Business Forum: Focus on short term hurt U.S. carmakers

Balancing current profits with future success is difficult - but Toyota has demonstrated that it can be done.

Today's anticipated announcement about the fate of Ford Motor Company's St. Paul plant, and the possible loss of nearly 2,000 Minnesota jobs, is a vivid reminder of how difficult it is for corporations to balance current profitability with future success.
Among U.S. auto companies, Ford has done the best job of changing to meet the future, embracing lean manufacturing techniques in the 1990s and producing the first hybrid SUV (the Escape). Yet it still finds itself cutting manufacturing capacity to reflect shrinking market share.

Ford's competitive position ranks somewhere between those of GM and Toyota. Toyota has become the benchmark for success in auto production and profitability. Its success in the hybrid market represents only its latest milestone.

In contrast, General Motors has traded its perennial status as a challenged corporate icon for that of a terminally ill giant. Recent talk of GM declaring Chapter 11 bankruptcy as a means of reducing its labor costs and pension obligations has become commonplace.

"Toyota's momentum just continues to snowball," Gordon Wangers, president of Automotive Marketing Consultants Inc. told Bloomberg News this month. "If I'm one of the guys running Ford or GM, at this point I'm deeply concerned about how quickly Toyota is accelerating."

Toyota, second only to GM in global auto sales, sold 2.26 million cars and trucks in the United States last year, an increase of 9.7 percent. According to Bloomberg News, Toyota's market value of $190 billion is about 18 times higher than GM's.

Hybrids are only a footnote in the 30-year war between Toyota and General Motors. Toyota's lean manufacturing expertise has played a much bigger role. But General Motors has demonstrated a consistent pattern of sacrificing the future to protect its current interests.

In the 1970s, GM ignored the subcompact market in favor of full-sized vehicles with higher profit margins. When gasoline prices rose drastically following the 1973 oil embargo, high-quality Japanese subcompact manufacturers went from niche players to preferred choices for many categories of car buyers.

In the 1980s, GM adopted lean production halfheartedly, even after it became clear that total quality management produced more reliable cars than Detroit's mass production model.

In the 1990s, GM's overreliance on SUV sales for its profits may be seen by history as its third strike. Yes, low gas prices made SUVs popular with U.S. consumers.

But the Energy Policy and Conservation Act of 1975, passed by Congress following the 1974 oil crisis, mandated higher average mileage. The SUV's low mileage was enabled by a legal exception for commercial light trucks. American manufacturers lobbied fiercely to maintain this loophole whenever Congress attempted to close it.

GM was captivated by its profitability in the SUV market, and was in denial that nearly every one of its car brands was no longer profitable -- a fact disguised by its huge size and complexity. Toyota also had success in the consumer SUV market, but did not lobby against closing the SUV mileage loophole.

Until recently, detractors would call attention to Toyota subsidizing the sale of hybrids by several thousand dollars per car. But in doing so, Toyota was priming the pump, creating a market in which it has become the leader and technology standard-setter.

In contrast, GM extended its below-cost "employee discount program" to consumers for no strategic reason but simply to move excess inventory.

To its credit, GM has invested large sums attempting to create revolutionary electric and hydrogen-powered vehicles. But these technologies are not yet viable. Toyota's success with hybrids, in contrast, integrated existing technologies and leveraged its lean manufacturing expertise.

Is there a capitalist case for alternative energy? The goal of a business is profitability (within the bounds of the law), not improving society. But Toyota's current success in the hybrid auto market suggests that companies that pursue incrementally "green" strategies may dominate the markets of the future.

There are, of course, critical social motivations for pursuing energy alternatives, chiefly environmental goals and national security. From a national security perspective, our reliance on foreign oil finances a range of toxic societies and ideologies. Ecologically, the scientific consensus continues to grow that industry is contributing to global warming.

But even if global warming is somehow a statistical glitch, common sense suggests that the rapid growth in China and India will strain the planet's resources. What happens when every family in China wants a refrigerator and car?

Hybrid cars have gone from curiosities five years ago to plausible alternatives in 2004 to a near-mainstream technology in 2006.

Toyota said in September that all its vehicles eventually would be run by hybrid gasoline-electric motors.

Toyota's operational excellence enabled it to be profitable in the present while making a small bet on the future.

That bet is now paying off. Companies that wish to dominate markets of the future should take note.

Manufacturer bringing work back home from overseas

Wednesday, January 25, 2006
By Dave Alexander
CHRONICLE BUSINESS EDITOR

American Coil Spring is proving global competition doesn't have to be a one-way street sending manufacturing work out of the town.

American Coil Spring has a relationship with Japanese-owned American Showa Inc. and now produces five different varieties of suspension springs being put onto Harley-Davidson motorcycles. That is the part that gives Harley -- one of American's most venerable brands -- its unique feel on the road.

The Muskegon spring maker, which is part of the Hines Corp. family of companies, is producing Showa parts that once were imported from Japan. Now, Showa picks up the front-fork springs weekly at American Coil Spring and takes them to Sunbury, Ohio, before the entire assembled suspension system is shipped to Harley-Davidson in Milwaukee.

"We read about so much going overseas," company President Mark Litke said. "It is still possible to compete in global markets based on technology. This is something to embrace in Muskegon."

American Coil Spring, 1041 E. Keating, was working with Showa for more than three years on the research and development of the American-produced spring. Besides a price advantage on shipping, American Coil received the motorcycle suspension spring contracts based on quality and technical issues, Litke said.

The specific spring provides high-speed performance over multiple terrains, according to Dick Carter, American Coil Spring's engineering manager. The development of the Showa spring for Harley-Davidson was developed under the direction of Carter and Quality Director Rhonda Paterra, Litke said.

"This is not a standard spring, but it is very high-end," Carter said. "The design and manufacturing of it is very proprietary. Very few have the capacity and technical knowledge to produce it."

Production on the springs began at the Muskegon plant a year and a half ago in a traditional "batch" method of moving parts from one machine operation to another throughout the plant. To better serve the customer, American Coil Spring has set up a manufacturing "cell" with equipment specifically developed for Showa that handles all of the operations in a small area in the shop's 125,000-square-foot facility.

The prior batch process had a year's volume production of Showa springs traveling more than 300 miles within the plant as parts moved from one operation to another. The new cellular manufacturing unit has not one part moving more than 50 feet from a wire spool on the CNC coiler to a box of final products.

This "lean manufacturing" technique has been supported throughout the American Coil Spring operations, with a training grant from the state of Michigan, Litke said. Lean manufacturing is in the process of eliminating waste and time in manufacturing, a concept that is used on the shop floor as well as in all aspects of the business, he said.

George Hefter of Muskegon has been working at American Coil Spring for 32 years and is a coiler machine operator. Working in a small team in a cell is a different way of producing springs, he said.

"This is going to work good," Hefter said. "It is a lot more efficient."

Showa officials were in Muskegon late last week certifying the cell operations.

"American Coil Spring has worked extremely well with us on the five parts that had been sourced from Japan," said Bill Purtee, Showa purchasing assistant manager. "This is a nice trend for us. We appreciate the relationships and partnerships that we can build with our supplier base."

Showa has 17 plants worldwide, providing suspension, power-steering and chassis components from the transportation industry. It does a lot of work for Honda and Harley-Davidson from its Ohio plant.

There are other Harley-Davidson parts that American Coil Spring hopes to produce from Muskegon as it tries to expand its business. Showa also supplies other motorcycle manufacturers. Litke said that similar spring products also are used in snowmobiles.

Lean Manufacturing Can Save American Manufacturing

Author: Jack Rink
Issue: 10/2005

A decade ago, the debate about manufacturing leaving the U.S. focused on the “giant sucking sound” of jobs being pulled into Mexico. Today, the sound is louder and more urgent than ever, but its source is no longer just south of the border. Open up the business section of any newspaper – or perhaps read your own employer’s latest press release – and you will quite likely learn about manufacturing relocating to Brazil, China, India, Bulgaria or Malaysia.

The first casualties to offshore manufacturing were high-labor, low-skill jobs in textiles, consumer electronics and similar industries. Since then, the floodgates have opened and even the most sophisticated products are fair game. Today, it seems no industry is safe from the drive to lower costs by relocating to developing countries. Even highly skilled jobs in design, research and technical development that once seemed untouchable are finding their way to the Third World, such as IBM which announced that 5,000 high-tech American jobs would be moving offshore.

It’s no secret that the powerful lure attracting manufacturing jobs in low labor costs. An hour of labor and benefits in Mexico may cost $1.50 to $3. The same hour in an area of interior China may cost less than 15 cents. While rates vary widely across the United States, even a minimum-wage contract worker costs 60 times as much. A similar ratio of salaries exists for skilled technical positions such as engineers, programmers, scientists and managers.

While lower labor costs are the most obvious reason for relocating manufacturing, other factors are at play as well. Restrictive and counter-productive government regulations, particularly in the area of environmental compliance, encourage many companies to look outside the U.S. In other cases, the lower costs of materials, generally a direct result of suppliers having lower-cost structures, as well, is the driving force.

In addition to these economic factors, technology has become a powerful enabler. The Internet and flexible communications makes coordination with offshore facilities much less intimidating today than only a few years ago. Documents, drawings, photos are only a computer click away and an online meeting can be held as easily with a production plant in Ghangzou as with a plant in Peoria.

The statistics are staggering. Since 2000, some estimates are that nearly 3 million U.S. jobs have moved overseas. Interestingly, we now seem to be in the second wave of relocations. I recently visited a manufacturer of medical devices in a low-cost labor region of Mexico. They had just finished research on emerging competitors and found that similar products were being offered for sale in China at 30 percent of their selling price. The manufacturer was convinced it had to lower its cost structure to compete in the long run and was actively working to improve productivity. Ironically, the same arguments probably were the very reason it was established decades ago.

The lean answer

Clearly, the source of the giant sucking sound is moving and growing stronger! Can anything stop or even just slow this trend?

Fortunately, the answer is “yes.” Lean manufacturing, best described as the relentless elimination of waste, has the potential to eventually stem the tide of job loss. The emphasis must be on the word “eventually” because there is no overnight or painless solution. Also, it must be recognized that valid reasons exist for offshore manufacturing other than low cost. For example, emerging consumer markets in developing countries sometimes justify manufacturing both to meet the local demand and to establish a presence near customers.

In addition, lean manufacturing principles must be aligned rigorously and thoroughly at all levels of the supply chain to make a difference. Even so, the late adopters of lean may still find it necessary to trim workforces since opportunities to grow market share through efficiency may have already been seized by more nimble competitors. However, even that is a much better alternative than the one faced by the companies waiting too long to implement lean. Jobs in those companies are ripe pickings for competitors, both domestic and foreign, that have discovered this powerful method of reducing costs.

Lean manufacturing has evolved from its roots as almost a cult-like philosophy spread by a small group of dedicated disciples. Those early advocates learned most of the techniques from the teachings of Japanese masters of the Toyota Production System. Today, virtually all major manufacturing companies have some form of lean initiative. Smaller companies and non-manufacturers have been generally slower to adopt the technology but several notable exceptions exist.

The power of lean lies in its ability to reduce costs in all areas. This is accomplished not through traditional cost reduction efforts but by challenging every activity to determine if it adds value in the eyes of the customer. This seemingly simple approach has powerful implications. Business processes that may have been taken for granted for decades are candidates for elimination. The emphasis is not on doing things more efficiently – instead, the first question is why an operation must be done at all.

A good example of this approach is the process of inspection. Not long ago, inspection was almost always assumed to be a benefit to the final customer. Companies would brag about the amount of effort spent inspecting their goods. Considerable cost and capital was invested into performing inspections completely and efficiently. After all, the argument went, what customer would not feel better about a product that was individually checked for defects?

Companies that have adopted lean manufacturing turn this logic upside down by reasoning that no rational customer wants to pay them to make a diving catch of their own mistakes. Therefore, the challenge becomes how to prevent potential defects so that the customer receives a product meeting all requirements without costly inspection and rework.

In addition to inspection, other processes that are automatically challenged include setup, packaging, equipment adjustments, material handling, inventory control, and rework. Even processes that generally add value often have individual tasks that are non-value added. Lean manufacturing uses a variety of tools and techniques to identify these areas of opportunity. Products and processes are redesigned, improved or sometimes completely eliminated to attach forms of waste.

The benefits of lean

The drive to eliminate non-value-added activities has obvious benefits. Almost invariably, preventing a defect is more efficient than finding and fixing it. Fewer errors mean less rework. More reliable processes lead to less work-in-process (WIP) inventory and reduced space requirements. As wasteful activities are eliminated, the elapsed time to manufacture a product is reduced. The bottom line is that customers receive a better product, at lower cost and in less time.

While lean technology started as a manufacturing initiative, more and more organizations are seeing its benefits in the office and service sector. The same principle applies – by examining every activity to make sure it provides value to the customer, companies are able to cut costs, improve quality and reduce the time required.

But the most powerful story behind lean technology is that by ruthlessly eliminating waste, companies are finding less need to rely solely on cheap overseas labor for cost savings.

The economics are straightforward. A manufacturer that can reduce direct labor costs by 50 percent slashes the potential benefit of lower-cost labor by half as well. Reducing defects cuts the need for generally labor-intensive rework, further reducing the attraction of low-cost labor. In many industries, the cost of direct labor is less than 15 percent even prior to lean efforts. As this number is reduced, there becomes less and less incentive to drive decisions primarily on this component of total cost.

Lean technology can also impact other factors that drive manufacturers overseas. For example, the high cost of dealing with hazardous waste products has forced some manufacturers overseas where environmental controls are less restrictive. Lean thinkers approach the problem from a different angle by questioning why they must use a process that creates waste in the first place. After all, what could have less value than a process with byproducts that cost money to dispose of? Powder paint, water-based coolants and citrus cleaners are just three examples of technologies that have reduced environmental problems. There are many other case studies about firms that have actually eliminated the need for solvents, heavy metals, degreasers, or harsh chemicals. This, in turn, has reduced the incentive to relocate to regions with less stringent environmental regulations.

The ultimate payoff of lean

As the economics of Lean Technology reduce the incentive to focus strictly on low labor and direct costs, other factor begin to become more significant. Excess inventory is another form of waste since it is expensive to store, is subject to damage and has a nasty habit of becoming obsolete. Lean companies work hard to reduce inventories to the minimum level required to meet customer demand. However, offshore manufacturing almost always adds to inventory – either because it is sitting in containers or because extra inventory is needed to meet changes in actual demand. (Those darn customers are always buying stuff different that what we made!)

By eliminating non-value-added activities, companies can make huge improvements in the time it takes to deliver products or services to their customers. Reductions in the total response time of 50 to 90 percent are common. Many companies have slashed lead times of products built to unique customer requirements from months to a matter of hours. This allows lean companies to begin using superior customer response as a competitive weapon. After the elimination of waste narrows the cost difference between a domestic manufacturer and an offshore supplier, the advantage often goes to the company that can innovate, responds and deliver in the shortest time. No current technology can overcome the fact that products built in Asia are still a 10-day boat ride from U.S. markets and incur significant costs and delays in transportation and border crossings. The concerns for international security are likely to add to this problem in the future.

Lean enterprises also find that the pace of innovation increases as they systematically attack waste in their products and processes. Many have discovered the value of making rapid and often extensive redesigns to processes as further opportunities to reduce waste are identified. While there is no geographic monopoly on innovation (in fact, “kaizen events,” which make quick, focused improvements, were invented in Japan), experience shows the value of continuously re-engineering processes to achieve the next increment of improvement. A well-educated, flexible workforce that is in close proximity to design and engineering resources regains its status as an important asset.

The future according to lean

There is little doubt that lean technology will continue to spread in the coming years. Many manufacturing companies are just starting to see the benefits of Lean and even those that are considered leaders today realize that they have just scratched the surface of opportunities.

Toyota, the company that invented many of the concepts, has been working on its form of lean for 50 years and says it has as much work to do as when it first started. Furthermore, lean is just getting a foothold in non-manufacturing fields. The potential for applying the same principles in the service sector, health care, military, education, and government is staggering.

The lure of low-cost labor will always exist somewhere in the world, and a reasonable distribution of business investment makes economic and political sense. However, locating business based solely on finding the rock-bottom lowest price of labor (if only for the moment) is a destabilizing approach. By eliminating the waste that drives companies to low-cost regions, lean technology has the potential to stem the recent tide of job loses.

Lean Manufacturing: Is It Really Worth It?

Author: R. Michael Donovan
Issue: 1/2006

Long production runs, big backlogs and long lead times are fast becoming operating styles of the past. Flexibility and quick response must become the norm. The driving force behind this need is customers who increasingly expect short lead times for products configured exactly as specified and delivered on time, every time.

The trend of quick-response, no-excuses delivery has put many manufacturers in the uncomfortable position of having to conform or lose business to a competitor who has developed short cycle time capabilities. To meet competitive requirements and reduce costs, many manufacturers are turning to lean manufacturing techniques to drastically cut cycle time and increase their competitive edge.

What, where and why

Lean manufacturing is a high-velocity order-to-delivery process that many manufacturers have successfully used to improve overall business performance. In an environment that employs this process, inventory is “pulled” through each production work center only when needed to satisfy a customer requirement. This means the entire organization must be configured for maximum flexibility and quick response so custom orders can be filled as quickly as standard orders.

The demand-based “pull” of material through production is in sharp contrast to the traditional “push” production method, which is driven by an MRP schedule that often pushes inventory into stock that may not reflect what customers need.

Compounding the problem, push production typically cannot adjust for sudden shifts in what customers really want, resulting in longer lead times, too much inventory and lower customer service.

Lean manufacturing can be used in production environments involving highly complex and variable products, even in engineered-to-order situations. It does not have to be a highly repetitive production environment to achieve synchronization and a high-velocity flow of quality information and material. Using lean manufacturing techniques and the right information systems technology, product complexity and variability do not pose the barrier they once did to creating a flexible and fast order-to-delivery process.

As requirements in the marketplace mandate more and more high-velocity, on-time performance, customers can, and will, change suppliers when they are unable to get the goods they want when they need them. The objective is to get today’s order produced and shipped without “yesterday’s orders” being in the way and stopping the flow.

High-velocity flow

Lean manufacturing emphasizes flexibility and throughput, with total order-to-delivery cycle time reduced to the bare minimum. As a consequence, more far-reaching processes and cultural changes are needed for successful implementation of a lean process. This is necessary because substantial redesign of a number of business processes is needed; not just “some” improvement of, say, inventory planning, but changes in the entire order-to-delivery flow of information and material.

A company that can benefit from lean manufacturing is usually easy to identify. Inventory accumulates in buffer stocks, which is both a sign and a cause of excessive cycle time. There are serious balance and flow problems, with excessive inventories in subassemblies and/or raw materials, and work-in-progress (WIP) is held up because of bottlenecks and poor information flow. Scheduling and rescheduling in these environments is often a constantly attempted task but valid, do-able schedules are never really achieved.

Manufacturers that can pull together all of the pieces with lean processes can cut their cycle time by at least 60 percent and usually much more. Lean manufacturing drives out the heavy costs resulting from imbalanced production schedules, excessive WIP queues and the high fixed overhead costs that result from trying to manage operations in disarray.

One durable goods manufacturer succeeded in cutting cycle time by 80 percent, reducing required factory space by 50 percent and cutting rework by 90 percent. The average working capital needed to support the business dropped by more than 50 percent over a two-year period, which allowed for other investment opportunities to strengthen the business.

Not just information technology

Lean manufacturing is not achieved by just installing new information systems technology. However, getting all the needed elements to come together requires that the information flowing into and through the business be of very high quality – accurate, meaningful and up-to-date – and precisely synchronized with the flow of material. Addressing this requirement is usually a major, but most worthwhile, task for many manufacturers.

Advanced planning and scheduling systems (APS), as well as electronic enterprise linkages, can sometimes help solidify improvements in customer service, inventory deployment and reduced cycle times to improve every function of the business. Also, improved process and information quality help eliminate many of the human handoffs and interventions that slow the order-to-delivery process.

Better balance

When too many manual interventions and variations are present, the problem is not just one of cutting out non-value-added activity, but also the value-subtracting activity caused by errors that are often repeated every day.

In addition, implementing lean manufacturing mandates the need for better balance and faster flow of material through production. In most cases, the company will need to reconfigure its manufacturing processes from large lot, functionally-oriented methods to more flexible, quick changeover smaller lot methods for fast response and higher throughput.

Sometimes easily justifiable capital investment is required, but most of the time substantial improvements in flexibility and cycle time reduction can be achieved with current equipment.

Remember, not just labor and inventory costs are saved by higher throughput and reduced cycle time – customers are more satisfied, and that is where the money is.

Measuring performance

One of the weak links in many manufacturing companies is in the performance metrics used by management. Very frequently, performance metrics isolate only on areas such as labor efficiency, machine utilization, overhead absorption and purchase price variance. When the pressure for performance improvement is focused on these areas, you can be sure that the organization will respond, not necessarily in the most positive manner, when the entire business is considered.

For example, parts and product will be produced and put into inventory, even when they are not needed, to satisfy what management communicates as important in terms of measurable results. Too often, this creates too much inventory of unneeded material and shortages of materials that are needed. Ultimately, cycle times become longer and the customer service level goes down which is the exact opposite of what management wants to achieve.

Just changing performance measures will not bring about lean manufacturing, although they are absolutely critical to the transition. The lesson to remember: management can ask for anything, but they will get what is encouraged by the measurement system.

Improving operating performance

The advantages of lean manufacturing go beyond just productivity gains and decreased cycle time and inventory (see Exhibit I).

Because new system enablers can link together the entire enterprise, as well as the entire supply chain, administrative productivity improves with redundancies eliminated. Orders can be processed without adding layers of paperwork that often waits in queues, sometimes with unknown or uncertain priority.

New working capital reduction techniques can be used. For example, completed products can be periodically backflushed to decrease inventory balances, allowing automatic vendor payments based simply on that day’s or week’s material consumed at the company’s location but still owned by the vendor. This technique can also minimize the vendor’s days outstanding in accounts receivable.

In companies with poor customer service performance levels, with service levels as low as 75 to 85 percent, low quality sales planning information is often one of the culprits. Also, product specifications and bill-of-material errors exist, and inventory records are inaccurate, among other things. In many cases, manufacturers often rely on suppliers with quality problems and/or who do not ship on time. Lean requires high information quality and close coordination with suppliers whose processes and systems may need to be upgraded to get their performance synchronized with your new level of capability.

Lean manufacturing is only as good as its weakest link. In one case, a two-plant company improved its overall service level from 77 to 90 percent as a result of traveling part of the way toward full implementation of lean manufacturing.

However, so far the company has missed the chance of hitting a 99 percent or better service level because the plant supplying part of the material continues to operate under the old, unreliable, and less flexible “push” method of production. As a result of the much improved performance at one plant, a change in the poor-performing plant to lean manufacturing is not only desirable, but inevitable.

How to get started

Getting started with an effective program to implement lean manufacturing requires careful planning, design and execution of the business changes needed to achieve the desired improvement goals. Implementation should not begin unless top management is solidly championing the effort with an understanding that many business processes must be changed. Starting with a pilot product line or another contained area of the business is a big help to “proof” your concept and methodology (see Implementation Methodology in Exhibit II).

Should you invest in lean manufacturing? This question, in one form or another, and management’s answer to it, will certainly set the direction for the future. First, the decision to go forward is much easier to make if lean is thought of and used as a competitive strategy for increased market share, generating more revenue, and fostering profit growth. Certainly, reductions in inventory and costs are also big benefits. Second, if your competitors get the jump on you in terms of response time, delivery performance, working capital, etc., how long will your company be able to compete? The worst position to be in is when you are constantly trying to catch up. The leaders always make more money.

Allsteel committed to protecting environment

By Melissa Regennitter of the Muscatine Journal

MUSCATINE, Iowa n Pollutants are not always evidenced by bellowing clouds of factory emissions or runoff into streams.

Sometimes, the worst pollution is invisible.

A local company is determined to reduce the ecological impact of its products by looking at solutions to environmental problems that aren’t as easily seen with the naked eye.

In the 1980s, Allsteel began integrating environmental management into manufacturing. Pollution prevention practices are now a part of virtually every aspect of operations at Allsteel, which is now an operating company within the parent corporation, HNI Corp., Muscatine’s largest employer.

Scott Lesnet is the corporate environmental and safety manager for HNI. He’s been an Allsteel employee since 1973. His main project is helping the company constantly meet and surpass environmental standards for every product.

Lesnet said it’s easier to fix things that you can see. Visible signs of pollution are noticed most by the public, but are not necessarily the most harmful.

“It’s what you don’t see that matters.”

At Allsteel, “Everyone is involved in pollution and waste reduction,” Lesnet said. “From the board of directors and the engineers to the workers in the factories who build our products each day.”

Product developers and designers at Allsteel and HNI Corp. continually work to minimize long-term damage to the environment. Products are designed to be recyclable 20 years down the road when their useful life has run out.

Erin Dindinger is the safety and environmental manager at the Allsteel plant. She is on the shop floor 60 percent of the time, observing workers and their practices as well as equipment and its functions.

“There are 450 people thinking about how we are going to get to the next level,” Dindinger said. “The workers are right there with us, making the right choices for the environment.”

Allsteel practices

The Life Cycle Assessment process focuses on the environmental impact of each component. They are tested in the following areas: energy consumption, renewable resource, recycled content, solid waste generation, air quality and water quality.

Lean manufacturing is a philosophy adopted by Allsteel that focuses on waste reduction. The theory is that any material or physical labor that fails to add value to a product is a waste and must be eliminated.

Every member of Allsteel is vital to putting the theory into action. According to Lesnet, the success of the company’s waste reduction and continual product improvement is the result of good people making responsible choices for the right reasons.

“A painter on the line must consciously choose to turn off his paint gun when it’s not in use instead of letting toxic emissions flow. Our members are taught how important each tiny decision is,” Lesnet said.

Allsteel also incorporates the Rapid Continuous Improvement (RCI) approach. According to Lesnet, all furniture produced has room to improve as an environmentally friendly product. Work places have a check list of opportunities n subtle changes in the manufacturing process where employees can make a difference in product proficiency.

The RCI method was introduced in post-World War II Japan. A failing economy led to changes in the Japanese manufacturing process.

Allsteel adopted several of these process practices:

N Each goal that is met should be continually viewed and analyzed as an area that will always have room for improvement.

N Human resources are the most important asset of an enterprise.

N Reduce tasks not contributing to the added value of a product, such as overproduction and warehousing.

N Quality control and maintenance of facilities reduces waste.

N Raw materials and parts arrive on the production chain just as they are required. Over- or under-ordering is wasteful.

N Improvements of the product quality must be gradual and are not necessarily the result of radical changes.

N Use only the material, energy and person-power needed to produce a particular part or product, and no more.

Utilizing waste

The HON Co., also an operating company of HNI, and Allsteel are using a process of their own creation that utilizes wood waste to mold chair seats and backs. It’s called Compression Molding and has replaced the use of new plywood by mixing wood chips with adhesive and applying heat to the molds to make it firm.

Nearly 5,000 tons of recycled demolition and construction-site wood picked up from other facilities in the area are used annually.

The company worked with the Iowa Department of Natural Resources in a collaborative effort. The Compression Molding project earned HON Industries (parent company’s name prior to HNI Corp.) the 2002 national Murray J. Fox Recycling Innovation Award.

In the past, Allsteel and HON used adhesives that were solvent-based and contained volatile organic compounds. Those have been eliminated and replaced with hot-melt or water-based adhesives to reduce ecological impact.

Much of the painting that coats the steel products has been replaced by solvent-free powder coating. Over spray from the powder-coating process n the powder that doesn’t hit the product and lands on surfaces in the spray booth n is collected and reused. When feasible, overspray from wet paint lines is re-tinted and reused as well.

On the laminate lines, wood finishes have been replaced with substances that also have a lower content of organic compounds.

Bulk packaging reduces a substantial amount of unnecessary waste compared to individual packaging. Also, time and manpower is saved.

Whenever it is practical, workers are required to use an unpowered cart rather that a forklift to reduce emissions.

Machinery is designed or made smaller to use the least amount of electricity as possible. Allsteel uses only as much manpower as needed. Machinery is designed to assist workers, requiring less strain and stress.

Recycle, recycle, recycle

Source separation maximizes the opportunity for each recyclable waste item to actually be recycled. At work stations and throughout the plants, steel, fabric, trash, landfill and aluminum have their own bins.

Not only are many products made of recycled materials, almost everything, down to the tubes holding rolls of fabric, is recycled. The tubes are sent back to vendors and fabric is reapplied to eliminate the cardboard waste.

Returnable totes and pallets hold product that is shipped to Allsteel and HON. They are emptied and returned to the vendor to be used again.

“There is even a cart for the glass vendor,” Lesnet said. “ Any time there is a long-term product of high volume, we will create a means for reducing or recycling waste.”

In 2004, Allsteel also won U.S. General Service Administration’s Evergreen and USEPA Pollution Prevention awards. The company is currently creating more environmentally friendly products and processes that may be announced later this year.

Designers and engineers continue to work on ways to eliminate problem materials such as fiberglass, which contain formaldehyde, and certain fire retardants that contain toxins.

Fastest-Growing Automotive Parts Company in Thailand Implements Oracle(R) E-Business Suite to Enable Lean Manufacturing

Monday January 16, 8:00 am ET
Company Moves to Lean Manufacturing to Eliminate Waste and Reduce Risk in the Supply Chain for Thai, Malaysian and Chinese Facilities

REDWOOD SHORES, Calif., Jan. 16 /PRNewswire-FirstCall/ -- AAPICO Hitech Plc, an automotive parts company based in Thailand, implemented Oracle® (Nasdaq: ORCL - News) applications and technology to enable lean manufacturing operations, Oracle today announced. AAPICO will soon be ready for fulfilling complex customer requests while reducing waste in its supply chain.

AAPICO wanted to move towards a demand-driven supply chain to accommodate the just-in-time manufacturing schedules of its customers to reduce inventory and fulfillment times. The company, a progressive jig, die and automotive original equipment manufacturer (OEM) parts vendor with facilities in Thailand, Malaysia and China, supplies parts to all major car manufacturers in Thailand including Toyota, Honda, Isuzu, Ford, Mazda and Nissan.

AAPICO began its migration to lean manufacturing through a pilot program with the support of Auto Alliance Thailand and Toyota. The program brought about quick success, as AAPICO received Toyota's coveted TPS (Toyota Production System) Championship Award in 2004 and again in 2005. After the conclusion of the program, the company decided to implement an enterprise software system to provide the platform for lean manufacturing and integrate the network of facilities.

After a careful evaluation of several vendors' offerings, AAPICO chose Oracle to support lean manufacturing using Oracle Database and the Oracle E-Business Suite, specifically the Oracle Supply Chain Management (SCM) suite, which includes Oracle Discrete Manufacturing, Oracle Flow Manufacturing and Oracle Order Management applications. AAPICO also selected Deloitte Consulting LLP to lead consulting services and additional software from A-Host, a Certified Partner in the Oracle PartnerNetwork.

"The competitive landscape in Asia has grown more challenging in light of the region's booming manufacturing business," said Yeap Swee Chuan, AAPICO Hitech President and CEO. "We moved to lean manufacturing to eliminate waste in our supply chain and boost customer service. Oracle was an integral partner in bringing lean to all of our facilities."

Companies relying on Oracle SCM are able to explore "lean" techniques for all facets of supply chain operations, such as creating a demand-driven supply chain. Oracle SCM supports lean capabilities such as scarce inventory allocation for fulfilling orders; license plate number and lot/serial receiving to help reduce labor costs; catch weight support to help companies accurately measure and price variable order sizes and amounts; and, lot specific costing to enable companies to accurately account for and measure cost variability in production output.

"There are clear advantages for a company like AAPICO using Oracle to enable lean manufacturing," said Maha Muzumdar, Oracle Vice President SCM Marketing. "Oracle SCM helps to reduce the risk in lean manufacturing and provides a flexible framework to bring new facilities online."

For more information about AAPICO, visit http://www.aapico.com .

FranklinÂ’s Faurecia to add workers

Exhaust system maker plans to hire 90 new employees

FRANKLIN — Faurecia Exhaust Systems Inc.’s main U.S. customers, Ford and General Motors, struggle with sinking stock prices and downgraded debt.

But business is booming for Faurecia itself.

The company’s 2301 Commerce Center Drive plant plans to hire about 90 workers in coming months, some 60 of them for hourly jobs and the rest in salaried positions.

A maker of automotive exhaust systems for the Ford Focus and Freestar, Crown Victoria police cruisers and other models, Faurecia is expanding everywhere, it seems. Last week, the company announced plans to open facilities in Northwood and Toledo, Ohio, Fraser and Sterling Heights, Mich., and South Carolina.

France-based Faurecia’s fourth quarter 2005 sales rose 5 percent to about 2.8 billion euros. Automobile production in Europe is slowing, the company said, but outside Europe sales have jumped more than 30 percent, pegged to currency exchange rates.

And exhaust system sales? They shot up 28.6 percent in 2005’s final quarter, the company said.

There are reasons for that, said Mark Fisher, the Franklin plant’s human resources manager.

“Our quality record at this site has been very strong,” Fisher said.

Today, 320 employees work at the 156,000-square-foot Franklin plant. “That will grow to about 400 before all is said and done in 2006,” Fisher said.

The hiring comes as a stark contrast to another auto parts manufacturer, Delphi, which seeks bankruptcy protection and plans to cut jobs, wages and benefits.

In all, Faurecia has 160 facilities in 28 countries. The Franklin plant opened in early 2000, drawn by Interstate 75’s proximity, among other factors.

Plans to make exhaust systems for the Lincoln Aviator at the site, with pre-production ramping up in June or July, triggered the need for more workers, Fisher said.

He credits not only quality but Faurecia’s “lean” manufacturing methods for sparking growth. These methods cut production “variables” and waste among machines and workers, Fisher said.

“If you go to a Toyota plant, they get as specific as telling you which hand to use” while working, Fisher said.

Efficiency, in other words, means more than cutting worker rolls.

“It’s interesting because I think the public perception of ‘lean,’ the blue-collar perception of lean, is that we actually eliminate people,” Fisher said.

The waste-cutting concept extends to plant and team size, too. The company ensures that supervisors don’t oversee more than 25 employees each and plants don’t have more than 500 workers, Fisher said.

Chrysler cuts trade workers

In lean manufacturing push, automaker also is reducing number of job classifications at plants.
Josee Valcourt / The Detroit News

Chrysler Group is cutting back the number of skilled trade workers in some of its factories as it strives to match the manufacturing efficiency of its Asian competitors.

Detroit's only profitable automaker has been on a crusade to build cars and trucks in less time and make its plants more flexible, which allows them to build several different vehicles on the same line.

As part of the push toward Japanese-style lean manufacturing, Chrysler is laying off some skilled trade workers such as electricians and tool and die makers. It's also reducing the number of job classifications at many of it plants.

"We are paying attention to classifications because fewer classifications would make our operations more flexible," said Chrysler spokesman Ed Saenz.

Skilled trade classifications typically limit workers from handling multiple job tasks.

The latest job cuts occurred at Chrysler's Warren stamping plant, which produces parts for the Jeep Commander and Grand Cherokee SUVs and the Dodge Dakota and Dodge Ram 1500 pickups. Last week, the company laid off 74 tool and die makers, welder repair and basic trade workers.

Union officials expect another 16 skilled trade workers to be laid off by Monday, bringing the plant's skilled trade work force to about 730 from almost 1,000 in 1999.

The laid off skilled trade workers will be transferred into Chrysler's "jobs bank," which means they will continue to receive pay and benefits while they are off the job.

Skilled trade workers, who make up to $33 an hour in straight-time pay, are the highest paid UAW factory workers.

Other Chrysler plants have made similar work force reductions or will in the future, Saenz said.

At Chrysler's Belvidere, Ill., plant, where the new Dodge Caliber small car will be built, the company expects to cut 5 percent to 10 percent of the body shop workers because of production improvements, Saenz said. Chrysler has said it is investing $419 million to retool the plant.

Chrysler's Sterling Heights assembly plant, which builds the Chrysler Sebring and Dodge Stratus, will also be retooled for new vehicles, which will mean job cuts, Saenz said, without providing details.

The moves are not sitting well with some Chrysler skilled trade workers. Dave Joiner, a committeeman for the United Auto Workers Local 869, which represents workers at the Warren stamping plant, warned workers about the cuts in a recent letter.

"On Dec. 21, the plant manager called me into his office and told me that on Jan. 9 he would be laying approximately 74 trades persons off into the jobs bank from the bottom up," Joiner wrote in the letter, which was obtained by The Detroit News. "I purposely did not come around to wish anyone Merry Christmas because I did not want to lie to anyone and I did not want to ruin anyone's holiday or their time with their families."

Joiner urged workers to notify union officials if they were asked to work outside their job classification. "We can help ourselves by not crossing lines of demarcation," he wrote.

UAW spokesman Roger Kerson declined to comment.

Chrysler has been trying to reduce its skilled trade work force for several years. In 2003, the company and the UAW agreed to a special retirement program designed to cut up to 5,000 skilled trades positions from Chrysler's then roster of 12,000 over several years. As part of that program, Chrysler offered $70,000 buyout packages to eligible workers in the first quarter of each year to reduce employment costs.

Saenz said the Warren reductions are not tied to the early retirement program.

Lowering employment costs and increasing productivity moves the automaker closer to goal of reaching parity with its Japanese competitors building cars in the United States.

"There's an enormous move at Chrysler to reduce the number of labor hours per car in addition to the cost per car," said Jay Baron, a manufacturing expert at the Center for Automotive Research in Ann Arbor.

It now takes Chrysler assembly workers 35.8 hours on average to produce a vehicle compared with Toyota Motor Corp.'s 27.9 hours, according to Harbour and Associates.

In 2005, Chrysler improved its productivity 4.2 percent, and by 19 percent between 2001 and 2004. During that period, Chrysler also trimmed its work force by 37,000 jobs.

Chrysler CEO Tom LaSorda told analysts that the 2007 goal is to build a car in 30 hours on average. "We will do more with less and that's the message," he said recently.

Time again for management by walking around?

Monday January 16, 2006 (12:00 PM GMT)
Topic: Project Management
By: Rod Amis

In Search of Excellence: Lessons from Americas Best Run Companies, by Thomas J. Peters and Robert H. Waterman, Jr., first appeared in 1982. The supposed threat of Japanese business practices outstripping those of the USA and changing the international economic dominance equation was the accepted wisdom. "Management by walking around," a popular idea for corporations back in the 1980s, was prominently promoted by people like Peters. Maybe it's time to bring back that philosophy.

Twenty years ago the idea of small, project-oriented teams within the enterprise and a management style that encouraged more contact up and down the organization was all the rage. Then we moved into the 1990s and everything changed. Many of the companies profiled in this book as fine examples of excellence, such as Atari, Data General, DEC, IBM, Lanier, NCR, Wang, and Xerox failed to continue to produce excellent results in their balance sheets, and the idea of management by walking around was all but forgotten. The Japanese tiger began to perform more like a sparrow, and that threat was soon forgotten. Management philosophy, driven by a focus on quarterly earnings, swung back to a more hierarchical approach.

It was also about this time that the legend of IT disdain for the business side of the enterprise took root and grew. The perception was that IT harbored a general disregard for the concerns of the generalist "drones" who could not comprehend machine logic.

However, the IT environment is constantly changing. The growth of new philosophies like Business Service Management (BSM) have acted as a partial antidote to this perception. BSM advocates aligning IT with the business goals more directly and focusing on "internal customers'" -- that is, the users' -- satisfaction.

Nowadays many IT teams form Six Sigma groups and analyze survey data. The only time users get to see IT people face-to-face tends to be a large gatherings or project launches.

Maybe this does not equal true "customer service." Perhaps the notion of Peters and Waterman's book, that customer focus is important to a successful enterprise -- including the internal customers of an IT department -- was not completely off base.

One way to test this question might just be to start walking again. Don't send a survey out your users in the business sector of the enterprise. Talk with users whenever a project is completed. Walk to the users' offices and let them show you what they like and dislike. Believe me, they'll be honest -- brutally honest.

While you're there, use their phone to call in a trouble report on the app and see how well it is handled. See if you're treated to telephone push-button hell, Musak, or instructions only a geek could understand.

Taking this challenge is, of course, risky, and we have all been conditioned to be risk-averse. But a survey, grudgingly filled out, is no substitute for actual user feedback. It mediates between IT management and the customers/users they serve. Two-way communication produces a buy-in and loyalty invaluable to your business operations. That sounds like a huge payoff for the perceived risk.

The notion of a successful project has at its core user acceptance and buy-in. Ask your users how satisfied they are.

A lean New Year

Magazine Article, Source : The Manufacturer US
Published : 09 Jan 2006 20:37

Anand Sharma traces the phases of lean from the transactional, through transformational, to transitional

If you look back on the news of last year, a few companies were repeatedly cited for their stellar performances. Toyota’s lean culture had magazines like Business Week and Fortune touting the company and its customer connectivity as a model for success. The New York Post noted that Toyota’s growth is largely based on the fact that they give customers what they want.

A second lean company that has received its share of recognition is Dell. The computer manufacturer grew its US market share from five percent in 1994 to 33 percent in 2004—phenomenal growth, even in a growth industry.

Both Toyota’s and Dell’s vision includes demand shaping, as well as a lean supply chain and innovation in channel development. Toyota places customers first, and continues to innovate with products like the Prius. It also plans to hybridize its other models, and reinvests in itself with construction of new plants across the world. Dell relies on strong customer relationships and a culture that thrives on change.

Going forward, neither of these companies, nor any other successful lean company for that matter, will simply rest on its laurels and expect to continue to reap the rewards of this year’s lean transformation. Lean is as much the future as the past and present, and even the best of the best find ways to keep improving—so much so that the energy of the lean culture is spreading across other industry silos with quite unexpected velocity.

When the early versions of lean broke onto the manufacturing scene at the turn of last century, the main goal for most companies was to manufacture products more efficiently. The lean journey was at the transactional stage. In the 1990s, lean companies began to transform themselves from efficient manufacturers to market leaders. Now, in the first decade of the 21st century lean is becoming transitional, migrating from manufacturing to the service sector. During this transitional phase, emphasis will be on agility, value innovation, responsiveness, and delivering value across a complex and hugely customer-centric global landscape.

A core element of this transitional period will be mutually assured information chains. Lean service companies will begin to create competitive teaming and synchronous productivity as a hedge against risk and unknowns.

Why are these changes taking place? Simply because the market has changed. At the turn of the 20th century, business involved focused centers of consumption and production. Technology was proliferating. A supply economy prevailed, resources were plentiful, and consumers were grateful for the products. The future was predictable and competition was limited.

Today’s market features disparate centers of consumption and production; a proliferation of knowledge (via the Internet); market leaders who are lean, agile and innovative; a demand economy; limited resources, and impatient consumers. Consumers also place greater emphasis on the buying experience rather than on just the quality of the product. On top of that, the future is full of risk, and competitors are emerging every day!

As the migration to the service sector gains momentum, lean’s advantage as a business system will gain greater transparency and acceptance as lean service companies begin to dominate their markets. Other companies will follow their lead, and Wall Street will reward their courage. As these companies emerge, don’t expect Toyota and Dell to leave the picture—they will continue to dominate their markets thanks to their commitment to a culture of continuous improvement. In this New Year, smart companies will make going lean their number-one resolution and lean companies will keep getting better.

We are the champions

Magazine Article, Source : The Manufacturer US
Zone : World class manufacturing
Published : 05 Jan 2006 16:15

Successful lean initiatives are often driven internally by a dedicated champion. Rich Weissman looks at the roles of lean champions and how they can positively impact lean

P assion. Drive. Leadership. Commitment. Enthusiasm. The sports world is full of examples of athletes who have worked hard, struggled, and sacrificed to lead their teams to victory. The glare of the television lights reveals their champagne soaked hair, their smiles, and their hugs of family, fellow players and team owners. The memories of these scenes are often etched in our collective memories. We often define these athletes, and teams, as champions.

Yet champions can also be found in more mundane surroundings, absent the champagne and television lights, but often still the target of adulation, support, and gratitude of company employees, management, customers, and stockholders. Successful lean manufacturing programs often have a champion, the person with the passion, drive, leadership, training, and commitment to lead a company to improved operational and financial performance, as well as increased customer satisfaction. Lean champions are often the most important part of lean initiative, offering a blend of personality and technical ability that provides a rallying point for fellow employees.

Lean champions have varied responsibilities and can come from different areas of the organization. Often they are members of the senior management team with operational responsibilities. Sometimes they are CEOs or company presidents. Other times they are at the vice president or general manager level. But sometimes champions come from lower levels of the organizational chart, including first-line supervisors or department leads. While it may be harder to affect change from lower levels of the firm, their passion and commitment may be enough to generate the enthusiasm necessary from all levels of the firm to successfully lead the lean effort.
Champions are certainly more than process improvement cheerleaders. They are often technically proficient project managers who completely understand the underlying business issues that lean needs to address. Additionally, they set and maintain the goals of the improvement projects, making sure that they are aligned with the overall business priorities and objectives. Lean champions also act as coaches and teachers, educating the entire organization, including the supply base, on the importance of lean. They are also facilitators and negotiators, helping to smooth out internal manufacturing and organizational issues, and keep lean initiatives on track.

Perhaps the most important element of being a lean champion is the ability to stimulate and motivate the workforce. Above all, successful lean champions seem to work well with all levels of employees and navigate through organizational minefields. “Corporate cultures have an undercurrent that can destroy many good intentions,” says Susan McGinley, a Lexington, MA-based operations consultant supporting the semiconductor processing industry. “Lean cuts across many corporate boundaries and it is difficult to get employees onboard without them seeing the eventual benefits.”

McGinley sees a lean champion as an executive level person with a clear vision, good communication skills, and a relentless tenacity to implement corporate wide change that will improve everyday work life and the corporate bottom line. She sees that lean philosophies are simple, yet implementation is next to impossible without a lean champion. “The most successful lean implementation I’ve seen was initiated at the executive level and championed by the vice president of operations,” says McGinley. “The least successful never got past the planning stage. They didn’t have a lean champion.”

In some companies there are several lean champions, with some having their foundations in related disciplines. “Our lean champions are a bit more broad-based than in some organizations,” says Dick Rappoli, manufacturing programs manager for military engines for Lynn, MA-based General Electric. “We employ Lean Event Teams to work on specific projects, and these teams often consist of from three to 12 employees. The team is usually led by a six sigma Black Belt.”

Rappoli sees these leaders as lean champions who are technically proficient and have significant leadership skills. “We have many lean champions working on many projects,” says Rappoli. “In our environment, they cannot be afraid to think outside the box and try new things.” He adds that the Lean Event Teams are designed to be cross functional and report into a senior leadership team, but they remain with a great deal of focus. “We may not call the leaders lean champions per se, but their training, focus, and commitment certainly put them squarely in that role.”
“A lean champion is the heart and soul of the organization,” says Larry Coté, president and CEO of the Ontario, Canada-based lean consultancy Lean Advisors. “Trying to complete a successful lean transformation without a lean champion can be as frustrating as trying to put a puzzle together without having the picture of the finished product—it can work but it is very difficult and takes so much longer.” Coté sees a lean champion as someone with the passion, dedication, and persistence to lead the participants in all levels of the organization.

“Lean champions need to communicate and influence up and down the hierarchy without being distracted or swayed by the naysayer,” says Coté. “They know the importance of following a proper implementation plan in order to get everyone moving in the same direction with the same vision.” Coté feels a lean champion doesn’t have to be an expert in lean, but they do need to recognize when they need assistance and where to get help when they need it. This is where senior level management must step in. “Whenever the lean champion runs into resistance or a problem requiring their influence, they need to step in without hesitation to do whatever it takes to reinforce the direction and activities detailed in the implementation plan. “A lean transformation is doomed to failure unless there is this special someone leading the charge and having the control and authority to complete the plan,” says Coté.

One of those special people is leading the lean charge for the Royal Canadian Mint, one of Coté’s lean clients. “I may be an untraditional lean champion,” says Craig Szelestowski, the vice president of human resources and lean enterprise for the mint. Using such lean concepts as value stream mapping, kaizen, and just-in-time, the mint has been able to increase efficiency in coin production and also reduce time to market in its important retail commemorative coin business. “We have manufacturing issues just like any other company,” says Szelestowski. “We are a vertically integrated company that includes the largest gold refining and bullion operation in Canada. We need to be focused on manufacturing efficiencies, time to market and cost. Lean helps us with that.” He notes that the mint has gotten so efficient that they are now doing some contract manufacturing as well. “We feel that our employees are the most important part of our lean initiatives, and as the head of human resources I have a unique relationship with them.”

Szelestowski adds that the mint has a no layoff policy which has contributed to increased employee involvement and a buy-in to lean initiatives. “We need to manage the people side of lean and work through the issues of change management,” he says. “We call it the cultural value stream.” He credits the mint’s senior management for an effective lean process. Its CEO is the organization’s overall leader, but Beverley Lepine, its chief operating officer, is the driving force behind lean initiatives. “There is accountability on all of our product lines and she keeps us focused.”

Companies with less mature lean implementations may have the most need for a champion to help them through the process. “Champions are critical especially in companies that are first time adopters of lean,” says Tony Paolini, a principal in the Dallas office of management consultant PRTM. Paolini, who has first-hand experience in client based lean implementations, sees the ideal champion as one who has a significant degree of influence and respect within the organization. “A good champion has an intellectual curiosity and a desire to understand what lean is,” he says. “A champion needs to be more than just output-based. They really need to understand the total effect of lean on the organization.”

One of Paolini’s lean implementations was with a manufacturing client in the telecommunications industry that had three international manufacturing sites. “The lean champion was the vice president of manufacturing,” said Paolini. “He participated in lean training, launched the lean implementation teams in all three manufacturing facilities, held regular conference calls with the marketing teams, participated in design reviews, and was present at factory conversions.” Paolini adds that the lean champion was available at all of the product line launches. “He was the go-to guy in all cases. He drove the corrective actions and understood the need to stay the course.”

“A lean champion believes in it,” says Bob Muth, the general manager for the Hanover, PA-based roller bearing and seal manufacturer SKF USA. “It is important to sell lean principles across the board.” Muth, a lean champion himself, feels that a lean champion needs to be a good communicator, a people person, and one who can convert the nonbelievers.

While people skills are important, a lean champion needs to have some level of a technical background, says Muth. “It is best suited for someone with an industrial engineering background with experience in capacity, manufacturing analysis, and time studies.” Muth feels the role of the lean champion gets easier over time. “SKF is very mature in our lean journey and we are continually working to improve our performance every year. Lean is part of our overall business plan.”

Lean champions are leaders. They bring focus and enthusiasm to a process that can be both exciting and frustrating at the same time. The lean champion needs a blend of the right personality, technical expertise, a solid belief in the principles of lean and strong management support. But they cannot be successful by themselves.

Successful lean implementations take strong organizational collaboration. The champion may lead, but a strong team is essential for success.

Foreign Competition Viewed as Only One Factor in the Decline of U.S. Manufacturing Jobs

News articles on the elimination of manufacturing jobs in the U.S typically focus on foreign competition in the form of low worker wages. They fail to take into account the effect in recent years of industry moving from mass manufacturing to lean manufacturing.

Richmond, VA (PR WEB) January 11, 2006––According to Stephen H. Martin, publisher of The Oaklea Press and editor of the highly popular book on lean manufacturing, “Lean Transformation: How to Change Your Business into a Lean Enterprise,” news and magazine articles that lament a decline in the number of domestic manufacturing jobs tell only a portion of the story because they tend to focus on jobs leaving the U.S. and heading overseas.

Martin said, “It’s true that in the new, global economy, out sourcing to other countries has become commonplace. What the authors of these articles fail to recognize, however, is that workers’ salaries are only a small part of the manufacturing cost equation. And they overlook that the elimination of jobs isn’t all to foreign countries. You see, the waste inherent in the old mass manufacturing system is enormous. Lean manufacturing simply requires fewer people to produce a like amount of goods. That’s a major reason so many manufacturing jobs have been eliminated.”

For more than ten years, now, manufacturing companies around the globe have been changing the way they work. Most people employed in service industries may have barely noticed, but this transformation has resulted in huge benefits for almost everyone, Martin said. It’s a primary reason labor productivity has been up about 4% annually in recent years and the prices of manufactured goods have remained steady, or even dropped.

So-called lean manufacturers do not build goods to forecast and store them in warehouses waiting for them to be sold, tying up capital and taking up huge amounts of space. Like Dell Computer, they wait until they have an order in hand, and then they assemble a product quickly, using continuous flow, lean manufacturing techniques.

Mass manufacturing typically generates enormous amounts of inventory in the form of work-in-progress––inventory that takes up expensive space and ties up capital. Building to forecast means gambling corporate dollars by making products without being certain someone will buy them. And it requires investments in warehouses to store them. When forecasters are wrong, goods often are sold at a loss––if they are sold at all. Imagine, for example, how much less a product in the electronics industry is worth six months to a year after it is made.

Lean manufacturing eliminates this waste. For a variety of reasons, a lean operation typically turns out higher-quality products than a mass manufacturing cousin. It almost always requires 25% to 40% less direct labor. It uses about half the floor space because no room is required for work-in-progress. Warehousing costs are cut to the bone because finished-goods and parts inventories are normally reduced from several months’ to only a few days’ supply.

Many American manufacturers caught onto this in the early to mid 1990s and have now adapted to the new way. These companies are able to compete in the global marketplace no matter in what country or location their products are assembled. Dell Computer, for example, builds products all over the world, including the United States, as does Toyota.

Martin said that in the last five years more and more domestic manufacturers have begun converting to lean manufacturing, which accounts for sales of more than 50,000 copies of his book. He said the biggest problem they run into is easy to identify but difficult to overcome. It is often the real reason behind the closure of a plant. People in middle management and in supervisory positions must shift from a “command and control” mentality to that of “team leader.”

Martin said, “If they don’t (change the way they operate), the lean model won’t work. Those who have been operating in the command and control mode all their lives usually find this difficult. For many it may be impossible. Often, top management may find it quicker and easier to scrap a factory and start over somewhere else, perhaps in another country or another state, than to spend time and money teaching old dogs new tricks.”

He went on to say that studies show that workers in a lean enterprise are happier with their jobs than those in traditional businesses. “Why wouldn’t they be?” he said. “They are no longer viewed or treated as unthinking robots. Because the hierarchy has been eliminated and no supervisor is breathing down their necks, they must use their heads, make decisions, and solve problems in consultation with other team members. The only downside––and whether it is a downside depends on your point of view––is that there are fewer of them. When a factory is fully lean and operating at its former capacity, it often will have 40% fewer employees. Unfortunately, this part of the story is all that normally makes it into print.”

Expert suggests lean production

by Bradley Parsons

Staff Writer

Sixteen years ago, James Womack examined General Motor’s convoluted supply chain and successfully predicted the auto giant’s slow decline. Womack hopes Jacksonville heeds the warning that GM ignored.

Toyota is expected to soon surpass the Detroit car maker to become the world’s largest, while industry analysts debate the chances that GM will be forced to declare bankruptcy. Toyota won that battle by stripping inefficiencies from its production, marketing and consumption chains. It’s a plan of attack that could prove useful for Jacksonville businesses to stay competitive in a global economy, said Womack.

Womack, the founder and president of the nonprofit Lean Enterprise Institute, was the keynote speaker at Tuesday’s Regional Workforce Summit. Womack presented his production strategy to an audience of about 300 gathered at the Hyatt. Dubbed “Lean Manufacturing,” the approach seeks to create value at every step a product takes from the drawing board to the customer.

Lean manufacturing started on Henry Ford’s assembly lines. It was later perfected by Toyota. The Japanese manufacturer used the approach to bolster its profits and market share. The Toyota/GM comparison is instructive, said Womack. Those who use lean manufacturing will grow, he said, usually at the expense of businesses that don’t.

That should cause some concern in America, where Womack sees a manufacturing sector rapidly losing ground to developing countries.

“There’s 1.3 billion people in China, and they all want your job, and they’re willing to work for less money,” said Womack.

By wringing value out of every step of the manufacturing process, lean manufacturing can keep American suppliers competitive and preserve their employees’ standards of living, he said.

Womack advised employers seeking to get lean to first take a walk through all of their processes that impact their customers. But, be prepared, he warned. It’s usually not a pretty sight.

Managers are likely to find procedures riddled with redundancies and inefficiencies. Navigating company procedures produces the infamous busy work. In fact, most employees would list as their primary value to a company as “being able to get things done,” said Womack. In other words, their ability to work around the intractable procedures.

“Their greatest value shouldn’t be working around common problems,” said Womack. “It should be finding ways to fix recurring problems.”

At every step of their tour around their company, managers should ask “Does this step create value for my customers?” said Womack. Many will find in the process that their customers are not clearly defined. Rather than catering to customers’ wants and needs, many companies are cranking out product first then trying to convince people to buy, he said.

Jacksonville is the first city to contact Womack about the potential of lean manufacturing. Mayor John Peyton and City Council President Kevin Hyde have taken an important first step in initiating a conversation on workforce strategies, he said. Government can make its biggest impact on the workforce by providing forums like Tuesday’s summit where workforce problems can be candidly discussed, he said. Public schools could also help by teaching children the basics of creating value for customers, he said. The subject is largely ignored today.


Mayor John Peyton fields questions from reporters before entering the Regional Workforce Summit.


Jerry Bussell, vice president of global operations for Medtronic, and James Womack, president and founder of the Lean Enterprise Institute.

Chrysler boss urges workers, managers to espouse change

Fri Jan 13 2006

By Chris Vander Doelen

DETROIT-- Big changes will continue on the plant floor in the Chrysler Group's North American assembly operations as the company expands lean manufacturing, and Canadian workers should embrace them, said president and CEO Tom LaSorda.
If Canadian autoworkers try to block Chrysler's efforts to match Toyota-style manufacturing efficiencies they will endanger their plant's competitiveness and put their jobs at risk, LaSorda said.

In the U.S., the United Auto Workers has agreed to the introduction of work teams at Chrysler's two Toledo, Ohio, plants, and in their truck plant in Sterling Heights, Mich. During contract bargaining last summer the CAW refused to entertain talk of work teams, which rotate assemblers through different jobs during the same day or week. Veteran workers consider team work a threat to preferred jobs they have won through decades of seniority.

LaSorda said most of Chrysler's Canadian workers are not attempting to block the changes, and it would be "in their best interests" to help the new systems work.

"They can call it whatever they want if they don't like the word team," he said of the few who might oppose the coming changes. "The issue is, people have to work together. We need to move into smart manufacturing and we want to do that in Canada. "They're experimenting," he said of Chrysler's two Canadian plants. "They're going to pilot" -- meaning run test vehicles down the assembly lines again and again to find faster and more ergonomically sensible ways to build cars and trucks.

The widespread changes Chrysler is introducing to its American assembly plants include Japanese-lean manufacturing, European-style work teams and campuses of parts suppliers and subassemblers.

Between them, the workplace changes will totally transform Chrysler Group's efficiency, quality and profitability, LaSorda said. Since Dieter Zetsche took over the company in 2001, Chrysler's goal has been to match the best automakers in the business by 2007 in vehicle quality and plant efficiency.

"We're already doing it in Mexico," Lasorda said during an interview during Detroit's North American International Auto Show with Steven Landry, president of DaimlerChrysler Canada.

Chrysler's Mexican assembly plants even exceed Toyota's efficiency levels, he said.

Workers shouldn't be afraid of the changes, LaSorda said. They already exist in some form in every one of Chrysler's 30 assembly plants, including those in Windsor, Ont., and to a much larger extent, Brampton, Ont.

LaSorda said he doesn't decide how the workplace changes occur. "I don't get involved in it." He leaves the details to the managers of each plant and their local bargaining committees.

"Everyone's seen what's been done in Mexico -- these plants are absolutely competitive with Toyota. They can compete with any Toyota plant in the world. And we want to see the Canadian plants do something similar."

The issue of Chrysler becoming a modern manufacturing company that can beat the best in the world is not about Chrysler's unionized workforce, he said. "This isn't about the employees only. It's about management waking up and saying, let's treat the employees the way they should be treated I and let's recognize employees when they do a great job. "Our eyesight cannot be 'what did GM do,' and 'what did Ford do.' We already know that. The people and the companies taking our jobs away are usually from Asia: Toyota, Honda, Nissan and Hyundai."

Chrysler is not yet capable of beating them in all its plants, LaSorda said. "I believe that we do not have an organizational structure or culture yet that embraces what needs to be done. Which means that the operator is at the top of pyramid and everybody else is there to support them.

"The day we get to that is the day they'll win. But it's management that usually screws this stuff up. Not the workforce."

--CanWest News Service

Making Iowa more business friendly a goal for lawmakers

DES MOINES, Iowa Making the state a friendlier place to run a business is a priority for some lawmakers this year.

Governor Vilsack, in his Condition of the State speech, proposed a plan that includes 50 (m) million dollars over three years to help researchers turn new ideas into products.

He also seeks more than three (m) million dollars in next year's budget to create an Iowa Biosciences Alliance, a board that focuses on improving research at universities.

The group also would help workers develop the skills needed to work in the biosciences.

The goal is to create 10 new bioscience businesses in the state and attract 300 jobs.

Vilsack's plan also includes creating the Lean Manufacturing Institute, which would provide training for Iowa's manufacturers. The training would help companies focus on methods of reducing inventory, on-time delivery and higher productivity.

Vilsack's budget includes 250 thousand dollars for the Iowa Department of Economic Development to kick off the institute.

Hanger Prosthetics and Orthotics Wins Manufacturer of the Year

ORLANDO, Fla., Jan. 12 /PRNewswire/ -- Hanger Prosthetics and Orthotics
National Fabrication Center in Orlando has been awarded the 2005 Manufacturer
of the Year Award by the Manufacturers Association of Central Florida (MACF).
A division of Hanger Orthopedic Group, Inc., Hanger Prosthetics and Orthotics
operates national fabrication centers in Orlando, FL, Anaheim, CA, and Tempe,
AZ and is the largest provider of orthotic and prosthetic patient care in the
United States.

One of the keys to Hanger's Orlando National Fabrication Center winning
this award is the success the center experienced as a result of implementing
Lean Manufacturing through a collaborative effort with the Florida
Manufacturing Extension Partnership (Florida MEP).

Lean Manufacturing utilizes simple but effective methods to identify and
reduce waste and inventories, clear shop floors, and streamline production
processes, all with a goal of decreasing costs and increasing productivity.

Based on previous experience and success with Lean Manufacturing and Six-
Sigma, Randy Harris, Vice President of Fabrication Services and Jeff Rosen,
Director of National Fabrication - Orlando knew that ever-changing technology
and increasing overseas competition made it necessary for the division to go
Lean.

"While we continue integrating the latest CAD/CAM techniques featuring the
Hanger Insignia(TM) laser scanning technology into our products and
manufacturing processes, several of the steps in the manufacturing of our
orthotic and prosthetic devices are still labor intensive and can benefit from
Lean methods," said Harris.

After educating the center's employees on Lean Principles, Florida MEP
Project Manager Henry Miller worked in a collaborative effort to select two
different orthotic production areas and map the flow of work from beginning to
end of the production process. "Through this process, we identified several
areas in which to improve productions processes and made a group within the
cell accountable for the changes," said Miller. "From there, the National
Fabrication - Orlando team took over and really turned the opportunities into
reality."

Results included:

* Reduced customer lead time,

* Improved product quality,

* Cost savings from reduced labor hours,

* Increased average monthly product thru-put, and

* Sustained continuous improvement.

Recognizing the success achieved by the National Fabrication - Orlando
facility, Hanger senior management determined this model to be the company
standard and rolled out Lean Manufacturing in the Anaheim and Tempe national
fabrication centers.

'Line' process requires smooth running

Bangkok Post

KANUTE NIRUNTASUKKARUT

This is our penultimate article in our series about selecting continuous improvement initiatives for your manufacturing organisations. Our series is based on the fact that the choice should tie closely with the type of manufacturing processes used in your organisation. We have already covered three process types: "project", "one-off", and "batch".

For "project", the improvement initiatives should focus on the human-resource aspects of your company due to its high leverage on people skills. For "one-off", on the other hand, job planning and scheduling are critical aspects because this process typically is for large, complicated products. Lastly, for "batch", improving flexibility is the key aspect due to the need to maximise the overall utilisation of the production line, while minimising the work-in-process inventory.

This week we will move on to the next process type, which is "line". This is similar to a batch except that the issues of idle production or batch queuing do not exist. A line process means that as work on a task at a particular stage is complete, it must be passed directly to the next stage for processing without waiting for the remaining tasks in the "batch". When it arrives at the next stage, work can and must start immediately on the next process. In order for the flow to be smooth, the times that each task requires on each stage must be of equal length and there should be no movement off the flow production line.

Businesses with line processes generally sell standard products that are sold on price and are typically associated with large customer orders. The level of product change is comparatively low and usually prescribed within a list of options. Product design and quality are determined at the outset to meet the perceived needs of the customer. Examples would be the manufacturing of automobiles, FMCG (fast moving consumer goods), and beer bottling.

To provide low manufacturing costs, the process is dedicated to a predetermined range of products, and is not geared to be flexible outside this range, due to the high costs of change. This provides an opportunity to maintain the necessary quality levels throughout the process. Typically the production volumes are high in order to achieve the high level of utilisation necessary to justify the investment, and the cost structures involved. Output changes are more difficult to arrange, due to the stepped-change nature of capacity changes.

To achieve low manufacturing cost, generally relatively high process capital investment is required. The volumes involved allow schedules of materials and components to be planned with associated buffer stocks to cover the uncertainty of supply. Work-in-process inventory will be low.

Although finished goods will tend to be high, many businesses will only make standard products against customer schedules, or on receipt of an order. Also, makers of products for which many optional extras are offered (for example, automobiles) will tend to have a policy of only making to a specific order. The high areas of cost tend to be in materials, bought-out components and plant overheads, with direct labour a relatively small part of the total.

Since the characteristic of the line process is that the output from each stage moves forward continuously, typically with high production volume, we need to focus on two aspects. The first aspect is to ensure that the production line runs smoothly without hiccups along the line, otherwise the process will cease. The other aspect is to ensure the process produces minimal defects along the way because there is no tolerance for substandard output to be reworked.

There are quite a few well-known techniques or concepts that address these two aspects. They include lean manufacturing, the theory of constraints, and Six Sigma.

Lean manufacturing is a "flow-focused" management philosophy focusing on the reduction of the seven wastes (over-production, waiting time, transport, over-processing, inventory, motion and scrap) in manufactured products. The theory of constraints is a "system-focused" concept that concentrates on the part of the overall process that slows the speed of product through the system. Six Sigma is a "problem-focused" quality management programme that identifies and corrects defects in the company's processes and products. Each of these is very appropriate for a line process and selection should depend on the nature of the most obvious problems in your current condition.

Next week, we will move on the last article in this series, about continuous processes.

Lean and Mean

Sheryl Nadler, Hamilton Spectator
Robert Hattin, president of Edson in Hamilton, says, 'If people aren't involved in lean manufacturing, fold up and go home because you aren't going to survive.'

A stronger loonie is forcing Canadian companies to firm up to survive
By Lisa Grace Marr
The Hamilton Spectator
(Jan 5, 2006)
Every time the loonie rises, Robert Hattin gets a major goose egg.

"I don't mind a little motivation but I don't like being clubbed over the head. It makes for a very painful day and unfortunately the Canadian dollar is clubbing us over the head," said Hattin, president of Edson, a Hamilton packaging machinery company which exports 80 per cent of sales to the U.S.

With fixed prices, Edson loses about 5 per cent plus for every 5 per cent increase in the Canadian dollar.

Financial analysts celebrated the TSX's record-setting pace this week. According to a new poll released yesterday, Canadians are more optimistic about the economy than they have been for 13 years.

And many Canadians have changed their mind about the impact of the strong Canadian dollar on the nation's economy, with 43 per cent believing the strong dollar has a positive effect on the economy, compared to 41 per cent who think it has a negative effect.

Maybe that 43 per cent should talk to Hattin.

There aren't a lot of options for manufacturers in the face of such change. But there are some.

Jay Myers, senior vice president and chief economist with the Canadian Manufacturers and Exporters (CME), said Canadian companies have responded in a series of ways: raising prices; forging global partnerships; buying equipment or supplies from U.S. companies; and/or making investments in new technologies.

Edson used a host of these to survive.

Awhile ago, Hattin was forced to lay off some staff, but then reconfigured his company, changed a product mix to offer a more expensive, higher-end set of machinery and hired a lean manufacturing consultant. That expertise and switch in philosophy has helped get rid of waste at every level of the organization, from engineering to shop floor, and helped Edson's managers and staff take ownership of the process.

"The rise of the Canadian dollar is a two-edged sword. There is loss of revenues, loss of profitability, all those other things. The upside for those who want to gamble and say there is a tomorrow, we have used this (strong Canadian dollar) to buy machinery to become more efficient. The biggest (change) is the lean processes. If people aren't involved in lean manufacturing, fold up and go home because you aren't going to survive."

He also realized 20 to 70 per cent in savings when he switched from Canadian to American suppliers -- a move he regretted but found inevitable when Canadian suppliers refused to lower prices. These changes helped his company recover -- Edson hired back some of its old staff, and at about 80 employees is only 15 shy of its level a couple of years ago.

Myers said Canadian manufacturers must use such innovation and technology to survive.

"A lot of companies are saying it doesn't make sense to produce a standard product, so we're going to make a more specialized product. They're looking at improving design, quality or service of a product or they're looking at the degree of customization of products."

That's just where Elettra Technologies was two years ago. Elettra Technologies is a company which rose from the ashes of Westinghouse in 1995. Ex-Westinghouse employees decided to forge ahead and make standardized engines to replace or maintain parts for Westinghouse engines that were made all over the world.

But when the dollar started to rise, "things were looking pretty bleak" said Walter Silva, marketing and sales manager for Elettra. "The rapid rise of the dollar caught us off guard. The way we've managed to survive is to get out of standardized products. We had to change our philosophy and quickly."

Elettra now makes custom machines for companies all over the world -- it recently sold electric motors to be used in nuclear power plants in Ontario, South Korea and Romania. It also sold specialized boring equipment to transportation officials in Turin, Italy who needed to extend subway tunnels for visitors to the winter Olympics.

"Our U.S. business is now bigger than we had two years ago. For us, it's been a bit of a benefit."

John Leavitt at Pensafe, which makes snap hooks and D-rings, said four months ago that if the dollar went above 86 cents, they wouldn't be able to survive. But as he drily observed yesterday -- when the dollar closed at 87.21 cents US, its highest level since mid-1991 -- that he's still answering the phone.

"I think it's forcing all of us to change our focus a little bit," he said. "What we're trying to do here is focus on product innovation and design/engineering rather than pure manufacturing. If we're forced into it, we'll take manufacturing elsewhere.

"Business for the last 100 years has chased cheap labour around the globe and will continue to do that. One thing we're hopeful for is our ability to compete on engineering and customer intimacy standpoint."

Pensafe is also working closer with a company in the U.K. which has helped them market and distribute product there. Pensafe will do the same for them in North America. Leavitt said more Canadian companies will need to consider global partnerships to stay in business. "You talk to any Canadian business of any size, it's all about forging partnerships. You look at the electronics business, everybody is a competitor but everybody is also a (potential) partner. We're a microcosm of that."

That's the same position in which Edson has found itself. Late last year, Edson entered into discussions with a Japanese company, "the equivalent of Toyota in the packaging world," about a partnership, said Hattin.

Some analysts suggest the dollar could hit 90 cents this year -- that and other factors could throw a wrench in the best-laid plans.

"The No.1 threat for Canada going forward is the U.S. dollar," said BMO's Rick Egelton.

He said Canadian firms have "largely adjusted" to the loonie's rise in the past three years but will be ravaged if foreigners weary of buying American assets and pull the plug on the U.S. current-account deficit, causing the American dollar to plunge.

Lavoie said many analysts are projecting the U.S. economy to take a downturn later in '06. That, too, will present even more challenges.

But there is an upside. Lavoie said so far, despite the turbulent economic environment, manufacturing has survived. According to the CME, manufacturing productivity has increased by 15 per cent since the end of 2002, over the time the dollar has risen dramatically.