By embracing lean thinking, employee-owned Flinchbaugh Engineering (York, PA) aggressively developed its line-transfer business into a viable alternative to offshore outsourcing. It has grown from a supplier of pivot shafts for one company into a $24 million organization specializing in precision machining of complete parts using production lines owned and operated by OEMs nationwide.
The line transfer concept goes beyond the old-fashioned subcontractor relationship. By transferring individual or multiple-part machining lines, a manufacturer can reap lower part prices, eliminate high labor costs, improve machine uptime and extend equipment life.
The line transfer story goes back to 1985 when the firm took in Caterpillar Inc.'s clutch piston manufacturing line. Flinchbaugh manufactured the product using CAT processes until their in-house manufacturing improvements proved more efficient.
In 1996, bearing manufacturer SKF (Norristown, PA) transferred an entire assembly line to the company. New manufacturing processes were developed to improve efficiencies by nearly 300%. On-time delivery improved to 100%. Thus, several more SKF lines found their way to Flinchbaugh in 1997.
Flinchbaugh only recently realized what this line transfer expertise might mean to even greater business growth. The company now markets itself as the "on-shore alternative to off-shore outsourcing." According to Flinchbaugh's president Mike Lehman, going overseas seems like the thing to do these days. "They hear about 40 to 50% savings and companies are convinced offshore outsourcing is some kind of panacea. So, they write down their capital equipment and send production overseas-only to find out that the savings is more like 15 to 20%. With our lean manufacturing concept, however, we can take that equipment in-house, maintain it and keep it humming for years- in the states!"
When the company hears about a closure (line or plant) because of outsourcing, they propose line transfer. The company goes after the more complex projects - like the agreement etched out in 2003 that calls for 16,000 parts per year, involving 103 part numbers in two different families, or the transfer of a mature product line of more than 100 various Siemens mechanical sensor parts. The value of this line transfer exceeded $870,000 in annual sales and opened even more doors for them at Siemens. Currently Flinchbaugh has 10 line transfer agreements with more in the works.
LEAN LEARNINGThough lean implementation at Flinchbaugh Engineering started in the 1990s with Empowerment, Total Productive Maintenance (TPM), 5S, and even Kaizen, the cultural change within the organization didn't truly begin until Jim Reed from production and Wil Burkholder from engineering returned from their Lean Experience class held at the Lean Learning Center (Novi, MI) in March 2002.
The Lean Experience, a five-day program, aims to jump-start lean thinking and encouraged the company to try certain things, see how well they fit, modify it and go from there. The company was challenged with the four lean system rules: structure every activity; clearly connect every customer; specify and simplify every flow path; and improve through experimentation at the lowest level possible.
By applying the rule of structuring every activity, the company was able to put together a line transfer manual. It incorporates past transfer experiences and lessons learned, compiling the information into a book that's taken on sales calls and used by engineering to develop planning processes for new projects.
As for improvement through experimentation at the lowest level, it has used this principle to change the manufacturing belief system. Individuals closest to the machine operators-who may have resisted change in the past-are now the ones who are experimenting with new ideas and coming up with solutions.
HIGH AGREEMENTThe company now practices establishing high agreement, another Lean Learning Center principle. This was instituted successfully in a channel line that's part of the 1985 line move. First Flinchbaugh did training on lean rules and principles with the whole channel group. Then the group began analyzing their bottleneck area-lathe setup. In the past, an exercise like this may have resulted in disagreement. But Lean Learning taught the company to concentrate on establishing high agreement. By bringing everyone in and analyzing the situation step by step, they're getting the team to say, "Yes, this is the best way." In a company of 160 employees, that's a real challenge, but production manager Jim Reed says the team members made it happen.
As Reed and Burkholder point out, all organizations go through periods when they empower their employees to change. But, this can get out of hand if people start changing everything in sight. When management has to step in, often employees are reined in, which may stifle their creative thinking.
The trick is to find a happy medium. After coming back from the Lean Experience session, they put the four lean bedrock rules onto an 8 by 11 chart in several rooms to encourage employee discussion. By connecting these discussions to lean rules, change is more controlled and thus more positive.
Back in 1985 when Flinchbaugh did its first line transfer, they basically brought the line in, put it on the floor, got it up and running-and left it alone. The managers will be the first to admit they could have gone back and improved through experimentation, and connected process steps to get a better idea of waste or to improve line flow. These tools are in place now and the company is seeing results. In one channel area, they've reduced setups by 35%. They've also maximized floor space to accommodate new business and they're getting more throughput per person than ever.
Their success with Lean has changed more than processes and ways of thinking within the organization. Lean success has helped change the nature of their relationship with customers. From engineering firm to subcontractor to true partner, the company has parlayed lean into a dynamic new business model, lowered OEM costs and kept jobs from going overseas.
"More companies need to think like Flinchbaugh Engineering," says the Lean Learning Center's Andy Carlino. "When a company has truly embraced lean, it uses it not just to improve cost and quality but to really change the value they deliver customers. Through their successful lean efforts, Flinchbaugh Engineering has significantly improved on an already solid line-move strategy, and along the way they are delivering the kind of value manufacturing companies need to compete in our global economy."
Benefits1. By transferring machining lines, manufacturers can gain lower part prices, eliminate high labor costs, improve machine uptime and extend equipment life.
2. By applying the rule of structuring every activity, Flinchbaugh was able to put together a line transfer manual incorporating past transfer experiences and lessons learned.
3. Individuals closest to the machine operators, who may have resisted change in the past, are now experimenting with new ideas and solutions.
4. In one channel area, Flinchbaugh reduced setups by 35% and maximized floor space to accommodate new business.