Lean Helps Company Soar
The national economic storm that began in the latter half of 2000 has hit many states, but in California alone, more than 300,000 manufacturing jobs have been lost.
The aerospace sector, in particular, has sustained some of the heaviest casualties. A November 2002 report by The Commission on the Future of the U.S. Aerospace Industry-called for by President Bush-calculated a national loss of 24,500 aerospace-related jobs from 1996 to 2001. While California still employs a fair number of aerospace workers, states such as Arizona, Georgia, Illinois, Kansas and Texas actually gained aerospace jobs during this same period.
The emigration of aerospace jobs is no surprise given California's high energy costs, workers' compensation expenses that have skyrocketed almost 100% in one year and hefty business taxes that are expected to rise as the state tries to solve its budget deficit.
Yet, this dark cloud has a silver lining as proactive aerospace manufacturers are fighting back by adopting lean manufacturing techniques. Under the guidance of manufacturing technology consultants, one local manufacturer managed to save approximately 30 existing jobs and create 12 to 15 new jobs, all while achieving a return on investment (ROI) that exceeded 5:1.
For one local aerospace parts supplier, lean management techniques spelled the difference between relocation and making a stand in California.
Operating from three buildings totaling 225,000-square-feet that are situated within a 10 square-mile radius in Southern California, Ace Clearwater Enterprises (Torrance, CA), has 182 employees who design and build complex, formed and welded assemblies for major aerospace and power generation companies.
"We've been fairly successful at keeping our customer base, but commercial aerospace isn't exactly doing real well right now," says Gary Johnson, vice president of Ace Clearwater. "There are several parts houses that are no longer around. We didn't want to go out of business, too, so we realized that we had to take advantage of any opportunity to expand our business."
Such an opportunity materialized a few years ago when one of Ace Clearwater's customers, Honeywell, decided to move away from manufacturing its own formed details and, instead, focus on design and systems integration. Honeywell first considered moving the plant to Mexico, momentarily putting some Ace Clearwater jobs at risk. However, the extension of an unofficial "right of first refusal" to Ace Clearwater resulted in the company's decision to purchase the Honeywell operation.
"Honeywell approached us and said, ‘You can buy our press and support operations, however, you can't buy the land,'" recalls Johnson. "That meant we had to move everything out of their facility near downtown Los Angeles."
Given the high price of real estate and the spiraling costs of operating in California, Ace Clearwater's senior management also considered moving the Honeywell equipment to an alternative location, but management wanted to continue growing its existing Southern California base. Consequently, a vacant, company-owned facility located in Compton, CA, was chosen as the new site.
To stay in California, Ace Clearwater had to shoehorn all of the heavy equipment-three hydro-
forming presses, a 400-ton Lien Chei press, a custom clean line, annealing ovens and all support equipment-housed in Honeywell's 180,000-square-foot facility, into its 20,000-square-foot plant in Compton.
"It was a pretty immense project, and we did not have the staff to handle the logistics of laying the facility out," admits Johnson. "Additionally, the Compton facility was receiving some equipment that was new to us, like the hydro-forming equipment and new hydraulic presses. We were concerned that we didn't have the internal expertise to do the industrial engineering for this machinery.
"What made the task even more challenging, is that Honeywell was very adamant that we had to move everything, and be up-to-speed on making parts for them again, in just six months," adds Johnson. "With such a big task, we knew we needed help. Because we had used California Manufacturing Technology Consulting (CMTC, Torrance, CA) for several projects over the years, we contacted them this time to (help us) pull off the Honeywell acquisition. We knew that they had already done some great stuff in terms of facility layout and lean manufacturing, so we felt they could do the same for us this time."
CMTC, with regionally focused teams throughout the state, is a consulting firm that helps California manufacturing companies increase their competitive advantage through improved methods of management and manufacturing. A private, nonprofit organization, CMTC is partially funded through the California's Business, Transportation and Housing Agency Office of Small Business under the Manufacturing Technology Program. Some funding is also obtained through the Federal Manufacturing Extension Partnership, under the auspices of the National Institute for Standards and Technology (NIST).
Lean manufacturing starts with lean integration
CMTC initiated design work in the summer of 2001. Honeywell's current plant layout was mapped and analyzed, and the results were used to develop and map the new, smaller layout to improve space utilization.
"The move was a massive ‘24/7' nonstop effort for several months," Johnson says. "One press was 80,000 pounds. It went 22 feet underground, and we still had to raise the roof 12 feet to get it in. It was a terrific example of really great teamwork. CMTC was absolutely awesome in terms of the logistic coordination. At first, we had a teleconference every Tuesday with representatives from Honeywell's headquarters in New Jersey, an office in Phoenix-where some of the parts went-and their local management here in California. Pretty quickly, though, it got to the point where the weekly Tuesday teleconference was canceled because there were no issues."
By June 2002, Ace Clearwater had managed to squeeze all of the required equipment into the much smaller space and was online three weeks ahead of schedule.
Johnson explains that what made the move work was the lean manufacturing techniques that were integrated into the move. "Everything was done with an eye toward being as efficient as possible," he says. "A lot of it had to do with how the facility was actually laid out and how the work was designed to flow through there."
The lean-manufacturing facility layout reduced the need for floor space by improving the workflow, resulting in a reduction of unnecessary inventory.
Johnson says that competitiveness has increased by at least 50% because the building of parts has improved. In addition, implementing lean manufacturing has resulted in new business. "The new capabilities allow us to offer more parts to our existing customer base," says Johnson. "Now we can compete with other, more horizontally integrated, houses. The plant runs two shifts to keep up with the demand. This saved jobs-not just the people that we hired from Honeywell, either. The increased demand has created new jobs."
The lean-manufacturing project not only resulted in keeping the plant in California and retaining the manufacturing jobs, but the moving and building-improvement costs stayed within the California economy. Ultimately, the new plant layout and the incorporation of lean manufacturing principles resulted in an estimated $5.2 million sales increase.
CMTC's manufacturing consultants provided Ace Clearwater employees with hands-on guidance in the areas of lean enterprise services, strategic business services, information technology, quality management and supply chain management. Under their guidance, manufacturers such as Ace Clearwater learn to fight back against the loss of business and jobs to out-of-state enterprises.
In a recent survey, the number-one barrier to success that California manufacturers face is meeting the demands of increased production and cost efficiencies. Manufacturing plants have traditionally produced large lot sizes based on forecast, with batches pushed from department to department by people trained in limited, repetitive tasks. However, it is becoming clear that this approach leads to excessive inventories, long customer lead times, unnecessary material handling, wasted time and wasted resources. Lean manufacturing meets this challenge by reducing costs and increasing production while maintaining a product's original quality.
The implementation of lean manufacturing techniques began with a lean factory diagnostic, where consultants assessed how work and information currently flows through the factory. A baseline of metrics was established to act as guide points to determine how to apply lean methodologies to achieve the greatest impact.
Ultimately, the plan was rolled out in phases that involved project management, mentoring, knowledge transfer and joint implementation-a process that called for thorough training of most plant personnel.
To help reduce training costs, CMTC holds a contract with the California Employment Training Panel (ETP) that allows manufacturers to take advantage of $2 million in employee training funds. This frees up funds for both classroom and hands-on training at the site. Since its inception in 1982, the ETP has disbursed more than $762 million in training funds, with more than 417,000 California workers trained. Approximately 41,400 California businesses have been served, 80% of which have fewer than 250 employees.
After lean manufacturing techniques are fully learned, implemented and maintained, businesses commonly experience reductions in production costs, overhead, factory floor usage and work-in-progress inventory levels. A fiscal year-2003 survey of 165 CMTC clients by NIST identified the following results from the implementation of lean manufacturing techniques: a total annualized sales increase of $100 million, and a total annualized cost savings of $16 million.
"CMTC's level of expertise and knowledge for the facility layout and relocation helped us reduce costs, increase sales, save jobs and move into the new facility," says Johnson. "This gives us a bit more of an edge to control our own destiny."
• Under the guidance of manufacturing technology consultants, one manufacturer managed to save approximately 30 existing jobs, and create another 12 to 15 new jobs.
• Lean manufacturing helps reduce costs and increase production while maintaining a product's original quality.
• Businesses commonly experience reductions in production costs, overhead, factory floor usage and work-in-progress inventory levels from implementing lean manufacturing.