Discuss the hairball 3M was facing and how it was dealt with. What is its impact

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Discuss the hairball 3M was facing and how it was dealt with.

What is its impact on cost?

3M Begins Untangling Its 'Hairballs'

• BUSINESS • May 16, 2012, 7:20 p.m. ET 3M Begins Untangling Its 'Hairballs'

Making Plastic Hooks Is Harder Than It Seems; Streamlining a Four-State 1,300-Mile Supply ChainBy JAMES R. HAGERTY

ST. PAUL, Minn.—3M Co.'s MMM -0.65% Command picture-hanging hooks, made of plastic and strips of sticky foam, don't look complicated. Until a couple of years ago, however, the Command production process meandered more than 1,300 miles through four factories in four states.

3M's recently retired chief executive officer, George Buckley, branded such convoluted production trails as "hairballs." The 110-year-old conglomerate is still trying to untangle them to wring costs out of one of the world's most complex manufacturing enterprises.

In a time of slow economic growth, most companies can't excite investors with soaring sales. In this year's first quarter, 3M sales edged up 2.4%. That makes cost-cutting all the more urgent.

"Hairball," the sort of colorful term favored by Mr. Buckley, isn't a word 3M manufacturing executives relish. Even though Mr. Buckley stepped down in February, the fight against this scourge continues under his successor, Inge Thulin.

The man in charge of untangling, John Woodworth, 3M's senior vice president in charge of supply-chain operations, characterizes the situation this way. "We had long supply chains," he acknowledges. "It was and continues to be an issue."

Every company tries to streamline manufacturing and supplier networks, of course. But few have a task as daunting as Mr. Woodworth's. He estimates that 3M makes 65,000 products, ranging from Scotch tape to film for solar-energy panels, dental braces and dog chews. They are produced in 214 plants in 41 countries. Mr. Woodworth, an electrical engineer and 38-year veteran of 3M, figures he has been inside half of those plants.

3M's long-term plan is to have fewer, larger, more efficient plants, and spread them out around the world. More production will be done in what 3M calls "super hubs," plants capable of making scores of products for a region of the world. 3M now has 10 hubs, including six in the U.S. and one each in Singapore, Japan, Germany and Poland. It plans at least six more, all outside the U.S.

3M has been expanding its overseas sales aggressively for decades and gets nearly two-thirds of its sales outside the U.S. But less than half of its production is outside the U.S. To improve that balance, 3M is building more plants in Asia, Latin America and other fast-growing markets. By putting production closer to customers, 3M can cut shipping costs, reduce currency risks and customize products to suit regional tastes. It also can eliminate hairballs.

One of the prime hairball untanglers is Jim Welsh, a vice president responsible for manufacturing and working with suppliers. He leads a committee of supply-chain executives, currently focused on 18 "high-impact" opportunities to improve efficiency in making major products, including respiratory face masks, stethoscopes and reflective material for highway signs.

The goal is to reduce cycle times—the period needed to go from ordering raw materials to delivering finished goods—by 25%.

Before the war on hairballs, the production process for Command hooks began at a 3M plant in Springfield, Mo., which made the adhesives. Those adhesives were shipped about 550 miles to a 3M plant in Hartford City, Ind., where they were applied to polyethylene foam.

The foam was shipped 600 miles to a contractor's plant near Minneapolis, where the product was imprinted with the 3M logo and sliced into needed sizes. Then the product was trucked about 200 miles to central Wisconsin, where another contractor bundled adhesive foam with plastic hooks and put the product into blister packaging.

About two years ago, 3M consolidated these steps at its plant in Hutchinson, Minn., one of the super hubs, where Scotch tape, Nexcare bandages, furnace filters and other items are made.

That plant creates finished Command products for the Americas while sending giant rolls of unfinished sticky foam to Singapore and Poland, where they are tailored for Asian and European

markets. The cycle time for making Command has dropped to 35 days from 100, Mr. Welsh says.

3M's Littmann stethoscopes used to be made in steps involving 14 outside contractors and three 3M plants. Now all processes are being brought into a plant in Columbia, Mo. The cycle time will fall to 50 days from 165, Mr. Welsh promises.

Hairballs mean more inventory costs because at each geographically separate production stage a buffer stock of unfinished items is kept to cope with any disruptions in the flow from another plant. Holding that inventory is expensive in terms of space and cash sunk into materials waiting to become merchandise.

Why did 3M let some processes get so complicated? Part of it, says Mr. Welsh, is the company's risk-averse culture. An old saying at 3M is "make a little, sell a little." In other words, don't buy a lot of new machinery and set up plants until a product has proved itself in the market.

So 3M product developers would look around for available machines and expertise even if it was hundreds of miles away. That meant 3M could keep machinery running round the clock more often, gaining efficiency. But it also meant more costs for shipping and longer production cycles. Now 3M's goal is to ramp up production much faster when it has a hit product and avoid "disjointed supply chains," Mr. Welsh says.

He doesn't use the term "hairball" but says that Mr. Buckley's crusade against them has proved "a great opportunity for us."

Write to James R. Hagerty at bob.hagerty@wsj.com

A version of this article appeared May 17, 2012, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: 3M Begins Untangling Its 'Hairballs'.

Explanation / Answer

So 3M product developers would look around for available machines and expertise even if it was hundreds of miles away. That meant 3M could keep machinery running round the clock more often, gaining efficiency. But it also meant more costs for shipping and longer production cycles.

            Now 3M's goal is to ramp up production much faster when it has a hit product and avoid "disjointed supply chains," Mr. Welsh says. He doesn't use the term "hairball" but says that Mr. Buckley's crusade against them has proved "great opportunity for us."

On the afternoon of Friday, Aug. 13, 1971, high-ranking White House and Treasury Department officials gathered secretly in President Richard Nixon's lodge at Camp David. Treasury Secretary John Con nally, on the job for just seven months, was seated to Nixon's right. During that momentous afternoon, however, newcomer Con nally was front and center, put there by a solicitous president. Nixon, gossiped his staff, was smitten by the big, self-confident Texan whom the president had charged with bringing order into his administration's bumbling economic policies.

In the past, Nixon had expressed economic views that tended toward "conservative" platitudes about free enterprise and free markets. But the president loved histrionic gestures that grabbed the public's attention. He and Conn ally were determined to present a comprehensive package of dramatic measures to deal with the nation's huge balance of payments deficit, its anemic economic growth, and inflation.

Dramatic indeed: They decided to break up the postwar Bretton Woods monetary system, to devalue the dollar, to raise tariffs, and to impose the first peacetime wage and price controls in American history. And they were going to do it on the weekend—heralding this astonishing news with a Nixon speech before the markets opened on Monday.

The cast of characters gathered at Camp David was impressive. It included future Treasury Secretary George Shultz, then director of the Office of Management and Budget, and future Federal Reserve Chairman Paul Volcker, then undersecretary for monetary affairs at Treasury. At the meeting that afternoon Nixon reminded everyone of the importance of secrecy. They were forbidden even to tell their wives where they were. Then Nixon let Connally take over the meeting.

There are five products required to make the final product:

1.     Adhesives

2.     Polyethylene foam

3.     Foam backings

4.     Plastic hooks

5.     Product packaging

The initial state of the supply chain is shown when you load the “Hairball” case study. Assume you still use the factory in Springfield to manufacture adhesives and the factory in Hartford City to manufacture polyethylene foam, experiment with ways to combine product assembly at a single super hub factory in Minnesota to cut costs.

Factories in Springfield and Hartford City can just ship products directly to this super hub. The super hub factory will expand and its operating expenses will increase but there will be savings in eliminating one factory and reducing transportation costs.

Experiment with different rates of production at the two feeder factories in Springfield and Hartford City. Experiment with different size trucks and different delivery routes and delivery schedules. See what levels of production can be supported in the super hub depending on the amount of adhesives and poly foam rolls that are delivered to the super hub.

Assume that a finished product is a case of 1,000 wall hanging units and that each 1000 unit case requires:

§ adhesives costing $200 and with volume of 0.5 cubic meters

§ one tenth roll of polyethylene foam costing $50, volume of 1 cubic meter

§ 3,000 plastic hooks costing $75 with volume of 0.2 cubic meters

§ 1,000 packaging units costing $200 with volume of 0.75 cubic meters

Demand for the finished product is 300 cases per day (each of these cases has 1,000 wall hanging units). And the storage volume required for finished product is 1 cubic meter for each case of 1,000 wall hanging units.

What can you do to make this supply chain run for 30 days while still lowering transport and operating costs and reducing on-hand inventory across the supply chain?

To load the SCM Globe model of this supply chain go the SCM Globe library and click the “Import” button next to this case study. To share your own improvements on this basic model with other SCM Globe users see online information “Download and Share Supply Chain Model

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