TRAVERSE CITY, MI – Spreading the best practices from one plant to another doesn’t happen without work, even when the top management is focused on the subject.
Freudenberg-NOK, the U.S. joint venture between top German and Japanese sealing and noise, vibration, harshness-product suppliers, was a leading proponent of lean manufacturing from its beginning in 1989.
When the company’s Santa Ana, CA, plant started losing business to lower-priced competition, management tried to figure out why, says Mohsen Sohi, the CEO since 2003.
It turned out the plant was taking six to eight weeks to get a product online.
“Lessons we had learned in other plants on lean had not been implemented,” Sohi says at the Management Briefing Seminars here.
When Santa Ana turned to the best lean, no-waste processes, it reduced its turnaround time to three days and started winning business again.
Although Freudenberg Group and NOK Industry Co. Ltd., the parent companies, remain independent entities, they now operate essentially as a global Freudenberg-NOK Group, with the U.S. JV as the third leg of the stool.
The U.S. operation has sales of nearly $1 billion this year in basically 50-cent seals and NVH parts, of which 60%-70% goes to automotive customers – either OEs or Tier 1 and Tier 2 suppliers. The U.S. Big Three are the largest end customers, and Freudenberg-NOK has been growing its market share for the past three years, Sohi says.
A global approach has worked for the company from the beginning. At first NOK and Freudenberg competed with each other in North America and lost money. The JV, on the other hand, is profitable.
But in the late 1990s, Sohi says, the group didn’t properly recognize the coming new level of industry globalization and began losing sales to new low-cost competitors, some of whom didn’t honor intellectual property.
A rethinking of the group organization brought back business and profitability. Today, Sohi says, the two parent companies and Freudenberg-NOK are leaders in their respective regions, sharing customers and technology seamlessly.
Technology is key to the company’s future, he says.
“We positioned our business to be high technology and high quality,” Sohi says. “We have to stick with that. Quality and technology always win. It might lose some business in the short term, but in the long term it wins.”
Freudenberg-NOK spends 4%-5% of its revenue on research and development, and to increase the dollars available, it has been diversifying into non-automotive areas. Earlier this month, it bought Imperial Rubber and Urethane Corp. of Alberta, Canada, a supplier of seals to the oil and gas industry.
The basic science for engineered polymers that meet tough environmental demands can be shared among industries, Sohi says, while application engineering is specific. Research is done at all three companies in the group and shared freely, and projects are engineered around the clock.
“We try to leverage each other’s strengths and get benefits across the board,” he says.
Another aspect of the new global vision is how customers are treated.
The company’s Global Cost Leadership Program coordinates activities by customer, so that NOK manages the Japanese auto maker accounts, while Freudenberg-NOK or Freudenberg deliver the work in North America and Europe, and Freudenberg-NOK coordinates the activities relating toMotor Co. and Corp. operations around the world.
Finally, global activity means new locations. Freudenberg-NOK has plants in Mexico and Brazil, near Singapore and now in Canada.
“There are major challenges in cross-world operations,” Sohi says. “We have fallen into traps.”
At one new plant, the company didn’t do a good enough job of understanding the local labor force or choosing its plant manager. In the end, parts from the low-cost location were more expensive than if they had been produced in the U.S.
Nevertheless, Sohi says, it is important to have a good global footprint.