Tuesday, February 19, 2013

PolyOne Lean Six Sigma Transformation - Bankruptcy to Industry Leader in 5 Years

My blog post this week is extended from “Evolution of Toyota Production System” to illustrate the effectiveness of Lean & Six Sigma principles. The idea of this post is not to talk about an innovation but to explore the effectiveness of Lean and Six Sigma standards with an example.

PolyOne, a company that produced seasonal products and polymer solutions to over 14000 customers across the globe had facilities in USA, Asia, South America and Europe. PolyOne Corporation, as a result of acquisitions, owned a lot of companies that produce similar products. Even the facilities that produced the same type product had disparities and inconsistencies in the production and business process. PolyOne incurred unnecessary operating costs in managing such an inconsistent environment.

In March 2008, industry experts predicted that this company would go bankrupt and would not survive the economic downturn. The stock prices went down to $1.34 per stock in March 2009. PolyOne has since then made a long journey in a short haul. Thomas J Kedrowski – Senior VP of Supply Chain says “despite the challenges I saw a company that could triple or quadruple its financial performance through improvements in supply chain and business processes”.

They took 4 major steps – Specialization, Globalization, Commercial & Operational excellence simultaneously, to lean their manufacturing and supply chain structure. These steps consolidated the organization and increased the cash flow helping the company to exist in business. Operational excellence with over 100 process improvement projects was the major step forward that would revive and reposition the company in the industry. As a part of this process the company:
  • Identified inconsistencies in business and manufacturing processes.
  • Rationalized processed across the corporation. They started by bench marking each of those processes with those from within the organization and competitors. (through sharing best practices and tracking progress in global meetings)
  • Trained 600 managerial employees on Lean and Sic Sigma quality practices to inculcate lean in the company culture.
  •  Mapped every customer feedback to a business process and eliminated or trimmed down processes that do not yield value to customer. By adopting control measures to enforce quality and cluster graphs to identify outlying customer requirements, the company eliminated much of cost incurred in inspections and re-work.
  • Segregated projects under ‘make-to-sell’ and ‘make-to-order’ categories resulting in improved the average inventory cycle time from 54 to 37 days in the 3rd quarter of 2009.
  • For every project the compan tied the incentive plan to the improvement in working capitals thereby harnessing new ideas and instilling collective responsibility.

The process that started by training 600 from the community expanded to 1000 trained professionals (25% of the employees) in just a year’s time and by the end of 2011 about 40% of the total head count was trained in LSS (Lean & Six Sigma practices). Within one year of inception, the LSS program helped PolyOne realize 40% reduction in working capital. During the one year period from 2008 to 2009 the on time delivery accuracy improved from 81% to 95%. The stock prices rocket from $1.34 in March 2009 to $23.47 per stock now in 4 years. All this is just by consolidation and optimization of manufacturing and supply chain using the LSS program. The company is still looking at areas of improvement and avenues to meet new customer needs.

The effectiveness in performance has revived a company from being bankrupt to a profitable position. The question that has to be answered is “Will other companies read signals from this transformation and optimize their operations and supply chain without any need for urgency?”


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