Innovation Winner: Carrier Corp.

Companies Mentioned
Posted on Jun 09, 2006

Most people will never tackle a challenge as daunting as scaling Mount Everest. Likewise, most companies won't embark on a product redesign and manufacturing overhaul as extensive as the one Carrier Corp. recently undertook to rearchitect its air conditioner line to meet growth imperatives for the next decade. The historic, $251 million redesign initiative, dubbed Everest by the company, won top honors for Innovation Mastery as part of Managing Automation's 2006 Progressive Manufacturing Awards. The effort was spearheaded by a dedicated, 100-person, cross-functional team from Carrier Residential, North America. With Everest, Carrier (Farmington, CT), a $12.5 billion maker of heating, ventilation, and air conditioning (HVAC) systems, was able to upgrade hundreds of models and nine major air conditioner brands to meet emerging government mandates for energy efficiency. It was also able to reposition the line to better serve multiple customer segments -- with the goal of improving its current 30% market share, according to company officials. One of the principal drivers of the Everest project was a Department of Energy (DOE) order to boost the efficiency rating on air conditioners and heat pumps from 10 to 13 SEER (seasonal energy efficiency ratio). SEER is comparable to the automobile industry's miles-per-gallon efficiency measurement. As a result of the mandate, residential HVAC manufacturers like Carrier could no longer produce or import HVAC products below 13 SEER for sale in the U.S. after Jan. 23, 2006. Longer term, the changes presented more onerous challenges, including how to modify product designs in order to achieve ongoing compliance. "Everest was the single largest investment in the history of Carrier Corp., and it covers a lot of ground," says Chris Nelson, vice president of the company's Light Commercial division. "As we took a look at how we were going to get there -- a 30% increase in efficiency -- there were no answers for tweaking the product line. For the benefit of our customers, the best way was to completely redesign the product from the ground up." Starting from Scratch The Everest team began its journey in August 2003 with a blank sheet of paper for both design and manufacturing. By employing new CAD and finite analysis modeling tools, Carrier was able to facilitate product designs that addressed quality concerns around such problems as vibrations and air movement. Automated testing systems and manufacturing software helped Carrier inject lean principles and processes into its manufacturing operations. The company also poured millions of dollars into expanding its manufacturing facilities to accommodate the additional space requirements of the new HVAC design, and embarked on an aggressive campaign to achieve a ten-fold increase in its product quality over the course of 10 years. The sheer scope of what Carrier accomplished with Everest is what makes its innovation effort so compelling, according to analysts. "Carrier's crucial efforts around complete product redesign of their North American Residential business is a case study in reinvention," notes Doug Engel, vice chairman and U.S. manufacturing industry leader at Deloitte, and one of the judges for Managing Automation's 2006 Progressive Manufacturing awards. "Their ability to coordinate the 100-plus members of the 'Everest Team' across product design, sourcing, engineering, and manufacturing was inspiring. To do so under the pressure of conforming to government regulations and an uninvolved customer base was remarkable." The new 13 SEER standard was the primary impetus for Everest, which was championed by Halsey Cook, president of Carrier Residential, North America. While the company had some 13 SEER equipment for sale, it didn't have anything close to a full product offering. Carrier saw an opportunity for a complete redesign to address the DOE mandate as well as another looming requirement: creating products around the company's R-410 Puron refrigerant to accommodate the 2010 phase-out of ozone-depleting alternatives. In the span of 18 months, all of Carrier's air conditioning and heat-pump condensing units were redesigned to meet the new 13 SEER energy standards, as were furnace coils, fan coils, and the controls interface. At the same time, the new line was designed with improved aesthetics, including new 7mm micro-tube heat transfer technology that significantly reduces the size of each unit, as well as better diagnostics and controls systems for accuracy in installation and maintenance, according to Nelson. Moreover, employing a common refrigeration system across all brands led to a 50% reduction in complexity, thus lowering the opportunity for errors in assembly, Nelson notes. Another bold move was to tackle in one fell swoop the design requirements around 13 SEER and Puron. That way, as Nelson explains it, Carrier is assured of having a product platform that is scalable for the next decade. "We don't want to go back in 2010 and do this again," Nelson says. "Now we have a Puron offering in every tier and at every SEER point." To accommodate the redesign of its product line, Carrier needed to make some significant manufacturing changes. The firm expanded its Collierville, TN, manufacturing facility by 250,000 square feet, bringing the total space to 800,000 square feet with a production capacity of three million units. Modifications were also made to the Monterrey, Mexico, plant to handle increased volume and improve product throughput. Much of the focus around the overhaul was to implement lean practices that logically identified material flow, Nelson says, including the U-Line manufacturing process commonly used in automotive assembly. "We stayed with a number of the traditional straight lines, but for higher-end products, we went to U-shaped cells with more flexibility in order to produce more efficiently," he says. "Now, materials come into one end of the factory and finished goods go out the other. You can walk into the factory and visually understand the flow of materials, whereas you couldn't before." Quality on the Rise Automation, both in testing and scheduling the production line, also played an important role. Glovia manufacturing software is now used to help schedule the factory floor, particularly the coil and sheet metal stamping lines, Nelson explains. Before, Carrier operated on a mostly manual system. "The automated system makes sure we're building the right components to go into the final assembly," he says. A new automated testing system performs specific test parameters depending on the nature of components such as coils -- as opposed to earlier, one-size-fits-all testing strategies that were not as efficient and tended to discover problems later in the manufacturing process. This modification, along with other changes to Carrier's quality control procedures, was in keeping with the company's intended goal of a ten-fold improvement in quality and reliability in 10 years. Known internally as Achieving Competitive Excellence (ACE), the goal is addressed through Carrier's proprietary Six Sigma-based business process, which is geared toward ensuring world-class quality. "We believe that a high-quality product is very important to customers and that it can be a key differentiator," Nelson says. So far, the improvements have led to a 25% improvement in quality, he adds, as well as a 20% reduction in the cost of manufacturing. The greatest challenge associated with Everest was pulling off an initiative of such magnitude in a non-negotiable, 18-month time frame. Key to Carrier's ability to succeed, Nelson says, were organizational changes and key management support -- from the 100-person team to sponsorship and involvement directly from the top, including the chairman of United Technology Corp., Carrier's parent company. "The project touched every aspect of the business, so getting the right teams and decision makers to draw the right conclusions was key," Nelson says. "It was all about making sure there was focus and participation from all levels. All the technology answers in the world wouldn't have gotten us there on time if it wasn't for that." Despite the vast scope of Everest, Carrier did meet its target dates, including the launch of the new product platform by January 3 and ongoing production to meet its plan of producing two million units in 2006. What Carrier accomplished with Everest, according to Nelson, was to plant an internal foundation that will ensure future success. "We believe we've chosen the core technology and core designs adaptable for future market needs that will keep us in a leadership position for years to come," he says. Since meeting the deadlines, Everest has been scaled back. But, while the dedicated team has for the most part been disbanded, the Carrier community is still focused on the effort. "What was a project is now the business," Nelson says. "Everyone is focused on it."

Top Enterprise Software Planning (ERP) Comparison