Eurotherm Controls, headquartered in Worthing, UK, is one of four divisions of Eurotherm plc, all of which are involved in industrial process control and instrumentation. A leading company in the global market for controls, drives, recorders and gauges, Eurotherm was acquired by an even larger player in the automation industry, 3.67 billion GBP ($6.18 billion) Siebe plc of Windsor, UK. This was just one of many acquisitions made by both companies before their merger into one of the dominant control and automation companies worldwide.

For example, Eurotherm acquired San Diego, Calif.-based Action Instruments shortly before the merger with Siebe. Siebe itself moved into the mainstream of process automation with the 1990 acquisition of Foxboro, the US industrial controls company. Foxboro was joined by other major companies, including Eckardt, the NAF Group and Triconex, to form one of the world's most technologically advanced intelligent automation companies.

More recently, the acquisitions of Wonderware, Sinisa, Eaton's Appliance Controls, Eurotherm and EMI have enabled Siebe to strengthen its product offerings in both the Intelligent Automations and Controls Divisions. Eurotherm, for example, added to Siebe's research, development and manufacturing capabilities both the latest in facilities and equipment and a wealth of experienced, dedicated employees. As part of Siebe, Eurotherm Controls is expected to provide revenues in excess of 100 million GBP ($169 million), making the division one of the largest industrial temperature control company in the world, according to Ashley Mills, operations and finance director for Eurotherm Controls.


Ph.D. in Sales

Mills gave a brief history of Eurotherm and its unusual marketing approach, saying, "The company was formed by four people who saw an opportunity to manufacture products using the then-new technology of the transistor. Their strategy was to use a direct sales force and offer an exceptionally high level of quality and technical expertise. At its inception, Eurotherm required that these sales engineers hold a Ph.D. That requirement has been eased somewhat but the members of the direct sales force still have graduate degrees. The idea was, and still is, that the sales engineer should be able to sell the product and also understand the buyer's problems and applications."

The change from a Ph.D. level sales staff to "merely graduate degree holders" wasn't the only philosophical change at Eurotherm in recent years. Mills recalls, "In 1988, we had a team of very capable people who were determined to change the ways we did things throughout the company. One area they set their sights on was to improve the manufacturing capabilities, to make Eurotherm a world-class manufacturing company. Some of these people were Cambridge graduates from the top of their class. They put their heads together and came up with a concept that would change the way we manufactured our products forever."

At the time, Eurotherm Controls was experiencing lead times of eight to nine weeks, about average for its industry segment. The team saw this as a disadvantage in the dynamic markets where the company competed. Luckily, Eurotherm's culture was such that each division was fairly autonomous and so there was a

flat organization to get their ideas through. "In the area of cultural change," Mills says, "they had it relatively easy since it's Eurotherm's way to experiment and take risks. The process didn't cost a lot in terms of capital spent on technology or equipment resources, either. However, it did cost a lot of money in terms of personnel resources. In the end, the payback on that investment has been huge."

The path to success is neverending, of course. What was changed in 1988 started an evolution at the company that continues today. While manufacturing was being driven to be world-class in every way, other functional areas were brought into the project. Bill Davis, operations director at Eurotherm Controls, started with the company in 1988 and has seen what these changes have meant.

"We're a very product-based company," Davis acknowledges. "We make, essentially, electronic instruments that are highly configurable. We do the electrical, mechanical and software engineering at the Worthing location. Because we want to be exceptional in our ability to respond to customer's needs, we feel it's important to have as much of the R&D; under this roof as possible. Engineering, manufacturing and purchasing are knitted closely together. It's what we found is necessary when you want to design and build your product so it's easily configured."

The development of the control products stresses both design for quick and easy manufacture and design for configurability. That was a strategic marketing decision because Eurotherm employs only a small staff of designers. "When you want a product that can be many things to many different customers in many different industries and parts of the world," explains Davis, "you have to think in terms of modularity and configuration. This theme runs throughout our specifications for the life of the product. The products have easy-to-assemble modules, modular software for configuration of key functions and a strong communications capability. We want to be able to download changes quickly."


Concurrently connected

To create this design philosophy, Eurotherm Controls developed concurrent engineering principles that, as Davis indicates, at times have been carried to extremes. "The idea started as a multi-discipline meetings every week. Now, we have teams co-locate so senior people from engineering, manufacturing, purchasing and product marketing all sit with engineering members such as software, mechanical and electronic designers. The whole idea was that these individuals would interact as peers so their input to the team would be equally valued, regardless of their discipline. Our engineers are highly qualified, many with multiple degrees or a Ph.D., so we want the quality, test, manufacturing, purchasing and even sales people to have graduate degrees if possible."

Structures must be changed as concepts change. "Our headquarters in Worthing was built in 1978," Davis recalls. "However, when we looked at it from the concept of concurrent engineering, we recognized that it wasn't designed right. So we started to knock down walls. We have virtually taken out all the walls that we could without

weakening the structure. We've established a main corridor of communication among most of the support areas and R&D.; There is a free movement of people, and therefore of ideas and communication, without walls to impede them. And this isn't just for engineering. We've opened up these departments to manufacturing, as well. Although manufacturing can be a bit noisy, the benefits outweigh the disadvantages."

Engineers must be flexible and ready to move between projects because Eurotherm is constantly working on new designs as well as enhancements to existing products. Some products, in fact, have been in the market for 10-15 years and are still being produced. Here, again, things have changed. "Now we have surface-mount technology (SMT)," Davis says. "With the improvements in technology such as that, I can see where we might be making a 10-year-old product but with modern surface-mount instead of the older insertion techniques."

The move to SMT has allowed significant improvements in the way products are assembled and the quality of the results. In addition, suppliers for the more commodity level chips and components compete for the business with cost and quality as benefits. Eurotherm Controls has simplified its supplier list — "rationalized it" as Davis says — and attempts to use common components where possible. Their suppliers are also working with Eurotherm on a just-in-time system that is based on kanban/pull manufacturing techniques.

Again, Davis explains how Eurotherm has changed its approach. "When I came here in 1988, we had a large storage area quite full of raw material. Today, we only hold what is needed for immediate production and that is at the point of use. Many of our suppliers have more visibility into our needs than even we do. They are hooked directly into our demand-pull system through electronic data interchange (EDI) so they can see what our needs will be by the day, week and month."

When asked their definition of "demand" manufacturing, Davis answered, "It means building solely to order, building nothing for finished goods. At each stage throughout the business, the order is reflected in the demand on the previous work station. And we try to do it in the simplest way possible, usually with a kanban card system maintained by the people on the floor themselves.

"Typically, an order can be processed very quickly," Davis continues. "An order is entered on a PC and gets into the system, fully validated, in a matter of minutes. That will trigger the printing of a shop or build order, usually the morning after the order is received. From there to delivery is a short distance."

Peter Tomkins, business area manager for Eurotherm Controls, explains the change in the company's delivery philosophy. "The way we have become the market leader in temperature controls is by developing a range of products that is second to none. We cover the market with products that are designed and manufactured to suit the complete range of industrial customers we serve. Our approach is to package the unit with the needed modules for the customer's application while making the configuration as transparent to the user as possible. We have made a considerable investment in our operations and information management systems worldwide so that we can now offer our customers the standard product in five days or less, even overnight if necessary."

In the past, as mentioned, the company's lead time was eight to nine weeks. Today, by using modern software systems, the lead time has been brought down to where the order taker can promise delivery within a five day window after the order is placed. "In order to balance the load on the factory," says Davis, "the production control person will decide whether the order will be built on the 2nd, 3rd, 4th or 5th day of the window. With about 25 products of a particular type, and based on standard lead times, we can offer that accuracy so the customer knows when the product will show up at their door."

Having made that decision, a card is printed and dated. This order card will sit until the day before the order is due to be shipped to the customer. Then it will be scheduled into the line's capacity for the day, built, calibrated, tested, configured and promptly shipped by that evening so it is in the customer's hands on schedule. There is even a provision for expedited delivery, very often within 24 hours. "There is 15 percent of what we build each day which isn't run on the regular system," claims Davis. "This is our next day service. The order often will be placed because our customers have come to rely on this service. It will be for a limited quantity of product. We will actually process that order within the afternoon and ship by 5 p.m. that afternoon. That allows us to meet the delivery time in the UK of 10 a.m. the next morning or 3 p.m. if delivered overseas."

To make the flow of product match the compressed delivery window Eurotherm now offers, other manufacturing changes were made. The surface-mount line can comfortably equal the order rate and meet sudden surges in demand. But to deal with the wide variety of product configuration available, as well as the diverse product line itself, quick setups were implemented. "That's absolutely essential," Davis admits. "There is no other way to run our SMT line. You have to work very carefully in making your set-ups because there are 145 printed circuit board types and about 90 are SMT. The problem is flipping quickly between one board and another with minimal or no visibility into the future of what we will be building beyond a few kanban cards in the queue. We've refined the Japanese idea of production leveling so the whole business runs on a metronome kind of tick. With the systems we have in place, the business runs like an idling engine."


A very responsive engine

As a global marketer, Eurotherm must find ways to satisfy its customers outside its home market of England while providing the same response it offers those nearby. Mills paints a picture of what happens when an order comes in from another European country. "Let's take an order from Germany for an example. The German company would input its order with full details of the configuration it needs. The configurator is synchronized with our system so the customer will know immediately that their order can be manufactured as requested. Our goal is to only enter information once into the computer system and then have it available throughout the process."

The core system Mills has implemented is Avant� from DataWorks Corporation of San Diego, Calif. Its available configurator aides the process of getting complex products defined in ways the customer can be assured will be built to order. If a combination of components or functions is not possible, the system will immediately notify the customer, as the order is being entered, so there are no surprises a week later.

Mills continues with his scenario. "Once the order has gone through the approval process, it is entered into the manufacturing queue. Avant� determines the total number of orders that are available for manufacturing and sends that information every hour to whichever Eurotherm company has the responsibility of building the product. In the case of Eurotherm Controls, the information comes to our facility in Worthing and goes through the order entry process without any re-keying of data. This is one of the benefits of having a highly integrated computer system, the ability to have data entered only once and yet available to all the modules and functions throughout the company."

With Avant�, the sales organization can do custom configuration pricing automatically, knowing the results will match those at the manufacturing facility. Once in Worthing, the order is scheduled for manufacture, usually within three days of the receipt of the order. The production coordinator prints out a job card which goes with the order until completion and contains all details of the product's build sheet with a parts list based upon the configuration requirements. At the assembly station, the worker can pull the assembly components from stock on shelves within arms reach in most cases.

When completed, the control is packaged at a nearby workstation and accumulated for delivery to dispatch. As Mills says, "The interesting thing is that there are no finished goods on shelves at Dispatch. All you see are filled packing cartons, ready to be shipped by DHL, our logistics partner. For the German order we were creating, we can have the product at the customer's site the next day with DHL's help. In about 95 percent of the cases, products can be delivered by mid-day anywhere in Europe.

"What we are doing," he adds, "is attempting to make Eurotherm the �three-day supplier' of temperature controls throughout Europe. One way we are doing this is by coordinating manufacturing facilities in the UK and France. An order may be divided between the two sites and the resulting combination delivered from both sites at the same time or within a day of each other. We found that our customers didn't care if the order came in separate boxes from different locations, so long as it got to them in a timely manner."

Distribution of manufacturing to sites best equipped to make the delivery promise is only part of the solution. Mills recalls that in the past, they might have 300 or 400 different suppliers. "Now we have about 90 suppliers in the UK that provide 95 percent of our material. We work very closely with our suppliers to make sure they can react as quickly as we must in filling orders. We don't want our bins to get empty."

The bins Mills refers to are the kanban bins on the shop floor. There are two for each component or subassembly and when one is empty, a kanban card is used to signal the need for replenishment. "The kanban card is scanned by a bar code reader," Mills explains. "The information generates a computer EDI message to the corresponding supplier and that supplier has agreed to deliver the appropriate component, in the right quantity, within 24 hours. There are enough components in the second bin to provide for production until the replenishment arrives the next day. That quantity has been determined by experience and production rates. It's a very simple system but it has eliminated huge amounts of administration since we can now use blanket purchase orders with periodic release orders."

Mills sees a side of the supply chain some companies overlook: risk management. Because they have culled their supplier base down, each supplying partner can expect a larger share of the company's business. That's an incentive for doing things Eurotherm's way. For example, "We require our plastic manufacturer to hold our inventory separate from their molding machinery," Mills notes. "In case of disaster — the plant burning down or such — we won't lose both the inventory and the means of replacing it. It's a question of training people in how to best manage the risks of dealing with outside suppliers. It can't be all �stick,' there has to be some carrots, too. Should

we receive poor or even marginal product from a supplier, we will send a team to help them improve their quality and their processes. The relationship must be a partnership, not an adversarial one."

Demand flow manufacturing has already paid benefits to Eurotherm according to Mills. "Our inventory costs have plummeted, as would be expected. Three years ago, we had a thru-put turn on stock, based on cost from manufacturing through the sales organization, of about four times per year. That turnover has doubled to eight times on cost and 16 times on sales. Our cash flow has improved dramatically, and we have minimized the risk of holding obsolete equipment, material or products. The wasted selling costs have been reduced at our European locations due to the direct shipment of product to customers. Those are directly quantifiable benefits."

But there is more. "In a proper demand flow system," he adds, "you only manufacture what the customer wants. No wasted finished goods inventory gathering dust. That allows you to put the resources to work in making that product faster, cheaper and delivering it quicker than the competition. All in all, improving the company's image and reputation in the market, which we hope is showing up in increased sales."


Delivery as a strategic weapon

Eurotherm Controls has developed a partnership with global courier service DHL that replaces more than 50 delivery services used just two years ago. When the barriers to cross-national transportation and commerce came down in 1993 within the European Union, it became easier to ship products directly from the manufacturing site. Mills indicates that this created a new opportunity for Eurotherm and DHL. "DHL had a number of forward thinking companies on its customer list that were seeing the future the same as we were. Working closely with DHL, we have developed the business to the point where we account for in excess of $1 million per year to them. In return, we have been allocated DHL management resources to look after our needs throughout Europe, not just in the UK."

And this partnership approach is found in other areas, as well. "We develop relationships with companies where we share common objectives," Mill points out. "In 1996, I went to San Diego and met with some of DataWorks' other customers and found that many did not have traditional information technology (IT) departments. I realized what we were doing was inconsistent with the DataWorks model for key accounts. Sitting with top executives of the company, I discussed some of our concerns and was pleasantly surprised to find they wanted to devote the time and resources to get this arrangement tied down to our satisfaction."

For several months, Mills and the DataWorks team worked on a plan that resulted in a new relationship between the companies. In the end, DataWorks agreed to take on the responsibility for Eurotherm's business software systems as an outsource supplier. It was a new relationship for both companies but it foreshadowed a coming trend in the industry. Mills wasn't fully sold that it would work. "Although with any relationship which is that crucial to the future success of a company like Eurotherm you can imagine that there are some times where there are difficult moments in the relationship. It's like a marriage," was his recollection. "But, having said that, when I look back on the arrangement and what we've achieved, despite some of the difficulties, I think we've accomplished a lot because the management within DataWorks regards the Eurotherm contract as being a vital part of their future. They see the way that Eurotherm does things is going to be what they want to build their future products on."

A partnership means more than buying a product, it means special support when necessary. "For example, when I had difficulty with some support issues, I got on the phone and spoke directly to the DataWorks chairman," Mills says. "These people are available night and day to discuss any issue you have. You can't beat that in terms of commitment."

And this relationship is a two-way street. Mills explains how he sees the benefits to DataWorks. "I think there is a good chance that if DataWorks builds the Avant� product on the specification that currently exists within the version running at Eurotherm, then they will have a winning product to sell to their other customers and prospects as well. My role within the next year or so is to try to make sure that the key elements of functionality that we see in the product today — and have worked so hard to achieve — will be there in the new products they will be developing in the next year or two."

Working closely with its system supplier has allowed Eurotherm to get enhancements to the Avant� product to further Eurotherm's progress in demand flow manufacturing. Mills found this to be a big advantage because it put the demand flow elements into a standard product. "I don't like the idea of having custom code," he acknowledges. "The problem with custom code is that we are a worldwide DataWorks account and need to have 100 percent reliable support anywhere in the world. We can't train every support engineer within the DataWorks environment on the Eurotherm custom code. Rather than having little pockets of implementation expertise on custom code, I would rather it was part of the product, properly documented and supported as a functionality in the standard Avant�. Currently, we are in a situation whereby 50 percent of the Avant� product (at Eurotherm) is custom in some way, shape or form. My expectation would be that in two year's time, if things go to plan, that would be between 0-5 percent."

As Eurotherm moves into its future, partners such as DHL and DataWorks will be walking along side it on that never-ending path to success. The concepts of partnership and renewal that epitomize Eurotherm's philosophy are applicable to companies everywhere, in all industries and at all revenue levels. Good ideas have no boundaries.

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