Productivity Payoff

TUSCALOOSA, ALA.--Last year, assembly line workers at trim station 1 at the Mercedes-Benz factory here noticed they were laboring a bit too hard. To reach fasteners and bolts needed to install consoles and wiring harnesses in Mercedes's M Class SUVs, workers had to "slant walk" zigzag style to parts bins a few feet down the line. Each trip required five or six steps, and workers would sometimes bump into each other.

In a conventional factory, the response to such a complaint might be predictable: Shut up and get back to work. But when Jack Duncan, a supervisor on one of the plant's "continuous improvement" teams, heard about the situation, he began brainstorming with the workers. They reconfigured the bins and the job order so that needed parts would be closer. Then they measured the improvement: between one and two seconds for each SUV passing through the station. "One improvement in one or two seconds--there's not a lot you can do with that," says Duncan. "But two or three improvements can add up."

Such obsessive attention to detail is at the heart of the productivity revolution that has swept corporate America, encompassing big and small factories, and even the local Wal-Mart. The goal in most cases is not to audit employees' every move but to improve the processes that they know best. "Some people take this and say: `What a bunch of nonsense,' " acknowledges factory President Bill Taylor. "But I'm not looking for quantum leaps. If it doesn't solve the problem, they learn more." The payoff so far: In six years of production, the M Class SUVs made in Tuscaloosa have been among the automaker's most profitable vehicles.

The pace of economic growth and the monthly unemployment rate might get headlines, but productivity gains are the fuel nudging the economy forward. After years of slow growth, the rate of output per hour in the United States began to accelerate in 1995, a dividend of the digital age. And the past year or so has been a "productivity feast," according to Federal Reserve Chairman Alan Greenspan, with annualized gains of nearly 4 percent, more than twice the historical average. The ability to produce more with less is what boosts incomes, gooses corporate profits, and raises the overall standard of living. The more efficient manufacturing of semiconductors, for instance, has led to plunging computer prices and the rapid adoption of new information technologies in businesses and homes.

In the auto industry, productivity gains of 6 percent to 7 percent a year--well above average--have helped lower the cost of a new car from about 29 weeks of median pay in 1990 to about 20 weeks today. At the same time, auto industry wages, at about $20 an hour, have remained high for manufacturing. "If the productivity is there, we will keep the jobs," says David Littmann, chief economist for Comerica Bank in Detroit. "Otherwise, the jobs would have migrated to Bangladesh."

That sentiment reaches all the way to the factory floor in this corner of the Deep South, where there was virtually no auto industry until Mercedes arrived in 1994. "If we constantly do better, we get to keep our jobs," says Susan Warner, a process engineer who joined Mercedes after graduating from the nearby University of Alabama. That mentality is widespread among the workers here, but not because the factory is a sweatshop. Quite the contrary: The gleaming Mercedes campus off Interstate 20 includes a health club and a day-care center. And last year, each of the factory's 2,000 employees got a bonus, based on the plant's performance, that could cover a year's tuition at Alabama or a comfortable family vacation.

Big savings. Mercedes started from scratch when it began building its Alabama factory nearly 10 years ago. That allowed the company to incorporate modern "just in time" and "just in sequence" manufacturing techniques, setting up shop without the huge warehouses typically needed for storing parts. Instead of buying parts from thousands of suppliers and bringing them together at the factory, Mercedes had 100 top suppliers preassemble major components such as interior consoles. Those suppliers are then tied into computers that track order flow.

Along the assembly line, plastic tubs arrive with mirrors or bumpers or interior inserts at the point where they're needed, often within an hour of when they're plunked onto a chassis. The only storage is a series of shelves that looks like a section of an Ikea store. The streamlined system helps save about $75 million a year, estimates Jeff Sage, an IBM consultant who helped design the facility. And with suppliers handling much of the manufacturing, Tuscaloosa "is really just a final assembly plant," says Sage.

The factory opened in 1997. And with 60,000 applications for 2,000 jobs, Mercedes has been able to tap into the most qualified workers in the state. In its first full production year, output was about 68,000 vehicles. But Mercedes officials knew that would have to increase because of the SUVs' popularity.

Production at the plant rose to more than 77,000 units in 1999, then leveled off at about 80,000 vehicles in 2000 and 2001--all with the same number of workers. But another boost in output was needed. In the summer of 2002, a contract to produce several thousand M Class vehicles a year at a third-party factory in Austria was set to expire. That volume would shift to Tuscaloosa. So early last year, Taylor called for a takt down, a German term for reducing the time it takes each vehicle to move through assembly. Each worker was required to come up with more-efficient ways to do his or her job, with the goal of shaving six seconds off the time that vehicles spent at each of hundreds of workstations--ultimately raising the number of vehicles produced each shift. Line workers and supervisors scrutinized slant walks, ergonomics, labor-saving gizmos, and safety enhancements that could reduce the number of accidents that shut the line down. "Most of the improvements were small," says Kevin Martin, who is helping design a new assembly line. "If you were working on the line, you'd barely notice at all."

Employees say the process was anything but elementary. "The takt down was a phenomenal undertaking," recalls Steve Nord, a line supervisor and retired Army 1st sergeant. "The first time, it tears people apart mentally. You do something different, you're going to get resistance." But, says Luella Minor, a supervisor known as the "Windshield Lady" from her first job on the assembly line: "The one thing I really like is that we get the team members involved."

After nearly a month and more than 1,000 tweaks, the takt down became a success. By the end of 2002, that enabled the plant to produce 88,271 vehicles, a 10.4 percent increase over the prior year.

As a sign of the plant's success, Mercedes decided last summer to build in Tuscaloosa a new vehicle called the Grand Sport Tourer, which will create another 2,000 jobs. But a more notabletestament to the productivity breakthroughs at the plant may be that the workers take their job lessons home. While reviewing plans for a house he's building, Kevin Martin shifted the location of a washroom so that he wouldn't have to slant-walk from the living room. And process engineer Susan Warner has begun practicing continuous improvement in her kitchen, moving the coffee filters closer to the coffee maker and making other labor-saving changes. "My husband," she confesses, "must think I'm brainwashed bringing all this stuff home."