Nypro

Karthik Arumugham (1311299)

Managing Innovation at Nypro, Inc. 1. How does Nypro’s market for innovation function? How is it managed? ► Distinct sectors, independent work: The internal market for innovation at Nypro is based on separate distinct sectors which work independently to establish themselves as the company’s best manufacturing plant. Nypro wanted its workers to harness their innovative spirits and improve the company’s overall production. ► Incentives: Each independent plant, motivated by company offered stock options, seeks to improve productivity, efficiency and innovation in the work area on a continual basis. The employees of each plant wanted to be the best so they could receive the offered stock options. ► Internal competition: Through the creation of an internal competition between plants, Nypro management helped to eliminate complacency and stagnation. The plants compete against each other for the top ranking. By constantly improving their systems, the plants improve the company as a whole. Creating an internal competition, which is driven by money, is good way to stir both innovation and encourage employee loyalty. ► Employee satisfaction: By encouraging employees to be successful, the company in turn was rewarded with a happy staff that was continually looking for ways to better improve the company. The continued profitability of Nypro was furthered out of a competitive attitude and desire to be the best. ► Four Steps: o Find the actual occurrences of process innovations. o Select the most important innovations which can be implemented in other plants. o Find the ways to transfer the innovation from the original team to other teams and plants. o Nypro sets up the new rules of the innovation. 2. What is Lankton’s mental model (way of thinking)? Lankton’s managing process at Nypro followed five specific guidelines/strategies: ► Developing superior technology: Focus on large-scale molding jobs with demanding, technologically progressive customers. Nypro was able to become the fifth largest plastic molder in the United States under this approach. ► The standardizing of processes and offerings: Any potential customer, regardless of Nypro’s location in the world, would have the same opportunities and offerings to product creation that another customer might have in a different location. This process was achieved by the individual organizations reporting their successes and failures in the production process, so other organizations around the world would know how to handle a similar situation if it arises. ► Creating a proactive and innovative environment: Clearly Nypro’s different locations around the world would have customers that want different products. So while differentiation is difficult to achieve, the different Nypro locations were able to share their thoughts, processes, and innovative applications, which helped the organization to overcome this challenge. ► Rewarding employee performance: Proactive and innovative people were encouraged to stay at Nypro, allowing the organization to maintain those components/employees which made them successful. This process was accomplished by installing an incentive-based reward system, which provided employees with stock options based on years of service, pay level, and performance ratings. These employees (who became stockholders) would be responsible for selecting the board of directors. ► Customer-oriented operations: Focus on managing their customer relationships by establishing teams that focused on the product development and process improvement issues for each customer-specific project. These teams were comprised of individuals from various disciplines, as well as different organizations made-up of the customer’s organization and Nypro personnel. Teams were then created to focus on different aspects of the development and production processes. ► Development Team for each project o Engineering Program Manager o Variety on Team o Customers’ Engineers o Responsible for product idea and process innovation

Karthik Arumugham (1311299) ►

CIT (Continuous improvement) Team o Manufacturing, Quality Control, Materials procurement, Marketing o Customer reps & suppliers o Responsible for continuous improvement as long as product is under production These teams allowed for innovative steps and processes to be continually developed during all aspects of the product/process creation and production, while focusing on improving each step. If teams became stagnant in their innovative process, Nypro management would change some of their people to offer a different perspective and possibly stimulate advances in the processes. ► Organization structure conducive for innovation: Each plant is a company with board of directors composed of managers from other facilities. Board supports General Manager of Plant. Sales is centralized reporting to headquarters with dotted line reporting to GM of each plant. o Innovation Centric Formal structure  Plant managers or departments approach management  Management reviews and makes decision  If approved the idea spreads across company  E.g. Visual Factory, MRP2 system, reduced tooling supplier lead time o Informal Structure (Bottom Up)  Plant Managers have the authority to implement ideas  If successfully idea spreads across company  E.g. clean room manufacturing ► Benchmarking: Lankton would judge performance results of all divisions throughout the company by making comparisons of the teams/units and not the individuals. Quarterly plant performance reports were analyzed at annual management meetings. 3. What are the alternatives before Nypro regarding adopting Novoplast? What should they do? The three options that Gordon Lankton (CEO) had for building a profitable business with Novaplast to produce a wide variety of products in smaller volumes are, 1) Build a new plant with Novaplast machines whose sole business would be to pursue the sort of highvariety, low-volume-per-part business for which the machine was designed. 2) Install two or three Novaplast machines in each plant in the Nypro system. Assign several engineers and salespeople to work on the job of figuring out how the machine could be exploited most profitably. 3) Assigning one plant to build a business around the Novaplast and then to learn from that plant’s experience to roll out the machine across the company. 4) Don’t adopt Novaplast. Option#1: Strengths  Most popular with senior management  Engineering efficiency  Centralizing development would facilitate personal oversight of project  Quick execution

Weaknesses  Transportation costs  Against current philosophy decentralized  No successful experience

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Option#2: Strengths Weaknesses  Close-to-customer manufacturing particularly  Against economy of scale philosophy important in the market segment  Unproven technology and no clear indication  Allows for the pontential to capture more of its feasibility market share  Puts more engineers and marketers to work on exploiting the NovaPlast

Karthik Arumugham (1311299)

 Better technology would emerge Option#3: Strengths  Could be implemented rather quickly  Allow for engineering/efficiency to be gathered  Could evaluate how resource planning systems interoperate  Use “internal market” for innovation Option#4: Strengths  The niche market identified and capability allows company to compete in market

Weaknesses  Time consuming to deploy if research shows that the flexibility is required in other international markets

Weaknesses  Avoids taking advantage of the strengths, innovation  Not dealing with problem of the changing market and competition

The recommendation would be to go for a partial option #2, of installing two or three Novaplast machines in a few of the most innovative plants. This is to ensure that consistency is not lost across plants due to innovation. The roll out has to be done almost immediately as they need to quote shorter delivery times to capture market and do away with time involved in non-value added activities such as changing molds, etc. If successful then the new machines can be rolled out to the other plants. ►

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Lankton’s belief: This solution would be in line with Lankton’s belief that no one in the company could foresee which process innovations to be adopted companywide. This would allow him to explore more on where, whether and how the machine would help Nypro before making large commitments to the technology. Compatibility: The smaller injection molds would be able to work along with the larger injection molds, by downsizing some of the production parts/processes. So the new machines needn’t wait for new customer orders, but can actually co-exist in the Nypro ecosystem by contributing to the existing capacity. Test Bench/Rapid Prototyping: Moreover these new machines would also act a test bench or for Rapid Prototyping for the plant managers to experiment, if they didn’t need to commit to a new type of equipment before their customers accepted. Machine Characteristics: As per Exhibit #4: Characteristics of shorter lead time, just in time deliveries, cost effectiveness, ramp-up to high volume production, 24x7 operations, etc would lead to creating new market segments in the low volume and high variety products business. As per Exhibit #5, the capital and operational costs of Novaplast are significantly lower which would enable them to deliver parts to their customers at competitive prices and at shorter notice. Diversification into new products and markets: By installing two or three Novaplast machines in few of the most innovative plants would give them access to a wide and diverse customer base such as in healthcare, electronics, telecommunications, automotive, consumer and industrial products. They can also experiment with existing products to see if they can improve the performance or receive new orders from customers for low volume and high variety products. This would enable the growth needed to sustain and also retain the engineers. Performance Metrics: If the individual plants are measured based on metrics such as ROA, depreciation, etc, then the corporate office could take the asset ownership and in turn rent out the new machines to the plants, thereby not interfering with the performance metrics of the plants. But in the other cases the new machines would be an asset and affect the performance metrics. Flexibility: In adverse cases of the new machines not contributing to margins or unable to find suitable customers in a specific region, the managers could return/send the machines to the other locations which requires additional capacity, thereby serving as a risk cover.