Lukáš Jac (ŠKODA AUTO): All employees can see real-time reports and how the production meets KPIs
10. 02. 2023
Reading time: 10 minutes
Even a successful company can be even more successful if it relies on the right algorithm. This is confirmed by the daily experience of the world's largest vinyl manufacturer with more than 2,000 employees and sales of nearly CZK 4 billion. "The human experience was irreplaceable for us until we discovered that even the most skilled human could not find the optimal combination of press sheets. Adastra has created a solution that saves us tens of thousands of crowns every day," says Michal Štěrba, CEO of GZ Media, in the Adastra podcast.
Ivana Karhanová: 600 million gramophone records, 3 billion printing products, 1.7 billion CDs and DVDs, or from the Shipyard to the big world. That's what the cover of the book Gramophone, founded in 1951, says. Our guest in the studio is Michal Štěrba, CEO of GZ Media, a company formerly called Gramofonové závody. Hello.
Michal Štěrba: Hello.
Ivana Karhanová: The company now has more than 2,000 employees, sales of almost CZK 4 billion and presses the most vinyl in the world at factories in Europe, America and Canada. You produce more than 700,000 printed materials and packaging every day. So far, where is the best place to replace - in a good way - human labour with algorithms in such a manufacturing company?
Michal Štěrba: There is too much space. We are a traditional manufacturing company and for a long time we didn't deal much with the problem of automation. Thanks to the great development of technology, there are a lot of these areas.
The simplest way is the classic way, where you have a production process and you try to replace a human with a robot or an automated workstation. At some point, the potential is huge and it goes from the simplest and most logical solutions to a little bit more complex and complicated.
But at some point, you find that you gradually exhaust the potential of the simple solutions - replace one human feeding a component into a machine, and it might be fed by a robot or an automated loader instead.
And you find that when you want to automate a manufacturing process, suddenly you have to look at the process from a little bit above, and with a more complex solution you start to put smaller units together so that you don't need to have one, second, third isolated workstation, but you make it one big complicated line. And at the end of the day you may only apply a few of these solutions or maybe one a year because it's usually a big hit to the process itself.
But even so, at some point you gradually get exhausted and suddenly you find that you need to think about the company in a much more process-based way. To look at where what starts and ends, how to put the process together so that the flow of material goes the right way and you've replaced, for example, a rigger or a warehouse worker who takes a component from one machine to another. And then suddenly you find that it all has to be covered by some more complex software or solution that is already connected and integrates the different activities.
And we can go on to talk about administration, for example, where many companies are thinking about how to streamline the process within manufacturing operations. But given how many administrative or THP activities are going on in each company, the potential there is exactly the same as in manufacturing, it's just much more difficult to identify the cost-saving or right solutions.
Ivana Karhanová: And what stage are you in now?
Michal Štěrba: Well, we are a bit of each. I would say that we have already passed the first phase. In it, we've replaced really only the unambiguous activities where the human is useless, you just have the problem of how to find and solve his errors and inconsistent inputs or outputs. We have a number of lines pieced together.
At any given time, we're dealing with a huge logistics project in the company where we're trying to make sure that the components for our products, which are phonograph records in packaging, don't flow through the company with the help of a pallet truck and a warehouseman, but to go from the individual workplaces to the automated warehouse completely automatically and then to be ready for assembly again in a completely automatic way, which is a huge project, probably the most investment-intensive one we have dealt with, and at the same time we are dealing with a number of small activities in the administration, where we are really learning and starting.
Ivana Karhanová: Is it that you have a need to replace those people because maybe they are making mistakes, or is it because those people are not there and you have to go down the automation route anyway?
Michal Štěrba: The company cannot function without people. Every company is only as good as its employees. So we don't need to replace every employee inside the company, but I think that a modern company that wants to succeed in the global competition has to make smart solutions and be efficient.
The need at the end to make a product that is very reliable, very high quality and at a reasonable cost, and at the same time pay your employees in a way that they want to work for you and enjoy it, so that's a long-term necessity for the survival of the company. That's, I would say, the main reason.
Ivana Karhanová: How do your employees see this effort? Because I assume that many of them work in the company because they enjoy the company and the industry.
Michal Štěrba: It is a huge intervention into the company, its culture. We have employees who have worked there for decades and for generations. And for many of them it is really difficult to see that the company is changing under their hands. For example, it's a completely different company than the one they joined or the one they enjoyed so much.
And that's a fundamental challenge for me and for all of my team, to make the case that we can't do without that, that creative, intelligent solutions are the way forward and the way we're going to stay successful. And on the other hand, it's also an opportunity that opens the door for us to expand our ranks with new and interesting people who have it in their blood and who show us that the ruts that have been there for 70 years can be done a little differently. And that we can move the company in the right direction.
Ivana Karhanová: You told me that every day you deal with about a hundred orders for labels for gramophone records. And that's a process that you're trying to optimize in some way with Adastra? What do you need an algorithm for here, the calculation?
Michal Štěrba: It is true. Take into account that every day we have to process a little over 100 orders that contain a gramophone record and each gramophone record contains two labels for side A and side B. And that label has to be printed.
And because you're offset printing it, there's 48 labels on one sheet so that you're printing it efficiently, and you can either take one title and put together 2x24 labels and you don't have to deal with anything. But each label or each title would be re-run and there's a high cost associated with re-running for printing plates, preparing the machine, overwashing the machine.
What is called in the printing industry a makulatura, that is, the number of printing sheets that are needed to run the machine to re-colour, and that involves thousands of crowns of costs and quite a lot of wasted time. It is common in printing to look for sufficient quantities, brothers or other jobs that can be combined together on one printing sheet to make the process efficient.
But you have to do it in a way that respects all the rules that are needed to do that. It's got to be the same material, it's got to be the same colors, because you're not just printing with the four basic CMYK colors, you've got spot colors as well. You have to make it so that you're not printing a job that you need tomorrow and another one in three months, because you don't want three months of products lying around your company because it costs money, time, space.
Finding the optimum combination for each print sheet is quite a complex task, which is usually solved in companies by having someone experienced who knows how the graphic process works. And in some big database where there are thousands of titles - you have over a hundred every day and you have an average work in progress of maybe six weeks - you're looking for the optimal combination to put on each sheet, and that's not easy.
We decided and spent a number of years thinking about how to optimize this. What helps us to do that is some macro in Excel that picks the right jobs. In the end, human experience has always proved to be irreplaceable - until we just met Adastra and you convinced us that there might be a solution that could replace that human experience.
Ivana Karhanová: But your people were still better than macros in Excel.
Michal Štěrba: They were still better than macros in Excel, exactly. Macros help, but you always intervene in some way to straighten out or direct the process.
Ivana Karhanová: It means that these people are extremely valuable to you as a company.
Michal Štěrba: Yes, it's a certain experience, a skill in preparing work that is important for us to do our process effectively. We can do it inefficiently, but the degree of efficiency is important in this case.
Ivana Karhanová: How long does it take for a new person to work his way up so that he can fold the sheets the same way as his colleague who has been there for many years?
Michal Štěrba: It's hard to say. It's going to be months, long months, and at the same time you need some significant concentration and feeling for the work. But at the same time, from the experience and the analysis that we did afterwards, we found that even the most experienced person does not find the optimal solution.
Ivana Karhanová: And how did you calculate the business case in this case?
Michal Štěrba: There are two possible views. The first is that the activity we need to do is done by some number of people. And if you automate that activity, you save a given amount of labor costs because you don't need a given job to find the optimal combinatorics. That's one possibility.
But the one that ended up being more fundamental was when we really went to the trouble of taking a cross-section of one day and how the combinations were put together by a human in the previous day, and then we let more people in on it and took a lot of time to look for the best solution. And the best solution varied in cost by tens of thousands of crowns that day.
That showed us the huge potential. If we had taken the trouble to find the best possible solution every day, it could have brought us tens of thousands of crowns in cost in that better arrangement of labels on the sheet.
Ivana Karhanová: You are originally a manufacturing company and you have been on the market for over seventy years since 1951. Who is now responsible for new technologies at GZ Media? Does the production company have someone like Head of Data?
Michal Štěrba: I am trying to make sure that ideally all employees are responsible for them, which is not easy, of course, because not everyone has innovative potential. On the other hand, every department, every section has key people in its centre and its head. I need my immediate environment to understand that without innovation, without smart solutions, there is no way forward.
We're trying to create a micro-team of people in each department that is free from the operational side, that is not tasked with putting together a production plan every morning and figuring out why somebody didn't come in and replace them with somebody else and why this machine is broken, but that is tasked with optimizing the whole process and coming up with ideas and then trying to implement them.
This separation at the operational, innovation or improvement level has been very helpful in creating a desire around the whole environment and people who are immersed in operations to participate in these tasks.
Ivana Karhanová: I wanted to ask you how difficult it is to push innovation inside a company in the case of a traditional manufacturing company. But from what you tell me, I understand that if you set it up well from the top, it's not that hard.
Michal Štěrba: Well, it's a daily struggle or a daily joy. It depends on how you look at it. The process is never ending and you can't be satisfied with the fact that yesterday you managed to install some smart camera that reads your labels and you don't have to stack the pallet by machine anymore, but you have to think about how to take the good from that and try to apply it to the next process and to the next weak points. So it's not easy at all. The difficult part is the beginning, the change.
Ivana Karhanová: To push the machine.
Michal Štěrba: Yes. To convince people that what we've been doing for decades doesn't have to be the only way and that it's possible to do it differently. Suddenly, when you succeed and you have the first successes and people see that it really helps them, you manage to open their eyes, you don't need new people at all.
Yes, it's good when someone from outside refreshes the company and brings a new perspective, but when the people who have been there for many years see that and have the desire to push things, then suddenly it starts to work much easier and you don't need to be the one who kicks it, who comes up with the next initiatives, but they come up with it themselves.
Ivana Karhanová: Where do you see further opportunities for innovation in manufacturing now?
Michal Štěrba: For us it is quite simple. It's very simple, but it's very simple. For thirty years there was no innovation in the manufacturing process itself, and the world has come a long way in that period. Our main task now is to erase those 30 years or to incorporate the good that has been created across the manufacturing process during that period.
And it doesn't matter if it's the way your information system works, or how a die is made in some electroplating process, or how steam is used efficiently to heat a mould when you press a plate. There are a huge number of these topics, and our job is rather to pick the supporting ones, the key ones, that will help us to bring the process as close as possible to the optimum or the ideal.
In terms of information, I would say that every manufacturing company is dealing with how to leverage the data that they have, that today's technology allows, and improve their behavior based on that data, whether in manufacturing or in administration. So those are probably the two biggest areas.
Ivana Karhanová: You have factories in the Czech Republic, in America, in Canada. Can these three countries be compared in terms of technological maturity? Or do you think it doesn't matter and the differences are blurring?
Michal Štěrba: It is difficult for me to comment on this, given that we are in a position at the moment where we are trying to transfer our know-how that we own, that we have developed or historically acquired, to our foreign daughters. That is, we are in the position of the transmitter, the teacher, the mentor.
And because our foreign companies are relatively young and growing relatively fast, they are dependent in many ways on what technology and what know-how we transfer to them. Today it is an information system or the principle and technology of pressing plates. I sincerely hope that at some point these companies will also become independent and contribute their percentage of improvements and ideas to the common pot.
So far this is not the case. Right now we are the bearer of those ideas, and at the same time it is quite interesting for me to see and watch how the bread is two crusts everywhere in the world. When you enter America, you think: this is America, can we even produce there? And suddenly you find out that they have the same problems that we have here, and you're dealing with how to motivate people to do their work well and how to teach them to do their work properly.
And you even find out that America has pretty much moved away from the traditional manufacturing world and we're trying to reintroduce and reinvent it back to them because at some point manufacturing stopped in America, they moved it all to Europe, or rather Asia. And now you see that even with Czech technology you can be successful in America.
Ivana Karhanová: So there are now innovations in vinyl production heading from the Czech Republic to America?
Michal Štěrba: Absolutely. We send there all the key equipment that we manufacture and design here. Our technologists and engineers draw it, test it and it is ready for production.
That's where the most interesting and technologically demanding processes go, such as mastering, i.e. the production of the master, the groove or the die that is used to press the phonograph record. So far, it is produced only in the Czech Republic and we send it to the United States for each title.
Ivana Karhanová: What are your other plans at the moment? What can you still improve on the production itself?
Michal Štěrba: We are still in a phase where we are growing quite dramatically, so this year is still a year of extensive growth. There is some opportunity in the market. Our competition is weaker than we are and we want to take advantage of that and we need to increase our capacity dramatically, especially in the United States.
And that's going to be the hallmark of this year, and if we can take that step, then step number two is to streamline each of the activities that we've hot needled to win and dominate that vinyl world of ours. And then there will be beautiful moments when we can streamline and work to be not only the biggest, but the best.
Ivana Karhanová: This is how Michal Štěrba, the CEO of GZ Media, describes the future of the company. Thanks for coming to the studio, and hear you next time.
Michal Štěrba: Thank you and have a nice day. Goodbye.