they tend to think just of the people on the factory floor that are putting these pieces together or creating these parts. But they’re just one piece of the total structure. You’ve got their managers; you’ve got quality assurance; you’ve got incoming inspection; you’ve got accounting; you’ve got the computer system that supports it; you’ve got the purchasing department and administration for human resources, payroll and so on. When you make a total commitment to become world class in manufacturing, you’ve got to look at the entire structure of the company, from my office right on down to the factory floor and increase the efficiency of all that. We had people doing a lot of clerical tasks that didn’t really contribute to the product. We’ve eliminated all that, and that’s where a lot of the people saving has come from.
Q. You mentioned before that you had to look at what kind of jobs people were doing from this office to the manufacturing floor. Can you point to any specific changes that were made?
A. Sure. One of the things I implemented when I came here was something called the senior production control committee. The purpose of the committee was to establish a production schedule for the next nine months because you had to order parts in advance, and the bigger volume orders you gave the better cost you got on each part. When I first got here, I’d sit in on monthly review meetings, and the sales people would say, ‘We could have sold a lot more units this month, but manufacturing didn’t produce enough.’ And then I’d ask manufacturing, ‘Why didn’t you produce enough?’ They said, “Well, we didn’t think they’d sell that many.’ What you discovered was that everyone wasn’t committed to the same plan. Well, once we started implementing world class manufacturing, where we produced exactly what was needed, we discovered one day that we didn’t need this committee any more. We were sitting in my conference room having this big, high-powered meeting, and one of the guys said, ‘Hey, this is getting to be obsolete because the factory is producing what they need to produce anyway, what do we have to get into the act for?’ And we disbanded the committee. I think that’s a very dramatic example of getting rid of a lot of bureaucratic baloney and concentrating on the business.
Q. Do you think morale has improved among the average worker because of this program, or is there any way to measure that?
A. Oh yeah, you can certainly measure that. There’s absolutely no doubt about it. The morale is terrific. You go over to the factory and ask anybody on the line what they do; they’ll tell you; they’ll explain the process. The pride just comes out of them--what they’ve accomplished. And we use almost no automation at all. We have one piece of automated equipment and that packs the plotter in a box, wraps it up and puts it on a pallet for shipment.
Q. Did you used to have more automation?
A. Oh yeah, conveyor belts and all that stuff. The basic premise of this program is that you don’t want to bolt anything down to the floor. You want to have it flexible so you can readjust it and continue to improve it.
Q. Where did these ideas originate?
A. They go back maybe 40 years. There is a person named Deming (W. Edwards Deming, a Washington consultant renowned for developing concepts of manufacturing cost and quality control) who was a proponent of this approach to manufacturing. After World War II nobody over here would listen to him. But the Japanese were anxious to get back on their feet, and they invited him over to Japan. He’s like a god over there. And they implemented all of his ideas. Toyota was the first company to really do it, and it produced tremendous results. And now we’re copying what they implemented. It goes against everything that U.S. industry was doing in ‘50s and ‘60s and ‘70s. We would relegate manufacturing to a very low status in a company. The way you manufactured over here was you had as big an inventory as you could afford. You built up a big supply of finished goods so that if business improved and orders went up, you were able to deliver right away. It was more “just in case” instead of “just in time.” It was terribly wasteful. But we got away with it for two reasons. One was that interest rates were very low. So the cost of having a lot of inventory was negligible. Plus, there was no competition from the rest of the world. We were all terribly inefficient, but we didn’t have a better standard to be measured against. We ran very inefficient companies because we got away with it. We praised ourselves on how good we were. It took foreign competition to shape us up. Most companies haven’t shaped up yet.
Q. Were you getting beat by your competitors?
A. Yes. If your costs are too high and your competitors get aggressive on pricing, you’re in trouble. Now we’re in a position where we do that to our competitors. A year ago it was a tremendous benefit to us. We cut prices on a very critical product line (an electrostatic plotter) by 38%.
Q. These kind of ideas about manufacturing have been around for a while. Why haven’t more companies done this before?
A. A very simple reason: chief executives are typically afraid of manufacturing. They don’t understand it; they don’t want to understand it; they want to delegate it to somebody else and have them fix it. This kind of system is so diametrically opposed to anything that American industry has done before that nobody down the ranks is going to go out on the limb and implement it if he doesn’t have the total backing of his management. So it requires a total commitment on the part of the corporation, and most companies are afraid to do that.
Q. Does your parent company, Lockheed, do anything along these lines?
A. Lockheed has some versions of this themselves. Of course, what they produce is totally different--huge cargo planes and missiles and things like that. But you can still apply some of the same concepts. And they do.
Q. What did it cost to do this?
A. It cost nothing. It saves money. We have fewer people, less capital expense, higher quality products, less maintenance expense.
Q. Is this something that other companies can and will start to do?
A. I think this is addressing a real fundamental problem with American industry. We’ve got the ability to compete with any manufacturing country in the world. It’s just a matter of committing to do it. If they don’t, they won’t survive. You can’t ship everything offshore.
Q. What’s your forecast for whether American manufacturing is going to become more competitive and perhaps adopt some of these ideas?
A. It’s starting to happen. I think out of desperation we’re going to wake up.