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Demag Crains in the running: Awarded "BEST FACTORY 2010"

Demag Crains in the running: Awarded "BEST FACTORY 2010"

The Wetter/Ruhr plant of Demag Cranes AG was awarded the second prize in the annual industrial competition for the best factories in Germany, France and Spain in 2010. International judges of the Insead Management School in Fontainebleau and the WHU-Otto Beisheim School of Management in Vallendar honored the Wetter plant with the commendation for excellent production management. This is proof of the company's outstanding management quality as the basis for profitable growth. TMG would like to extend its heartfelt congratulations!

"This award confirms that we produce top quality products at our plant in Wetter and that, with our performance and flexibility, we meet the high standards of the markets in an exemplary manner." said Thomas H. Hagen, member of the board of directors of Demag Cranes AG, who, as the chief operating officer (COO) is responsible for the operative business. In recent years TMG was always decisively involved in projects, which have raised the production processes to this high standard.

Investments pay off
Against the background of the financial and economic crisis and the necessary restructuring measures, the board committed itself early on to the Wetter production location, agreeing to investments of about 14 million Euros in recent years, to be used for the modernization of the manufacturing infrastructure. And now we reap the reward. Rainer Berthan, responsible for the worldwide production in the executive committee of Demag Cranes AG, explained: "By inquiring into the customer's needs at an early stage, thus orienting the product range accordingly, and the consequent implementation of improvements in the production processes, we have been able to win over the judges."

"Together with our customers, motivated employees, and external support through TMG it was possible for us to achieve the wide-ranging excellence as extolled by the jury." explained Dr. Rainer Harkort, the manager of the awarded plant in Wetter. 

Many elements were necessary to achieve this excellence. Full flexibility in catering to a diverse customer base now takes place through an intelligent combination of standardised components and assemblies. The prerequisites for this were already created during product development and product configuration, and then consistently implemented in production and logistics with new assembly concepts.

We followed a principle of strict separation of standard and specialized processes. At the same time, the transition to the pull principle was implemented, resulting in a marked reduction in inventories. The development and implementation of these new concepts was carried out by cross-departmental teams, with the participation of the works council, and with the support of TMG. We used the most advanced tools, such as value stream mappings and process cost analyses.

Motivated employees contribute a large share
Of special importance were teamwork and the motivation of the employees. Demag Cranes scored points, among others, for the strategic product development, the operative supply chain management, and for organisation and human resources. In addition, its partner management and process of continuous improvement, into which the employees are actively integrated, were awarded high scores.

"All employees - from procurement to shipping - have contributed to this great success with a high degree of motivation and a lot of enthusiasm", said Dr. Rainer Harkort." Naturally, we also relied on external support, which provided us with additional know-how and further creative ideas."

Outsourcing to foreign countries decreased significantlyThe WHU study generally also shows with which measures Germany's production drivers want to defend their position of leadership. The most important factor in this endeavour is an investment in quality, e.g. by checking products for faults after each work step, and not only the final product. Nearly as important, according to the study, is the optimal usage of the employees' knowledge. On the other hand, what is decreasing significantly is the allocation of tasks to external companies or service providers, the so-called outsourcing, or the shifting of whole production sites to foreign locations. 

These were considered as a cure-all for a long time, in order to reduce costs and to concentrate on the core competencies. Now, the other side of the coin becomes ever clearer. Thus, outsourcing to foreign locations often goes hand in hand with loss of quality, unexpectedly high transportation costs, and the lack of ability to supply quickly. On top of that, the salaries at traditional outsourcing sites often increase faster than the qualification of the employees.  And as the number of globalisation failures rises, so does the number of returnees.

This is confirmed by a study undertaken by the Fraunhofer Institute for System and Innovation Research (ISI) in Karlsruhe: Every second company returns from Eastern Europe due to such problems. With a share of only 9 percent, the ratio of offshoring has decreased to the lowest level in the last 15 years. This means that Germany is currently rated as highly attractive as a production location. In the opinion of Insead judge Loch, however, it is absolutely necessary for German companies to outsource part of their production to Asia. Not only to profit from the lower wage level there, but also to be close to the most important emerging markets with individually tailored products.

Demag Cranes with intelligent strategyThe Demag Cranes managers, whose wire rope hoists and cranes, among others, hoists for aircraft fuselages and truck engines weighing several tons, have already translated this insight into an intelligent dual strategy years ago. In China and India they develop products according to local needs in co-operation with domestic engineers and technicians, and these products are also partly produced there. "This ensures our access to this fast-growing business", said Thomas H. Hagen, the COO. In the mature markets of North America and Europe, the manager continues to use the current formula for success: He tries to beat the competition there by means of technology, quality and service. At the same time, he increases the efficiency of all processes there to such an extent that there is enough money left for shareholders, investments and good salaries.

And so there will be enough issues in the next few years to not only keep Demag Cranes at this level of excellence, but also to ensure its optimal adjustment to the continuously changing market conditions and customer needs. This means that the customer-oriented process must constantly be questioned with regard to its actual creation of value, while the numerous ideas of the employees must be incorporated more intensively into the process. The objective is clear: Through an even stronger process orientation of the employees and the delegation of responsibility, entrepreneurial thinking and trust should be promoted - important prerequisites for further productivity growth and an increased competitiveness of the high-wage location Germany.