IBM: Change Order Management
Dramatically reducing cycle times – increasing speed and cutting cost
Consultants who now form part of VISION’s senior team undertook work for IBM just before Lou Gerstner's enormously successful change programme and before it had shifted its focus to services. At that time IBM was earning $27 billion in annual revenues. It was a high-tech manufacturing company experiencing the pressures that are common today throughout high-tech and other manufacturing industries.
Strategic Situation
In the current manufacturing climate, consistently fast cycle times in managing change orders and new product orders provide a company with a competitive advantage enabling both pricing and new product flexibility. Slow changeorder cycle times can put a company out of business. Before our intervention, IBM's key electric card assembly and testing plant, which assembled 5,000 component boards a day, each with up to 700 separate components, had already cut the change-order and new-product cycle times from 28 to 14 days. This time reduction met the industry benchmark.
Senior Management's Declaration
Concerned both with costs and speed, IBM's Senior Management declared that the change-order processes in the board assembly plants should be able to run in a single day.
Our consultants were invited to diagnose the engineering change management process and make recommendations for alterations.
Engagement Strategy : Combined Team and Management Process Redesign
We formed an interdisciplinary team, including five IBM operations analysts, trained by the consultants and conducted a 10- week diagnosis. The team's focus was to identify the core management process and the core culture change required to meet a one-day change-order process. The team then had 3.5 months to pilot intensively the new process so that the IBM team could take over the remaining roll out.
Intervention
The consultants began training the five IBM operations analysts and continued the training as part of the 10-week diagnosis phase. During that period, the joint team discovered that the management processes had been fashioned to follow the basic input/output manufacturing processes, which left a huge gulf in culture and understanding between the development engineers and the process engineers.
The team redesigned the critical process, and eliminated the source of many of the delays caused by poor communication and mis-understandings between the development and process departments. The new process ended awkward handoffs and included negotiating commitments and reaching mutual agreements. These agreements would concern new designs, production methodologies, or root-cause analyses. The integration of the development engineers into the manufacturing process shifted the culture of the assembly plant from a quality-for-the-sake- of-quality culture to an innovation-based culture. That change included involving plant engineers in what were previously strictly development processes and development engineers into the plant processes. This critically important shift had all engineers working in the same culture, so that they asked for and made commitments that were focused towards a common purpose, which was well-understood and accomplished quickly.
Results: Devil's Live In The Details
The average cycle time dropped from 14 days to 7 days, and could be run, on demand, in a single day. Management estimated that each day saved was worth $800,000. The commitment-based management process design was extended to all remaining plant processes to create a single plant culture. IBM has been recognised for its leadership in this key manufacturing competence.
IBM purchased a license to use commitment- based management internally, and even with all the changes Lou Gerstner installed, IBM has continued to use commitment-based management as one of its basic process-design tools.