Performance-based strategies work in tooling management.

Author:Bierma, Thomas
Position:Managing for tomorrow

HN Automotive Inc. in Effingham, IL, and Haldex Hydraulics Corporation in Rockford, IL, couldn't be more different. HNAI produces a couple of dozen products, such as suspension components for the automotive industry, on dedicated production lines. Haldex produces thousands of different products for hydraulic systems, in varying volumes, using constantly shifting production processes.

Yet each plant has created an extremely successful partnership with a Tier I tooling management company.

Tooling management/integrated supply has received its share of criticism. Some critics claim that it restricts competition, depletes the plant's tooling expertise, and turns over key business decisions to outsiders. Much of the criticism stems from failed programs in which initial cost savings were not followed by similar savings in subsequent years. The experience at HNAI and Haldex suggests that programs with the right controls and incentives--which we call performance-based tooling management--can be very successful.

Tooling management

HNAI Automotive has a history of commitment to quality and continuous improvement. As a result, sales have grown over 50 percent in the last three years and HNAI currently has approximately 120 employees at its 130,000sq-ft facility. In 2003, HNAI recognized that to make significant progress in improving machining operations and holding down costs, it needed more than just good tooling suppliers. It needed a tooling technology partner that would share both the risks and the rewards.

HNAI negotiated a unique tooling management agreement with one of its tooling suppliers, Decatur Custom Tool Inc. of Illinois. DCT had established tooling management programs with other facilities.

Haldex Hydraulics performs manufacturing and assembly of hydraulic systems at its 125,000sq-ft plant, employing about 500. Haldex began an integrated supply program in 1992 with Engman-Taylor Co. of Menomonee Falls, WI. ETCO has served similar programs since 1987, primarily in Wisconsin, Illinois, and Iowa. In 2000, management of the program shifted from purchasing to manufacturing engineering, signifying a greater focus on production, budgeting, and cash flow management.

"Everyone had to understand that we manage tooling because we want to be more profitable," explains Terry McCormick, manager of manufacturing engineering. "Everyone knows they are going to have an expense for tooling, but if is not managed well, it can have a significantly greater...

To continue reading