Sourcing

The Sorcery of Sourcing

Want to optimize costs in sourcing? The best method is to gain an intimate understanding of your suppliers’ products and technologies.

It’s perhaps no coincidence that the word “sourcing” sounds a lot like “sorcery.” A good sourcing manager can indeed appear to know black magic. But Lenka Hrušecká, Sourcing Manager Holic & Projects at Fortaco Group, says doing the job well comes from a combination of relationship building, pure curiosity, and a willingness to understand the suppliers’ world.

Relationships matter

Sourcing is finding the right source for the right costs and right quality with right delivery. “My job is to ensure that the components for everything we assemble in our factory has a source,” says Hrušecká. “That means we build relationships over the entire supply chain and challenge suppliers to improve costs. But not only costs. We ask they improve delivery, quality, and bring innovations and new ideas.”

Hrušecká’s team deals with approximately 200 suppliers, with around 50 of those considered strategic partners. “It’s impossible for our team to know all 200 personally,” she says, “so we invest real time with our strategic partner suppliers to whom we’re closely connected. We invest time in suppliers who want to grow with us, have a good combination of offerings, have the potential to be innovative, and can offer R&D support.”

Depending on your industry, 200 may seem like lot of suppliers, given the constant challenge to streamline and reduce the number of partnerships. “Before you can reduce the number of overall suppliers, you have to develop your strategic suppliers,” says Hrušecká. And that’s done through as many face-to-face meetings as possible with suppliers and her team, as well as category managers. The objective: learn their businesses, learn the cost drivers, learn the limitations and technologies.

Curious about screws

There are always calls to bring down costs and improve cash flow. But in order to do that Hrušecká says you have to understand what’s behind the prices, and what factors ultimately influence the final price. “You’ve got to have a hunger for information. You’ve got be curious about material groups, like screws, polycarbonates, even the simplest materials. The most basic screw will have a huge story behind it.”

For example, suppliers can tell you how the screw is treated and whether it’s possible to reduce the variety of screws used in assembly. “Suppliers can significantly reduce your costs by not only reducing the price, but also by proposing solutions to reduce assembly time, administration, or warehousing,” she says. “Suppliers, if there’s a good relationship, can offer better tools to allow operators to work faster and more efficiently, and they can support you in bad times, as well.”

“Glue is another example,” says Hrušecká. “How’s it made? Is it curing too long and influencing the final product, and final costs? And polycarbonates: what’s important and what differentiates them? High optical, low optical? What are the regulations and norms? Ours is a strangely wonderful business. You’d probably never imagine that suppliers talk about cabin glass with love!”

A fresh, female approach

Hrušecká studied marketing in Bratislava, worked in media, advertising, and then found herself as marketing director at Bratislava's biggest shopping mall. Moving to western Slovakia with her family, she joined Fortaco as a junior in the sourcing department. "I wanted to learn the business from the ground up," she says, "so I studied drawings, absorbed the technical details, and after six months I was responsible for ready-to-weld parts." She bounced around a bit in the industry, but returned to Fortaco, becoming sourcing manager for three Fortaco factories across Europe dealing with cabin and vehicle assembly.

Hrušecká loves the teamwork in what is a predominantly male industry. "There are very few women in the factories, and women perceive different things than men. This combination actually makes for a great team, though it’s not always easy to convince men of this.”

"I once told a future boss in an interview that I was creative and improvisational, and he suggested improvisation wasn't the best approach to the job,” she says. “But since then I've seen the approach bring some very interesting solutions for customers. This way of seeing the world can really impact the numbers."


Changing a Culture

When a culture improves, KPIs follow.

Anna Młynarczyk-Widomska holds a Master of Engineering degree from Cracow University, though as fate would have it she never worked as an engineer.

Right out of school she got a job in selling technical maintenance and infrastructure services, then soon transitioned to do controlling for a production company from the automotive sector, and then worked for a Spanish construction company which built highways, buildings and airports. This was the beginning of her journey into finance.

At Fortaco, as Finance, People, and HR Director, she supervises a team of eight responsible for the financial areas of accounting, cash flow management, financial KPIs, and relationships with banks. Her team’s HR responsibilities include payroll, recruitment, and motivation. Motivation and people engagement is a topic of particular importance to her. She is lead of the IT and Administration team.

Communication and our behavior

“When I joined Fortaco in 2014, we still encountered elements from a very formal and old fashioned culture in our factory,” Młynarczyk-Widomska says. “Managers were addressed very often as ‘mister’ or ‘missus,’ doors were kept closed, people kept to their own departments, and the opinions of employees were not often sought.” Mrs. Młynarczyk-Widomska set out to change that.

She began to lead by example, using names instead of positions during daily work, keeping her office door open, greeting people in the production hall. “With other leadership team members we focused on introducing cultural change at Fortaco Janów Lubelski.

“Day by day we were able to see improvements. It was very helpful that new people joined our team. For example, we had a new production director, engineering manager, and quality manager.” Over the last five years new tools were implemented, including monthly meetings with three employees to hear their opinions about equipment, health and safety, salaries, or anything they wished to discuss. General meetings with the managing director were held in the production hall where people could ask questions and get key information about our current situation and our challenges.

The management team also began a campaign to tidy up the factory to make it a more pleasant environment. “You don’t have to spend much money to do that,” Anna says. “We painted walls and changed the carpets, put things in their proper place.”

Most important was the interaction with people, the hellos delivered on the factory floor. "It’s important to show people that we see their work, that they’re important. We must communicate with them, and treat them as partners whose ideas are valued.”

Accounting not only in the finance department

We are here to deliver the right numbers to our owners. “In the past, the forecasting process was located in the finance department. I changed it and asked managers responsible for each area to deliver data necessary to complete forecasting process,” she says. “We had to ‘clean up’ some mistakes from the past in case of bookings, clear up some accounting process ‘doubts,’ and take control of the flow and verification of financial documents. We created a new structure of cost centers and a transparent cost allocation process. Managers now get to manage their own budgets.”

“The beginning was very difficult because people couldn’t understand why they had to do these things, but now I know that they also see benefits from this changes.”

KPIs will follow

The soft changes quickly produced hard changes. Financial KPIs and survey results improved. EBITDA moved from three percent of turnover to double digits. Return on invested capital moved from a negative number to over 30 percent in the positive. Employee turnover is within normal bounds.

“There are lots of intangibles, too,” Anna says. “You can ask people how they’re feeling and get a very positive answer.”

Anna believes creating the right culture is essential to tackling problems which turn out to be more complex than previously thought. Several years ago, when KPIs did not improve after an across-the-board salary increase, we introduced a productivity bonus tool. To decrease sick levels, we created an availability bonus. “It’s a simple system. It’s very transparent, and people can easily calculate themselves the results of doing things differently.”

“Poland is not a low-cost country anymore,” she says. “In this period of transition it’s more critical than ever to create the best possible environment for people. It’s in everyone’s best interest. In Fortaco I meet a lot of fantastic people with great personalities. I am very proud to see what we achieved in Fortaco JL. We are aware that this journey is still ongoing. Trust in tomorrow.“


From Safety Cop to Safety Culture

Changing the way safety is viewed in an organization.

Safety has traditionally been a matter of compliance. Pity the safety specialist, the compliance officer responsible for filling out reports, recording infractions and sending information to management.

"Historically, people on floor think someone else is responsible for safety. That someone else is a safety policeman," says Andrzej Wrona, Operational Excellence Director at Fortaco Group. “And lots of people don’t like the police.”

What doesn’t work

The safety policeman approach may be popular — it has many years of manufacturing tradition behind it. But it's being shown to be ineffective. "The policeman approach either doesn't work or its effect is temporary," says Larissa Shabunova, Managing Director of Fortaco Estonia. "You can issue a lot of rules, you can make demands, but the only thing that’s effective is constant reminders, trainings, and showing examples from other factories."

Shabunova’s statement is borne out by modern research, which shows safety cannot be disconnected from quality, delivery accuracy, and productivity. Record safety goes hand in hand with record performance. With that in mind, Fortaco is working toward transforming its safety cops into culture creators.

From the top to the shop

But just as the lone policeman cannot be effective, it isn’t possible to assign one individual to create a safety culture. Safety must permeate every level of the organization, from top management to the most junior employee on the shop floor.

Buy-in must start with not only group-level management, but with top management at every production site, as well. “We spend a lot of time doing night audits to show people that top management is involved, says Yuri Krupinin, Fortaco Estonia's QHSE Manager. “We’re not only present, but we’re leading by example. Safety starts with us, and you’ll see the director wearing a hard hat. We don’t ask people to do anything we don’t do ourselves.”

Asking employees to take part is critical, because there are barriers which simply cannot be broken without them. “It’s difficult to get your LTIF rate below five or six without employee involvement,” says Andras Csizmazia, Head of QHSE for Fortaco Group.

Hard heads and transitions

Historically, Fortaco has required hard hats to be worn by employees operating a crane from the floor. Welders and forklift operators were not required to wear them. In 2018, Fortaco weighed its options to make hard hats obligatory for all.

"We could have issued an order and then administered warnings and punishment, but we tried another approach,” says Larissa Shabunova. “We bought a variety of helmets, tested them with management when we went to production. This allowed us to both see which helmets met our needs, but also demonstrate to workers that we were wearing them. We chose three suitable models, and then allowed middle management to choose the one they liked. They started showing up on the floor in them. Then we added shop floor supervisors, department managers, and team leaders, slowly moving down the chain. We never issued a formal order, though we told people hard hats would eventually be required. Finally, when we approached the workers there was little resistance, because they'd already seen us setting an example for several months."

As of January 1, 2020, everyone in a Fortaco factory in Estonia wears a hard hat.

The workers know

Educating workers about what’s unsafe isn’t the real challenge according to Agnieszka Koziara, Fortaco's SVP People & HR.
“I have a feeling that people know exactly what is safe and unsafe. I know that if I’m hurrying to pick up my kids, I know that’s dangerous and improper. We have to be honest with our colleagues and with ourselves.”

Koziara says the challenge of creating a safety culture lies in convincing workers that safety at work is as important as safety at home. “Why don’t we take responsibility for our colleagues at work, just as we take responsibility for our family members at home?” she asks. “If you see something unsafe you need to say ‘stop.’ I think there’s a barrier in our minds.”

Teaching safety

Larissa Shabunova has tried to cross that barrier one step above the individual level: with the team.

In order to improve efficiency we need to empower team leaders. "Before, a foreman managed 50 to 60 people, which is far too many. A leader should be responsible for a maximum of 15 people. We selected the best workers to be team leaders, since they were unofficial leaders, anyway. The team leaders became ambassadors of our values, with safety as one of those key values.”

What’s the most impactful teaching tool for safety? Many believe it to be real-world examples. Since human beings are by nature curious, and often competitive, frequent trainings and constant emphasis on safety should include information from other factories.

Fortaco Estonia's Yuri Krupinin organizes trainings for welders and bending machine operators. His sessions include not only safety requirements for each task, but fault and deviation figures from other factories. It’s also routine to distribute accident reports across the Fortaco organization. "If you show real situations, not stuff from the newspaper, then it's very effective," says Krupinin. "Forklift drivers are always curious about forklift drivers in other factories."

Tomorrow’s safety education

As technology develops so will safety training. "If we’re going to have trainings," says Andrzej Wrona, “then let’s make sure we benefit from it. I believe that virtual reality training can be very effective and is a good option to consider in the future. Put people in unsafe situations in a virtual setting. Make it interesting and deliver a message.”

Regardless of modern tools available, the most effective safety tool will remain the one between the worker’s ears. That tool, combined with the clear understanding that the employee is actually encouraged to stop work if something is unsafe, will bring Fortaco closer to its goal of zero accidents.

It’s a cultural shift that won’t come overnight, a step toward Eastern philosophy, as Yuri Krupinin describes it. A workplace environment where it’s clear one impacts his own safety, and a company that has your back. “If you’re part of our company,” says Krupinin, “then we’re here to teach you, not to blame you.”


Residual Value: Beyond the Holy Trinity

How data will eventually impact residual value, total cost of ownership, and transform heavy-equipment financing.

“Hours of use, type of use, and maintenance record. These are the three things that matter when calculating residual value,” said a former director of a major OEM’s financial business. While it’s hard to find anyone who would dispute that information has value, is more information necessarily good information when it comes to residual value?

"Don't overthink it," cautioned the finance professional, who has left the OEM for another business and agreed to bounce around ideas off the record. “Was the bulldozer used 2,000 hours per year in a single shift? Or double that? Was the ADT used to haul mine tailings, or did it transport feathers? Was the backhoe professionally serviced? Or was the owner a DIY type?”

At the moment, the prevailing wisdom seems to be that hours of use, type of use, and maintenance record — the Holy Trinity of residual value — adequately serve the industry’s purpose.

A used-car model

Dr. Rafał Sornek, Senior Vice President of Technology at Fortaco Group, makes the case for data impacting residual value.

“Take data OEMs already collect, store it in a public place, authenticate it with blockchain, and give industry professionals access to it.” Sornek’s proposal is to do for the off-highway industry what has already been done for used cars in Europe. "I can use a VIN to see a vehicle's entire history. Why not do the same for a used crane?"

Sornek’s vision is massive amounts of data contributing to more accurate residual value, resulting in a lower total cost of ownership. "Even in an honest marketplace," he argues, “sellers themselves sometimes don't know what they're selling."

What OEMs know

Chris Domagala, CBDO of Lectura, a German- and Czech-based company which collects and sells transactional data on heavy machinery, says OEMs don't always know as much about their assets as they let on. "OEMs have huge distribution- and dealer networks that sometimes show significant price autonomy. There are cases where the OEM doesn't even know exactly for how much their machines went to market. They may not get data back from dealers. OEMs are experts on machine specs — they know which components break fastest — but not market prices."

Domagala offers an example of how residual values are still handled on a higher “aggregation level” than they could be at financial institutions (the majority of assets in most countries belong to banks). “It depends on the institution, but crawler excavators, for example, are generalized on a rather high level. You’ll see it's a 20- or 30-ton crawler excavator from a first- or second-tier manufacturer, and that’s usually it. Thus, the residual values they use are aggregated. But the more you know about your particular asset’s value development, the better you can calculate risk, the more profitable it can be. There are more and more ways to approach the car market’s transparency regarding rather accurate model-based value estimates.”

Change begins with a process of mutual educational, he says. “Bankers in the risk department have been in their jobs for 35 years, and to have a third-party company say ‘Our data knows more than yours and your experience’ isn’t always welcome. Also, vast smart data can fail. Banks will naturally take a defensive posture if the process is not symbiotically designed. There is also, literally, a lot that data can learn from ‘old stagers.’”

While collecting data isn’t at all new, putting it to good use is. “We're not in the Dark Ages of collecting data, but we're still at the beginning of connecting data,” says Domagala.

A new type of finance company

Michael Rohmeder is CEO of Equippo, which he characterizes as "a full-service marketplace for construction equipment” with a telematics project. Equippo might be thought of as the Zappo's for excavators, offering online sales of inspected, delivered, and guaranteed equipment.

Depending on how you count it, the annual global transaction volume of used heavy equipment ranges from 100 to 300 billion dollars. Equippo's goal is to get its customers the highest price possible for their equipment, with a high residual value and the lowest possible total cost of ownership. "The components of TCO are the new price, maintenance cost, and the resale value,” says Rohmeder, “and data can impact these heavily."

Rohmeder says banks will write a seven-year contract with a residual value curve so they won't lose money if the value turns. He sees room for a new type of finance company that derives benefit from connected data. One that might offer higher residual value thanks to smart data models, knowledge of future use, and maintenance, allowing the financer to be more aggressive on residual value and still make money.

“A starting point might be in the financing of extremely high-value equipment like cranes,” he says, which can sell new for over a million euros. But when purchased used, he notes, “Crane hours don’t convey how much it's actually lifted. It's an indication, but sometimes the crane is moving up and down with no load. What if we could prove with telematics data that the boom was only used to lift 20 percent of the time?" It's the grandmother-only-drove-it-to-church scenario. Grandma may be telling the truth, but data could tell us whether she had a habit of riding the clutch.

Persuading the bankers

Since interest rates can represent 30 to 50 percent of total ownership costs, it's a matter of time before things begin to change. Chris Domagala says a proper consortium must be built. "We need suppliers like Fortaco with deep knowledge of steel structures. Then we need an OEM with telematics data, a data company like ours, and then a tech provider who can build safe ways of data transfer."

Domagala praises JCB as a first mover. "They launched a telematics platform for JCB users which gives you an overview of all JCB machines, where they are, and all telematics data on one dashboard. It's impressive. But you've got to be an accredited JCB customer, it applies to JCB machines only, and it's not even semi-public."

"Bankers can be persuaded," he says. The risk buy may be intimidated but the CEO will think differently. The bankers will eventually be in favor of it, and they have pull with the OEMs. It could happen in as fast as a year, if an OEM is willing to share historical data.”

Join the cause

Rafał Sornek hasn’t named the group yet, but he’s talking to anyone who’ll listen. He’s convinced Rohmeder and Domagala. And he’ll get around to convincing you, too.

“I want to appeal to people to be part of this project,” says Domagala. “The more people we have at the table, the better the results, and the better we can build trust. Think about a machine's decreasing residual value curve and the upward-sloping cost development. Where the two curves intersect is the perfect place to sell. This leads to better circular economy and, in the end, lower emissions. It’s better for everyone.”


Petra

Opportunities Beyond Obstacles

Every cloud has a silver lining – Petra Špačková’s motto, and more thoughts about her quarantine times during Corona virus crisis.

Special circumstances require special solutions – and those solutions would not be created with ordinary thinking. As everything else in life generally, these special circumstances shall be passed by, but in the meantime our thinking is being stretched to dig deep into our potential in creative thinking and problem solving. Petra Špačková, Fortaco’s Operative Purchaser in Holíč, Slovakia, is a professional, who is working at the frontline of business to keep operations going. Communicating with vendors and production, she is securing that all parts needed in the manufacturing process are being purchased just on-time.

Fortaco operations have been safe and solid during the Corona crisis this spring thanks to all hardworking and flexible members in our team, like Petra. At the moment working means for her spending the days in the solitude of her home office. “In the beginning it was hard to imagine a different daily routine, even though I did understand the seriousness of the situation”. Like for many, at first it was obvious to see only the negative sides, and the change didn’t come without doubts.

“It’s difficult to deal with someone without seeing face to face. On top of that I’m also communicating quite often with people whom I’ve never met before.” Naturally, there were a lot of questions occurring in her head, and not all the answers were totally clear; what can be expected from virtual suppliers; are our network agreements the same as personal agreements?

When the dust was settled, Petra started to pay attention to the advantages of this special situation. Thanks to the advanced information technologies we’re able to stay in contact without the physical presence. “There is no need to meet people personally, in most cases a considerable amount of time is being saved – and also a huge cost”. Even though she was worried the circumstances would affect people’s communication skills, it proved out to be that connections were still made, and people were able to carry on and follow the path towards a common goal.

We are not always able to change situations around us, but luckily, we can always decide, how we respond to them. When a crisis occurs, there are also opportunities to be found. ”I have said to myself, it’s a new period in my job and I should take it as an opportunity for my personal development.” Staying resilient and calm, these are the key factors when making progress through the crisis. And we all have our own way forward when facing hardships. “I´ve discovered the benefits of yoga thanks to my social networks in free time”.

“Viva information technologies - technologies against business crises”, Petra sums up.


True Believer

Agnieszka Koziara’s goal is to create conditions that allow teams to play to win, rather than playing not to lose.

Fifteen years ago Agnieszka Koziara began her career as an executive assistant. Her direct supervisor was from Sweden. "As a Pole it came as a huge surprise to me that you could work with people without giving orders,” she says. “My boss gave me lots of freedom.”

As fate would have it, a career move gave her a second direct superior who was also Swedish. “I wanted to be like them. I wanted to work with people who had their own mind and own ideas, and I wanted to bring out the best in people."

Playing to win

In 2014, Koziara was invited to join Fortaco’s human resources team, and having never forgotten her Swedish bosses and the work cultures they created, she found Fortaco’s culture to be familiar. Today she’s Fortaco’s People & HR Director.

“My Swedish bosses made me a believer that you have to give people the freedom to take risks and make mistakes. When you’re taking risks then you’re playing to win. Otherwise, you’re just playing not to lose.”

She says Fortaco is full of like-minded believers, despite the fact they come from a wide variety of cultures.

Strategy for a winning culture

Koziara works regularly with people from Hungary, Poland, Estonia, Slovakia, and Finland, and within each of these cultures are generational differences. Accommodating those differences is one of the challenges that she relishes.

“Each environment has a different reality and there is no one good way to deal with everyone. What’s critical is that you find enough time to listen to everyone and hear their proposals for change. As an organization we can't dictate how people must behave. We should give guidance and work together to build our own reality."

Take safety, for example. "We'd like to have zero accidents, however our work environment can be quite dangerous. You reach zero accidents by increasing safety awareness. But you can’t do that by organizing training sessions alone. In addition, you’ve got to interact daily with your coworkers, explaining why safety issues are important, and why shortcuts are not necessarily a good idea. In private life, we do everything possible to keep our families safe. Work should be no different."

These conversations go better when everyone is on the same page, and at Fortaco that page is the company’s core value of respect. “We’re all believers in this vision, and Fortaco's vision and strategy are key in empowering our employees to choose the right direction.”

Challenges

Culture is also key when confronting business challenges. In Koziara’s role coordinating HR at the group level, her challenge twofold. First, she readies the staff for an environment of change, since change is the only certainty in business. Second, she’s charged with attracting young people to Fortaco. “We’re competing with the IT industry for young people. Those with us tend to have real experience and know-how we can’t find on the market. We need to treat them with great respect, and it’s critical to show appreciation for them.”

There are more direct measures, too. "We know technology is something that attracts young people to work, so we’re investing in welding robots and other modern solutions. We also want to make the production environment less dirty. But above all is our culture. Everyone has the freedom to share ideas and sometimes make mistakes.”

Koziara says feedback is particularly important to young people. “They get feedback when something is done wrong, but not always when something’s done right. We’re always working to improve that.” To make sure feedback runs both ways, each year Koziara invites employees to European Work Council meetings and to take part in joint initiatives.

Creating leaders

“The Fortaco culture is about creating leaders,” she says. “A leader isn’t a person with a title, but a person who illuminates a direction and allows others to use their own skills to get there.”

Her two Swedish bosses once made Agnieszka Koziara a believer. And now it’s her job to create more believers within Fortaco. "If you’re working with believers, then it's much easier to move forward.”


Can safety be measured?

Better Ways to Measure Safety

Days Without Accidents posters may be common in industry, but counting accident-free days does little if anything to prevent accidents.

"Traditional manufacturing safety programs deal with negative information, says Andras Csizmazia, Head of QHSE at Fortaco. “If that’s how we think about safety, then it means the best result is when we hear nothing at all.”

Of course, the seemingly obvious approach is to celebrate those accident-free days. (Fortaco’s cabin vehicle assembly plant in Holíč, Slovakia, has over 888 accident-free days. A unit in Sepänkylä has over 5,000 days!) But factory workers can be as superstitious as 18th-century sailors, and a celebration can be viewed as inviting an accident.

From lagging to leading

Like days without accidents, loss time injury rate or frequency (LTIF) is another lagging indicator of safety. It’s expressed in hours lost per one million working hours. It’s not bad to measure it – manufacturing in Finland averages an LTIF of 30, according to tvk.fi – but like all lagging indicators, it measures only a lack of safety.

Since accident-free days and LTIF are both easy to understand and measure, it’s unlikely the measure will soon be fully replaced. “We’ll of course continue to use lagging indicators, because they’re accurate, and make it simple to benchmark ourselves,” says Csizmazia. “But they’re not of help to predict the future or take actions to change outcomes.”

Heinrich's triangle was one of the first attempts to create a leading indicator of safety. This theory of industrial accident prevention, developed in the 1931, posits that if the number of minor accidents is reduced there will be a corresponding fall in the number of serious accidents. After studying 75,000 accident reports, Heinrich concluded that there is one major injury accident for every 29 minor injury accidents, and for every 300 no-injury accidents.

Larissa Shabunova, Managing Director at Fortaco Estonia, routinely tracks three KPIs at her factories in Narva: number of accidents, near misses, and unsafe behavior. As she works further down the list, the indicators transition from lagging to leading.

In practice, less unsafe behavior and fewer near misses translate to fewer lost-time accidents. Shabunova knows that if she can convince a worker to stop riding a palette jack as if it were a recreational scooter, she will reduce serious accidents.

Fortaco’s Agnieszka Koziara, Senior Vice President of People & HR with Fortaco Group, is also a believer in tracking near misses. “KPIs of risk behavior are the key to unlocking the mindset.” She says zero tolerance for accidents has to be more than just a slogan. “We can’t stop with the motto and pretty words. We’ve got to have zero tolerance for unsafe behavior.”

A new KPI: measuring ideas

Near misses and incidences of unsafe behavior are easy enough to count, but only if employees report them. Adam Czerwiec, General Manager of Fortaco’s Wrocław Steel Fabrications plant, and his team decided to create a new KPI: ideas. Czerwiec’s management team regularly collects ideas for changes from the plant’s 400 blue collar workers.

Ideas are written on a whiteboard on the factory floor and systematically addressed before being erased. “We’re trying to show that all ideas are most welcome, and we’ll at least try to fix the problem, says Czerwiec. “This demonstrates that the workers’ ideas are important. Sometimes, with small issues, we encourage them to help us fix the problem, so it doesn’t just become a worker complaint board.”

Many critical ideas are received, and no idea is too trivial. Last summer, requests were addressed to put drinking water on the production line on hot days. Another request was to remedy missing toilet paper. “The process shows that every worker can be an influencer,” he says. But it’s not only psychological. The ideas serve as a leading indicator.

Czerwiec’s team counts the number of ideas that come from employees, and tracks from which employee group they come. “We still get most ideas from white collar employees and the safety department,” he says. “But our goal for Wroclaw is to be challenged and supported by our blue collar workers in safety.”

No matter how you measure it

For the near future, near miss and safety observation reporting may represent the best indicators for both improving safety and changing culture. But no matter what your leading indicator, no one disagrees that success depends on safety becoming a personal commitment for everyone in the organization.

“People are eager to raise their hands and say ‘this is unsafe,” says Andrzej Wrona, Fortaco’s Director of Operational Excellence. “But once you identify these things management has to react immediately. If you don’t, people will think you’re not serious.”


Heidi Lehtonen

Citius, Altius, Fortius!

What sports and business have in common and how they’re applied at Fortaco.

By Heidi Lehtonen, Fortaco Quality Health Safety & Environment Manager

From sports to the factory floor

I’ve been involved in sports all my life. From the beginning, I have competed as an individual athlete and as a team member. Today I’m a group fitness instructor and part of a coaching team for swimmers ages 16 and older.

At Fortaco, I lead the QHSE-team in Kurikka, Finland. My team is responsible for maintenance, customer- and supplier claims, internal quality, safety management, and the operational excellence of quality assurance.

The principles of competitive sport are something I bring with me to work at Fortaco, as well. People who’ve taken sports seriously know all about target setting and strategy — it’s the very key to their success. They set long-term targets and train systematically according to a plan to get there.

But no matter how carefully you plan, life will surprise you from time to time. These are the times when we must react quickly and focus on containment to get back on the track. To be a champion, we must learn from failure and move on.

Consistency transforms average to excellence

Long-term development needs a solid base before details can be fine-tuned. It means daily rituals and common processes that every member of the work community is familiar with. Why? Because rituals coming from the spine free up space for the next step: for a new skill, for better performance, for thinking, and continuous improvement. They enable climbing to the next level, step by step.

It takes time to create rituals. Shortcuts are not permitted and will result in efforts that are quickly forgotten. Human beings are lazy by nature and always try to find the easiest and the most comfortable way of doing things. The possibility for human error is always present and must be eliminated by quality assurance and operational excellence throughout the whole chain.

In both sports and business, great results are never the accomplishment of one person alone. Doctors, trainers, massage therapists, family, and friends are all needed to take care of athlete’s overall well-being through coaching, administering tests, analyzing, motivating, and simply being present. Equally, collaboration between functions creating cross-functional competence is necessary to build the best possible quality culture and zero-defect mindset.

Team power and a successful attitude!

Quality is a process of teamwork, where every team member has their own important role to support the goal of the team. The most valuable player is the player who makes the most players valuable. By respecting that, and combining our strengths and different perspectives, we multiply success and bring more value to processes.

The equation “result = competence x motivation x attitude” holds a lot of wisdom. Most important, I think, is to understand that we are all responsible for our own attitude. What can I do today to make tomorrow better? How can I support and help my colleague? Because what could be more motivating than a team of co-workers you know will play toward a common goal?

There are many similarities between sports and quality management. Both aim for continuous improvement and finding the most effective method to achieve a desired result. As a QHSE Manager, I do my best to ensure our team is competent, motivated, and has a successful attitude.


Top Down Safety to Change Daily Habits

If the CEO doesn’t make safety a priority, nobody else will, either. If you don’t believe Lars Hellberg cares, ask him to show you his thumb.
 
Anyone who watches “The Simpsons” knows that Charles Montgomery "Monty" Burns, owner of the Springfield nuclear power plant, is famous for safety violations: rat infestations, cracked cooling towers (held together with chewing gum), and leaky pipes that spill radioactive waste.
 
But what Mr. Burns doesn’t know is that safety cannot be disconnected from quality, delivery accuracy, and productivity. This was proven dramatically in the 1980s by Paul O'Neill, the CEO of Alcoa. By making safety its primary focus, Alcoa reduced its accident rate to 10 percent of its previous level. And with record safety came record profits.
 
Safety is an easy topic to pay lip service to: everyone has seen a faded safety poster on a workplace wall. To bring about safety requires not only constant focus, but also a CEO who truly believes in it. So how does Fortaco CEO, Lars Hellberg, convince his employees that he truly cares, that safety isn’t just a passing fancy?
 
True believer
 
Hellberg places safety first – literally before quality. “For the last six years I've opened every group leadership meeting with safety,” he says, speaking of the meetings which connect Fortaco's 70 top leaders. “If there's been an accident then the site leader explains what happened, why it happened, and how it will be prevented."
 
Second, Hellberg is known to stop production if he sees anything unsafe. He was recently in Hungary where a third-party supplier was installing an overhead crane. “They were lifting the new crane’s boom with a mobile crane, and wooden blocks had been inserted inside the band around the boom. There was a guy at each end to steady it. I stepped in and stopped it. If the boom had teetered, it would have fallen and seriously hurt one of those guys. People probably saw that it wasn’t safe, but thought it wasn’t their problem since it was a third-party supplier.”
 
Finally, Hellberg has insisted on uniform, cross-company safety standards in Fortaco factories. “We used to have differing standards by site and country. Some required hard hats, some didn’t. Over the years we’ve created one consistent standard in how we look at safety. This is to remove all excuses.”
 
One of those standards is that site leaders must alert Hellberg personally when there’s been an accident, which is always a difficult call for a Business Site Head to make. “If it’s a call they don’t want to make,” Hellberg reasons, “they’ll enforce safety procedures so that the call isn’t needed.”
 
The missing digit
 
Much like a Head of State visiting a hurricane disaster area, Hellberg frequently travels to factories after accidents. He asks questions and takes photos with his smart phone. And then he often shows his thumb.
In 2008, he and his son were using the bucket of a tractor to drive fence posts into the ground for a corral at his farm. They'd placed a wooden block between the post and the tractor bucket, which Hellberg held in place. But the block split when struck by the tractor. "A few tons of pressure is like a guillotine," he says. The top of his thumb was gone and was too mangled to sew back on. "I was wearing gloves but it didn't matter. I thought I was smart. I was more worried about getting the pole straight than I was my personal safety. Stupid me!”
 
Whether on the farm or factory floor, he says, “we’ve got to be prepared to say 'stop’. I ask 'Would I feel safe doing that job?' People say, 'Yeah, but we’re in a hurry.' I think that’s a bad excuse. The supervisor, the leader, has to change the mindset and behavior – a stop is more honorable than pushing deliveries and causing injuries.”
 
Zero accidents
 
Lost time injury frequency, LTIF, is the industry measure for accidents, with an accident defined as an injury that causes an employee to miss more than one full day of work. Currently, Fortaco’s accident rate is below the Finnish industry average but still not on par with the best customer performance figures.
 
Since Hellberg joined the company at the end of 2013, the rate of accidents is in decline, but he’s still not satisfied. Like Alcoa’s Paul O’Neill, he’s shooting for zero accidents. "You can say the group should have zero accidents. But it’s better to say each function should have zero, because ‘the group’ isn’t as relevant on the factory floor. To talk about your own functions makes it a personal engagement and you get buy-in.”
 
After telling his thumb story to a visiting journalist, Hellberg opens his phone to show photos. One image shows a massive welded structure a meter above ground, with staircases present at both ends. “We had a guy jump off this because he thought it would be faster. He could have used the stairs, but instead he tried to save maybe five seconds. He strained his ankle and was out of work a few days. The stupidity here actually belongs to his superior, for not making sure the guy was trained enough.”
 
The not-so-secret safety formula
 
Hellberg knows that he can tell his thumb story until he’s blue in the face, but unless safety is truly ingrained in Fortaco’s culture, zero accidents will never be achieved. He believes the secret is using teams to get there by changing habits.
 
“At Komatsu, in Japan, they have inspectors that roam the floors noting safety violations. The inspectors report what happened, but they never pinpoint the individual. The supervisor is forced to call the entire team together, to get them thinking to identify and solve the problem. Komatsu knows how to use the team to change habits.”
 
“Think about sports,” says Hellberg. “The team is a powerful, self-motivating unit. They don’t need the coach to make them feel bad when they lose.” Fortaco is doing the same: Let teams pursue the issue from the bottom up, and Hellberg go at it from the top down.
 
Hellberg will likely never stop roaming the floors calling attention to risky behavior. “I recently saw a guy moving cut steel with a bare hand. I stopped him and insisted he wear a glove. The explanation I got was that ‘He’s been doing it 30 years and knows what he’s doing.’” Hellberg shakes his head. “We’ve still got work to do.”

Devil’s Advocate

Joanna Lesicka is Fortaco’s Group Controller. If she challenges you, it’s just part of her job.

Winter is coming. Well, eventually. Although an economic downturn hasn’t yet arrived, it’s Joanna Lesicka’s job to be ready for it.

As Fortaco’s Group Controller, Lesicka describes her job as “the bridge between all functions.” Reporting to the group CFO in Helsinki, she’s responsible for performance monitoring of five factories in the Steel Fabrication Business Unit, plus Group Sourcing and IT. She measures and controls financials and KPIs, and attempts to predict and steer future direction of development. Most succinctly, it’s her role to question the current state of things and push for improvements.

Culture clash?

In her role of Chief Questioner she's always pushing people to justify their current approach and consider new options. No one likes to entertain the notion that what they’re doing isn’t optimal, and Lesicka’s job is further complicated by challenging the status quo in cultures not her own.

Lesicka is responsible for five factories in four countries with employees from at least six different nations. “And add to that that I’m a woman in a male industry,” she says.

“I need to delicately make the point that just because I question something doesn’t mean I’m the enemy. I’m really there to offer support.” To do her job well, Lesicka has learned the nuances of communicating with the different cultures.

Speaking with nuance

“People in all cultures like to know what they’re doing well,” says Lesicka. “That’s just human nature.”

“If you’re talking to a Finn, it’s best not to propose a specific solution, but show your faith that they’ll come up with one.”

“Poles, on the other hand, like you to be direct and offer specific advice. They also expect you to follow up.”

“Russians are extremely hard workers. It pays to show pride in their work.”

“Hungarians, more than other cultures, appreciate great detail and regular follow-up.”

“It’s interesting that if I send the very same email to four countries I’ll get four different responses. But this can be a plus: these very same differences bring a variety of new ideas for a single situation.”

Universal challenges

If an economic downturn arrives, as many predict, it will impact all of the business. But even if winter doesn’t arrive, there are plenty of other universal challenges.

One of those is that many countries in New Europe are no longer low-cost countries. “Poland and Hungary, for example, have salary inflation of about 10 percent,” says Lesicka. “We have to offset that with productivity improvements and automation. There’s also very low unemployment, which means a small rise in pay elsewhere can mean welders disappear. And with white collar jobs, we’re finding we need to build flexibility in contracts to accommodate seasonal fluctuations.”

Having originally graduated from a technology university with a specialty in finance, Lesicka revels in the challenges of a controller. “I love controlling, because it’s not just about analyzing numbers. With finance, you’re mostly attempting to predict the future based on the past. But in my job to push for improvements I’ve got to connect the functions across the entire business, with the added complexity of cultural differences.”