Oticon, Inc., a Denmark based company, located in Somerset New Jersey, manufactures high performance solutions for the hearing impaired. The company was founded in 1904 when Hans Demant began importing hearing aids to Denmark. Demant’s wife suffered from hearing loss and he was determined to help her and others with hearing impairment. Oticon acquired exclusive distribution of hearing aids for Acousticon Nordic division. World War II make it nearly impossible to locate and acquire supplies, so the company began producing its own hearing instruments. In 1946, the first Danish hearing aid was produced, the “Oticon TA”. During the 1960’s, Oticon expanded its operation to bring the manufacturing of its specialized products to the US.
In the 1990’s, Oticon made its mark as a forward thinking organization when its new headquarters in Copenhagen was designed as an open, ‘paperless’ office environment and the company was restructured along radical lines. Lars Kolind, who took over the company, rethought the organization, placing interaction, collaboration, and connectivity of people, customers, suppliers, and ideas, at its heart. Kolind called it, ‘a spaghetti organization of rich strands in a chaotic network’. The key characteristic of Oticon’s new business model is “choice.” Staff initiate projects and assemble teams, and individuals who are invited to join a project can decline. The team environment approach creates multi-disciplined individuals and transparency as knowledge is shared throughout the organization.
Oticon’s products are highly specialized and require a knowledgeable workforce to assure quality in its manufacturing process. In order to continue growing its manufacturing operations in New Jersey, Oticon needed assurance it would have a highly skilled workforce; a workforce knowledgeable in manufacturing techniques that would increase efficiency, reduce costs, insure top quality and also speed throughput.
Tom Falvey, Oticon’s VP of Operations, met with NJMEP to discuss the company’s challenges, needs and objectives. NJMEP identified process improvement and customized workforce training as the best solution for addressing Oticon’s challenges and meeting its objectives. NJMEP developed an action plan consisting of a customized Lean training program, delivered by certified instructors, to develop industrial technical skills for Oticon’s operators and technical employees.
The training would help Oticon grow its business in New Jersey and compete on quality, service and cost. The “Introduction to Lean Manufacturing” introduced the concept to the workforce and “Workplace Organization,” “Quality at the Source Tactics” and “Value Stream Mapping” expanded on the Lean Principles and focused on specific areas identified for improvement.
In addition to the Lean training, NJMEP assisted the company’s customer service operation—seventy employees interface with Oticon’s customer base. Specific training was delivered to improve the quality of these interactions to improve the company’s image within the marketplace. The customer service department was trained in team building, PC Skills (both spreadsheets and presentations) as well as customer service skills.
Over 90% of the training focused on Oticon’s front line workers, its direct leaders, the hourly office and customer service staff. Additional training was given to its operators and technical staff. The entire training took place within a six-month period.
Oticon was able to reduce lead time, work in process inventory, and the defect rate while increasing the inventory turns. The company improved its understanding of customers, markets, or competitors. This led to improved customer development and retention as well as provide entry into new and better markets. The training improved employee skills, reduced employee turnover and improved the work environment. In addition, Oticon achieved greater integration with its customers and suppliers information systems. Profit margins improved and revenue increased.
Oticon’s VP of Operations, Tom Falvey sums it by saying, “Communication between, management and employees has improved. Employee involvement and sense of ownership in the process also approved, as well as the employees decision making skills. Employees have a much better understanding that they can make a difference in creating a more effective streamlined operation.”
In a highly competitive market and tough economic environment the process improvements not only helped Oticon grow sales and retain employees, it also resulted in job creation with operating savings well into the six figures. Inventories were reduced while order turn-around-time was improved. Truly a win- win situation.
Oticon’s forward thinking approach to business enabled the company to identify NJMEP’s proposal on education and process improvement as the best means of ensuring the company’s leadership position in a highly specialized market. The company continues to invest in processes improvement and educating its workforce in best practices for a manufacturing environment.