It is Doris Day's birthplace and home to detergents giant Procter and Gamble. But Cincinnati, the prosperous Middle American city on the Ohio River, can also claim to be the cradle of the modern machine-tool industry.
Cincinnati Milacron - the unusual name derives from Greek words meaning `highest precision' - pioneered the first Computer Numerical Control (CNC) machines in the '60s. The company had evolved out of the riverboat repair shops of the past century to become the biggest machine-tool company in the world. Sixty years ago founder Frederick Geier had set up his first overseas factory in Birmingham. Like its parent, it prospered for many years.
But the good times did not last. Japanese companies such as Yamazaki and Mori Seki took the CNC concept, refined it, used it to build their country's legendary productivity and then exported the machines to the rest of the world. Thirty years ago Britain's machine-tool industry was bigger than Japan's. Now Japanese companies boast the largest slice of world production - 25% against Britain's measly 3.5%.
After boom times in the '50s and '60s, Cincinnati Milacron in the UK felt the effect of the decline of Britain's industrial base and the intense heat of Far East competition. By 1988 the company had retrenched heavily, closing down a plant in Bedford, a foundry and a parts-making factory in Tamworth to consolidate operations on its Birmingham site. It was still the Ohio company's sole overseas machine-tool manufacturing site, but only one-sixth the size of its parent. With the worst recession since the war looming on the horizon its very survival seemed in doubt.
Remarkably, from that low point the company began to fashion a dramatic comeback. Today John Bloxham, chairman and managing director of Milacron's Birmingham operation has every reason to be in bullish mood. `Last year we shipped over 500 machines,' he says. `This year we look as if we are going to be shipping over a thousand.' Some 79% of its £50 million of sales in 1994 went for export - roughly half to the US but spread around more than 25 other countries. Europe took 17% with 13% elsewhere. Even Japanese industry itself has bought 27 machines from the now booming factory.
Cincinnati Milicron has apparently done everything right - it even invested heavily in new equipment during the depths of the recession when home orders were falling - and the company has attracted Government attention as a result. Three parties of Treasury mandarins have visited the plant lately, as has former industry minister Tim Sainsbury as well as officials from the Bank of England. They learnt how Bloxham's business has seen a big pay-off from a radical restructuring of the Cincinnati Milacron machine-tool operation on both sides of the Atlantic.
The new programme of change throughout the group began in 1988 and was given the codename Wolfpack. It implied an aggressive new team approach to the development of the business. It was a programme which had already proved its effectiveness in Cincinnati Milacron's plastics machinery business. Now it was time for the toolmakers to try it.
Wolfpack had two complementary aspects. First, there would be a new-product development programme aimed at replacing the entire range as swiftly as possible. Second, the group introduced the concept of the focus factory where each location focused exclusively on one range of products to be supplied to the world market.
In the past factories in Ohio and Birmingham had shared the product range. Marketing director Malcolm Scarlett says: `Before the concept of the "focus factory" was introduced, in simplistic terms, we looked after the European market while they looked after North America. Who supplied the rest of the world usually depended on the strength of the dollar against sterling. It had been the traditional way of doing business from the mid-70s.'
The new regime meant the parent company gave Birmingham complete responsibility for developing a new range of CNC vertical machining centres for the global market while other products would be made only in the US. The effect on production in Birmingham of its new global role has been to raise exports from 50% to 79% of sales and to double the company's share in its biggest single market - the US.
`At a single site we have just one set of start-up costs for the engineering, manufacture and development of the new product range,' Bloxham says. `Now we also get the full benefits of economies of scale whereas before they had been fragmented.'
The six-man team round the boardroom at Cincinnati Milacron UK has been together for nearly eight years. All are British and between them boast something like 150 years' experience with the company. The `newcomer' and only non-engineer in the team is Roy Smith, the finance director, who has only been with the company since 1982. The rest are long-time Milacron men.
Such a `one-company' mentality - as much prevalent among shop-floor workers at the site as among managers - might have been expected to produce great resistance to change. That was not the case. `We were talking about survival and everyone knew it,' Bloxham claims. And getting the workforce and the three unions who represented them on side for the changes did not prove difficult.
`We get the same level of loyalty from a very large proportion of the workforce,' says Mike Ryan, director in charge of customer support services. `Around this table we have been through some extremely difficult times with the company. But some of us have also been here long enough to remember what the good times were like. We always knew what the company was capable of.' Implementing the Wolfpack programme changes required recognition of one inescapable fact about the machine-tool market. Intense competition has been pushing product prices steadily downwards in recent years. On the shop floor, marketing director Malcolm Scarlett describes how prices have more or less halved in the past six years. This is obviously good news for the customer, but has benefits for Milacron, too, since the company is a significant customer for its own machines in the manufacturing process.
`The vast majority, possibly 80% of the machines on this site, have been replaced in the past five years,' Scarlett says. He points to one cell of four machines in the plant turning out machine-tool parts in an essentially unmanned operation: `To supply that cell in 1987 would have cost £1.6 million. In 1990 the cost would have been only £1 million. Today it would cost only £800,000. Of course, the latest machines are not only cheaper they are a lot more productive.'
Right across the group during 1988 and 1989 new machines were being developed on an unprecedented scale. But before that could happen Scarlett's marketing team needed to find out what the market wanted. `We used our network of offices around the world to test our theories. We checked on price, specification and the likely volume of sales in each market and made a complete survey of the strengths of the competition. Our experience under the old regime had been to try to be all things to all men,' Scarlett adds. `That was reflected in extremely high specification and extremely large amounts of special engineering for our products. Frankly that gave us a cost base and a sale price which did not give us any volume.'
The new approach was to analyse every aspect of the competition's product and to aim to be at least 80% as good on each of a large number of the machine's features. `We also weighted which features we thought were important,' Scarlett adds.
`The technique we developed involved identifying main competitors in particular vertical machines and then looking at between 30 and 35 different features of those machines,' Bloxham says. `We positioned our new machine relative to each one of those features. We do not look to be the biggest or the best in every aspect but we certainly look to be well positioned in the upper quartile in all of them. Thus we ensure we have a very competitive product in its overall specification.'
Working methods were altered radically as the Wolfpack programme of new-product development got under way. As well as the greater emphasis on market research, multi-functional teams were formed for each product. The old way was for the engineering department to design the product, the purchasing department would then search for suppliers of the parts, and finally the manufacturing department would see how it could be made. People who had worked in separate departments, often in separate buildings on the site, were brought together as teams. `The team is a pack. It has to be aggressive,' Bloxham stresses. `Initially we were talking about survival, but if you want to flourish nowadays you have to take something from the other guy.'
In May 1988 a team was formed to develop a mid-range vertical CNC machining centre - a multi-functional machine tool - called the Sabre 750. Giving product ranges brand names like cars and buses - Sabre was followed by Lancer and then Arrow - was a new departure for Milacron. But Scarlett, whose office is adorned with various impressive pieces of jousting equipment, has found it helps to produce the right commercial result. `The target was to launch the Sabre 750 on the market within a year,' Bloxham says. `It was far quicker than we had ever attempted before.'
To offer better performance and reliability the machine had to have 40% fewer parts than the product it replaced. That would also make it more profitable to produce. Partnership sourcing has cut the number of suppliers from 350 at the beginning of the programme to only 70 today. Once the first Sabre model hit the market place in mid-1989, other products began rolling out in quick succession. The Lancer range for the top end of the market was followed by the Arrow range to cover the lower cost end of the market spectrum.
There are now five versions of the Sabre available with a sixth planned for 1995. Within each range and even across the ranges, common parts are extensively used and proven engineering grafted onto the latest machines. Design and development times for derivatives within each of the three ranges have been cut to only six months. The most dramatic success has been with the Arrow product range, which now makes up half the unit sales of the company and accounts for the booming conditions experienced at the factory in 1994. The Arrow 500, a low-cost, general-purpose machining centre launched on the market in September 1993, has become something of a phenomenon. Because of the strength of the yen, the machine sells in Japan for only £45,000 and has been undercutting the domestic competition by as much as 20%.
The product range has expanded Cincinnati Milacron's customer base significantly. In the past the sales ledger was dominated by big household names such as Rover, Rolls Royce and Ford. Now small and medium-sized firms make up most of the sales. A typical order is for one to five machines and a contract for say 20 machines is seen as exceptional. `The same machine might be doing a great variety of jobs in a small sub-contract machine shop,' Bloxham points out, `but it could equally be turning out high volumes of auto parts three shifts a day, seven days a week.' The changing customer profile increases the demand for greater reliability. `Smaller companies are far less self-sufficient and if the product goes wrong they cannot fix it themselves,' says Ryan.
Machine tools are the type of product that needs installing and starting up for the customer. `We used to have typical installation times of three to six weeks and it was often longer than that depending on the product's complexity. The objective of the Wolfpack team now is to deliver and instal the machine in just one day. To a large extent we now meet that. Generally speaking, our warranty costs are also now about one-third of what they used to be.'
At Albon Engineering in Essex they are turning out 2,000 connecting rods a day to supply Cummins engines using a Sabre 500 machine. The company also has a Sabre 1000 on loan which, so far, has proved satisfactory in pre-production tests.
Albon's technical director, Ralph Howard, says Albon has been buying Cincinnati Milacron equipment since 1982. `The Sabre 500 which we have run on a 24-hours-a-day basis for three years has proved very reliable,' he says. `We require the machine tools we buy to work 24 hours a day for 10 years. Although we look at Japanese machines we do not buy them. We do not expect a Japanese machine to last more than three or four years.
Milacron may be American-owned but the UK management makes it clear that development of the new product range has been an all-British affair. `We have full responsibility for market analysis, design, production and marketing of our products from here,' says Bloxham.
A Total Quality Leadership programme, led by personnel director Ian Good, among the company's 370 employees has assisted financial performance. Roy Smith points out that fear of having to borrow to finance future growth has been one of the main drivers of the TQL programme with its close monitoring of the key influences on cash flow. `We have set ourselves the objective not to go to the bank to borrow more money,' Smith says. `What additional finance we have for capital spending we have looked to fund from a more aggressive stance on customer receivables and inventory management.'
It has been an approach which has been enough to generate `several millions' under the new regime to be spent more or less equally on either new equipment for the plant or on the development of the new product range. In 1994 the company spent more than £1 million on new plant and equipment. Bloxham is confident he now runs a world-class company with world-class products. He is concerned, however, that Chancellor Kenneth Clarke's latest budget has not done what he and manufacturing industry colleagues called for - first-year 100% capital allowances for the first £200,000 of new investment. `At present Britain certainly has competitive labour rates,' he says. `But Britain needs appropriate capital investment to go with that. If labour does not have the right tools there will be a shortfall in both quality and productivity. It is no good a guy having a competitive wage rate if he is not properly trained and is using old equipment, with a high scrap rate or low productivity. We need people investing continuously in the kind of equipment you see on our shop floor.'