Workplace Issues

Operations Nirvana: Profits Soar Far Beyond Sales Growth

Textile maker Milliken improves manufacturing productivity every year and helps other companies do the same.
David McCannApril 11, 2014

Milliken & Company is, in the words of its CFO, Jim McNulty, a “very private company.” That is, it doesn’t share many details with the public. It does, though, share a lot about its manufacturing operations with other manufacturing companies. More on that later.

A global textile, chemical and floor-covering maker, Milliken self-identifies as operationally excellent. In the 10 years since McNulty became finance chief, the company has improved manufacturing productivity by at least 5 percent each year, he claims.

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In fact, the CFO says, rather than accepting diminishing returns on productivity initiatives, Milliken expects and budgets for that level of productivity enhancement — every year.

Milliken CFO Jim McNulty operational excellence

Milliken CFO Jim McNulty

Among the few textile companies with U.S. manufacturing operations today, Milliken has little choice but to be vigilant on operations in order to stay competitive. “Any company today is dealing with inflation in labor costs, benefits costs, energy costs and more. We neutralize those [with the annual productivity gains] and maintain our gross margins.”

What the company calls the Milliken Performance System is “the backbone of Milliken,” says McNulty. It’s the reason that, he claims, since 2006 the company has more than doubled the S&P 500’s rate of earnings growth, despite lagging behind the index in topline growth. “That dispersion exists because significant value has been extracted from operational excellence,” he says.

In part, that performance springs from a dogged devotion to measurement. “If you were to walk through one of our 38 plants, or a wing of one of our businesses, or our corporate headquarters, you would see charts everywhere — on our quality, our delivery, our safety,” says McNulty. When he was promoted to CFO in 2004 after five years with the company, he spent a lot of time developing systems and tools for measuring what happens in the plants.

But the real secret sauce, he notes, is that the company’s manufacturing operations are essentially run by groups of “production associates” at each facility. There is very little management oversight, and no management at all on the second and third shifts.

“The associates own it,” McNulty says. “They own their quality, their safety, and opportunities for process improvements. They’re not focused on protecting a group of jobs — they’re working on protecting the overall competitiveness of the operation. That’s a very different mindset and culture than most manufacturers have, and it makes for a highly engaged work force.” Any new-found efficiency is codified and implemented across all Milliken facilities.

The operational excellence is, then, a product of the culture, the daily management system and the tools. “I wish I could tell you there’s more to it than that,” McNulty says.

The efforts have a broad scope, though. The company uses the acronym QCDISME (pronounced “queue cee dee is me”) to describe the components of its operational focus: Quality Cost Delivery Innovation Safety Morale Environment.

So great is Milliken’s belief in its operational acumen that it has a unit, Milliken Performance Solutions, that trains other manufacturers to implement its system themselves.

About 10 years ago, as customers, suppliers and third parties visited Milliken and got a look at the manufacturing operations, the company started providing them with pro-bono consulting services, “helping them be more productive companies with safer workplaces,” McNulty says. A few years later, the company decided to commercialize the service. “It started off as a Post-it Note with some ideas and now, by the end of this year, it will have [a staff of] 150 people. It’s not 10 percent of Milliken, but it’s substantial.”

(The company doesn’t disclose its financial results; McNulty says only that it’s a “multibillion-dollar company” with 7,000 employees that does business in about two dozen countries.)

Milliken Performance Solutions primarily serves large companies, competing for consulting work with big firms like McKinsey, Bain, Accenture and the Big Four accounting firms. “What differentiates us is that while those companies hire excellent folks from high-end business schools, we’re practitioners,” McNulty says. “The people involved with Milliken Performance Solutions have worked on the manufacturing floor for 5, 10, 20 or even 30 years. Our Fortune 500 clients are not listening to executives but to people who make $15 to $30 an hour.”

Photo: Stephen Stinson, 2012, Spartanburg, SC