Driving an Upswing in a Downturn at PolyOne. High Performance through Business Transformation

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1 Driving an Upswing in a Downturn at PolyOne High Performance through Business Transformation

2 PolyOne Corporation is a premier global provider of specialized polymer materials, tailored services and end-to-end solutions. With more than 10,000 customers in 35 countries, the company offers more than 35,000 products to a wide range of industries, including building and construction, electrical and electronics, industrial, health care, packaging, textiles and transportation, and several others. Headquartered in northeast Ohio, the corporation maintains operations in North America, South America, Europe and Asia, including more than 30 manufacturing facilities in 20 countries. Its 2010 revenues totaled $2.6 billion, which is an increase of 27 percent versus the full year

3 Business challenge Facing unprecedented declines in demand due to the recent global economic downturn, PolyOne wanted to restructure its manufacturing footprint and implement cost savings initiatives to remain competitive and mitigate the effects of the downturn. Strong change management was needed to improve efficiencies across all areas of the business, break down functional barriers, and create collaboration between regions and business units on such enterprise issues as inventory management, price management and sales force performance. Senior Vice President of Process Improvement and Supply Chain Tom Kedrowski described the initiative by saying, In the midst of the worst financial crisis in decades, we committed resources to improving our processes for the benefit of our customers and shareholders. Improving cash flow and seeking greater efficiencies were imperative, but the leadership team also wanted to expand PolyOne s capabilities from manufacturing cyclical commodity chemicals to offering more specialized solutions that require more customer relationship management skills and greater sales force effectiveness. PolyOne s leaders knew they needed to bring in greater Lean Six Sigma (LSS) expertise to achieve a successful business transformation and get the company back on the path to high performance. Desiring a formal and structured transformation strategy, company leaders determined to use Lean Six Sigma as the foundation to support PolyOne s four strategic pillars specialization, globalization, operational excellence and commercial excellence. Opportunities for process improvement would be split evenly between manufacturing and commercial functions. Prior to the downturn, PolyOne had initiated a small number of Lean activities and kaizen (Japanese for improvement ) events to improve efficiency. While these efforts created small incremental changes in certain areas of the business, they failed to achieve significant transformational process improvements, and the improvements were difficult to execute in a timely manner. Many company leaders had worked with Accenture in the past and knew our strong track record of delivering comprehensive solutions on a global scale and helping clients succeed with multinational Lean Six Sigma deployments. To acquire the training needed to jump-start the company s transformation, PolyOne sought guidance from the Accenture Process & Innovation Performance team. 3

4 How Accenture helped Starting with the LSS turnaround strategy architected by Tom Kedrowski in December 2008, Accenture worked with PolyOne to engage the leadership team, make key deployment decisions, build a project pipeline and deliver LSS training. More than 20 PolyOne associates from around the globe gathered to help create a deployment road map and make key decisions to guide the effort. One goal was to ensure that at least 50 percent of the projects focused on commercial (customer-facing) processes and functions to drive greater benefits to the customer along with higher revenue growth. One of the first activities to broadly engage PolyOne employees involved conducting workshops to identify and prioritize projects in key focus areas, including pricing, sales force effectiveness, manufacturing efficiency, sourcing, sales and operations planning, and inventory management. Accenture and PolyOne could accelerate the project selection process because some members of the PolyOne LSS deployment team had previously worked with Accenture in deploying an LSS transformation. Using their experience, these members were able to develop a benchmarking template to help the various business units focus on project opportunities in each of the key areas. But even amidst a great start for PolyOne, analysts painted a grim picture of the company s prospects. One of these was an equity research analyst in chemicals. In March 2009, he said, We think the odds of (PolyOne) making it through this challenging period without having to file Chapter 11 are slightly better than 50%. Undaunted, PolyOne s leaders pressed on toward their goal and investment to train their associates and execute the business transformation. In the first year, Accenture trained more than 600 employees in Lean Six Sigma. Employees achieve LSS certification in a manner comparable to martial arts grades, with various belts awarded to professionals who advance to higher levels of proficiency. Attendees included employees engaged in yellow belt training, green belt training and black belt training. Accenture also provided training for leadership team members and project sponsors. By the end of 2010, PolyOne had trained more than 25 percent of its associates from around the globe in Lean Six Sigma. 4

5 In addition to the initial green belt and black belt training, Accenture helped PolyOne execute important short-term kaizen events that yielded encouraging results and built momentum for further improvements. Many kaizen events were identified as part of ongoing green belt and black belt projects, and they were completed within the larger project for enhanced process changes. In addition, dedicated kaizen leaders were trained in the United States, Asia and Europe to leverage the fast results of kaizen events. The initial wave of green belt and black belt projects emerged to a great extent from management-led project identification sessions and senior-executive suggestions; however, LSS projects now are being initiated by all levels of the organization and then are being led by a growing number of experienced black belt and green belt practitioners within PolyOne. In the LSS deployment s first year, PolyOne identified more than 400 project opportunities and chartered about 200 projects that touched all areas of the business in all areas of the world. Focus areas included pricing, inventory management, manufacturing and distribution footprints, and procurement functions. In addition, several global projects also focused on sales force effectiveness and manufacturing material efficiency. From the beginning, management s determination to foster a climate of change was a key contributor to PolyOne s success. Stephen Newlin, PolyOne s chairman, president and CEO, had set the tone, saying, Lean Six Sigma is a process improvement that brings fundamental and permanent change to our organization. Everybody has to participate. Management promoted participation further through employee newsletters, Global LSS Expos, an internal LSS website and the message, Profitable growth through customer focus. It s everyone s business. 5 5

6 Delivering high performance Accenture and the PolyOne executive team effectively engaged all business units and functions across multiple regions and countries. PolyOne achieved significant savings and began to see a return on investment much earlier than expected. Through the effectiveness of our transformational approach and partnership, the company realized significant hard benefits and working capital reductions of close to 40 percent (2008 to 2009) by the end of the project s first year. In addition, on-time delivery has improved from 81 to 95 percent during the same time period with customer complaints at a historical low level in Operating income growth of PolyOne specialty platform products is also up by 50 percent compared to pre-recession periods (2007 to 2009). The impact of the LSS projects has helped improve cash flow and renew credibility with Wall Street. PolyOne s stock price and profits have increased significantly since the beginning of 2009, and shareholder value has increased as well. In early 2009, Poly- One s share price was trading at $1.34 per share. In the third year of the LSS transformation, the share price has increased more than 10-fold, rising to over $14 per share. What s more, LSS projects are driving gross margin improvement each year over the next three to four years. The turnaround was so dramatic that in August 2009, the same analyst who in March had given the company only a 50 percent chance of surviving was telling clients to buy PolyOne. Additionally, PolyOne s first-year business results coupled with superb Lean Six Sigma execution culminated with it being recognized as the Best Start-up Program at the International Quality and Productivity Center s (IQPC) 11th Annual Lean Six Sigma and Process Improvement Summit held in January Chosen from a pool of 400 entrants, PolyOne received the award based on its ability to set organizational direction, deliver business benefits, and initiate a culture change. The award has been widely publicized and lauded within the company, and it was a key momentum driver for the 2010 Lean Six Sigma activities. According to Tom Kedrowski, Our LSS success was a direct reflection of our ability to translate customer feedback into process improvement projects. We are thankful to our customers for partnering with us and allowing us to transform their needs into mutually beneficial solutions. The program has been instrumental in allowing us to improve customer service and quality while delivering both balance sheet and operating margin improvements. Supporting their strategy execution with Lean Six Sigma training and deployment expertise, Accenture has been instrumental in helping PolyOne execute impactful projects and achieve high performance. The implementation has been the centerpiece of not only a very successful relationship, but a solid partnership between Accenture and PolyOne so successful that PolyOne awarded Accenture Process & Innovation Performance the 2010 Supplier of the Year Award. PolyOne and Accenture remain in their third year of partnership and contiguous Lean Six Sigma deployment support. The longevity of the relationship is a direct result of Accenture s significant contribution to the PolyOne business turnaround in 2009, and continued value from training and support in North America, South America, Asia and Europe through In addition to PolyOne, Accenture has helped numerous other companies successfully transform their internal operations and streamline crossfunctional workflows by integrating the methodologies of Lean and Six Sigma. This combined management strategy targets operational speed, quality, cost reduction and customer satisfaction in product and service delivery key capabilities for organizations pursuing high performance. 6

7 About Accenture Accenture is a global management consulting, technology services and outsourcing company, with approximately 323,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, Its home page is About Accenture Management Consulting Accenture is a leading provider of management consulting services worldwide. Drawing on the extensive experience of its 13,000 management consultants globally, Accenture Management Consulting helps clients move from issue to outcome, with pace, certainty and strategic agility. We enable companies and governments to achieve high performance by combining broad and deep industry and functional offerings and capabilities across seven service lines: Customer Relationship Management, Finance & Performance Management, Process & Innovation Performance, Risk Management, Talent & Organization Performance, Strategy, and Supply Chain Management. Accenture Process & Innovation Performance consulting services help clients to embed continuous business improvement in an organization s operational, process, and innovation capabilities to enhance long-term profitability. Copyright 2015 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of owner-ship of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.