U.S. packaging company's Lean journey brings unrivaled results
Many organizations have been faced with challenges in a declining economy, where even the best run companies begin to struggle with high employee turnover, fill rates that are in the tank and equipment changeovers that are painstakingly slow and tedious. Suddenly customer confidence is shaken and profit margins have all but vanished. Sound familiar? That is a very loud and clear signal that a company needs to make a change.
This was the scenario at Aerofil Technology, Incorporated (ATI) in 2007, when the packager for aerosol and liquid products experienced one of the most challenging years in the company's 22-year history. To turn things around, ATI looked to the core principles of the Toyota Production System (TPS). Three very short years later after implementing several key lean tools such as 6S, Standard Work, SMED and Pull Systems, the company located in Sullivan, Mo., has seen a dramatic 100% increase in productivity, double-digit inventory turns, a stable workforce of 400 motivated and empowered employees, plus expansion plans on the horizon.
Many companies have tried to implement continuous improvement processes, so what has Aerofil done differently to meet such unrivaled success so quickly? How has the company's Lean journey impacted its suppliers and customers? Also, what are some of the key insights that ATI leadership has gained as the company moves forward in its never-ending quest to eliminate waste and drive efficiency?
It's All About the Culture!
Unlike other companies that have implemented bits and pieces of the Lean Manufacturing improvement processes, ATI initially focused on what it considers its most valuable assets, not its equipment, but its employees. They spent almost the first full year alone on daily training of the core lean principles of TPS that were adopted as part of their new business model. These principles included 6S (safety, sort, scrub, set in order, standardize and sustain), Standard Work, One-Piece Flow and Pull Systems.
ATI employees are now highly involved every single day in driving waste out of their individual areas of responsibilities and processes. Senior leaders also take daily GEMBA -- a Japanese term meaning 'where the real work is happening' -- walks across the company's entire 16 packaging lines, providing employees with the resource support needed to drive continuous improvement. Going to the GEMBA ensures that informed decisions are made based on what is actually observed in the area of work. The GEMBA walks are considered opportunities for learning and building mutual respect-never as moments to reprimand an employee for deviating from the Lean Practices established on the shop floor. Weekly rapid improvement events (RIE), also known as "Kaizen Blasts," whereby a handful of managers and line workers collaborate on driving the improvement of a specific aspect of the packaging process, is another cornerstone by which line employees gain a true voice in operations, becoming stakeholders in, and drivers of the Lean Process.
The company is most notably recognized for its Visual Management Processes. Having established key metrics in the areas of Human Development, Quality, Delivery and Cost, every rapid improvement initiative is tracked and weighted against these measurements for a continuum of 90 days, with evaluations occurring at the 30-, 60-, and 90-day mark, to ensure that gains are being sustained. Moreover, operations performances are manually recorded and tracked by each individual process owner across all 16 production lines on four foot by eight foot boards on an hourly basis right on the shop floor, so continuous improvement opportunities jump out at employees from 30 feet away.
Benchmark for the Entire Industry
Recognizing that its customers and suppliers are a key part of the solution to totally eliminating waste, ATI now routinely invites its top customers and vendors to learn about the day-to-day continuous improvement practices that have now become part of the culture across the entire company. It has also extended the reaches of its Lean practices far beyond the shop floor, and has fully engaged the entire supply chain conducting RIE's at multiple customers and vendors locations, in addition to the improvement activities happening everyday at their facility itself.
Many Fortune 500 Companies involved in the marketing and distribution of numerous consumer products for the automotive, personal care, insecticide and home improvement markets now fully understand Aerofil's Visual Management System. The color-coded system provides customers, managers and staff with precise, real-time production and delivery status. Many of these same companies have also received training on Aerofil's Pull System and how the company used the Single-Minute Exchange of Die (SMED) approach to decrease equipment changeover from up to several hours, down to 10 minutes or less (an improvement that was critical for the company since each production line can have more than 400 changeovers per year) and are applying those same tools in their own respective companies as well.
Today, Aerofil's entire workforce is a highly motivated and actively engaged culture involved in weekly RIE's that are delivering system-wide value. The company has increased inventory turns from eight turns to more than 20 turns, in just one year. Simultaneously, they are improving the company's uptime from 40-percent to a sustainable 70%, and continuing to improve each day. This success can be seen across Aerofil's customer base where fill rates have soared above 98%, inventory turns in the double-digits are dramatically increasing across the entire supply chain and lead times that have shrunk from six weeks to five days delivering never-before-seen system-wide flexibility and performance to meet the ever-changing market conditions.
Taking a Lean journey requires keeping an open mind. The three biggest lessons learned at ATI fall within the realm of staying open to new ideas and maintaining a positive attitude. Hopefully, these points can be helpful to other companies that seek to implement Lean Processes.
First, Lean transformations need the unequivocal support of top management. For every 100 companies who undertake this process, 96 either fail or quit within 18 months. TPS requires top-down support and involvement for long-term success and sustainment.
Second, Lean does not have to mean layoffs. Employees may be skeptical when a company decides to drive out waste, assuming that by helping the company to become more efficient their jobs may be in jeopardy. From the outset, ATI guaranteed employees that no one would lose a job regardless of how efficient the business became. Moreover, once ATI began to see revenue growth and improved margins, the company introduced profit sharing. Employees have benefited from this quarterly incentive since the fall of 2009.
Finally, never think good is good enough. There is always room for improvement-whether on the packaging line, on the warehouse floor, or in the offices of middle and senior management. There is waste in everything we do and driving out these non-value added activities is a never-ending process. Without adopting this sensibility, ATI could not have become recognized as the Lean leader in the aerosol industry. Just 36 months after implementing Lean, ATI experienced the best financial performance in the history of the company despite the down economy, a 500-percent improvement on equipment changeover rates, and a 98% fill rate.
Pat Bergin is the president of Aerofil Technology. Bergin learned and developed his Lean (kaizen) management skills under the coaching of Shingijutsu Co LTD (Chihiro Nakao) of Japan, an original architect of the Toyota Production System.