New Energy: How GE Embraced ‘Lean’ And Reinvented Its Birthplace

Schenectady in upstate New York has seen its fair share of ups and downs in the past 150 years. But new energy is coming to town.

People call this place Electric City. According to town lore, the events that gave Schenectady that moniker started with a “little misunderstanding.” In the early 1880s, Walter McQueen, a master mechanic at a local locomotive shop who’d been at loggerheads with his managers, stormed out, determined to become their fiercest competitor. Backed by a New York senator, he bought 8 acres of farmland on the west side of town and built two expansive buildings for machine shops to manufacture his own locomotives.

McQueen’s plan never really left the station, but his buildings grabbed the attention of Thomas Edison, who was looking for a new home for his electrical businesses based in and around New York City. When Edison’s scouts visited Schenectady in 1886, they learned that McQueen had patched things up with his former employer and his factory stood vacant in the green fields. Edison wanted the spacious quarters so that his Edison General Electric Company could begin cranking out powerful dynamos, motors and other equipment for the world’s nascent power industry. He snapped up the buildings for a bargain, and Schenectady became a cradle of electricity.

The Schenectady factory, which became part of GE within a few years, grew steadily over the decades. One hundred and thirty years later, it is still making generators, steam turbines and parts for power plants that supply homes and businesses with electricity.

But these days the plant is attracting attention for a different reason. It has become a striking example of the power of lean management, a set of tools at the heart of GE’s transformation. In fact, lean might be the most important initiative Larry Culp implemented when he joined GE as chairman and CEO two years ago. “I know of no other way to run a business than through lean principles,” Culp said recently.

A Way Of Life

Adapted from Japan in the 20th century, lean has shown dramatic results in American corporations. Like a lot of management philosophies, it comes with its own glossary of terms and ideas. But it can be summed up in one word: “kaizen,” the Japanese term for continuous improvement. The concept is applicable in a generator factory, accounting office or even at home — it’s about trying to get better every day at what you do. Lean is “more than a set of tools,” Culp said. “It’s a way of life.”

Similarly, making electricity-producing machines has been a way of life at the Schenectady plant ever since Edison moved in. The way a generator works hasn’t changed fundamentally since Michael Faraday built the first one in his basement laboratory at London’s Royal Institution in the mid-1800s. It uses a spinning electromagnet that rotates thousands of times per minute like a rolling pin inside a large steel tube, inlaid with copper wire, called a stator. Following the principles distilled by Faraday’s friend and contemporary James Clerk Maxwell, the rotating magnetic field induces electricity in the copper wiring, which then flows into the grid and allows you to charge up your smartphone or brew your morning coffee.

But Faraday would have been shocked by the sight of modern generators. The ones made in Schenectady are high-tech machines that weigh many tons. They are as wildly evolved from their ancestors as a Tesla sedan is from the Ford Motor Company’s Model T.

One key component in the modern generator is the stator bar. Made from copper wire and insulation, it weighs 300 pounds and looks like a 30-foot-long hockey stick, with extensions at each end that carry massive amounts of electrons. More than 120 of these bars fold together like a complex 3D puzzle to form the inside wall of the stator. The bars may look simple, but their every bend and twist is precisely engineered for maximum efficiency.

As generators have become more complex, though, manufacturing them has become ever more elaborate, involving many intricate steps — each a potential entry point for a manufacturing issue or a costly slowdown that can ultimately affect the customer experience. That’s where lean comes in.

A Change In Mindset

After years of making generators the tried-and-true way, it became clear that things at the Schenectady plant had to change. Tucker Armstrong, senior lean manufacturing staff manager in Schenectady, recalls when plant management bought four top-of-the-line machines a few years ago to improve production. The purchase did succeed in improving one manufacturing step — but the increase in output at one place only pushed bottlenecks further downstream. “We used the technology well, but it only enabled our problem because we were making more bars that were just sitting there,” Armstrong said. “It didn’t attack our lead-time problem and our inventory problem.” In fact, Taiichi Ohno, the creator of the Toyota Production System and one of the founding fathers of lean, describes such “waste from overproduction” as the “greatest sin” in manufacturing.

Armstrong has spent a little over a decade at GE. He became a lean devotee a few years ago while part of a manufacturing leadership training program that rotates engineers through different factories. One of his postings brought him to Schenectady, where his job was to work on the stator bar line. “I would have well over 1,000 bars that I would be counting and tracking daily,” he said. “The desire to improve it became a personal quest when I came back to the site upon graduating from the program. Now the production leader has 120 bars and his job is significantly easier.”

The plant had experimented intermittently with lean in the past. But the early attempts — as far back as 2003 — either petered out or it focused on the wrong metrics. “How many bars did I get yesterday?” Armstrong remembers hearing when he walked the stator bar line as recently as early 2018, before this latest lean transformation. “Output was the only thing we were focusing on. I would be running four different machines in one part of the line just to get higher numbers out, but it did nothing to help shipments. Nothing in the process tied to the finished product — the generator — and to what our impact on the customer was.”

An Engineer Walks Into A Bar Shop

All of that started to change in early 2018. With GE racing to reenergize its Gas Power unit, lean was back on everyone’s mind, including in Schenectady. Stan Genega, who was the plant manager during the first two years of this journey, was a believer in the transformative potential of the approach. Genega, who now serves as a lean executive for multiple factories around the world while also supporting the lean efforts in Schenectady, encouraged Armstrong and the rest of the team to get to work.

Working with the local union, they sent both production operators and professional support team members to lean training. Leaders started making “genba” walks through the factory — a key lean tool that means “the real place” in Japanese. They used their observations to draw up a detailed “value stream map” of their bread-and-butter product, the H53 generator. This lean tool breaks down the entire manufacturing process into individual steps. It allows operators and managers to see where they are adding value and identify waste. “The bottom line is that customers want shorter lead times, better quality and lower prices,” said Eric Anderson, who became manager of the Schenectady plant and the generator value stream leader in August. “Sure, loading up on inventory can cover all kinds of mistakes, but it’s expensive. Lean, on the other hand, makes the process simpler and more intense. Now when something goes wrong, you have a part that’s defective, everything stops. You don’t have a bunch of machines covering for you. There’s an intensity level to get out there and fix it.”

The team then unfurled the map across a long wall inside an empty office area that used to hold rows of cubicles. That’s when the fog lifted. Going into the exercise, it knew it took the plant nearly a year to make a single generator. But the map quickly led it to the biggest culprit, the problem’s “root cause” in lean-speak. The stator bar shop, which accounted for a quarter of the manufacturing time and one-quarter of the workforce, was habitually late delivering finished bars for generator assembly. It was also producing too many bars with flaws that had to be reworked or scrapped.

“The problem with this shop was that we would have as many as 800 bars actively being worked on in work in progress (WIP),” Armstrong said, referring to parts in production that have not been delivered to the customer. It’s a form of inventory that tied up cash — several million dollars at a time. “We would be sending batches of 20 or 30 bars down five different lines running the same thing. If you had a defect on a machine and you hadn’t stopped the line, you would have a manufacturing issue that would apply to 20 or 30 bars. We were seeing instances where we would scrap that many bars at a time, each one costing several thousands of dollars in material and labor costs.”

Worse, it took the team nearly 11 weeks to finish one order of bars — too long considering that half of the work in the shop accounted for service orders, making bars to bring downed generators back online. “Imagine an outage where you are waiting 11 weeks to get a set of stator bars to your site!” Armstrong said.

Armstrong said when it came to eliminating waste — lean’s core purpose — the bar shop was “by far the biggest hit. We swung for the fences in terms where we are going to have the biggest hurdles, but also the biggest impact.”

The Island Of Misfit Machines

But seeing the map on the wall and the path paved with sticky notes is one thing. Convincing workers to start down the road is another matter. “You have to prove out the benefits of lean before it becomes well-adapted,” Armstrong said. “We had a great team here and it followed along with the initiatives, but that passion for lean only started showing when we started getting orders out in half the amount of time.”

The journey to that goal started in the same big room with the value stream map on the wall. The team brought in large pieces of plywood, propped them on folding tables and used foam, bits of plastic and wooden sticks to build a 1:20 model of the bar. It used yarn to trace the journey of a single stator bar through the factory. The group then invited the operators to comment on the setup and make changes to their own workstations that would make their lives easier.

“If I explain something to you, the picture in my head may not translate into the same picture in your head,” said Anderson, the plant leader. “But when you build a mockup or a model, now everybody can get on the same page. There are many different ways to get where you want to be. We are trying to make sure that we get there in the most efficient, most effective way. Then it is just a matter of execution.”

In the beginning, the operators were chiefly focusing on their own tasks, Armstrong said: “When they thought of sizing the line and setting up their workstations, it was very physical: ‘What is the best for me physically? What is the best for me to get the most bars out?’

“This was the first time we challenged and told them, ‘Hey, no, no, no. Design it so getting an entire order through is the most important thing.’ We put that in the hands of the operators, and they were down-selecting and ranking how they wanted their shop laid out.”

Soon, foam models of 200-ton, 60-year-old presses were being pulled off from the plywood and headed for a dedicated shelf near the entrance of a room labeled “The Island of Misfit Machines.” Within weeks, the team cleared off the equivalent of 120,000 square feet of factory space — half what the stator bar line originally occupied — and cut the distance each bar had to travel from 2.5 miles to just 0.3 miles.

Go Slow To Go Fast

The team was able to do this by adopting two key lean strategies. First, it moved from sending batches of many bars down the line to just a single-piece flow. Even now, the idea seems counterintuitive: Wouldn’t volume drop off by moving just one bar at a time? But it had the opposite effect. Suddenly any safety, quality or process issues became immediately visible and stopped the line. “You need to slow down to go fast,” Anderson said.

The second step involved refocusing the operators on the big picture. The team encouraged the operators to look over the fence at what their neighbors were doing. Instead of working as specialists, operators went through training to become holistic experts who understood the line and could handle many different tasks, from bending to insulating the bars, and see how each one of them affects the final outcome.

Operators could now follow their part as it moved through various production steps and make sure at each stop there were no snags. “The operators had blinders on to their impact on the rest of the shop, much less to our impact on customers and the rest of the value stream,” Armstrong said. “The model allowed them to see the shop laid out and see how what they do on this machine impacts the customer. Customers don’t really care if I put through hundreds of bars in a certain period. They care about when their bar reaches their generator.”

Clean Up Your House

“Opportunity is missed by most people,” Thomas Edison once said, “because it is dressed in overalls and looks like work.” And indeed, the team in Schenectady now arrived at the grueling-labor phase of its lean efforts.

The team spent the early part of 2019 taking its learnings from the scale model to the shop floor, ripping out, scrapping or auctioning off more than 30 machines, some as long as 60 feet. “There were pits in the ground,” Armstrong said. “We gutted that shop.” Next, it installed the line assembled from machines on hand. “We didn’t buy a single new machine,” he said. “We had everything we needed.”

Clearing the shop also allowed the group to focus on another lean organizational principle known as 5S, which stands for sort, set in order, shine, standardize and sustain. “It starts with cleaning up your house,” Armstrong said. “If you don’t have a clean house, it’s an ergonomic and safety problem, but here I couldn’t even tell if I had enough copper for the day. We had to get everything out and organized so we could see which tools and materials I need every day.” Another thing removed from the line were personal lockers. That eliminated the need for operators to go to the lockers to retrieve personal tools. “That was a point of contention,” Armstrong admits. “But their tools are now all set out and shadow-boarded at their workstations. It’s all shared resources, with which we take extra safety and sanitation precautions today due to the COVID-19 pandemic.”

Those shadow boards were built by another Genega and Armstrong innovation: a seven-member, dedicated lean SWAT team, one of the first things they put in place. According to Genega, the key to early success on the bar shop’s lean journey was creating a culture of listening to employees on the shop floor and engaging them in every aspect of the changes happening within the plant. This included the creation of this SWAT team — or “moonshine” team, in lean terms — which consists of highly skilled employees across various manufacturing operations in the factory.

The SWAT team has its own dedicated moonshine room — a space in the shop equipped with repurposed milling, welding and woodworking tools — to help solve problems across the factory. The workshop allows the SWAT team to rapidly prototype new ideas and make improvements to existing production tools and processes, and add new resources

Listening to ideas coming from the line, for example, the SWAT team has built customized carts and tooling that are more ergonomic and a better fit for the plant's purpose, as well as rearranged workstations to include moving equipment and entire sections of flooring. “You shouldn’t have to be looking for things,” said Jon Felt, a member of the SWAT team. “Everything should be right here and ready to go. You just show up, put your gloves on, and you’re ready to go.” In the past, the line would outsource such tasks to a central workshop, where it can get backed up. “We bridge that gap,” Felt said.

Felt said he took a “learning by doing” approach to lean. “Now we pretty much know what they are looking for,” he said. “Now we are just rocking through this plant.”

“On a personal note,” he adds, “I would like to retire. I wanted to be part of the solution.”

Right Here, Right Now

The totality of the changes the team introduced started emerging as soon as it turned on the new line. In April 2019, it took the operators 10.8 weeks on average to make a stator bar. Six months later, with the new line and single-piece flow system in place, workers were able to finish the same job in 4.5 weeks. “The old way made us feel warm and fuzzy because the extra inventory and batches meant that we had that buffer,” said bar shop cell leader Brian Mulvey. “But it didn’t help us in terms of the dollars we were sitting on and how long it took us to make a bar. We needed to change that mindset.”

That change has taken hold. “The way it used to be, we would have huge pans with 50 or 60 bars in them and we would just go through all of them,” said bar shop operator Bruce Weir. “With lean, it’s hand-to-mouth for the whole process. We don’t have inventory or bars laying around. We get rid of a lot of traffic and a lot of carts. Everything we need to do our jobs is right here and right now.”

The team is operating more efficiently. The new line requires fewer operators, allowing the managers to redeploy them in other parts of the factory. “Now when the volume on the bar line goes up, I have that lever to bring people over when I need them and staff the line,” Armstrong said.

The Battle Hymn Of The Lean Factory

Nearly 18 months after it started, the team not only halved the lead time but also reduced inventory by 84%. It also cut the injury rate by 45%, in part by eliminating crane moves needed to reposition the bars from 22 to just 8. It has even leased the 120,000 square feet of cleared factory space to a different GE business.

Is it over? Never. Lean is about continuous improvement. Operators place whiteboards in the shop where they meet before and after each shift to discuss operations, progress and setbacks. The team still goes back to its scale model when it wants to implement further changes. “We say: ‘Take it to the model before you take it to the floor,’” Armstrong said. “It has become a rallying battle cry.”

There are now 11 different lean lines in four different shops in Schenectady, and the team has been holding lean action workouts during COVID-19 — albeit socially distanced, with masks and flat-screen displays. “We had to adapt, but we didn’t stop,” Anderson said. It is using the workouts, or “kaizens” in lean, to dig deeper into the production process and focus on aspects like the quality of the raw material entering the factory. “We are going more and more granular,” Armstrong said. “We are going back to every station and looking at the steps that are holding up this machine. It’s a learning curve.”

Armstrong said the key part of GE’s lean progress in Schenectady was getting the operators involved and turning them into the most critical component of the process. “Lean requires the entire team to be committed to a change in culture and focused on continuous improvement, from leadership to the operators,” he said. “We wanted to get their buy-in from the start, and the only way to do that was to lead by example.”

It’s fair to say that he has succeeded.