By Sue Stuckey
Catering for people between the ages of ‘2 and 92’, bicycle maker Raleigh produces one million bikes a year, many for sale in the UK. Today the company is again profitable. During its post-war heyday, Raleigh made five million bikes a year which it sold, also profitably, into more than 140 countries.
In the years between, customers, markets and methods have changed. And the need to respond to those changes has brought a dramatic turnaround in Raleigh fortunes and the way the company is run. Over the past 10 years, the move from volume exporter to niche domestic player has been key to the company’s survival. The choice, says Alan Spencer, operations director was simple – change or die.
Addressing a workshop this week organised by the Institution of Electrical Engineers on the theme of responsiveness in manufacturing, he told delegates that cheap good quality imports, political instability in export markets and the evolution of the bicycle as a fashion item had challenged existing business practices based on long lead times, huge stocks and a culture of ‘we sell what we make’.
A pioneer of the all-steel frame, drop handlebars, Sturmey Archer gears, the children’s Chopper, the 16 inch wheel and winner of countless racing awards during its 110-year history, Raleigh failed to stop the rot which it blames on lack of investment in the early 1980s.
Raleigh now makes bikes in 90 colours that appeal to fashion conscious youngsters. The mountain bike is the top seller. It focuses on the demands of the stockist as well as the consumer. ‘People want more choice and the stockist is getting smarter,’ says Spencer.
In Raleigh’s case, responsiveness – the ability to respond to the demands of the stockist wanting lower stocks that produce higher margins as well as consumer demands – has meant reducing manufacturing firm time (the period when orders on the factory floor can be changed) from three months to three weeks. Manufacturing lead time (the time it takes to make a bike) has fallen from 42 days to four.
The challenge is to bring firm time and lead time into line, at less than four days. Finished stocks have fallen from three months to three weeks. In the same 10-year period, Raleigh sold two-thirds of its 25ha Nottingham site and cut the UK manufactured content of its bikes from 85% to 40%. It no longer makes washers but concentrates on making frames and wheels as well as painting and assembly. Raleigh measures success today in relation to its share of the market by value not by volume.
Working practices had to change, spencer told the workshop. To cope with the three-month build-up to Christmas when half of all sales are made, staff work a two or three-shift day over five days, using temporary staff to supplement the usual four-day, single-shift working. Pay rates stay the same over the year.
But the idea persists that it is cheaper to make 1,000-off. Spencer suggests ‘we need a culture which says we will examine the issues and then tackle the problems that stop us being flexible and responsive’. The core workforce is being trained to meet a long-term goal of interchangeable skills to meet the day’s demands.
Highly visible shopfloor information systems are central to managing a flexible, responsive production environment. Raleigh is moving away from a rigid point to point system of MRP control towards faster, less regimented just-in-time methods based on realtime batch and Kanban controls. An attempt to modify the existing MRP system is seen as a temporary fix while the company evaluates systems to meet its IT requirements.
Jeremy Matson, a researcher at Cambridge University department of engineering, highlighted at the workshop the complexity of the decision-making process and the burden it puts on IT systems, seen as a weak link in a company’s attempt to respond to change. Headed by Dr Duncan McFarlane, the department’s manufacturing automation and control group has received a £120,000 grant from the Engineering and Physical Science Research Council to develop audit procedures which companies can use to measure their responsiveness to change within an existing production environment.
The emphasis is to help managers understand how their factory decision systems work so they can fine tune them for extra performance. If you have 50 parts and 50 possible manufacturing sequences you end up with different costs and the choice can be mathematically very challenging, says Matson.
Another speaker, Dr Bart MacCarthy at the University of Nottingham department of engineering and operations management, warned managers to regard responsiveness not as an isolated step but as a performance objective within the overall manufacturing strategy.
Independent consultant Dr Paul Kidd goes further. Responsiveness is a defensive measure, he argues. He proposes that firms actively promote change as part of a strategic plan. ‘You have got to acquire competitive advantage that is difficult to emulate’, he says.