Examining one company's operations-based growth strategy

Associate autonomy drives Hypertherm’s success.

By Kevin J Duggan, Institute for Operational Excellence

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Founded in 1968, Hypertherm is a world force in plasma cutting technologies, with products in use in industries as varied as construction, demolition, earth-moving, shipping, and transportation. Hypertherm’s primary manufacturing facility is headquartered in Hanover, New Hampshire, with a newly constructed, 300,000-sq-ft manufacturing facility built in 2012 located about 3 miles away.

While Hypertherm has more than 1,300 associates spread across the globe, all manufacturing takes place in New Hampshire. Incidentally, the company has never had a layoff in its history. And more than 95% of Hypertherm’s supply chain is within 200 miles of its headquarters in Hanover. Even though all of its products are built with locally sourced labor, the company still sells about 60% of them outside of the United States, including 24% to low-cost countries.

Hypertherm’s success can be attributed, in large part, to its ability to leverage its manufacturing operations to drive business growth, which it’s been doing for more than a decade. In the early 2000s, Hypertherm embarked on an aggressive approach to continuous improvement but decided to forgo the traditional method of brainstorming, applying tools, and performing kaizens to eliminate waste and get a little better each day. Instead, Hypertherm set business growth as the goal for all of its continuous improvement efforts.

To achieve this end, the company knew it had to get its manufacturing operations to a point where, “each and every associate can see the flow of value to the customer and fix that flow before it breaks down.” In other words, it had to achieve operational excellence. In practical terms, Hypertherm wanted its production associates, meaning the people who actually handle and build the products on the shop floor, to be able to flow orders to the customer under normal conditions and fix any abnormal flow on their own, without needing management intervention.

This "self-healing flow" enables almost complete autonomy for Hypertherm’s production associates. With so much of the responsibility of flowing product resting with those closest to the manufacturing operations, Hypertherm’s leadership, including its team leaders who directly supervise the production associates, has the time it needs to work on offense, or activities that grow the business in either the short or long term.

Visual flow

Setting self-healing flow as an operational goal meant Hypertherm needed to design and develop systems of flow that the associates could fix on their own without the need for outside involvement. That meant associates had to be able to distinguish normal flow from abnormal flow just by looking at or observing the manufacturing processes. The company achieved this through the heavy use of visual systems that signal when the flow is becoming abnormal.

Figure 1. Hypertherm uses visual production systems such as this temperature board throughout its operation.
Figure 1. Hypertherm uses visual production systems such as this temperature board throughout its operation.

The associates followed a specific set of design guidelines to create visual, self-healing flow in manufacturing, at mixed model pacemakers and shared resources, in the office, and even in the supply chain, all with the ultimate goal of making the flow so visual that it could be fixed without the need for management intervention. In fact, the intent was for the flow to be so visual that a visitor who had never been to the factory before could come in, follow the flow from end to end, and tell if it was on time without asking any questions. If a visitor could do this, then everyone who worked in the company could, too.

Central to Hypertherm’s creation of visual, self-healing flow was the use of standard visual systems, sequencing boards, and signaling techniques throughout the manufacturing operation. For example, when producing a high mix of customer products, the company uses color-coded visual boards to integrate customer orders with production sequencing at a single key process called the pacemaker, which has eliminated the need for prioritization, expediting, and management directives. Processes that provide components to the pacemaker work off of visual boards, too, as does the material handling device for each process. At Hypertherm, these visual boards are referred to as “temperature boards,” and they let each associate know if they need to produce or not (Figure 1).

The different colors on the temperature board have been linked with different levels of customer demand to indicate each product’s inventory level and its corresponding need for replenishment. “Red” indicates low inventory for a product, and therefore a high need for replenishment. “Yellow” is a warning track, indicating that the associates need to pay attention to the situation. And “green” means the inventory levels are good for that product, and replenishment is not needed as urgently as it is for the products in the yellow or red zones.

At the start of the day, the production associates simply look at this board, process all the orders in the red zones first, then the orders in the yellow zones, and finally the orders in the green zones. If there is more than one product in a red zone, the production associates follow pre-established standard work to determine which product needs to be built first.

Using this visual system, an entire day’s worth of production can be completed without the need for management intervention, team-leader involvement, meetings, or computer reports or printouts. Everything is handled directly by the associates working out on the shop floor and is so visual that even a visitor could quickly tell if the flow is normal or abnormal, on time, or not.

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