Since 2011 Hydro has been a key participant in the national research program Lean Operations, which has been looking into the use of “lean” techniques in Norwegian businesses. Hydro’s experiences from the implementation of the Aluminium Metal Production System (AMPS) are considered a best case example in the final research results.
AMPS is Hydro's common platform for continuous improvement which has been developed based on lean principles.
The system turned out to be essential in the challenging times when the financial crisis hit and the aluminium prices dropped from $3,000 per tonne to $1,300 in less than a year.
“AMPS was launched in 2007 when aluminium prices were high,” explains Per Holdø, Director of AMPS in Hydro Aluminium Primary Metal. “At the end of summer 2008 prices dropped dramatically. It would have been tempting to drop AMPS and get consultants that would lead us through simple cost-cutting efforts.
“But Primary Metal management stood firm, saying that AMPS should be the way through the stormy waters that we were approaching by involving the whole organization in improvement work. This was a strong signal of determination and foresight.”
AMPS is based on five principles:
• standardized work processes
• defined customer and supplier relationships
• optimized flow
• dedicated teams and
• visible leadership.
The principles all have their associated tools and guidance to encourage best practice in Hydro's primary metal operations.
Clear resultsAlthough individual elements of the AMPS principles and tools may be applied separately, Holdø points out that it is the integration of the five principles that's the key to Hydro's success with lean methods.
"It has been important to us to see the interrelationship between the soft and the hard aspects of our production environment, from the processes and the production systems to the management. These aspects are mutually dependent and essential to our results," he says.
The research findings from Lean Operations confirm Hydro's success in addressing both of these aspects.
"We found that Hydro and AMPS have emphasized the softer aspects of the lean method in a greater extent than international reference cases. While others have had a relatively exclusive focus on rationalization, logistics and cutbacks, Hydro has also managed to include the organizational aspect, the team work and the visible leadership," says Jonas A. Ingvaldsen, Associate Professor at NTNU and a researcher at Sintef Raufoss Manufacturing.
AMPS has been a major enabler for the $300 improvement program in Hydro's fully owned smelters, which was completed in 2013. The result has been nearly NOK 1.5 billion in annual cost savings since the program started in 2008. A new program is now targeting additional saving of $180 per tonne of aluminium produced in Hydro's joint-venture smelters.
In line with the dual attention to improvements in both the technical and human aspects of Hydro's primary metal operations, attention has been given to involving the operators even more in the decision making processes, and the results of this can be seen in Hydro's employee survey, Hydro Monitor.
"We see a positive correlation with the implementation of AMPS and several indicators of employee engagement. The employees report a clearer understanding of their roles and the purpose of their tasks in the larger context, as well as a higher feeling of involvement," Holdø says.
Continuous improvements and research
Despite the positive results from Hydro Monitor, a flat organizational structure also pose some challenges, Ingvaldsen says: "We found that AMPS deviates from the more hierarchic original lean concept by removing the supervisors from the working shifts. While this has enabled increased employee engagement, it also challenges the decision making in the teams. This is therefore one of the areas we recommend to prioritize for further improvements."
And the development of Hydro leaders is exactly one of Hydro’s priorities going forward. Holdø explains how this coincides with one of the core concepts of lean, continuous improvement.
"The work with AMPS will be a ‘never-ending story,’” he says. “In order to build and maintain the culture and practices we prefer in our company, continuous improvements involving all employees will be key.”
Along with the internal improvement efforts, Hydro will also continue to participate in research on lean practices. Starting this year, Hydro will share experiences in how the Norwegian improvement platform is compatible with other cultures in Hydro's international joint ventures.