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STIHL, Inc.: Where Quality is the Culture

Tue, 03/11/2003 - 10:27am
Rick Carter, Editor-in-Chief
The top-producing plant for this leading Germany-based maker of outdoor power equipment is in Virginia. Executives at the award-winning facility credit company culture and dedicated employees for nearly 30 years of continuous improvement.
Peter Mueller (right), executive vice president, guides Stihl's best plant in the world in Virginia Beach, VA, aided by Paul Bruggeman, director of manufacturing.

It's possible you have not used a piece of Stihl outdoor power equipment, but it's highly unlikely you haven't seen one. With its familiar orange color and Stihl name in black italics, the brand is in the hands of most professional landscapers and arborists in the U.S., as well as most professional loggers around the world. In recent years, U.S. homeowners, too, have increasingly stepped up to this premium brand of two- and four-stroke chain saws, blowers, hedge trimmers and brushcutters. Entrenched customer preference for Stihl quality have helped make the 77-year-old, Germany-based manufacturer the world's largest producer of these products.

Privately held and family-owned, Stihl Holding AG & Co. operates seven worldwide manufacturing plants: three in Germany, one each in Switzerland and Brazil, and one in Virginia Beach, VA. The company's sole U.S. outpost established in 1974 as Stihl, Inc. is now its top producer. At that time, the company had many more competitors and offered far fewer products, but had a clear idea about where the market for outdoor power equipment was headed, particularly in the U.S.

"We built the first plant here with about 100,000 sq. ft.," says Peter Mueller, executive vice president, "and it was more than half empty. But we knew where we wanted to be."

After expansions in 1983, 1990 and 1996, the company now has more than 600,000 sq. ft. under roof in Virginia Beach, on 62 acres of land. Mueller moved from Germany to open the facility, and began producing chain saws for the homeowner market in the U.S. a market that didn't exist when the company was founded in 1926 to make chain saws for loggers. It still doesn't exist elsewhere in the world, says Mueller. But as worldwide logging activity began to slow in the later 20th century, it became the market that would enable the company to maintain its growth. "The professional landscaper is to us now what the professional logger was 20 years ago," says Mueller. "The landscaper has replaced him."

When the company opened in Virginia Beach, it assembled units from parts made elsewhere. In its efforts to make products that not only beat competitors' quality but surpassed that of units made in other Stihl facilities, the company took more and more production in-house. Today, it manufactures or machines a high percentage of parts used in the products it makes, including crankshafts, all injection- and blow-molded plastic, and, most recently, pistons. In the process, the plant has become the top producer in both numbers and quality among all Stihl plants in the world. The Virginia Beach facility has placed first in the company's Plant Quality Award program 10 years in a row. And it just marked a doubling in total annual production from one million units in 1997 to two million in 2002.

In the same five-year period, the Virginia Beach plant won the U.S. Senate Productivity Award, became ISO 9000 and 14000 certified, was a Stage 2 finalist for the 2001 Malcolm Baldrige Award, and won eight local environmental excellence awards.

"People don't shy away when you walk through the plant," says Bruggeman. "They're proud of what they are doing."
"Realize what we had to do to accomplish this," says Paul Bruggeman, director of manufacturing. "People-wise, machine-wise, philosophy wise, culture-wise. They all need to work together. That comes with some pain."

"Challenges!" interjects Mueller, who, more than anyone, could take credit for his facility's record, but does not. "It's the corporate philosophy of Stihl," he says. "It's straightforward and very clear. Do it right the first time, then we don't have to do it again. That's where it starts. That's the culture."

Company culture is referred to often at Stihl, and is credited for making the company work like it does. It reflects the belief that, given the best environment and treated fairly, workers will do their best. It has allowed Stihl to stand alone in the world market, says the company, and to command a premium price for products that are available only through what is now an unconventional channel: the servicing dealer. It's the last outdoor power equipment manufacturer in the world to go to market this way.

At the foundation of the culture is respect for the worker. Mueller and Bruggeman say this includes regular, two-way communication among employees at all levels, healthy working conditions (such as air-conditioned manufacturing facilities), job flexibility, paid training, and room to advance. The company is, in fact, geared to the needs and capabilities of its workers as much as it is to the demands of the product. The approach has helped it build a loyal workforce with an average service time of 10 years.

"We don't think that because we are managers, we are smarter, that we have all the answers," says Mueller. "We work with the people and understand their needs." This ranges from responding to employee questions, ideas and preferences, he says, to guiding their careers and funding career improvements.

Bruggeman, who spends 40% of his workday on the factory floor, offers examples of the Stihl philosophy on a plant tour. His interaction with line workers and other personnel is unforced and friendly. He knows names and responsibilities and communicates with ease. "I tell my people that, yes, I happen to have a different title, but I'm still an employee, just like you. I think they relate to that. And you don't see them shying away when you walk through the plant. They're proud of what they're doing, and they're proud to talk about it. That's a main part of the success story of this company," he says. "There is quality and product, but people are our most important assets."

Workers at Stihl's Virginia Beach plant enjoy job security, career-path opportunities, paid training and the respect of management.
Communication supports that belief, says Bruggeman, and opportunities for it are regular and inclusive at the company. Hourly workers, for example, routinely meet with unit managers, but also with management. A quarterly president's roundtable affords them the opportunity to discuss with him "what's on their mind, what issues there are, what hassles there are," says Bruggeman. Twice per quarter, Mueller meets with up to 80 workers in the company lunch room to update them about business conditions and to also take questions. "There's no guessing here," says Bruggeman. "We inform our people of good things and bad, about how the business is doing, new products, where are we going and if we are going to hire more people. We keep them involved and keep them informed."

And they keep them on the job. Layoffs are unknown at the company. Only once, in the early '80s, did it approach a layoff situation, says Mueller. Rather than lay off, however, the company shortened the work week and reduced pay by 5% for all personnel, including management. "So I had no negative feedback from the employees," he says. "That's how you build loyalty."

Nor has automation thinned the ranks. Mueller mentions a company ground rule that prevents workers from being replaced by automation. "If we build a new machine, and it replaces three people," he says, "we cannot lay them off. They must be gainfully employed somewhere else."

In deference to this position, the company pursues new levels of automation only after careful consideration of how the workforce will both interact with it and be affected by it. For example, a new Swiss-made CNC machine the company has acquired will make a certain part seven times faster than it currently does (in 10.5 seconds versus 75 seconds). The new output level will allow Stihl to replace five machines. But the workers currently assigned to those machines will become part of a team of specialists _ three hourly operators, a process engineer and two maintenance-department members that will receive special training in the operation and maintenance of the new machine. To provide it, the company will send the team to the manufacturer in Switzerland for three months, all expenses paid. "And when that machine comes over," says Mueller, "my guys are ready. And when it's put together, I'm producing parts. Yes I have an investment," he says, "that I don't have a crash over here."

Emphasis on advanced training exists at other levels, too. Hourly workers, for example, can enter company-paid apprenticeship programs that can take them to unit manager, universal operator, quality-control supervisor or, after a four-year program, a tool and die maker. Wage incentives and paid college-level courses encourage workers to move up and to move around. Some of the company's highest-level training takes place in maintenance, enabling it to confidently bring in sophisticated equipment like the new unit from Switzerland.

Bruggeman inspects an engine assembly that will be installed in a brushcutter (below). A rigorous quality-control program at the plant has helped it win the company's Quality Award for 10 consecutive years.
"The maintenance technician has changed," says Mueller. "The guy who was just a mechanical maintenance man is a dying breed. The new guy is a combination guy. We call him a 'mechatronica' because he is a mechanical guy and an electronics guy. He can do the mechanical work on the machine, but also understands the electronic portion and how they work together. You're not efficient," he adds, "if you have a mechanical guy and next to him is an electrical guy and someone else to check the computer. You need someone with all-around training. If you don't do this, you cannot keep today's machines running."

All-around training extends to production-improvement concepts, too, though the company refrains from allying itself with conventional nomenclature. Mueller stresses that modern production-improvement techniques are routinely blended into standard training and operating procedures.

"We do not have a philosophy that every year or every other year, we start a new production-improvement program," says Mueller. "We do have programs that are modeled after lean manufacturing, after Kaizen, and we could call them anything. But is there an official program called 'lean manufacturing' at Stihl? No. It is simply done and the workers all know how it is done, and it is part of the overall, continuous improvement. It's the culture."

And the culture heavily stresses that improvements are conceived and implemented in-house. "Kaizen training is a requirement for our middle and upper management," says Bruggeman. "But we don't want to do this with a moderator from the outside. We want a familiar face. Let's do this together."

But even the company's own engineers don't run these events. According to Mueller, they moderate, leaving workers room to explore. "The people on the assembly line do their own time studies," he says. "They decide what is being rearranged. The group does it together and they're done in one week, not six months, and it's implemented."

By participating in events like this, through formal training, and contact with experts strategically placed within the system, employees quickly learn to become responsible for their work. As completed product sections flow from one manufacturing cell to the next, for example, workers at each station inspect incoming material. If quality is lacking in any regard, the section is returned unfixed.

Similarly, quality-assurance inspectors are allowed to pluck units from the assembly line at any point and take them aside for a thorough breakdown and quality check. Checkpoints, such as the 45 to 50 for chain saws, are pursued visually and electronically. When found, defects are reported to the offending unit and corrections are addressed immediately.

Additionally, each business unit/manufacturing cell (crankshaft manufacturing, injection molding, engine assembly and others) is audited twice yearly from the production quality department, unannounced. The two-hour process involves checking equipment condition and calibration, maintenance records, measuring equipment, process sheets and other elements. Results are posted on company bulletin boards. "And if there are any action items," says Bruggeman, "they are told, and the team will go back in one week to recheck.

Mueller emphasizes that the company's rigorous quality-control efforts are not only accepted by company employees, but fully understood.

"Our workers know that in our industry we have not been able to pass along price increases to the consumer for a number of years," says Mueller. "And because of the exchange rate, we have to give export customers a price reduction. That is understood. We all still want bonuses and pay raises, but we are all working together. Purchasing has to get better prices, we have to look at our consumables, and we have to look at productivity and see what we can do."

Recent achievements underscore the success of the company's continuous improvement efforts. Last fall, for example, it became the first and only manufacturer of power equipment to date that meets the EPA's Phase 2 emission standards that will take effect in 2005. This distinction was aided by the company's introduction of a new-design, low-emission engine, called the 4-Mix. Designed in Germany, the innovative engine uses a fuel/oil mix to power a four-stroke engine.

A completed chain saw is tested in one of the company's fully enclosed, proprietary test cells. Inside the cell, the saw automatically receives a small amount of fuel, is automatically primed, pull-started and adjusted.
And last month, the company announced plans for another expansion in Virginia Beach. Over the next two years it will invest $60.8 million to build a 228,000-sq.-ft. addition to its manufacturing operation, creating 200 new jobs. Again, Virginia Beach beat out its overseas counterparts for the opportunity to grow.

"Mr. Stihl once made a comment to me," says Bruggeman. "He said, 'A final design which is successful, can still become better.' He meant that if you finish a design or a Kaizen, or whatever you're doing, it doesn't mean you're finished. You continue with the program," he says. "You continue improvement. That is a must. And it is something you need to look at every day."

(Photos by William Carter)

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