When most people think of lean, companies like Toyota, Ford or Boeing spring to mind. And when they think of Wisconsin, they envisage cattle and cheese. However, manufacturing accounts for over 20% of the state GDP. Kelly Sullivan, Senior Project Engineer at the University of Wisconsin-Stout, explains what lean has done for local manufacturing SMEs.
Between 2005 and 2012 I worked for the Northwest Wisconsin Manufacturing Outreach Center at University of Wisconsin-Stout, in Menomonie. The NWMOC serves over 3,804 manufacturing enterprises in 33 counties in the northwestern part of the state. Over 99% of these companies employ less than 500 people, with over 70% employing less than 10 people.
The NWMOC was formed in 1994 as part of the Manufacturing Extension Partnership (MEP), a federal funded programme to help small and midsize manufacturing companies to become more competitive and to keep the sector strong in the United States. The organisation is supported by the expertise of over 55 centres nationwide. MEP provides for a unique check and balance system that evaluates the effectiveness of client interactions six months after a project is completed.
The survey is conducted by an independent auditing group to track metrics such as number of jobs created/retained, increase in sales, increase in profit, etc. We categorised small and medium sized enterprises (SMEs) as those with 100 employees or less, and these are the companies this article will focus on.
WHY DOES LEAN WORK EFFECTIVELY IN THIS ENVIRONMENT?
This could be debated in many different ways, but here is my supposition.
First of all, when working with SMEs you are typically working with the owner or C-Level personnel to initiate a lean journey. They usually speak with fellow entrepreneurs about how they manage to survive and thrive during a downturn in the economy. We have repeatedly seen that the SMEs that embrace lean can truly compete in tough economic times.
Secondly, when you work with smaller companies, decisions on how to more effectively make your product can be made quickly. They do not get caught in the red tape of having to get three approvals, which takes days, weeks or even longer. On the other hand, it might take some extra coaching to convince them of the fact that changes are necessary, because most of the company owners have only known one way to produce their product.
Once they can see the value of a one piece flow or of reducing their changeovers, things can happen rather quickly. When implementing change, the fact that many of these facilities are not dependent on automated assembly lines is also beneficial, as it enables layout adjustments to be made over a weekend. I have seen some of these companies change their layout several times during a week to optimise their flow.
The last element I should mention is that the owners are willing to take risks and to try new manufacturing methods. This philosophy is what had them start most of their businesses in the first place. Most of these people had a vision for their product, but struggled with the manufacturing aspect.
HOW TO IMPLEMENT LEAN IN SMEs
Implementing lean in SMEs is not much different than implementing it in larger organisations. Here’s a couple of differences:
- With SMEs it is always important to start any lean interaction with an overview that includes a hands-on simulation to explain the terms and concepts. It can vary in length and structure from a one-hour session with a paper airplane simulation to a full eight-hour overview with simulations that involve building working circuit boards. This overview is critical to ensure that all employees understand why they are going down the lean path and have a clear idea of the impact lean can have on the company and on themselves. Also, when someone mentions that next week they will hold a VSM kaizen event, they will know what it is and why it’s happening.
- It usually takes several meetings with the owner or top-level management to convince people that lean is what is needed at their company. At larger manufacturing companies, employees have either seen the implementation of lean already or come from a company were lean was deployed. As I alluded to previously, once the owner of a small manufacturing enterprise sees the benefits of starting a lean journey, it is hard to control people enthusiasm. Sometimes they wonder why their company is not transformed in a weekend, which is why it is important to remind them that lean is a journey, not a point solution.
Once the journey to lean production is started, it is important to recognise that management style must change. Because the way the product is manufactured changes, the way the business is managed must change too. It is important to incorporate visual displays, daily defect huddles, PDSA/A3 and other lean management tools.
REAL RESULTS HAVE HUGE IMPACT
The following are some other impacts reported by NWMOC clients who wished to have their company names remain confidential:
- Reduced work in process from 30 days to 6 days;
- Reduced cycle time by 50%;
- Retained 13 employees and retain 3 other employees;
- Reduced defects by 28%;
- Reduced downtime on equipment by 30%;
- Increase sales by increased production floor space by 15%;
- Sales increased from $1.2 million/year to over $10 million/year.
During his seven years at the NWMOC, Kelly saw over 1,800 individuals receive training, worked with over 50 companies, recorded impacts of $60 million and over 350 jobs retained or created.
A couple of inspiring case studies follow.
Genesis Attachments LLC
The company was started by a small group in 1997. In 2005 they contacted NWMOC to start a lean journey. Genesis is a true engineered-to-order company. Every shear they produce is custom-made for the application. They have truly embraced lean production and lean management culture. Every employee is required to attend lean training, which has resulted in some incredible results.
- Lead time has been reduced from 43 to 11 days;
- Processing cycle time has been reduced by 42%;
- Improved profits;
- Increased market share, with the capacity created by eliminating waste they introduced a new product line.
Empire Bucket Inc.
This company was founded by Joe Pertz in 1971 and currently employs 35 people. The business had experienced success, but in 2010 sales were declining. In addition, Joe wanted to improve overall quality. General manager Sue Olson and sales manager Dan Miller met with Joe and convinced him of the need to investigate lean implementation. NWMOC project manager Aaron Bialzik and I visited Joe and his team and together we designed an implementation plan for Empire Bucket.
Here is what the company has realised thanks to the implementation of lean in just 12 months:
- Increased annual sales by $520,000;
- Added four new jobs;
- Retained two existing jobs;
- Retained $300,000 in sales;
- Cost savings of $150,000 in labour, $40,000 in materials, and $4,000 in energy.
Northern Wisconsin has a very diverse manufacturing base; the companies that have benefited from lean specialise in food processing, heavy metal fabrication, large agriculture machinery, custom kitchen cabinets and plastic injection molding, just to mention a few examples. Lean can be applied to any industry and to companies of any size.
So, the next time you drive past a start-up company, or a small job shop and wonder whether lean can be applied in such a setting, think about the experience of Wisconsin’s micro-manufacturers. The answer is a definite yes!
Photo courtesy of B Garrett