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Vickers Omaha Plant

Submitted
by
Kancherla Narendar
Reddy
0181/52

Background
Vickers manufactures hydraulic machinery that is used in various industrial
and engineering applications. It has 3 business/product segments: Vane
pumps, Piston pumps and Remanufactures services. Its major customers are
from North America region. Vickers has manufacturing plants in Detroit,
Joplin, Omaha and other international locations. Its Omaha plant, with an
Engineering laboratory, is the largest hydraulic component manufacturing
plant in the world.
But for the past few years, Omaha plant sales were declining continuously,
which affected companys topline. It was not able to offer competitive
products to the customers. Product quality and performance were also
deteriorating gradually. Product innovation and development was not
happening according to the customer requirements even though its
engineering laboratory has state-of-the art facilities and skilled employees.
Competition was also increasing both from large multi-national corporations
and small pump shops. All these issues plagued Omaha plant and reduced its
revenues and profitability.

Problem and Cause Analysis


Vickers Omaha plant is facing many Operational problems. Plants
productivity is very low and operational costs were on the rise. Product
specifications were not in-line with the customer demands and they are not
very sophisticated. Plant is not able to leverage the latest manufacturing
processes that are in place. Employees are demotivated, focused on
protecting their jobs and are not open to change.
There are many root causes underlying the above mentioned problems. The
underlying causes are internal in nature. Though there were some external
issues like intense competition, changing customer demands, these cannot

be stated as the causes since they are inevitable in any industry. The below
diagram depicts the causes and effects (problems).

INTERNAL CAUSES
Old machinery and
technology
Lack of standard
procedures

PROBLEMS
Obsolete Higher lead time and
products; Higher costs

operating Low quality products and poor plant


management

Low Employee morale


Lack of Knowledge sharing
Poor
communication
groups

off-spec

Hinders Openness to change;


Poor productivity
Lack of best practices

among Redundancy in the work; Lack of


trust

Unionized labor or workforce

Hindrance
flexibility

to

innovation

and

Strikes
and
shutdowns

intermittent Results in Poor customer service and


increases the burden on other
resources/plants.
Reactionary Behavior by top No active involvement with the
management
customer;
No strategic vision of the company

Turnaround Actions (Solutions):


To address the problems faced by Omaha plant, Weber has to conceive of
turnaround actions that can save the plant and make it profitable one. Below
are some of the core actions he has to immediately act upon.
1. Upgrading of Machinery and Technology:
This is one of the first steps Weber has to take. He should convince the
top management to invest in the latest manufacturing equipment and
technology. Weber has already estimated the cost of new testing
equipment at $400,000. He should also do this for core manufacturing
equipment.
2. Adopt a new manufacturing process and streamline the
operations

In order to reduce the lead time, wastage and operational costs, it is


imperative that the company follows a standard manufacturing process
like Lean. They have to streamline the operations to improve the
customer service.
3. Focus on building strategic resources and capabilities:
Since its inception the plant management focused only on resolving
the issues that came up frequently. They did not chart out the vision
and strategy of the company. They completely ignored the key issues
like developing competitive advantages through strategic resources
and capacities. Webers course of action should address this imminent
issues and start developing competitive advantages.
4. Negotiating with the Union for new employment contracts
The current labor rules restrict the co-operation between employees
and management. It also hinders innovation and openness to change.
Weber should convince the Union for new employment contracts that
can benefit both the company and the employees. Employees are very
conservative and risk averse. They prefer fixed salaries to variable.
Company can reduce the wages and increase the benefits like
insurance, health and travel coverage and others. This will save the
costs in short run, which company can invest in other core activities.
5. Buy-in from Top Management
Top management involvement is necessary to incorporate all the
changes. They should care for their prime assets i.e. employees. They
should foster a conducive environment for the workers to work and
heed to employees requirements. They should create the assurance
that the management is there for the employees.
6. Mindset Change
This is the most important aspect of the turnaround process. Both the
employees and the management have to change their current opinion
about the business. Till now, the company is reactionary and focused
on crisis handling. It did not invest much in companys growth. All the
internal stakeholders must think that it is their collective responsibility
for not growing the plant and fulfilling the customer demands. They
have to act collectively and solve the problem instead of complaining
about others mistakes. They should feel the ownership responsibility
to increase the shareholders wealth. Mutual understanding and
collective responsibility will make the Omaha plant the best in the
world.
Weber should form a Review team to look after the implementation of the
above mentioned solutions along with others. And also he should conduct

periodic reviews about the status. In future, he has to assess the validity of
these actions and change them in accordance with the changing industry
landscape and customer requirements.