In 2008, PPG Industries’ fiber glass business was evolving from a mass production system to a lean-based customer pull manufacturing system to enhance organizational adaptability, better serve the changing needs of the customer base, and reduce the working capital or cash required to operate the business. In the past, the organization would have determined what was changing within each of the functions and trained only those employees on the tactics of what they needed to do differently. This time, they used a different approach. PPG’s fiber glass business wanted all of its employees to see the big picture of the business from the leaders’ point of view.
As many companies do, PPG leaders keep score with metrics such as earnings per share, return on capital, and free cash flow. But often, when these words are “translated” for people, they hear something different. They hear things like “reduce inventory,” “pay suppliers slower,” or “manage TAKT time.” Leaders often inundate employees with tactics, but fail to provide them with the big picture of the business from the leaders’ point of view.
Partnering with Root Learning, PPG’s fiber glass business told their story to each of their employees, helping them to understand the importance of cash flow, the key drivers of cash flow, and how their individual behaviors needed to change in order for the organization to optimize their cash position.
It was vital for plant-level employees to understand that a shift from mass production to lean didn’t necessarily mean head-count reductions. In fact, certain plants were able to add head-count because they built a core competency in responding to the changing needs of the customer – something they could have never achieved with mass production.
The experience also demonstrated that effective cash management wasn’t just the job of the finance department. Effective cash management is the job of all employees from sales to purchasing – for example, helping the sales and customer service organization understand the value of cash management and how it linked with a lean customer pull manufacturing model. Understanding the opportunity and how the entire business model fit together allowed employees to better sell the benefits to their customers.
PPG’s fiber glass business has successfully moved to a customer pull manufacturing planning model, and their customers now understand that their orders drive the production scheduling. The Root Learning sessions helped all functions of the business understand the importance of our new model and how it could enable PPG to reduce inventory while at the same time improving customer satisfaction and order fulfillment.
As a result of our focus on cash flow, we’ve been able to manage the downturn better than many of our competitors. For instance, as a result of our fiber glass business unit’s focus on cash flow, we increased our inventory turns by 28% in 2008. The fiber glass business unit was also a contributor to PPG’s fourth quarter of 2008 cash flow improvements when the company increased its cash position from $526 million to $1.02 billion.
Root Learning’s methodology enabled all employees to see the problems of the business and work through them just as leaders do, thus eliminating resistance and accelerating change, allowing us to connect the dots for our employees and deliver great results to our shareholders.