Q. What evidence does the case offer regarding Esterline's success? What factors appear to havecontributed to Esterline's performance?
In the case, there are severalevidences of Esterline success. In 2005, Esterline had employed more than 7,500 people in the production, maker and engineering facilities in Washington, Illinois, Arkansas, North Carolina, Virginia, New York, Massachusetts, Michigan, Idaho and California. In these 11 States across the United States, Esterline had 34 units. The revenue the company accrued by 2005 had reached $835 million and income from continuing operations was $51 million. The projections indicated that Esterline would earn over $1 billion in revenues. Also, Esterline had expanded overseas to United Kingdom, China, Mexico and Germany hence widening its network.
Another success indicator for Esterline was when it achieved the Tier-1 supplier Status with Boeing and Airbus in 2005. The company was contracted to produce 787 overhead panel control cockpit system for Boeing and sensor suite for the TP 400M turboprop for Airbus. Cremin summed up the success as having implemented successfully the internal new product development based on targeted acquisitions. The ability to switch from Jumble flows to families is a strong indication of Esterline success because it enabled Lean System implementation that included training operating level employees on the methods to lower costs and improve efficiency in manufacturing.
There are many factors that have contributed to Esterline’s success. The first factor is continuity, the chairman of the company Robert Cremin had served the company since 1976 according to the case and over those three decades he had been involved in almost all the major operating areas such as Senior Group Vice President, Chief Operating Officer and Chief Executive Officer. This is important because he understood well the company and knew well what the company needed to become a success. Another factor that hinges on the longevity of Cremin is the adoption of lean manufacturing strategy. This kind of approach enabled the reduction of production costs, and also improved quality of Esterline products and improved competitiveness of the company.
In 1999, Cremin as a CEO sold 12 non-aligned companies hence shrinking Esterline’s revenue to about $155 million albeit temporarily. This was a good move because the sale decreased Esterline’s industry mix to just two from ten hence giving them more time to specialize in aerospace and defense. This therefore contributed to Esterline’s growth since they made 30 new targeted acquisitions between 1999 and 2005. These companies include Leach Holding acquired in 2004 and Darchem Holdings in 2005 bringing a total of $210 million in revenues.
Q. What is the central question being addressed in this case? Why is it important to Bob Cremin? What issues are raised in this debate?
The central question addressed in this case is how countries should embrace change in order to keep up with the changing economy and dynamics in the manufacturing industry. More specifically, it tackles the need for Lean manufacturing strategies backed by IT in order to improve efficiency. In the case, Cremin was not utterly convinced on the significance of IT’s in manufacturing if not backed by lean strategies and that is why he supported pushing some of the decision making to the operating level employees in order to find ways to streamline the manufacturing process.
Cremin found the issue of Lean manufacturing important because of the reduction of costs and the efficiency the strategy would bring to the company and subsequent success. Bob had worked in various important sections of the company and knew exactly what the company needed, including the importance of IT working together with the lean manufacturing strategy to produce a well-working system. He however also acknowledged the demerits of over-reliance on IT and the potential of overly-structured IT systems in stifling innovation and creativity.
The issues raised in this debate include the importance of lean manufacturing in ensuring Esterline’s success and it serves as an example for manufacturing companies in specializing in particular processes then increasing their efficiency in these processes and sectors just like when Esterline reduced their industry mix to just two from 12. Another issues raised was the importance of IT but as a back-up to lean strategy and not working by itself because some IT systems are too rigid and they stifle creativity and innovation. Cremin highlighted the importance of employees’ creativity in the continuous search for even leaner methods of production.
Q. What is the role of an ERP system in a "traditionally run" manufacturing plant? Does it present conflicts for lean manufacturing? Why or why not?
The ERP system in traditionally run systems is important in improving communication by standardizing the information entry and creating the central data sources for sharing information across the company. ERP system also improves customer service, saves time during setup, and improves quality, cash flow and more accuracy in inventory keeping. ERP also reduces errors in the company processes and enables faster flow of information.
ERP as an IT system in the manufacturing process does not conflict with lean manufacturing. This is because they perform the same roles and can be used to complement each other. ERP is more important in big manufacturing companies because of high number of employees, processes and resources and in order to optimize production and minimize costs, lean manufacturing can be used to support ERP system. As Fran Houston, the Corporate Group Vice President in 2005 reiterated in the case that lean process just looks for ways to simplify systems while IT systems like ERP are complicated. There are some minor discrepancies such as ERP needs more training of the employees while Lean manufacturing is developed by employees. ERP can be a source of waste in the manufacturing process and there is less chance for incremental improvement.
Q. If you were Korry Electronics President Gary Dytrt, What decisions would you make about replacing the outdated MRP system? Would you just let it die and live without it? If you would replace it, what selection criteria would you use to identify a system with the best fit?
I would look at replacing the outdated MRP system with improved MRP to make it more relevant to the needs today such as emphasizing the improved customer service functionality and inventory keeping. I would then ensure that it is able to work together with Lean production methods. I would not let it die because MRP still has its advantages considering that ERP was developed from it. In the same way, a newer better system can be developed from MRP and I would encourage my employees to troubleshoot the issues in the system that would help improve the system especially in streamlining the communication between the company and the buyers regarding the orders made of the components to avoid overproduction or underproduction of these components.
I would improve MRP by following the following criteria: The system to be chosen should be simple; the system should be able to work seamlessly with lean manufacturing process; the system must have the benefits of IT systems such as information sharing; accuracy in inventory keeping and cash flow; short setup time and improved customer service.
Q. What advice do you have for Bob Cremin with respect to IT?
I would advise Cremin to embrace more IT in bigger units of Esterline so that the processes can be done faster. However, the use of IT must be in line with lean technology hence I would urge Cremin to look for better and more efficient IT system that is customized to Esterline. IT can be rigid but it can also be modified, therefore Esterline would benefit greatly from a carefully designed IT system, such as improved ERP to both incorporate lean processes and also efficiency in inventory management, customer service, cash flow and information sharing.
IT is also important in eliminating duplicating processes in the lean system and can also support paperless environment which if quantified, will save Esterline a lot of resources. Also, it is not entire true that IT systems do not encourage creativity, employees just need relevant IT systems to be creative and reiterating to them the importance of innovation using IT will help improve the manufacturing process at Esterline. Since the manufacturing industry relies heavily on forecasting of trends in the market, Esterline must use IT systems to predict the demand of their products especially targeting expansion. Cremin thus should acknowledge the importance of IT in lean manufacturing.
Nolan, R., Brown, K., & Kumar, S. (2006). Esterline Technologies: Lean Manufacturing. Boston: Harvard Business Publishing.
