Lean Manufacturing at FCI (A) :: The Global Challenge
Lean Manufacturing at FCI (A) :: The Global Challenge
04/2013-5864
This case was written by Cynthia Laumuno of CUBIK Partners, based on interviews with Yves Merel and Pierre
Vareille of FCI, under the supervision of Enver Yücesan, Professor of Operations Management at INSEAD. It is
intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of
an administrative situation.
Additional material about INSEAD case studies (e.g., videos, spreadsheets, links) can be accessed at
cases.insead.edu.
This document is authorized for use only in Seminario de Procesos de Manufactura SCM by Daniel Benites at Universidad del Pacifico from May 2014 to June 2014.
It was getting late as Pierre Vareille put the finishing touches to his presentation in
Guyancourt, France. In two days he was due to fly to Singapore for the annual management
meeting, one of the communication routines he had created since joining the company. Three
years had gone by since getting the call from Bain Capital, which, having invested in FCI,
was searching for a new president to devise and implement its transformation for value
creation. He clearly remembered his first day. He knew nothing about the company’s history
or the connectors market, but his career path from plant manager to CEO had taught him one
key lesson: “Never get too much information in advance nor focus on the past. Keep an
element of surprise. Keep the focus on the mission to transform the company so that it can
adapt to the future.”
His phone rang, announcing the arrival of his next appointment: Yves Merel, VP of Industrial
Development. Vareille had asked Merel to join the team to implement lean manufacturing at
FCI. They had had their disagreements but felt and showed mutual respect for each other’s
values and contributions to the firm’s success. They shook hands longer than usual, aware that
it was an important milestone for both men. Twenty-eight months earlier, Vareille had set out
a vision of the company’s future during a seminar in Shanghai in March 2008: “Our goal is to
become the benchmark in our industry in terms of market share gain, sales growth,
profitability, and people empowerment.” He had also decided that lean manufacturing was
one of the ways to achieve his goal, and that Yves Merel would be the man to get it done.
Since then, they had never stopped driving “lean” into the global organization.
Now he was going to share the results with the FCI team at the annual management meeting.
It was time to take a step back and assess what had been accomplished thus far.
A connector transmits electrical power and/or electronic signals between two devices. As such
it provides the link among electrical components in many devices with speed, efficiency and
reliability (see Exhibit 1). Makers of electronic connectors and other passive electronic
components therefore rely on manufacturers of finished products to maintain favourable
prices and provide a market for their goods. In other words, the health of the electronic
connectors industry is closely tied to that of electronic equipment and other finished products
(e.g., automotive manufacturers).
Within the connector industry, printed circuit connectors accounted for approximately 21% of
the worldwide production volume during the mid-2000s. Cylindrical connectors and coaxial
(RF) connectors accounted for 14% and 11% respectively. Rack and panel (rectangular)
connectors 8%, and other connector types and parts for the remainder of production.
Throughout the 1980s and 1990s the connector industry was overcrowded, with
approximately 800 manufacturers worldwide. However, consolidation, mergers and transfer
The worldwide connector industry was dominated by Tyco Electronics Ltd. of Berwyn,
Pennsylvania. Its parent company, Tyco International Ltd., headquartered in Princeton, New
Jersey, posted 2008 sales of just under $20.2 billion, with approximately 113,000 employees.
A distant second was Molex Inc. of Lisle, Illinois, which shipped nearly $3.33 billion in
products and employed 32,160 in 2008, followed by Thomas & Betts Corp. of Memphis,
Tennessee, with sales of $2.47 billion and approximately 10,000 employees that year.
Globally, connector sales grew 9.7% during 2003 to $25.4 billion, although the US saw only a
marginal increase of 0.4% in revenues. China’s connector industry, on the other hand, grew
23% year on year. Computer and peripheral related connector sales increased by nearly 10%
from $6 billion to $6.7 billion, and the applications for the medical equipment industry grew
more than 17%, from $557 million to $653.5 million.
By the mid-2000s, China was the fastest growing market for electronic connectors in the
world as an overwhelming portion of the world’s production of electronics equipment was
located there. During 2004, the global market grew approximately 12%. But while China's
market grew more than 20%, the US industry shrank 1%. China accounted for approximately
10% of the global demand for connectors, which was expected to double within a short time.
(See Exhibit 2 for a snapshot of the global market.)
FCI was currently operating in Asia, the Americas and Europe, where most of its customers
were based. Its global footprint spanned 30 countries and 24 manufacturing sites, employing
14,000 people – most of them based in Asia (see Exhibit 4). In 2010, FCI had a turnover of
€1.28 billion.
With its rapid growth, global dynamics and links with the automotive industry – his first love
– the connectors market intrigued Pierre Vareille. He was also puzzled by FCI’s structure. It
was a centralized organization where most of the directors were French and were based in
France, while the fastest growing market was in Asia, notably China.
During his first two months as CEO, he visited each of the 24 plants and R&D centres around
the world, flew thousands of kilometres, met hundreds of employees from plant directors to
operators, and shook so many hands that he lost count. His conclusion was the same after
A strategic plan covering the next four years was presented to the shareholders in July 2008.
Designed to promote long-term value within the company, it was based on five key cross-
functional and mutually-reinforcing initiatives, led by the corporate headquarters, with its own
visual identity and targets (see Exhibit 5):
• Customer focus emphasized quality and customer satisfaction, based on three main
initiatives: integrating on-demand tools; developing a well-defined key account strategy;
and adopting a complete customer service culture by instilling values such as
responsiveness, availability and flexibility.
• Supplier development was aimed at partnering with suppliers for quality, innovation and
customer satisfaction by training suppliers to FCI’s standards.
• Lean development used lean techniques to boost engineering efficiency for promoting
innovation within the R&D centres. It was also a way to continue patent development and
follow patent compliance. FCI filed more than 100 patents a year and currently had a
portfolio of 3,000 patents to manage.
• Lean manufacturing focused on and enforced operational excellence to serve the strategic
objectives.
• People empowerment was based on the conviction that no strategic plan can be
successfully deployed without people. Only with the right people, in the right positions,
within the right environment could the implementation exceed expectations. In the words
of Orest Fiume, “In the end, it is all about people.”
Key performance indicators (KPIs) were necessary to monitor progress. As Vareille visited
each plant, he was surprised to discover that each site had its own reporting system, focusing
on different indicators depending on the plant director’s experience and vision. He was
convinced that to improve an activity, a consistent set of KPIs were needed with a baseline
and a clear target for each plant. Early on, he communicated the KPIs and the target
performance (see table) and never stopped reminding employees about them. To enforce
cultural change, two levels of indicators were deployed: the first to monitor the results, the
second to monitor the processes to achieve these results. Based on his previous experience,
Vareille was convinced that processes led to results, and that results could not be sustained
without proper processes because repeatability could not be ensured without them.
He was further surprised to discover that none of the sites monitored the number of accidents.
The number of accidents was a clear indicator of how the plant was managed. Making this a
high-priority topic would demonstrate to employees their importance to the company.
For Vareille, the evolution of a KPI was more important than its current value – he always
emphasized the rate of improvement over the result itself. Monitoring the KPIs (see Exhibit 6)
required particular care due to FCI’s global presence. All plant directors were required to
report on all indicators to an India-based business analysis centre on a monthly basis. After
the reports were compiled, Yves Merel dedicated a day to analysing the KPIs, which enabled
him to follow the lean implementation throughout the production sites. He not only shared his
conclusions with plant directors and lean managers but also with Vareille, who dedicated two
hours each time to providing feedback. Both men believed in the value of praising excellence
and constructively criticizing lack of performance. They would also plan specific actions such
The Lean initiative kicked off in Asia with a two-day seminar in Singapore for all the VPs
and directors (including plant directors), who thus discovered the CEO’s ambition for the
company and his expectations for their activities. The challenge was tremendous. Two months
later, the lean programme was launched both in Europe and America. The global initiative
relied upon the following management routines:
• Yearly lean visits were organized to reinforce the CEO’s commitment to visit every site
once a year. During these visits, Vareille and Merel were supported by Freddy Ballé, a
renowned lean expert and Pierre Vareille’s Senseï. Together they carried out a waste hunt
within the plant, a common lean practice, but also focused on target issues based on the
monthly reports or the lean team’s observations (either the Lean Manager, the Lean
Expert, or the VP Industrial Development).
• Lean reviews – quarterly two-day meetings conducted in every region of the world gave
an opportunity for about 40 people to meet and learn from their colleagues and from the
VP of Industrial Development. Best practice sharing and rigorous usage of the lean system
for implementation was the main focus of these reviews.
• Daily routines – standard among FCI’s plants, these consisted of the plant director and the
lean manager visiting the shop floor on a regular basis. (See Exhibit 7 for the flat plant
structure.)
• Many Kaizen workshops were organized when participants (usually a cross-functional
team) were relieved of all operational duties (no mail, phone calls or meetings) for three
days to focus on achieving the workshop targets, team building and creating a high level
of energy within the group (See Exhibit 8).
While this was the tip of the iceberg, the real infrastructure had already been put in place by
Yves Merel, who had put together a team of lean specialists to support the plant directors and
the lean managers during their local lean deployments. The team consisted of:
• The Group Quality Director, a French Six Sigma Master Black Belt, with a specialty in
process stabilization and product quality improvement.
• The former Lean Director, an American with a specialty in process engineering and
hoshin workshops.
• The Supply Chain Director, with a clear understanding of flow improvement through the
whole supply chain, from the suppliers to the customers, able to adapt the ERP to the
Kanban usage.
• Two German Field Senior Experts (moulding and stamping) based in France and Korea,
with a specialty in maintenance management and TPM.
• A former Plant Director, a Canadian based in Toronto with a specialty in pull flow and
lean management.
• A former Lean Manager, a Chinese based Dongguan-China plant with a specialty in
SMED (Single-Minute Exchange of Die) in the Asian plants.
In order to support each site during the lean manufacturing seminar, plant directors were
asked to dedicate one full resource to lean: the lean manager. This critical resource selection
was done by the plant director. Lean managers dedicated 100% of their activity to workshop
facilitation within their plant. They were also in charge of providing training to local teams as
needed. To succeed in his/her mission, the lean manager was in direct contact with the VP of
Industrial Development and supported by the team of lean specialists, even if he/she reported
directly to the plant director. His/her appraisal was based on the field implementation. A lean
manager was regarded by both the VP of Industrial Development and the CEO as a locally
identified high-potential employee who would subsequently take over the management of an
autonomous production unit or APU (see Exhibit 8), and ultimately become a plant director of
one of FCI’s worldwide plants.
As people formed the basis of the lean manufacturing initiative, Yves Merel (who had moved
to Singapore in June 2008 for the lean initiative deployment needs), launched a ‘Lean School’
in September 2008 to equip lean managers with the necessary skills by providing nine days of
training, consisting of three 3-day sessions over the first three months of the initiative. The
first session took place in India, the second in the US, and the third in France. A month was
allowed between the sessions to enable a workshop to be organised in their local environment,
and for work on a project to be presented to the CEO on the last day of their training. Upon
graduation, the lean managers could, with assistance from lean specialists, launch workshops
in their home plant.
Even when all the other budgets were frozen, expenses for lean manufacturing were left
intact, including travel expenses for the plant personnel to attend the quarterly lean reviews.
This sent a strong signal: lean was no “flash in the pan” – it was a long-lasting effort to
achieve long-lasting results. Vareille and Merel conducted a second round of lean visits and
continued the quarterly lean reviews, which allowed them to follow the different projects,
workshops and implementations. They focused on optimizing the supply chain and
purchasing networks by launching milk runs (see Exhibit 9) with tremendous impact on
operations. This persistence delivered the first visible benefits in 2009.
By December 2010, Bain Capital had been a shareholder in FCI five years. Its investments
lasted on average three to five years. Meanwhile, thanks to the lean initiative, FCI’s estimated
value had doubled. Hence Vareille could anticipate a shareholder change (see Exhibit 10 for
the current organizational structure). How would such a change impact the firm’s strategy? In
particular, how could he ensure that these achievements were sustainable?
As Merel left to take a phone call from Kevin Zhao, the Lean Manager at the plant in
Nantong, Vareille added a few concluding thoughts to his presentation. He strongly believed
that, as CEO, his mission was to prepare the company for change and to transform the
company culture. This was only possible if people believed in it. While he could congratulate
his team on a job well done, more importantly he needed their renewed commitment to the
remaining tasks.
Source: www.fci.com/
Source: FCI internal - Lean Initiative EU Launch Convention - September 10&11, 2008 - Tatabanya
• Micro connections
o Manufacturing sites : 2
o This department is the world’s leading manufacturer of flexible tape material for smart
cards. These sophisticated flexible etched circuits are used in several applications,
including SIM cards for mobile phones, banking cards and e-ID cards, etc. Other products
are also being developed such as connectors for medical sensors and connectors for LED
bulbs.
• Electronic
o Manufacturing sites : 8
o All kinds of electronic equipment are powered by connectors – and FCI’s Electronics
division is a leading supplier to this market designing, developing, and manufacturing
solutions for a whole range of everyday uses.
o When you store data on a server, a hard disk drive or your desktop computer, you are
relying on a connector. If you watch a DVD on an LCD television, you are putting a whole
series of connectors to work in both devices. In short, the Electronics division provides
solutions for everything from consumer goods like digital cameras to specialized
equipment such as hospital diagnostic apparatus.
• Motorized vehicles
o Manufacturing sites: 11
o The Motorized Vehicles division represents the biggest single activity, and its solutions
cover a wide range of applications.
o FCI’s connectors play a major role in vehicle safety. They link together the various
components of an airbag, for example, ensuring you have a soft cushion in the event of a
crash. Connectors are also used in the vehicle’s engine and in multimedia applications,
such as your in-car CD player. In total, you’ll find several hundred connectors performing a
whole range of different roles in any given vehicle.
o Furthermore, FCI’s connectors for motorized vehicles have proved so reliable that they
have been adopted by other markets such as construction and agriculture.
Note: The US division (the 4th one) was sold shortly after Pierre Vareille’s arrival at FCI.
Source: www.fci.com/
Source: www.fci.com/
Exhibit 6
Sample of KPI Reporting (January 2011)
SMED means less than 10 minutes to switch from the production of part A to the production of
part B). While classical mass production approaches consider the changeover time as a constraint
and determine the associated economic order quantity, the lean approach targets the “one piece
flow” as the ultimate goal. This vision pushes the organization to solve a number of important
issues, and at the same time create the conditions to reveal any problems that may interrupt the
flow of goods.
Serving the customer at the right time is key to ensuring future sales and retaining customers. To
enhance customer service, for example, one might consider having more stock in order to satisfy
any request for delivery. In fact inventory is regarded as the ‘enemy’ – and is associated with
missed deliveries, as indicated below:
The vision of FCI was therefore to reduce the flow time to less than 10 days from more than 35
days, with an accompanying decrease in missed customer deliveries measured by MPM (missed
per million).
When an activity heavily depends on machine availability (which means that problems such as
production blocked by missing parts or missing people are less significant), a real improvement of
maintenance activities can be achieved through the TPM (Total Productive Maintenance) approach.
Equipment performance requires a delicate balance between efficient production and efficient
maintenance. In the short run, the pressure of deliveries and production can lead to postponement of
maintenance activities. In the long run, however, this will affect machine availability and process
quality, reducing the ability to deliver ‘good’ parts on time.
TPM consists of eight pillars to be improved and a base, the maintenance management system. The
OEE (Overall Equipment Efficiency) is a commonly used indicator that allows for concentrating
action on all types of waste. Lack of equipment reliability leads to higher stocks (in the case of down
time), higher defect rates, waste of labour time (while waiting for the repair of the machine), and thus
harms customer service.
Improving the cooperation between production and maintenance teams, as well as simplifying the
production lines to make them less vulnerable, is a must to improve market position and profitability.
Typical targets can be to have the machine cleaned and inspected by production people, who learn to
monitor them and take care of first-level maintenance activities. This enables skilled maintenance
teams to focus on higher level activities such as finding the root causes of a frequent breakdown,
creating maintenance standards, transforming curative maintenance into preventive maintenance, and
accelerating preventive maintenance activities.
iii. Hoshin
When considering the lifecycle of a product, one often finds an unpredictable start-up phase, peak
volumes during the maturity phase (which rarely corresponds to forecasted figures and lasts for a
shorter period of time), and finally a long tail mainly influenced by the type of markets served,
ranging from a few months of service period for the fast-changing high tech market to decades for the
automotive or aerospace industries.
For an existing line with high labour content, a Hoshin Workshop is an effective tool to achieve
significant improvements on all QCD factors.
Hoshin is a specific and precise method of seeking improvements in labour productivity. In particular,
Hoshin is a way to analyse the variability in cycle times with the involvement of the operators who
know the working environment better than anyone else. Reducing variability is always quicker and
cheaper than optimizing standard working cycles.
The result of a Hoshin workshop is a reorganised line – re-laid out or even rebuilt – with less waste,
fewer interruptions, reduced quality risks, reduced wait for missing parts, etc. It is also something that
continues to be improved in the future thanks to a modular and reconfigurable construction. The
following figure illustrates an on-going Hoshin activity where part of the line is rebuilt using modular
material.
QRQC workshops focus on frequently recurring problems in order to implement the QRQC
methodology, which aims at instilling the habit to go and see on the floor as soon as a problem occurs,
rather like visiting the scene of a crime. Support teams need to come quickly to sift for clues and
interview the witnesses before they forget the crucial details needed to understand the origin of the
problem. The teams learn how to compare the good parts and the bad parts, the results between two
lines, the results with the day before, and to establish where the problem originated and understand
why it was not discovered earlier. After this first phase based on data and observation together with
logical thinking, the team learns to swiftly implement and test efficient countermeasures.