Friesen has headed up Terex’s Waverly, Iowa crane manufacturing plants for the past three years. But his culture seems to originate from Toyota. He studied the legendary Toyota production system in Japan, and applied what he learned at General Motors and JCB before moving into cranes.
In his remarks to customers at the opening, where he stood in for Terex Cranes director Rick Nichols, who could not make it, he put his position in context.
“Terex is changing. You guys have known Demag for a long time. Terex has only been with Demag for five years. Three and a half years ago, we decided Terex would no longer be a mergers and acquistions company, and started to focus on operational excellence. We started looking at the business differently; we wanted to be lean and customer-focused. Different people were brought in than m&a people, who were cut-and-run sorts of people. I’m one of the first.
“I worked for Toyota, and learned its production system, so I have experience switching from traditional manufacturing to a new way of thinking. I made the GM Astra and Vectra production in Belgium the lowest-cost producer. Afterwards, I went to the UK with JCB, and opened up the new North American factory, implementing these concepts. I spent seven years in the manufacturing and service side. The last three years in North America I spent changing manufacturing processes, and delivering on promises that we made. I changed the way the production works.
“With Alex [Knecht] leaving, Demag was needing a replacement, and Demag is a very important part of Terex product line, giving legitimacy to all of Terex’s cranes. Terex asked me if I would be willing to go.”
In his public comments, Friesen said that his immediate priority is improving delivery times. “Demag’s problem with delivery dates is one of the first things I will tackle in the new role. At the moment, I can’t tell you whether we will deliver a crane in six months. The first time in North America we had a similar product – and couldn’t get it out on time. We can’t put up with it; I went about changing it. I went into a situation where we were making 350 RTs, and have moved it to 1,000, and next year it will be 1,600.”
Later, in the more intimate environment of a meeting room, he qualified his statements in an informal press conference. He says that he is aware of delays because of his previous experiences selling cranes in North America. “Demag sells to the USA; I’m a customer. But until I assess the situation there, I don’t know what the issues are. Every site is different. In North America, we were creating some of the issues we were trying to fix. What does seem to be real is that there are slippages [at Demag]. People are talking about it.”
q. How long will it take to bed in?
a. “That’s an unknown. In North America, it took 18 months, and you start to implement changes immediately. A manufacturer has hundreds of variables, including issues such as supplier availability, capacity, and the internal systems of ordering. Another portion is quality. The goal is to bring together the promised data and the delivery date. That is inbred in car manufacturing, in which one is made every 60 seconds, and you can’t not make the schedule, or you have to make it up that day, and you can only go so far before you are losing significant amounts of money.
“In construction equipment, there is a sense that there is always time to make up, because you make maybe one crane a day. But that is not true. I need to start inbreeding a different philosophy. I have known lean principles, and educating people in that discipline.
“With a car, it is easy to see when the production is behind, because the car has not moved to the station where it should be. Cranes are stationary. So in Waverly, after a four-hour process, every 15 minutes people need to verify if they are on time; if not, alarms go off, and people go and help them. This was just one element to it: to instill this value, retrain a sense of urgency again.
“Another problem we found was that suppliers didn’t trust our scheduling. We had to reengineer the MRP [material requirements planning] system, the total enterprise system, and how it shows lead times. And we had to give notice that time limits might increase.
“It’s also about making sure that the parts are there, the workforce is there, and are conscious of tack times [the time required for a specific factory operation]. As we get better, there are quality improvement issues, and it is a constant improvement process.
“Cranes are not one-offs. There are so many standardisation processes. The lean manufacturing process calculates a model’s unique options into the build, and they are anticipated. Every crane has its basic components. Really unique items can be made off-line.”
q. Are you coming to change Demag? Many people feel it is a very good brand already.
a. “My problem is that if you put me in Tesco [a UK supermarket], I would change it. A company like Toyota has world-class manufacture. It is the best. I am not saying that Demag is wrong or bad. Wherever it is at, it can get better. There are ways to improve every business.”
Later in the discussion, Friesen returned to the topic of manufacturing. “I hear the bottleneck is the supply base: gears, and slew rings – we have a competitor with the windmills. I don’t accept that we can’t improve that. Everyone said that when we went from 300 to 1000 RTs [in Waverly] our suppliers wouldn’t be able to keep up, but they did. Part of it is about how you treat your suppliers. And there were internal issues that were solved relatively quickly. I already have a team already breaking down these issues at Demag.”
q. Are you bringing in yourown team?
a. “I am looking at bringing over a couple of people. I know someone who is really good at eliminating waste. A Demag crane is highly configured, so that position would be useful. I am also thinking of a director of quality, who brings a different way to look at quality that our industry is not used to looking at.
“On the car side, the customers are fit and finish orientated – everything has to be perfect. With a crane, customers aren’t looking at that, they are looking at the function. Function is also important in cars. But car customers are very detail-orientated; the car has to be almost perfect. If there is a scratch, that’s a problem. When you start looking at that micro level, your consciousness changes. There is also a more detailed spec[ification] for supplier quality, a tighter spec on reliability, and quality reliability.”
q. What do you use to measure your success?
a. “Delivering on time, meeting our promises. Market share, profit margins, surveys, people’s perceptions of us, through internal surveys. Morale is critical. [Production] throughput too.
“Ultimately I am leaving Waverly. My measure is about sustainability, that this process is not personality-driven but process-driven. If it is a strong enough process, it can be repeated [without me]. We are a little unique; we don’t measure ourselves against our competitors, but against ourselves, if we can beat our own goals.
“September 6th is my first meeting with staff, and we will decide the metrics of success then. Their buy-in is important.”
Friesen went on to talk about how he has managed to satisfy customers with such long backlogs.
“In North America, we are strong. Only once per year do we release cranes, and right behind that there are 6-9 months of orders for a slot in 2010. We are trying to be fair to everyone. We used to order on a first-come, first-serve basis. Then we did it sequentially, which now would take us to 2012. I think this gives false hope, false pretence, a false order book.
“In the period of October 2007 to July 2008 we took orders without having booked a purchase order, with the hope to try to make [a delivery] in 2009. We ended up with 1,800 orders.
“Then we went to the production, and it looked like we could make 1,400 units. I challenged them to go higher, to 1,600 units. We challenged the supply base too. Once we talked internally and to suppliers, I was confident it was safe to say 1,600. We made 1,600, so we had to disappoint 200 people. But I believe that there is a lot of speculation in those orders, and so when we go to market with pricing and orders they would back down. And then we split up the 1,600 machines as fairly as possible.
“Demag books its orders out to 2010. I don’t understand how they can be stable with pricing when they have unstable commodity market, particularly steel. That is something that I need to learn.
“I hate having to put prices up again four months after raising them. I don’t think customers like it. We try to be as accurate as we can. I recently met with a group of our investors, who asked, ‘How come you haven’t raised prices?’ Before we go to market, we meet our suppliers and ask them to lock their pricing for 2009.
“What I like about Toyota is that it is constantly improving. As part of my training, I went to Japan, and had to study a process that was 60 seconds long, and watched it for two hours, 120 times. I was the first to hand in a report, and I thought I was the best, because I was the first done. But they came back and said, ‘Doug-san, this is no good.’ They drew a circle on the floor and made me stand in it for eight or nine hours, and [my report, which] was three pages became seven. You never stop, and there is big money in it ifyou take it seriously.”
