Lean Material Handling Takes Center Stage

Being in the limelight is what being a materials manager is all about—good when things are going well, stressful when they are not—says Cliff Gilroy of International Truck and Engine.

Located in Warrensville, Ill., ITEC manufactures medium-and heavy-duty trucks, buses, and diesel engines, It is the operating division of Navistar International Corp. The holding company (NYSE: NAV) reported total sales of $9.7 billion and net income of $247 million for its 2004 fiscal year. Buoyed by strong growth in the truck market, sales climbed 30 percent over the previous year and earnings recovered following three years of losses.

Prior to joining ITEC, Gilroy was general director lean implementation in Europe and director inbound logistics for the U.S., Canada and Mexico for General Motors. He developed his lean expertise at Toyota Motor Manufacturing and began his career with General Electric. Gilroy earned his bachelor's degree in business administration and materials management from Conestoga College of Applied Arts and Technology in Canada. Gilroy is also a member of the board of directors of the Automotive Industry Action Group (AIAG). Based in Southfield, Mich., AIAG's 1,600 member companies include North American, European and Asia-Pacific OEMs and suppliers to the transportation industry. (To find out more about AIAG's global materials management standard, see the story beginning on page 20.)

Tell us a bit about your experience with lean manufacturing.
"I worked for Toyota Motor Manufacturing in Japan and in Canada at a startup plant. I'm totally a believer in lean. I think there's almost no end to what lean can do for you, but lean is not easy.... It's really a journey that you have to go on. To engage in lean, most companies have to have a crisis. Sometimes it's a quality crisis, sometimes it's a cost crisis, every business has lots of crises....

"Are we real lean [at International Truck and Engine]? Do we have self-directed work teams and group leaders in the Toyota style? Not yet. But I've been talking to the senior executives here and this is the direction we want to go. Lean takes some time. Lean's not free either. It takes a change in attitude and you have to add some heads here and there. You'll get the benefit later but there is a short-term investment to get the long-term benefit."

How do you quantify the benefit from implementing lean?
"How do you measure improved quality? What's that worth? How do you measure customer satisfaction, which leads to repeat business? How do you measure that you're not doing as much repairs? There are a lot of benefits but you have to dig down a bit. It's hard for me to say, 'Put lean in and I'll write you a check for $2 million this year.' Lean is an enabler to save money in all of these other areas."

Why did you agree to be on the board of AIAG? What do you get out of your involvement?
"I'm there because I want to help direct the board's decisions, that it supports what we're doing in the heavy truck business. We're looking at global sourcing. I want to make sure AIAG is involved in that, in doing some training in those areas....

"There are other things you get out of [AIAG participation]: Common business processes. Our suppliers don't just do business with us. We can see how they're dealing with other businesses like ours and we can commonize our plans so they can do business with us easily. If they can do business with us easily, maybe they won't charge us as much—I wish."

What is the biggest challenge that you're currently working on within ITEC?
"We have seven businesses in six plants. They really are silos. The chore we have is bringing them all together under one supply-chain organization. That's easier said than done. I'm not saying that what they're doing is bad or anything. It's something they know, and they're very efficient and each group probably thinks they have the best practice. What we're trying to do is bring them all together under one roof.

"Take IT for instance. Before, if you were in one of these plants, you could fill out a form saying you want this system to do this, and someone would go and spend a lot of money. Now if you want something done in supply chain, you have to bring it to the supply-chain board, which is all of my direct reports and all of the supply-chain managers from each plant. We will not implement a request unless we all agree we're going to use it....

"If you came up with a great idea in your plant before, it was a great idea and you saved a lot of money. Now we multiply it by six. We can all use that great idea. We're getting very good at that."

What do you like about working in materials management?
"It's fun to be in supply chain. It's exciting, it's different all the time. There isn't a part of the business that can do something without telling you. I also like the culture at International. We can learn from our mistakes and you're not afraid to take a risk. If it doesn't go as well as you expect, you'll get another shot. International wants to improve. For someone like me, I think I have a little bit to offer and they're letting me do it. I'm working with a great team."

What advice do you offer to your people who are just getting started in their materials management careers?
"They should only be in what they're doing now for a couple years. It doesn't always mean a move up. You have to be more patient than that. You should be prepared to move sideways. In the so-called good old days we all stayed in the same job and moved up, became a supervisor, then a manager. It's more like a pyramid now. You have to be more diverse. You have to understand more pieces of the business. I don't think a good career move is [to stay in] one piece of the business. You have to understand a lot more of the business."

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