International Journal of Applied Quality Management (ISSN: 1742-2647) Volume 1 Issue 3
TPM Manager, Caradon Sterland
This is the first of three papers designed to test the hypothesis that the use of total productive maintenance (TPM – a Japanese manufacturing technique) will reduce costs at Stelrad Mexborough, a South Yorkshire factory. This paper analyses the need for this cost reduction to clearly show its scope and strategic importance to the organisation.
Stelrad Mexborough is the manufacturing site of Stelrad UK, a producer of domestic central heating radiators. Stelrad UK itself is part of the European radiator arm of Caradon PLC’s plumbing division. At the time of writing Stelrad employed the author as a Kaizen Engineer with responsibility for continuous improvement. In November 1999 he was given the task of implementing TPM by the UK Operations Director in order to improve operational efficiencies and reduce costs. The improvement was necessary to address urgent strategic issues that were having a detrimental effect on the business.
Stelrad UK performed badly for the whole of the 1990’s with each year seeing a fall in market share. During 1998 marketing forecasts showed that Stelrad would be running at a loss by 2002 unless market share could be increased. There were many reasons for the loss of market share (cheap foreign imports, increased number of competitors in the industry), but the major cause was Stelrad’s premium pricing policy. Stelrad’s products were priced at around 20 percent higher than a comparable competitor’s product. This policy relied on product differentiation (Porter 1985) based on the close relationship that Stelrad had with its merchant customers, its superior quality and service and the value of its brand name. The company had considered these to be its core competencies but it had in fact neglected the three recognised factors that constitute a core competency (Hamel and Heene 1994, Johnston and Scholes 1997, Prahalad and Hamel 1990) which are:
The relationship with the customers had eroded as they switched to the cheaper imports due to them placing greater value on price rather than on relationships and service. Also the quality advantage that Stelrad had over the rest of the market (* Endnote 1) was not sustainable since all major players could now match it. Although the brand name still held some sway it could not sustain a price, vis-à-vis quality that was 20 percent above market norm.
The decision was belatedly made (considering the previous decade of year on year market share loss) to drop prices to market level in order to win back custom. This required immediate savings in costs and, in order to do this, the two manufacturing sites were amalgamated into one. Thus the plant at Dalbeattie, Scotland was closed with the loss of 160 jobs and all production was moved to Mexborough, South Yorkshire with the expected increase of 50 jobs. Although the movement of machinery during this transition was handled very efficiently (* Endnote 2), the movement of people was not, since only five of the Dalbeattie workforce (all managers) took up the 200 mile relocation package and Stelrad lost the experience of the ‘hands on’ Scottish operators.