(FORTUNE Magazine) – KENWORTH TRUCK BUILDING FREIGHT-HAULING'S CUSTOM CADILLACS

Mention "mass customization" to the folks at the Kenworth Truck plant in Renton, Wash., and you'll get knowing smiles. Automakers talk about the concept largely as a future aspiration, but the Renton plant has been doing it since before the term was even invented. Amid the rattle of air guns and buzzing alarms, Renton's 950 workers turn out 36 customized trucks a day, week in and week out.

Stand where truck cabs are mated to truck bodies, and you'll see a burst of colors. Some cabs, rounded and aerodynamically shaped, resemble huge Easter eggs painted red, blue, white, or some other hue. Fleet owners prefer these aerodynamic noses and cabs, which Kenworth pioneered, because they cut fuel usage as much as 20%. A different breed of Kenworth truck, built for those rugged individualists known as "cowboys"--independent truck owners--boasts loads of chrome and polish, extra lights atop the cabin, and sometimes the owner's name laser-inscribed on the front bumper. Cowboys' trucks stand out with their traditional rectangular long-nosed hoods, fuel economy be damned.

Renton produces three lines of vehicles, all available as tractors that pull highway trailers or as load-bearing trucks. It's rare for one truck to be followed by an identical one on the Kenworth assembly line, even if the following truck is the same basic type and configuration. There's little chance of exact replication when a truck can have more than 100 options differentiating it from its neighbors on the line; some cowboy drivers even request that a waterbed be installed in the sleeper behind the cab. Even when an order comes in from a fleet operator for, say, 100 look-alike tractors, the plant staggers production so that the workers won't get stale building the same vehicle over and over. Says Kenworth general manager Edward B. Caudill: "We've taught our employees that complexity is normal."

Caudill is also a vice president of Paccar of Bellevue, Wash., Kenworth's $8.6-billion-a-year corporate parent. Paccar is the world's No. 2 builder of heavy trucks, after DaimlerChrysler. It produces both Peterbilt and Kenworth trucks in the U.S., Canada, Mexico, and Australia, and other trucks in Europe. New-truck sales have fallen in the U.S. this year because of an oversupply of used vehicles and rising fuel prices. But analysts think Paccar will do about as well as it did last year in sales and that it will remain profitable, as it has for 61 consecutive years. Joanna Shatney of Goldman Sachs expects Paccar "to outperform its peers in an industry downturn, thanks to its higher-quality backlog, higher used-truck pricing"--which makes Paccar owners more inclined to buy new vehicles--"and diversification into the European truck market, which could grow by as much as 10% this year."

Paccar's tradition of building high-quality vehicles stretches back to the early 1900s, when its predecessor companies started turning out rugged trucks to work the forests and mines of the American West. The Kenworth nameplate has adorned Paccar trucks since 1923. The Renton plant opened in 1993.

Unlike a passenger car, a Kenworth truck is built to last at least 1.5 million miles, which it typically racks up in two to three years. Since trucks often run 20 hours a day, seven days a week, this entails a special emphasis on reliability, ranging from flick-on switches that can stand up to heavy use to engines that perform for 800,000 miles without an overhaul. Known as the Cadillacs of their industry, Kenworths sell at a premium price of $80,000 to $120,000 each; a highly specialized truck for use in oil fields can bring as much as $350,000.

Kenworth's emphasis on quality is fostered by the unusual composition of Paccar's management, 14 of whose 17 top executives came up through manufacturing. Typical is CEO Mark C. Pigott, who started out washing trucks at a Peterbilt dealership in Seattle. It didn't hurt his career advancement, to be sure, that he is a member of the Pigott clan, founders of Paccar, which once built railroad cars. Paccar has long been an industry pioneer. It introduced the first trucks with factory-installed diesel engines, was the first to incorporate human-factors engineering into truck design, built the first sleeper cabs, and is currently developing a high-tech truck crammed with electronics.

In recent years the Renton plant has surged to the forefront of the industry in a number of important performance measures. For its outstanding safety record, for instance, it received a "best workplace" award last year from the Business Association of Washington, which has 3,700 member companies, employing 600,000 people. The plant's injury-causing accidents fell almost 50% in 1999, and the improvement is continuing this year.

Responding to a challenge laid down by general manager Caudill, Renton has also speeded up the order-to-delivery time for a truck. Six to eight weeks is typical for the industry. Renton has slashed it to three weeks and is racing toward a goal of two weeks. Just-in-time delivery of supplies has been tuned to the point that delivered components, such as engines, go almost directly to the assembly line instead of gathering dust in a warehouse. Renton has boosted inventory turns to 35 a year, no mean feat when most of its suppliers are 2,000 miles away in the U.S. Midwest.

Much of the credit for these achievements goes to Tony McQuary, 38, Renton's personable and energetic plant manager. The youngest to hold this post at Paccar, McQuary has tossed the standard managerial textbook out the window. Unlike many other plant managers, he shares most information on the plant's performance with the workers. To the surprise of his peers, McQuary hasn't hesitated to tell the plant's employees, all union members, about his staffing plans and where he intends to put new hires. His relations with the plant's five unions are excellent, in no small part because he spends most of his time on the factory floor listening and talking to the assemblers on a first-name basis.

McQuary rewards ideas by running the workers' pictures in the plant newsletter and giving out Renton plant caps. "That may sound trivial," he says, "but if you questioned most of the workers here, they'd tell you they are pretty satisfied with their lives and that a $500-a-year raise wouldn't make that much difference to them. But they appreciate the recognition." The average hourly wage at the plant is $19.43 plus benefits. Some of the workers' fathers and even their grandfathers have worked for Kenworth, and to many, being there is a matter of pride. "Working at a Kenworth plant is a career," says David J. Hovind, who rose from human-resources specialist at Kenworth to the presidency of Paccar. The annual turnover at the plant runs at a minuscule 1%.

Assemblers at Renton move in orchestrated fashion, with no loafing and no wasted motion. This may be in part due to McQuary's ready approval of worker suggestions on how to improve efficiency. Recently, in implementing one of them, the 3,213 feet per shift that workers walked to pick out components was cut to 500 feet by rearranging the parts' placement. "This is as much their plant as it is mine," says McQuary.

He learned a lot about motivating people from his father, Ed, one of winningest high school football coaches in Oregon, for whom McQuary played strong safety. His dad taught McQuary that the difference between winning and losing a game may lie in a coach's failure to explain such things as why he's ordering his team to run 50 sprints in practice.

If the coach just orders the players to run without explanation, says McQuary, he'll have unhappy players who think they are being punished. But if the coach explains that the team has to be in the best shape to win the next game, the players tend to cooperate more willingly. "The same applies to the workplace," McQuary says. He places communication, along with housekeeping and safety, among his top priorities. His management philosophy is that "if you take care of your people, they'll take care of you." His talks to the plant staff often draw prolonged applause.

The mass-customized assembly of a Kenworth truck begins when a buyer selects features at one of 450 dealerships in the U.S. The data are transmitted electronically to the Renton plant, where engineers review the request. Sometimes they suggest a different engine or transmission, or some other change to fit the truck better to the customer's intended use. Kenworth trucks perform a wide range of tasks in places as diverse as Alaskan forests, Australian coal mines, and the Arabian Gulf oil fields.

Once the proposal is approved, Kenworth suppliers get the details of each order over an electronic network. Careful orchestration of deliveries of engines, axles, and other parts and components is one reason why the Renton plant has been able to compress truck-assembly time. Step outside the plant, where finished trucks are parked, and you'll be surprised by the absence of warehouses, except for a small, open outdoor metal structure without a roof that holds components about to be moved onto the assembly lines. By a door sit a few new diesel engines, which the plant gets from Caterpillar, Cummins, and Detroit Diesel. "We get engines delivered twice a week," says McQuary. "Radiators arrive every three days, and trim kits for sleepers twice a day. You can be just-in-time and still make a customized product."

This is possible because suppliers are active participants in preparing parts for assembly, even those used in the first steps of building a truck. The steel or aluminum "rails," or beams, that Renton workers use to fabricate a chassis come with holes predrilled at the supplier's facility according to Renton specs in order to accommodate the chassis requirements of a specific truck. The rails then move along the line where cross-linking bars are attached to the holes to create a chassis frame on which water and fuel tanks are installed.

McQuary is big on factory ergonomics. For ease of assembly, the chassis is assembled upside down and then turned over by a special device. It is next sent into booths where paint is applied. Once the paint has dried, the chassis emerges ready for other assemblers to mount the big engine onto it. In another ergonomically sensitive operation, the big engines are guided by overhead hoists. Throughout the plant, assembly tools hang from the ceiling so that workers don't have to bend down to get them.

Half of the 270,000-square-foot plant is devoted to the assembly of cabs that come in all those sizes, shapes, and colors. Each cab is equipped with the requested individual dashboards, seats, and, for long-distance trucks, cabins with bunks or folding beds, refrigerators, TV sets, CD players, and other amenities. As the assemblers work, they can see big electronic displays that tell them how many of the 36 trucks the plant makes each day are assembled without mistakes. On a recent day, the figure was 32.

Throughout the plant, McQuary has judiciously employed electronic assembly aids. His plan is to transform Renton into a paperless factory. "We're 85% there," he says. Cab assemblers still follow a paper "build," a set of instructions that accompanies each truck. McQuary plans to make this document electronic; instead of leafing through pages, assemblers will scroll on a computer screen. Short TV films will explain how to do particularly difficult assembly jobs. PCs on the factory floor are supplemented with advanced wireless communications devices. Foremen equipped with portable radios see to it that a synchronized flow of components is maintained.

The cab is finally mated with a chassis that already has an engine, axles, and all the other components. Turning the truck's lights on, workers put the engine through a series of electronic checks. Then they drive a new great machine onto the parking lot, where it is ready to work in forests or oil fields, deliver just-in-time parts to other factories, and execute the movement of materials without which e-commerce--or any kind of commerce--would be impossible.

SQUARE D HOW NAFTA CREATES HIGH-PAYING JOBS IN NEBRASKA

This is a story about Ross Perot's famous "sucking sound," working in reverse. When the North American Free Trade Association (NAFTA) was created in 1994, the Texas billionaire and presidential candidate, along with national union leaders, warned that a massive loss of American jobs to Mexico would follow.

How about Mexicans in danger of losing jobs to smart American automation, which is creating higher-paying work in the U.S.? While quite a few American jobs have gone south of the border, the movement isn't all one way. Jobs are moving northward to the Square D plant in Lincoln, Neb., which makes electrical circuit breakers for home and industrial use. Square D is the only company that makes small circuit breakers in the continental U.S. Its chief competitors, General Electric and Eaton Corp.'s Cutler-Hammer subsidiary, have shifted the assembly of these items to Puerto Rico, the Dominican Republic, and Mexico, although they, and Square D, continue to make big industrial circuit breakers in the U.S.

Square D also happens to have a circuit-breaker plant in Pacifico, Mexico, near the U.S. border, an operation run by the Lincoln plant. The facility was established before NAFTA came into being. Now, lo and behold, the company plans to move some production from Mexico to Nebraska, and a few Mexican jobs may disappear.

What's Square D's secret? A fantastically clever, fully automated production line at the Lincoln plant. Some of Lincoln's small circuit breakers are still assembled by hand. But that spiffy new assembly line spits out 100,000 circuit breakers a day, one-third of the plant's production. It's tended by 37 highly trained operators, who replace the usual 250 human assemblers. The 37 command wages of nearly $20 an hour, plus incentive pay and bonuses.

Far from opposing the labor-saving production line, Local 2366 of the International Brotherhood of Electrical Workers collaborated closely in installing it and training the operators. Most union leaders and Ross Perot may still fume, but to Bill Mohr, president of Local 2366, NAFTA is no cuss word. He doesn't like the lax enforcement of environmental, safety, and labor standards in Mexico, to be sure. But his attitude is more pragmatic than that of national union leaders.

Says Mohr: "While NAFTA might leave a bad taste in my mouth, here in Lincoln we have been proactive in dealing with the fact that we have to compete against Mexico and the rest of the world. Local 2366 has been a leader in developing a cooperative labor-management relationship for years. We've accepted the fact that Lincoln is a high-volume automated plant. The combination of our work force and the willingness of Square D to invest in automated technology has given us the ability to compete with anyone."

Employee numbers, Mohr notes, "have remained steady throughout the implementation of our automated-equipment processes, while the number of higher-wage positions increases." That trend has been going on for some time, plant executives say. A decline in the number of jobs for hand assemblers at Lincoln has been offset by more jobs for skilled machine operators, moldmakers (the plant makes all the plastic housings for the breakers), and maintenance workers.

In the opinion of Ted Klee, 36, Lincoln's plant operations manager, NAFTA's elimination of duties on U.S. products sold in Mexico and Canada allows manufacturers like Square D to build products more efficiently and competitively in the U.S. The move toward automation at the Lincoln plant reflects Square D's companywide policy of making its plants in the U.S., Mexico, Canada, and everywhere else less vertically integrated than before. The idea is to raise volumes and drive down costs by letting some plants concentrate on making parts or finished products for wider markets.

This policy is what prompted Square D to shift work to the U.S. from Mexico. Even before NAFTA, the Lincoln plant, which employs close to 1,000 people, made parts by machine for the Mexico plant and for a much smaller plant in Ballinasloe, Ireland. Both plants use the parts to hand-assemble small circuit breakers. And now Lincoln's managers and engineers are so pleased with the new automated line that they plan to increase its daily production to 150,000 circuit breakers by transferring the production of 50,000 units from Mexico.

Square D is part of the North American division of Schneider Electric, an $8.9-billion-a-year French conglomerate. Schneider is one of the world's largest suppliers of products and systems for electrical distribution and industrial control and automation. Square D specializes in making systems for controlling electricity, including power meters and harmonic filtering equipment as well as circuit breakers. The circuit breakers made at the Lincoln plant are known in the trade as miniature circuit breakers. About the size of a wallet, they sell for less than $10 apiece.

A circuit breaker is a kind of silent sentinel that monitors circuit conditions and, by automatically tripping to interrupt power, protects wiring from being damaged by electrical overloads. Fuses do the same job but must be replaced after an overload causes them to blow. Circuit breakers allow power to be restored by resetting the switch.

Components inside circuit breakers are made of materials that range from 1% to 100% in electrical conductivity. When current passes through, it heats a bimetallic strip composed of two materials of differing conductivity that expand at different rates, causing the strip to bend. An overload bends the strip enough to trip the breaker; the greater the overload, the faster the response. The circuit breaker can also be tripped magnetically by a short circuit caused, say, when someone accidentally cuts an electrical cord.

To build their unique production line, engineers at the Lincoln plant, led by the engineering manager for advanced manufacturing, Jim Fixemer, 51, had to meticulously design portions of the automatic assembly machines. They also redesigned parts of the circuit breaker itself. The small breaker is not as simple a device as it may seem after it is packaged in its black-plastic housing, with only the plug-in prongs and the on-off switch sticking out. Inside are 20 fairly complex parts, including tiny springs, an armature, a jaw, a clip, a lens, a reset pin, rivets, a "pigtail" consisting of braided fine copper wires, and so on. All this has to be tightly packaged in a box measuring 2 1/2 by three inches and only three-quarters of an inch thick.

In redesigning the breaker, Fixemer and his engineers had some of their biggest headaches with the so-called toggle spring, a part less than an inch long that pulls down the breaker's trip lever. Solving the problem consumed about three of the 24 months it took to design the line. The team went through four redesigns to make the spring right. Then they had to find the right supplier. "In hand-assembled circuit breakers," says Fixemer, "the spring has an open loop at both ends. We needed closed loops. And we could only make the eye so big--it had to meet force requirements for the contact. There was little room for the size of the eye and the length of the spring. Besides, it couldn't break in endurance tests."

To make assembly machines do the work they had in mind, Fixemer and his engineers spent a lot of time at the New Jersey outlet of Bihler, a German machine-tool maker, and at Assembly Machines Inc. in Erie, Pa. The Lincoln plant engineers redesigned portions of those machines. Fixemer and his co-workers knew that in normal automation the biggest sources of jams are the so-called feeder bowls. These containers are supposed to act as orientation devices for parts moving along feeder lines but also happen to be the biggest single cause of downtime on automated lines. Fixemer's team decided to eliminate the bowls. They tried something different instead.

"We took an innovative stamping process and introduced it into final assembly as far as we could," says Fixemer. In the new assembly line, a tape of steel about two inches wide is fed automatically into a stamping machine, the first of nine machines that constitute the line. With its wheels turning and slides sliding, the stamper looks and sounds like a miniature locomotive harnessed in place. As other machines form parts, multiple parts are stamped out of the steel ribbon as it moves along.

Other machines on the line perform such intricate tasks as folding the "pigtail" around other parts and welding it in place. "We had to learn how to weld alloys nobody had welded before," Fixemer notes. Screws are automatically put in place as the circuit breaker's structure grows. "Some parts we don't cut off from the steel tape until the final assembly machine," says Fixemer.

Near the end of the line, an octopuslike 18-arm wonder, prosaically named a roundtable synchronized assembly machine, deftly puts 13 different parts in their proper places inside halves of the breakers' plastic housings. After that comes automatically adjusting the calibration screw that controls the crucial bimetallic strip, checking the trip time of the breaker, testing the trip speed, labeling the breakers, grouping them in sets of ten, and putting them in boxes--with the whole operation untouched by human hands.

Jim Fixemer's factory within a factory not only makes circuit breakers faster, it also makes them much better. Only one or two of the 100,000 breakers produced in a day's run are rejected. The high production rate on the fully automated line has also made it possible to slash inventories both at the plant and in the distribution chain. Because distributors can get high-volume circuit breakers faster, they don't need to stock as many. This allows them to improve customer service by carrying a broad range of lower-volume products that Lincoln also makes.

Since Square D has been introducing new products and growing by 10% a year, operations manager Ted Klee doesn't expect wholesale layoffs at the Mexican plant when some of the assembly work is moved to Lincoln. Whatever decrease occurs in the number of Mexican jobs, he says, will probably be taken care of by not replacing workers who quit. The labor turnover at Mexican border plants is notoriously high.

As it has in the past, the Lincoln plant will be using its Mexican factory for test production of new lines of breakers. Then, when the time comes to ramp up, some production will be shifted to Lincoln because the automated line is so efficient. Neither the Mexican plant nor the one in Ireland is there just to serve the U.S. market. Most of the Mexican plant's production is sold in Mexico and South America, while the Irish plant sells some of its output in Europe.

By running the three plants as a single integrated operation, Square D has achieved short lead times, short model runs, and global cost competitiveness while paying high American wages and benefits to its workers in Nebraska. Creating that remarkable automated line--nothing like it exists anywhere else--is what enables Square D to make its circuit breakers in the U.S. long after almost all manufacturers of inexpensive mechanical and electromechanical devices, including circuit breakers, have gone offshore. Says Ted Klee: "We had a vision in mind, and we were able to stick with it."

AEROQUIP GROUP A TROUBLED OHIO PLANT BECOMES AN EXEMPLAR

If there was ever a plant that pulled itself out of a morass of poor quality, declining sales, and low employee morale, it is Aeroquip Group's 47-year-old factory in Van Wert, Ohio, near the Indiana border. Once a sad sack, it has become a superman of best practices that have been adopted by many of Aeroquip's 35 other plants in the U.S. and abroad. By borrowing some of Van Wert's ideas, in fact, some of those plants have won quality leadership awards in such states as Michigan and North Carolina, as well as many other honors.

Van Wert makes products you normally don't see--metal connectors, fittings, and adapters as well as rubber hoses joined to them. They contain, control, protect, and otherwise facilitate the flow of liquids and gases: hydraulic fluids in airplanes, buses, and trucks; freon in refrigerators; even oxygen from one firefighter's pack to another's to save a life in a fire. Aeroquip hoses, hose assemblies, and quick-disconnect couplings are typically found in critical systems, where they must withstand extreme weather conditions, vibration, abrasion, corrosion, dust, and high operating pressures.

Raw steel and aluminum bars arrive at one end of the Van Wert plant, which employs 720 workers operating computer-driven and other machines in three shifts around the clock, and emerge as shiny, plated components. Like so many other plants in Main Street America, Van Wert found itself in desperate straits in the late 1980s, when international competition intensified and its customers went global. Located in a pleasant, tree-shaded town of 11,000, the plant had the advantage of a dedicated work force. There were fewer good things to say about its management's skills.

In the fast-moving new world of "lean" manufacturing, the huge 500,000-square-foot plant seemed to have gotten caught in a time warp, with excessive old-fashioned inventories blocking passageways and unhappy customers complaining about poor product quality and late deliveries. Competition, in the U.S. as well as abroad, was tough. "There were a lot of sharks out there nipping at our heels," says Donald G. Waggener, 49, who has been plant manager at Van Wert since 1992. "We needed to change the business."

The plant had some excellent products. In fact, Aeroquip during World War II had pioneered a couple of remarkable innovations. The company's founder, an immigrant German aeronautical engineer named Peter F. Hurst, had started the company in 1940 in an abandoned milk-processing plant in Jackson, Mich. Hurst had invented and patented two imaginative products designed for the aviation industry: detachable, reusable hose fittings and self-sealing couplings. Before then, when a metal fitting failed on a hose, both the fitting and the hose had to be replaced. Hurst's fittings could be replaced without discarding the hose. Aeroquip rapidly gained a foothold in aviation, and its equipment became standard on all U.S. aircraft.

When the U.S. entered World War II, Aeroquip's founder had a more difficult time than his products. Still a citizen of Germany, now an enemy country, Hurst found himself barred from the premises of his own plant, whose products were deemed critical for the war effort. He started a small shop recycling bottle caps for Coca-Cola, but by one account remained in charge of Aeroquip by sending memos back and forth from an office across the street. The military relented toward the end of 1943, allowing Hurst to return to Aeroquip as executive vice president to straighten out production problems. He became a U.S. citizen in 1945.

After the war Aeroquip began to expand beyond aviation, producing parts for motor vehicles and for refrigeration and air-conditioning equipment. The Van Wert plant, built in 1953, was the company's first major industrial facility. Independent in its early days, Aeroquip was later absorbed by a succession of conglomerates. Eaton Corp. acquired it in 1999.

When trouble came in the 1980s, Van Wert's managers went outside for help. They recruited two university professors, Jack Muckstadt from Cornell and Dennis Severance from the University of Michigan, to execute what later became known as the Cornigan process, a contraction of "Cornell" and "Michigan." The Van Werters soon used the term Cornigan as a wry acronym for their new motto: "Clear overdues, reduce needless inventory, and give adversaries nightmares."

The professors started a long process of rejuvenation, which is still continuing. They were assisted by Van Wert plant employees, whom they organized in teams to study and change plant operations. One of the most basic changes was the establishment of "focus factories" within the big plant--collections of people and machines that concentrate on manufacturing and assembling a specific product, often for a specific customer.

Formerly, manufacturing and assembly were in separate departments. This led to confusion and misunderstandings, Waggener recalls. "We reconfigured the whole facility, and we're continuing the improvements," he says. A concept that the Van Wert managers applied is what they call cell razing, a variant of barn raising, a term common among Amish farmers in Ohio and Pennsylvania, whose families customarily gather to help neighbors build a new barn. At Van Wert, razing means building--and sometimes rebuilding--production cells in a constant search for greater efficiency.

Plant workers have participated so heavily in the transformation that today 95% of employees serve on two or more improvement teams. Waggener wants to bring participation up to 100% this year. So intimate is worker involvement that the plant now gets employee input on purchasing production machines. Operators who will work on them accompany Van Wert engineers to the machine-tool makers' plants to try them out and make certain, among other things, that they are easy to operate. This new kind of participation has helped cut cycle times drastically on both new and old machines. Parts finishing, for instance, has been reduced from eight days to 24 hours.

Employees who contribute ideas that improve productivity receive gift certificates worth up to $25 as well as company jackets. Says Waggener, who sets great store by communication with the workers: "We recognize it's very important to let people know we appreciate their ideas."

What this has meant on the factory floor is simplifying how things are done. Take the Dynacraft cell, a focus factory dedicated to making truck parts that Dynacraft, a subsidiary of truckmaker Paccar, distributes to that company's truck plants. The cell has adopted a much simpler process for machining and assembling components for truck air-suspension systems.

Two workers are stationed at opposite sides of a gravity part rack. One attaches a nut support to the tubelike part and slides it down the rack. The other puts the part into a stamping machine. In an earlier version of this operation, there was no gravity rack, and the assembly and stamping jobs were separate. The part was dispatched to a stamping press, where it might wait in a queue for 48 hours or longer before being processed. The use of the gravity rack shows that not all improvements have to be high tech. The cell processes 1,400 parts every two shifts, vs. 100 parts before the change.

At Van Wert, "demand flow" has taken the place of pushing through product without regard for demand. Manufacturing managers have gotten the workers involved in vigilantly watching the "value stream," the flow of materials from suppliers being transformed into products for customers throughout the plant, and spotting any wasteful activities that might affect the flow.

A new scheduling system is now in place that reacts better to customer demand; the customers include a mix of distributors and original equipment manufacturers (OEMs) such as General Motors and Caterpillar. "We're now a fast-response organization that looks at how to solve customer problems," says Waggener. The plant now makes products that customers urgently need on a "fast lane" within four hours of receiving an order.

When parts are already in stock, they move out quickly from a 210,000-square-foot Aeroquip central distribution facility that adjoins the plant. Inside that beehive of activity, which employs 280, self-propelled guided automatic vehicles ferry finished parts from the plant into the computerized warehouse, where they are stored by computer-controlled gantry cranes and rapidly retrieved for shipment. The distribution facility receives and transships components from other Aeroquip plants around the world. It also assembles some hoses.

Van Wert continues to look for new refinements of the company's manufacturing processes. In the plant's advanced manufacturing section, which employs 70 people, new computer numerically controlled (CNC) machines are tested for use in Aeroquip plants at home and abroad. For customers, the Van Wert plant develops production techniques by trying out prototype machine cells in the engineering department before installing them on the production floor. A big current project is a program for a major diesel-engine builder, which may result in an investment of as much as $10 million by Van Wert to make a novel fuel system for trucks.

By a variety of measures, the plant has come back splendidly. Inventories of parts have been sharply reduced, from a 135-day supply in 1990 to 46 days' worth last year, and are expected to fall to 45 days in 2000. On-time delivery to customers has soared from 63% in 1990 to 96% last year, with the goal of 98% in sight this year. The return by customers of faulty component parts, as measured in parts per million, has plunged from 4,811 in 1990 to 1,863 last year. This year's target is 1,000. Most impressive of all, the plant's gross sales have increased by 25% over 1990, and operating income has rocketed 855% since 1992. (The plant does not disclose dollar figures.)

Kudos for all this should go to the employees, Waggener insists: "We like to say that anyone can buy the same equipment, but that no one can buy our kind of workers."

FEEDBACK: gbylinsky@fortunemail.com. Stories from FORTUNE's Industrial Management & Technology section can be found at fortune.com/imt.