Studies dating back to the JIT and Kanban concepts developed at Toyota Motor Company in the 1950's agree that lean manufacturing policies and procedures produce higher levels of quality and productivity and better customer responsiveness. However, you do not need to be a Japanese automobile manufacturer to benefit from world class manufacturing policies. Using the same concepts as Toyota, Navitar, Inc., a manufacturer based in Rochester, N.Y. has achieved the same kind of global success in the fields of machine vision, electronic imaging and projection display optics. The company has realized double-digit compounded growth over the last 15 years.
The privately-owned firm has focused on eliminating waste, including defects, transportation costs, inventory, over-production, waiting time and processing time. Navitar is a supplier of optics, opto-mechanical sub-assemblies and opto-electronic system solutions for the machine vision, automation, assembly, imaging, testing, measuring, and video inspection industries. However, any organization large or small can apply the concepts that Navitar uses. These concepts can help managers produce better products for less money than their competitors if they embrace a policy of continuously improving all manufacturing processes.
Setting Up The Strategy
The seeds of the approach were sown in the early 1980s, when Navitar's co-presidents Jeremy and Julian Goldstein visited Japan to work in optical factories and study Japanese corporations' manufacturing methods. The two brothers were particularly impressed with the way in which Japanese companies dealt with their subcontractors. Sony provided an example. Sony's own engineers developed the electronic and optical technology for its video camera, but the company contracted out the manufacture of the optics and electronic subsystems. That strategy allowed Sony to concentrate on what it did best -- innovation and design -- and then let a subcontractor do what it did best -- manufacture. The relationship between Sony and its subcontractor was an extension of family. It was a very positive, win-win type of relationship that would last through generations and guarantee continuing enhancement of the products' quality.
In 1990, Navitar's entire staff set out to apply that approach and others pioneered by Japanese industry to the company's operations. We began by identifying the talent level that we had among our people and scrutinizing the quality of the items coming into and going out of the company. As part of that process we put together teams of individuals to discover what they liked and disliked about their jobs.
Those initial discussions taught us the value of letting everybody in the company help to decide how we operate. The teams came up with three findings that immediately improved the company's ability to serve its customers effectively.
First, they realized that the company's machine shop contained inferior equipment. Rather than upgrading it, we decided to contract out all work that the shop had undertaken. We kept two of the workers from the shop on our staff and found outside jobs for all the others.
The other two findings impacted personnel issues. We changed from a five-day to a four-and-a-half-day week for our hourly workers. Since many of those workers had young families, the change gave them the time to arrange appointments with their children's (and their own) doctors, dentists, teachers, and other professionals during normal working hours without having to take time off. We soon understood that we could trust our people not to abuse the perquisite.
We also decided to change our approach to hiring. Previously, we had recruited only individuals with backgrounds in the optics business. Our discussions suggested that talented managers could easily adapt to our industry. So we began to bring in people from outside the optics industry who possessed specific skills relevant to our needs. In other words, we sought talent that would fit into Navitar. Our basic instruction to our employees is: "Do what you do and do it well." That strategy has proven to be successful.
The Basic Business Model
Our basic business model now requires us to do the engineering and product design for lenses and lens systems. After verifying the product design and performance characteristics, we contract out the fabrication phases of the product. We then handle the final assembly, quality verification, packaging, and shipping of the product to the customer in-house. Our assemblers hand-assemble all of our high quality lenses. In this manner we have total control of the product specification, the performance characteristics, and the quality compliance for the product. This approach enables us to give lifetime warranties on our lenses.
Success in this approach depends on one key demand: dedicated, cross-trained, hard-working, and experienced employees. The average Navitar employee is 45 years old and has almost 11 years of experience with the company. Employee turnover and the resulting costs of training and lost production until the replacements get up to speed are almost unknown at Navitar. Just two individuals have left the company in the last four years, and one of those retired.
We also have the benefits of a small organization. We take advantage of that by arranging events such as catered lunches, steak roasts for which managers do the cooking, and annual catered picnics. We have an excellent safety record; we haven't had a lost-time accident in nearly 10 years or a reportable accident in almost four years. We are extremely proud of our entire workforce and realize that this talented group of individuals permits us to perform so well as a company.
Operations In Detail
How does our business model affect the details of our operations? We can best outline that by examining our operation one step at a time.
First our engineering group designs a lens or a lens system to meet either an internally directed design or a customer's specific design requirement. Our optical engineers accomplish this using optical design software. The software provides verification of optical parameters such as modulation transfer function and Strehl ratio, as well as the impact on the design of conditions such as temperature and humidity. Next, mechanical engineers translate this information into a solid modeling program ready for design acceptance. In the final step, engineering develops the process sheet while, in conjunction with operations, the group assembles the prototype. Separating the engineering group into development, optical, mechanical, and process sections makes us more capable of handling the engineering from beginning to end quickly, without interruptions.
With the design complete, we enter the password-protected solid models into the computer system, along with the bill of materials and the operations process sheets. Purchasing then takes the bill of materials and initiates product buys. We maintain a small select group of suppliers with whom we have established close give-and-take relationships that enable us to utilize their specific expertise in the design phases of our products. On many occasions, our vendors recommend changes that will benefit manufacturing during the design phase. For example, one supplier recommended a change in the size of material we needed so that he could buy stock metal rather than specialty metal, at a significant saving in cost. As our willing acceptance of the suggestion indicates, we try to stay away from the "not invented here" concept.
Our quality manager spends the bulk of his time working with our suppliers at their locations to verify the product before they ship it to our facility. This saves costs for both companies: Suppliers ship only acceptable parts and Navitar has to do audit inspections of only those parts.
We continually look to eliminate any activity that does not truly offer any value added to the Navitar products. Thus, the vendors package the parts in the plastic trays that we use at Navitar to store, to protect and to transport the parts to the assembly operation. Vendors don't have to purchase and charge for packaging that would do no more than protect the product on its journey from their factory's location to the Navitar site. And Navitar doesn't have to spend time handling packaging material for either recycling or scrap, both of which cost us money. An extra benefit of requiring the vendor to ship the parts in the Navitar-supplied containers arises from the fact that the containers are partitioned; that makes the counting of parts much simpler, more accurate, and less time consuming. Each of our vendors makes daily deliveries. They pick up empty containers that have been cleaned and take them back to their facilities for another round of parts shipping. This also saves time and costs.
This process indicates how we have attempted to establish all of our operations and activities. Navitar is not a bureaucratic company; we try to keep our organization lean. We routinely perform cross-training from one discipline to another. We have had production operators spend time in the financial organization and in engineering, sales managers work in purchasing, and machine operators perform supplier quality audits, to name a few. We don't have secretaries or administrative assistants. In this day and age, everyone has a computer and can handle their own schedule, their own correspondence and their own phone calls. We intend only to add activities that add value to the Navitar family of products.
The Production Scheduling System
The production scheduling system that we designed plays a critical role in our approach. It identifies the part number to be produced, the number of units required, the time required to produce, check and package it and the date when the product is required. The production operators make entries directly to the computer systems that show the progress of the product through the various assembly, quality verification and packaging steps. Hence, anyone in the organization can readily determine when a specific product will ship. This is especially useful to members of the sales organization, since it enables them to provide immediate feedback to any questions from customers about product availability or shipping. The tool offers another benefit. It includes color coding that alerts production operators whenever a customer requests earlier delivery than the original order called for or special handling of the product, such as special packaging or marking. This saves time and hence costs for all portions of the organization, from sales through production, while providing additional customer satisfaction.
To gather all this information, we have installed personal computers at every workstation. That permits the operators to bring up the BOM for the specific item they are producing. They can also bring up the product drawing, which engineering has done in three dimensions and can rotate the drawing to see specific areas of interest. This has greatly improved the use of engineering drawings. It reduces confusion, leads to more accurate product assembly and has resulted in a large reduction in the time that engineering spends answering operators' questions or concerns. As a result, the operators have become more confident, a fact that has led to more efficient assembly. In addition, the system eliminates the copying and filing of paperwork that we needed in the past to fulfill orders.
These tools have also made it increasingly easier for Navitar to react to customers' requirements for both accelerating and decelerating product orders. We pride ourselves on being there for our customers in both good times and bad.
In the good times, we want to accelerate and react as quickly as possible to the changing demands of our customers' requirements. By getting them product even at levels above those they had ordered or earlier than they had ordered, we can help them become more successful. We firmly believe that the better our customers do, the better Navitar will do.
The system benefits the reverse situation, in which a customer has a slowdown in orders or needs to delay delivery of product from Navitar. We will readily accommodate that. Our small lot ordering technique and close relationships with suppliers permits us to re-deploy our resources so that we don't have to force the product on our customers. We accomplish this without having large increases in either our inventory or the inventory at our suppliers. This then prevents the need to tie up large amounts of cash in inventory.
Holding The Line On Costs
What about the cost of our products? We have developed an approach targeted to at least offset any increase in labor or material costs each and every year. We attempt to hold our product pricing consistent so that our customers who may be designing our lenses into a long-range project can be confident that we will not hit them with a major price increase that could prejudice their project development. For many of our lenses, we have waited more than six years between price increases.
Of course, we have material cost increases, our employees receive at least annual pay increases, and we must deal with the rising costs of energy and medical coverage for those employees. However, we have demonstrated that, by continually reducing the time required to perform various functions, ensuring that we eliminate unnecessary steps and procedures, continually soliciting ideas from our experienced workforce, and routinely evaluating our products, we save significant cost in producing our products. The use of our own plastic trays for all packaging and our acceptance of a vendor's recommendation that we substitute stock metal for specialty metal, referenced above, illustrate the type of flexibility that reduces costs.
These policies have made Navitar continually profitable, and able to develop more cost-saving measures. For example, we have recently invested in a revolutionary, patent-pending customer ordering system. Named the Optical Wizard, this is an extremely efficient way to help customers and potential customers to determine which Navitar products will best suit their needs. It permits customers to configure complete optical solutions quickly and easily at their own desks whenever they need them. This system, available 24/7, puts the knowledge and expertise of the entire team of Navitar engineers in one easy-to-use resource. The Optical Wizard is so powerful that it offers several options and lets users customize to fit their exact needs and budgets. It provides another example of Navitar's continuing to do all that we can to be the most customer-friendly provider of optical products.
Navitar has adapted many world class manufacturing policies and procedures to its specific approach. We have accomplished this while maintaining that small company feeling of belonging and involvement in all members of the Navitar family.
Tom McCune is COO of Navitar, Inc. Navitar provides electronic imaging and machine vision optical solutions. Areas of application include flat panel display inspection (LCD & Plasma); semiconductor component inspection, packaging & metrology; electronic imaging; life and analytical science; laboratory-on-a-chip reading; automotive part compliance; forensics; packaging inspection for the food and beverage industry; material verification for the pharmaceutical industry; high speed factory automation; laboratory automation; homeland security & defense; R&D; biophotonics; bioscience, fluorescence and nanotechnology. www.navitar.com