For some time business conditions in California have been less than favorable to manufacturers and as a result many are considering relocating to other states, or beyond. Others are looking at containing operating costs, trying to cope with the drop-off in orders and profits by cutting jobs — over 300,000 in the past three years. Yet for many companies, eliminating jobs or relocating for cheaper labor is a quick fix, and not a very realistic one.
“The major obstacle to profitability is not the cost of labor. The real enemy is waste,” says Saeed Madjidi, senior lean manufacturing consultant for California Manufacturing Technology Consulting (CMTC). “There are many opportunities to reduce waste in the plant, from wasted capital and labor to space, energy, inventory, materials and so on. The opportunities are not just wage-driven.”
CMTC is a not-for-profit organization with experience in areas of lean manufacturing, quality management, information technology, strategic business, and supply-chain management services.
To date, the group has helped more than 1,500 California companies, in markets that range from high-tech to heavy manufacturing, reduce costs, boost sales, and retain employees as well as profits. One of its primary methods is through lean manufacturing services, which help manufacturers apply the latest manufacturing technologies and techniques that result in more efficient and productive production processes.
“Lean manufacturing” should be understood as a business theory by which the manufacturing process is reconceived as a competitive weapon. The concept calls for removing all non-value-adding activities, those that often cause bottlenecks and other forms of waste, from the production process.
Eliminating waste from manufacturing reduces production time and costs while maximizing quality and customer service. For example, by eliminating waste, lean manufacturing can reduce inventories, lower the cost of production - including energy costs — save on shop floor and storage space, and save on labor costs without cutting jobs. The concept applies to older industries as well as newer ones.
Strategic Materials Corp., a South Gate, CA, steel foundry started looking at CMTC Lean Manufacturing Services in late 2002 at the encouragement of one of its primary customers, Fresno Pumps in Fresno, CA.
“Our production process is from the dinosaur age, technology-wise,” says Steve Livingston, SMC president. “Essentially, we are a provider of steel and stainless steel alloy castings to the OEM pump industry. We melt in induction electric furnaces and pour products that range from one-half to 2,000 lbs. Our production capabilities range from a single product — which, often, is an emergency replacement — up to about 100 products. Our customers are pump manufacturers that sell to users who typically are in the oil industry, and may be large contractors, producers, or refiners. The majority of them are offshore.”
Livingston describes his market as being purchase-order-driven. In the 1980s and ’90s purchase orders would come for products quoted six to 10 weeks earlier. The products ordered would be shipped six to eight weeks later, a relatively comfortable turnaround time.
“In recent years lead times have been getting tighter,” Livingston explains. “Typically it’s about four weeks now, and that has begun placing significant demands on the system. Because we use a very energy-intensive electric melting process, we do our melting at off-peak hours (normally nighttime). With the high cost of electricity in Southern California, we can’t survive if we have to extend our melting hours into peak periods.”
At the same time, Livingston says there were a lot of reasons for SMC to want to stay located in South Gate. The area offers a number of advantages, including skilled labor, readily available materials, and supporting businesses such as non-destructive testing labs needed by the foundry industry. Also, SMC had relocated in 1999, and the plant’s infrastructure, including a 1,700-amp power transformer, is important to its electric furnace operation.
“We knew that we had to react to increasingly shorter lead times,” Livingston says, “but we didn’t really understand that we also needed to become lean in order to remain competitive. That was pointed out to us when I visited our largest customer, Floway Pumps, last year. They explained to me that they were far more efficient, had reduced lead times, and eliminated waste. This would no doubt affect our business as one of their suppliers.”
CMTC’s Madjidi visited the foundry and explained the lean manufacturing process and what SMC might hope to get out of it. A CMTC consultant came on-site to study the production process and the flow of information, including a Value Stream Map.
“The consultants then gave us a clear presentation of the steps involved in their work, how they would begin with Value Stream Mapping to figure out where the waste was, and the steps it would take to improve of our processes,”
One of the first steps was getting SMC’s approximately 30 employees to buy into the project. “These were very loyal and knowledgeable employees who might have resented it if we simply forced the program on them,” Livingston says. “By including them in our discussions we got their support and a lot of valuable input.”
Lean manufacturing training that included participation from 10 key employees, including production line people, managers, and Livingston, followed the initial Value Stream Mapping.
“What was especially amazing to me is that we had recently moved into our building, and we had had the unusual opportunity to lay out our plant exactly as we saw fit,” he says. “But, we had made mistakes in the placement of equipment and allocation of storage space, mistakes that were causing us to work inefficiently and tie up materials.”
Livingston says that products sometimes traveled through the plant in circuitous routes — “spaghetti-like,” he says. Product molds were made too far in advance, tying up space and demanding materials, like the costly chemically bonded sand used to make the molds. Also, since some customers no longer performed the finishing on the castings they bought, SMC sometimes had to rely on outside machine shops to complete the order. This could require more time than was available. And, the front office data flow was not handled efficiently.
“Fortunately, we didn’t need to replace a lot of equipment to ‘lean out’ our processes,” Livingston says. “Simply by adjusting our logistics and incorporating more efficient building of molds we were able to make significant progress.” Importantly, this was all done without cutting any jobs.
Livingston says the lean manufacturing concept has SMC to compete well in the supply chain, delivering products on time without raising prices. He says that, so far, employees have raised their daily efficiency by a factor of 1.5-2 hours. It’s also important to note that electric melting is still confined to off-peak periods.
The full value of lean manufacturing may not be realized at the foundry for another year or two. But in the meantime, CMTC will help by installing an enterprise resource planning (ERP) system which should help improve communication, workflow, and overall efficiency even more.
Ed Sullivan is a writer in Hermosa Beach, CA.