The Journey To World Class, Part 3

Inventory is scrutinized, and it's time to assess progress.

Editor's Note: Jim Cauhorn is manufacturing advancement manager at J W Harris Co. Inc., a privately held manufacturer of brazing and welding supplies located in Mason, Ohio. Cauhorn has four decades of manufacturing experience and has been a contributing member to several IndustryWeek Best Plants winners. He was hired by J W Harris in September 2000 to assist the company in its goal to reach world-class status. This article is the third in a series of reports by Cauhorn documenting J W Harris' continuous-improvement efforts. (Read the second article in the series here.)

While sowing the seeds of significant change, not everything comes up roses. We at J W Harris are deploying tried and true practices that have been successful in my previous experiences, but every company is different. Each has different baggage and different attitudes to deal with. J W Harris is no exception. J W Harris is a relatively small, privately held firm that has had the same ownership for over 30 years. Therefore, it is easy to understand how attitudes and habits can be difficult to change.

The solid support of ownership has made the transition from a controlled environment to an empowered environment easier. Principal owner Joe Harris and President Robin Harris realize that to maintain leadership positions in our markets the principles of lean manufacturing as manifested in the Toyota Production System must be fully integrated into the fabric of this organization. That being said, the company does have issues from the past that we must deal with. There is a history of gallant projects started and not finished, and consultants hired but their advice not followed once they left the premises. Therefore, when we started talking about lean manufacturing, demand flow, continuous improvement and the like, there were many skeptics saying, "Yeah, yeah, sure we will . . . I heard it before, don't bother me."

The only way I know to overcome this syndrome is to prove through deed that we are going to sustain the effort. It is beginning to sink in. Another significant influence on our situation is a factor I have not talked about thus far. Last year the company moved into a new plant built to our specifications. Previously J W Harris operated from a conglomeration of old buildings located about 10 miles from our current location in Mason, Ohio.

The new facility, while offering a considerably improved environment, also presents many new challenges. Joe Harris wanted to take advantage of the move to upgrade from old equipment, transition to new technologies and take a giant step toward advancement and modernization of the operation. At the same time, a new enterprise-resource-planning (ERP) system was being installed.

Taking on all of these challenges at one time put a considerable strain on all resources. So, while we were implementing new management concepts, transitioning the workforce to new ways of looking at their work and eliminating waste, we were also debugging new equipment, developing new processes, learning new technologies and trying to keep our customers happy. Additionally, because of the new equipment and technologies, we had a major effort to establish proper documentation and procedures in keeping with the requirements of ISO 9000.The company has been ISO 9000 certified since 1997.

To make all of this happen in the way that we wanted it to happen required the establishment of a sound management structure that enables effective communications in all directions, training at all levels, cooperation, teamwork, well understood objectives and timely feedback.

Frankly, these were not in place when I arrived. Early on, however, we established that structure. I hired a plant manager to take over all production activities. We had two separate purchasing operations reporting to different managers, one for raw materials and one for maintenance parts and factory supplies. Both now report to me. The inventory-control/warehouse operations, which had been reporting directly to the president, now report to me, enabling more attentive direction and careful implementation of the demand-flow concepts.

The primary element supporting our push for excellence is the AIM (Accelerated Improvement Mode) process -- our interpretation of kaizen events. This process brings employees directly into the fray. They are not only involved but they have a say in how they operate, rather than management telling them everything to do. When the latter is the case, there is an onus on management to know everything that has to be done and the right way to do it. As everyone becomes more familiar with the principles of lean and our demand-flow process, it is becoming easier to get them on board with our improvement objectives.

When we started our journey one year ago, most of the conversations I had with employees were complaints. Now most conversation centers around how we can make things better.

Inventory Reduction Required

A few months ago Joe Harris called Robin Harris and I into his office to tell us that we needed to reduce inventories by at least $1 million -- and up to $2 million if we could -- to help reduce loans and improve cash flow. Six weeks later we were going out to lunch to celebrate a $2.6 million reduction in inventory. By the end of August we had reduced inventories by almost $7 million. How was this accomplished?

There is only one way to reduce inventory -- buy less than you sell. I called the raw-materials purchasing manager, Lindsey Jones; the plant manager, Jeff Boothby; and the inventory-control manager, Roy Breehne into my office and told them of the challenge. They were excited and anxious to put the new demand-flow process to task. Inventory levels had not been much of a consideration in the past; we always had been more concerned with making sure we had more than enough to satisfy customer orders.

It was obvious that we had excessive amounts of inventory at the plant. Having now implemented our demand-flow process in key areas of the plant, the threesome saw many opportunities for inventory reductions without sacrificing our fill rate. We knew that for some of our products we were maintaining up to four months of inventory to ensure customer satisfaction. This was the low hanging fruit.

For the higher hanging stuff, we took a different approach. Lindsey reviewed all purchases against raw-material inventories and upcoming requirements identified by the demand-flow process and our reorder review (ROR) system. Roy worked with Jeff and our remote warehouses to do the same. (The ROR is a scheduling and reorder system that interfaces with the MRP II portion of our ERP system and provides us with the information we require to keep the operation flowing without interruption. It has been a tremendous asset for us. The warehouses use it to maintain adequate yet minimum inventories, the production supervisors use it to schedule and purchasing uses it to control the inflow of raw materials.)

Lindsey and Roy discovered that there were arbitrarily set inventory levels based on a minimum on hand, which varied from 1.5 months to 4 months regardless of our ability to replenish. This resulted in more inventory than was needed to properly service our customers. Taking a more systematic approach -- one based on actual customer demand and real manufacturing replenishment times -- enabled further inventory reductions. In spite of our big reduction, the sales department tells us that product availability from the areas where we have implemented demand flow is at an all-time high. We are steadily improving our order fulfillment rate while inventory is going down.

Communications

Many significant elements are necessary to bring about the results we desire. One of the more important is communications. This pertains to every possible confluence of interaction within the entire organization. If we are not communicating effectively at all levels, we are doomed to failure.

Here is how we approached this element of success at J W Harris: We began by installing 4-foot-by-8-foot communications boards near the cafeteria and the employee entrance. They can accommodate special announcements, current metrics, human-resources information and general information. These are temporary measures until we have a full-fledged communications center, which is being fabricated.

The communications center will include professional looking graphs and charts showing our progress and a trophy case that displays our products, company history, and more. We have begun publishing a monthly newsletter with news about the status of our journey to world-class manufacturing, plant news, updates on AIM events, and more. We also have started a separate newsletter devoted entirely to the AIM process. I hold weekly staff meetings with all of my direct reports: plant manager, inventory-control manager, purchasing manager, kanban coordinator, quality manager, safety manager, tool room manager, AIM event coordinator and industrial engineer. Each manager has developed metrics for his or her area of responsibility and reports on it weekly. We discuss what is getting in our way and how to remove these roadblocks.

The plant manager had held daily production meetings with his production managers, plus representatives from sales, scheduling and purchasing, to review requirements, provide promise dates and prioritize the day's activities. This meeting was discontinued recently as the participants have learned to communicate outside of it. The plant manager also held daily accountability meetings with his production managers to review the previous day's performance. The performance of every employee in every department was reviewed to identify opportunities for improvement and eliminate waste. That meeting is no longer necessary as the production managers now do this routinely.

We conduct a weekly "Supervisor's Forum" that includes supervisors from all three shifts. This forum is their meeting. It has two fundamental purposes -- to inform and to train. We utilize speakers from within the company to enhance the supervisors' understanding of the entire organization. We review elements of the formalized training we received earlier this year. The human-resources department presents new policies. Some meetings are devoted entirely to the supervisors' concerns. Each supervisor holds monthly one-hour meetings with his employees, talking about safety, current issues, performance issues, upcoming events and other items. Additionally, I try to spend at least one hour per day on the floor communicating with employees. Owner Joe Harris does the same. The contact with Joe gives employees a sense of what the company is all about. So often in my experience "the company" was perceived by employees as "them." "What are they doing to us now?" There was no face time with the ownership. Here, there is no mystery, no need for rumors.

Recognition for Job Done Well

Mandatory to developing a culture of accomplishment is providing recognition for a job well done. We recognize good performance in several ways. We have seasons tickets to the Cincinnati Reds, the Cincinnati Bengals and the local concert venue (Hopefully the Reds and Bengals will start doing better so these rewards mean more). We hold cookouts for team achievements and have an annual company picnic. We recently have launched a program that allows any employee to formally recognize any other employee for a job well done.

Assessment

It has been almost a year since we started our journey to world-class status. It is time to look at the results we have achieved to date (December 2000 -- August 2001). Here are some pertinent metrics:

  • Inventory Reduction: 30.9%
  • Productivity Improvement: 26.4%
  • Scrap Reduction: 78%
  • Quality Returns Reduction: 49.1%
  • Inventory Turns Improvement: 200%
  • Employee Turnover Rate Reduction: 69.1%
  • OSHA-Reportable Lost-Workday Rate Reduction: 54.2%
  • Order Fulfillment Rate: Sustained in the low 90% range.

No major improvements have occurred due to the move to new facilities involving significantly new processes, new products, and a new ERP system. We expect to see marked improvement next year. These are certainly some impressive metrics for our first year, but they are not nearly as good as we expect them to be in the near future. Many of the steps we have taken in terms of culture change and management approach will positively impact all aspects of performance -- even without specific programs to address each. The idea is to change the way employees and management address their everyday jobs so that everything they do improves. Moving from a major R&D mode into a more normal operation that allows greater emphasis on continuous improvement and culture change will enable us to achieve greater heights of accomplishment. Stay tuned.

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