Top Plant 2013: A spark of excellence
Many factors determine how well a manufacturing plant performs. Those that perform best are qualified to become a Top Plant.
Exceptional manufacturing companies are more than just fabrication cells, assembly lines, or loading docks—they are departments working together in harmony. Successfully putting proven management philosophies into real-world action welds values and work ethic to form a cohesive culture at the Lincoln Electric Co. in Cleveland. The company’s machine division is the recipient of the 2013 Plant Engineering magazine Top Plant Award.
Lincoln Electric Co. is the world’s largest manufacturer of arc welding equipment and consumables as well as a technological leader in the welding market. The company’s machine division and the global headquarters are located in Euclid, a suburb of Cleveland, with a plant in nearby Mentor. The machine division occupies a little more than 800,000 sq ft of the 1.5 million-sq-ft main facility; the consumable division occupies the rest.
The 14 departments within the machine division at Lincoln Electric are divided into supply, assembly, and support departments. The four supply departments provide work in progress (WIP) to the four assembly departments. The six support departments are the supply management, production planning, quality assurance, manufacturing engineering, material handling, and time study groups. The material handling group is also responsible for the storeroom, replenishing the manufacturing floor, and spare parts fulfillment. The group also includes a tool room responsible for die repair or buildup, fixtures or work holding devices, and plastic molded parts. The time study group performs the time-and-motion studies that become the benchmarks for completing every task in the facility.
Incentive management, entrepreneurial environment
Manufacturing and plant floor employees agree that the company’s incentive management system and the entrepreneurial environment top the list of the many attributes that make Lincoln Electric’s machine division an exceptional plant. “Incentive management is the cornerstone of Lincoln Electric,” said Geoff Lipnevicius, general manager of the machine division. “It drives a culture that recognizes that our people are our greatest asset. It gives people an incentive to perform. It’s a very big aspect of the company and it’s what really drives the machine division to be an exceptional plant.”
For many people, when the word “piecework” is mentioned, “sweatshop” comes to mind. At Lincoln Electric, these words are not synonyms—and they never have been. Piecework, guaranteed employment, and the highly anticipated annual employee bonus are elements that marry the company’s incentive management system and the entrepreneurial environment.
In most cases, pieceworkers at Lincoln Electric are like entrepreneurs because they get paid only for the number of quality pieces they produce. Every job has standards that determine the average output from an average worker per unit of time. “We go through time-and-motion studies on every task in our facility,” Lipnevicius said. “We ensure that when we say a task takes 30 seconds to complete, the assessment is fair and accurate.”
Lincoln Electric has not laid off any permanent employees who meet the company’s performance standards due to lack of work or economic conditions since 1948. The “Guaranteed Continuous Employment Plan” was approved by the board in 1958. “Regardless of the cyclical nature of the business, we don’t lay off people,” said Doug Lance, vice president of operations at Lincoln Electric. “We only discharge people for poor performance just as any company would. When business is slow, we have the option to transfer people into jobs where there is work. By retaining our people, we keep the talent and knowledge within the company.”
Employee flexibility can translate into substantial rewards. “We try to instill flexibility into our employees,” said Lee Seufer, plant engineering manager for Lincoln Electric’s machine division. “We reward people with a substantial profit-sharing bonus at the end of each year.”
Part of this required flexibility involves cross-training. “Employees who can run seven different machines are more valuable to us than those who can run only two,” Seufer said. “The size of the bonus depends on how an employee’s performance is rated in five equally weighted categories: output/productivity; quality; environmental, health, and safety (EHS); adaptability/flexibility; and teamwork/communication.”
The annual profit-sharing bonus has been in place at Lincoln Electric since 1934. For production workers, the merit basis is straightforward: make more, earn more. However, this model doesn’t scale for maintenance employees. For example, the best people typically tackle the toughest jobs, which usually take longer. Applying the production-oriented piecework model would work against them. “The incentive management system in the maintenance department is managed differently,” said Seth Mason, superintendent of maintenance. “We rate people in 20 categories, such as safety behavior, completed training requirements, and project leadership.”
“The incentive management system really ties everything together,” said Dave Sterio, maintenance support engineer. “It encourages the right kind of activities and behaviors. It’s what makes us unique.”
Lincoln Electric’s machine division makes three platforms of welding equipment. The newer, high-tech products are inverter-based welders. The traditional welders use the transformer/rectifier type design. Welders that are powered by engine-driven generators are included in the third platform.
Workflow through the machine division facility is simple, although the same could not be said 20 years ago. “We’re laid out in bays from North to South,” said Dave Perrin, chief plant engineer at Lincoln Electric. “Raw materials come in at the north end of the building. Sheet metal comes right off the truck dock to its point of use where the operators use laser cutting machines, punch presses, and forming equipment to fabricate the parts that will become welding machines. After the fabricated parts are painted, they are assembled into finished products, tested, and then carted to shipping.”
Standard products are typically routed to the distribution center. “The bulk of what we sell is make-to-stock,” Seufer said. “We have some made-to-order products. There are some specials that come through the operation as well. For example, somebody may need a special type of electrical connection for a special type of welding that they’re doing. Someone may need special or custom software that allows them to weld a special application.”
The machine division uses both assembly lines and cells to manufacture welders. Seufer said, “Depending on the market we’re serving and the type of welder we’re building, we might be in a low-volume, high-mix module or we might be in a high-volume, low-mix module. The module we’re in at the time dictates how we make our products.”
“I think Lincoln Electric is set up very well in how we develop our products and processes to allow us to be successful,” Perrin said. “The physical layout of our facility was designed intentionally to locate the engineering departments in the center of the plant—right in the middle of the manufacturing area. By locating plant, manufacturing, and R&D engineering as well as new product marketing departments in the middle of the manufacturing area, there’s a direct line of communication between engineers, supervisors, and shop personnel on the production floor.”
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Annual Salary Survey
In a year when manufacturing continued to lead the economic rebound, it makes sense that plant manager bonuses rebounded. Plant Engineering’s annual Salary Survey shows both wages and bonuses rose in 2012 after a retreat the year before.
Average salary across all job titles for plant floor management rose 3.5% to $95,446, and bonus compensation jumped to $15,162, a 4.2% increase from the 2010 level and double the 2011 total, which showed a sharp drop in bonus.