Winsert shows suppliers how to meet EPA standards head on

By Brian Milligan -- Purchasing, 8/10/2000

Winsert Inc. saw the future coming. Undaunted by increasingly strict federal regulations, it set about the task of building new alloys that would allow for the creation of cleaner-burning diesel engines.

Its story highlights a supplier's foresight and illuminates an intriguing supplier-management program that would help foster the new developments.

Seven years ago, the Wisconsin-based engine-component supplier came up with a unique alloy development initiative that would eventually help it skirt the increasingly strict Environmental Protection Agency alloy regulations suppliers now face. The company had the foresight to make strategic investments, show disciplined work over many years, and offer something valuable to the industry. In this case, it came up with designs that would meet the operating requirements federal regulators imposed on the diesel-engine industry.

Because of its work, Winsert, which designs and manufacturers heat- and wear-resistant alloys for engine applications, won a top-supplier award from Detroit Diesel Corp. When it received the award, Winsert stood alongside major suppliers like Delphi Automotive Systems and Motorola.

Detroit Diesel Corp. builds heavy-duty engines. Winsert has worked with Detroit Diesel for 22 years, delivering approximately 50 million parts to the engine builder during that time.

Detroit Diesel would eventually include Winsert's efforts in a special supplier-management program. The three-year-old initiative, titled Continuous Customer Value Improvement (ccvi), was designed to focus on improving value through the supply chain. It measures and reports supplier performance in the areas of quality, delivery, cost and support.

In 1999, Detroit Diesel used the program to rate 73 of its suppliers. These suppliers represented about 84% of the company's total production spend in dollars. This year, 81 suppliers, representing more than 85% of Detroit Diesel's total product material purchases, are targeted for direct participation in the program. Suppliers who do well in the program are rewarded with more contracts.

"As a general rule we seek suppliers that provide us with value," says Nick Vassalo, vice president of purchasing for Detroit Diesel. "When we find those suppliers, we do what we can to develop a close working relationship with them."

Communication

Two-way communication lies at the heart of the process. Detroit Diesel and its suppliers try to discover ways to eliminate waste. Quarterly report cards on supplier performance are generated through a large cross-functional effort of supplier quality engineers, vendor schedulers, buyers and product engineers.

The program highlights the following metrics:

• Quality- The company measures the defect levels of ongoing receipts in parts per million delinquent or rejected sample submissions as a percent of part numbers shipped and the total number of line calls generated from machining.

• Delivery- These ratings are driven by the supplier's ability to adhere to Detroit Diesel's delivery requirements report, part shortages that cause line downtime, and assistance in maintaining low inventory levels.

• Cost- This metric looks at implemented cost reduction as a percent of annual supplier sales, the number and frequency of new ideas that are presented to Detroit Diesel for evaluation, and the supplier's willingness to take financial responsibility for warranty costs.

• Support- This criterion covers the supplier's ability to communicate with Detroit Diesel by EDI and 3D CAD, as well as the supplier's willingness to become involved early in the development process.

Vassalo says this program has been a tremendous success for Detroit Diesel. In 1999, it became the rallying point for measurable net reductions in overall material cost at the company. Vassalo also says it was responsible for on-time delivery improvements.

"This process is not a competition," Vassalo says. "We just like to recognize exceptional performers and look for continuous improvement in our four rating categories for all suppliers."

Winsert's own initiative, which was four years old at the time the ccvi program was created, quickly drew the attention of Detroit Diesel. The ccvi program began to rate Winsert's long-range plan to develop cost-effective new valve train materials that would accommodate increasingly stringent EPA requirements.

Designing alloys

Winsert launched its initiative when it decided to establish an alloy R & D department. The department was created to design alloys that would help OEMs like Detroit Diesel adapt to tougher standards.

Winsert knew challenges were on the way. Faced with the challenge of changing EPA requirements, it had to come up with new cobalt-based materials to put in engine valve trains and then deal with the related problems of higher temperatures.

These regulations recently reached the strict standards that Winsert predicted. On May 17, the EPA announced pollution-control rules that will have a profound impact on the nation's trucks and buses. The new regulations mandate cleaner fuels and fewer emissions, which in turn create a more severe operating environment for truck and bus engines. Among other things, the requirement to reduce soot will accelerate the rate at which diesel engines are being redesigned to meet new clean-air standards.

Winsert was determined to develop cost-effective alloys that would enable engine makers to meet the tougher emission standards well in advance of those requirements becoming law.

"These long-awaited regulatory changes will make obsolete engine materials that cannot perform cost-effectively in the face of the new, tougher requirements," says Stephen Dickinson, president of Winsert.

Vassalo says the suppliers may feel the heat. But the engine manufacturers will feel it even worse.

"Engine manufacturers are under a good deal of pressure. They are the ones that have to adhere to the regulations," says Vassalo. "We need to look to suppliers to help us find innovative solutions and to help us meet those EPA requirements."

In a way, Winsert's vision shouldn't be so surprising. OEM suppliers have lived with increasingly stringent EPA requirements for the past 10 years. The requirements are coming in different phases designed to awaken the automotive OEM community to the need for improved emissions standards, better technologies and systems that will protect the environment.

Soot reduction

But Winsert was able to predict it would one day be forced to work with the reduction of soot in diesel fuel. This reduction, which would eventually be mandated by the EPA, increases wear on valve-train components.

Soot is a by-product of oil-rich and incompletely burned combustion products. In the past, these by-products coated valves and inserts in diesel engines, protecting them from metal-to-metal sliding wear. The use of cleaner-burning fuels will cause some engine makers to reduce the oil and carbonaceous material from the combustion chamber that creates a protective film.

Winsert realized that eventually this change would move engine manufacturers in the direction of using expensive cobalt-based materials to avoid excessive wear.

"Sulfur and soot can serve as a sort of lubricant in the interface between the valve and valve seat, so if you take away the potential for that, you aggregate the wear potential," says Bergstrom.

Winsert determined to create new, lower-cost cobalt substitutes to meet this need.

The company invested $5 million and built the new department with the strategy of customizing proprietary materials in the diesel-engine niches. It created a wear testing facility that allowed the department to design and build special machinery to test the wear on the engine. The company would eventually invent new materials, put them through rigorous testing, and persuade the automotive/OEM industry that they would work.

Bergstrom says that from the early history of Winsert's relationship, the company placed an emphasis on the quality of the parts and the timeliness of their production. And Winsert's new alloys certainly figured into the "new idea" section of the cost metric. All of these factors helped it score highly in Detroit Diesel's program.

"The parts were there when they needed them," Bergstrom says. "Winsert made a strong commitment to customers to meet their order requirements in a timely fashion. And we have taken steps over the years to make sure the products are of the highest quality."

Commitment

Winsert was committed to its program. It took five years for the program to achieve its first patented alloy. Now, many are in the patent-pending process.

The effort is hitting its stride right now. Winsert's new low-cost, high-performance alloys are already approved for use in four major diesel-engine programs and are in test in eight other engine programs.

Dickinson credited the Detroit Diesel program for encouraging Winsert's alloy development.

"Essentially, Detroit Diesel's ccvi initiative encouraged us to develop alloys that would add value to our supply chain relationship," says Dickinson.

The supplier was one of five suppliers that received the highest ratings in this year's ccvi program. Winsert was given the Continuous Customer Value Improvement Award in March. The company was recognized for its quality, delivery performance, value improvement and technical support.

"You just have to give your case careful thought and try to stay the course," says Bergstrom. "We all are operating in an environment where there are increasing pressures on price and profitability. You have to keep doing your best all the time to meet those needs."

Not all suppliers have gone Winsert's route. Some manufacturers are still reluctant to let go of their old design and material paradigms. This is partly because required changes are disruptive to the status quo, expensive and time-consuming.

That's changing now.

"The new regulations have given them little choice except to change," observes Kevin Myers, Winsert's vice president of engineering.

Focus points of the Continuous Customer Value Improvement program