Lean ROI at WIKA, CIRCOR and Alstom Transport

I had a great opportunity several months ago to talk to the CEOs and Managing Director of WIKA, CIRCOR and Alstom Transport about their lean improvement efforts. That story has now been published online by Chief Executive magazine, “Lean Manufacturing’s Next Life.”

Overall I was impressed by several things during these interviews. First, the level of understanding of what lean can be—an enterprise-wide improvement methodology and not just a few management tools confined to the shop (or depot) floor—was exceptionally high among these business leaders. Second, I was encouraged by the very deliberate way, though not without hiccups, that they are implementing changes and achieving big returns across these diverse and globally dispersed organizations. As I wrote, “the end results are not only a lower cost structure, but operational advantages that customers notice, care about and, most importantly, are willing to pay for.” Here are some highlights from the lean ROI perspective:

WIKA Alexander Wiegand SE (Klingenberg, Germany), a 60-year-old, family-owned company that sells 40 million gauges, thermometers and other measurement instruments annually:

“Compared to our direct competitors, we are the only company that really grew over the last seven or eight years,” reports Alexander Wiegand, CEO of WIKA Alexander Wiegand SE…. WIKA has made the financial connection that some lean adopters have found elusive. “Since 2002 we have improved our EBIT margin every year by about 1 percent,” says Wiegand. Given the company’s high percentage of sales in the U.S., that margin improvement is even more impressive when you consider the devaluation of the U.S. dollar that occurred over that time period. “That’s the bottom line,” says Wiegand. “It’s not all coming from lean, of course, but more than half of that improvement is the result of our lean activity.

Circor International (Burlington, Mass.), which manufactures valves, regulators and systems that control the flow of fluids in energy, industrial and aerospace applications:

From 2007 to 2008 the division’s sales grew by 29 percent. During this period of dramatic growth, lean manufacturing efforts freed up space and other resources, allowing CIRCOR to not only meet the increased demand, but consolidate facilities. [Chairman and CEO Bill] Higgins also credits customer recognition of lean-driven performance improvements for helping the company to win new contracts. From 2004 through 2008, CIRCOR’s average on-time delivery climbed from 77 percent to 87 percent. During this same period, revenues increased at a compound annual growth rate of 20 percent, and earnings per share grew by 56 percent per year. High-profile contracts include the landing gear for Boeing’s CH-47F Chinook helicopter, and speed-sensing, speed-control and landing gear systems for the Airbus 350.

Alstom Transport (Paris) manufactures trains, develops and maintains rail infrastructure, and supplies maintenance, refurbishment and parts management services. With 27,000 people working in 60 countries, it recorded sales of €5.7 billion for its 2008–2009 fiscal year:

One of the goals that Alstom’s managers set was to grow the business by 20 percent over a three-year period while keeping the number of employees constant. “We’ve just had our internal review and we’re certainly on target, so we’re pretty chuffed,” reports [Roy] Sullivan. “With the old way of working we’d probably have been looking at 1,200 people, instead of where we are, which is at around 900. So we’re going in the right direction.”

Thanks again and best of luck to everyone at WIKA, CIRCOR and Alstom who took a few minutes to share their stories.