Weathering the tough businesses climate

Under the guidance of experienced manufacturing consultants, golden opportunities await those manufacturers who learn to adopt lean manufacturing techniques.

The national economic storm that began in the latter half of 2000 has hit California to an unusual extent, forcing the loss of more than 300,000 manufacturing jobs in the state. Within the month of July 2003 alone, factories ceded 6,500 jobs according to state figures released Aug. 8.

One weapon in Governor Schwarzenegger’s job growth arsenal is a private, non-profit consulting company - California Manufacturing Technology Consulting (CMTC), which is helping small and mid-sized California manufacturers implement Lean Manufacturing to cut waste, retain jobs, and remain in the state.

CMTC is partially funded through the California Business, Transportation, and Housing Agency Office of Small Business, and through the Federal Manufacturing Extension Partnership, under the auspices of the National Institute for Standards and Technology (NIST).

According to a recent NIST survey, 164 of CMTC’s clients reported a total annualized sales increase and retention of $80.2 million, realized a total annualized cost saving of $26 million, and enjoyed a typical ROI of three to eight times depending on the service provided.

CMTC’s certified project managers have at least 15 years experience in product development and quality/process improvements, including Lean Manufacturing, Cellular Manufacturing, Six Sigma techniques, and Total Quality Management Process Implementation.

The aerospace sector, in particular, 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. Obviously, employers and jobs are exiting California.

No surprise, either, given California's current business climate of high energy costs, worker compensations expenses that have skyrocketed almost 100 percent in one year and hefty business taxes that are expected to rise in order to solve the state's 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 28-30 existing jobs, create an estimated 12 to 15 new jobs, while achieving a ROI that exceeded 5:1.

The challenge to save 30 aerospace jobs in California
For one local aerospace parts supplier, applied lean management techniques spelled the difference between relocation and making a stand in California.

Operating from three buildings totaling 225,000 square feet within a 10-square-mile radius in Southern California, Ace Clearwater Enterprises is one of the fastest growing suppliers and manufacturers of high quality aerospace parts in the United States, with approximately $16 million in annual sales. The company’s 182 employees design and build complex, formed and welded parts and assemblies for major aerospace companies.

"We've been fairly successful at keeping our customer base, but commercial aerospace isn't exactly doing real well right now," said Gary Johnson, Ace Clearwater vice president of operations. "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 two years ago when one of Ace Clearwater's customers, Honeywell, decided to move away from manufacturing its own aerospace parts and, instead, focus on design and systems integration. Honeywell first considered moving the plant to Mexico, momentarily putting 28-30 California 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. Yet, management preferred to continue growing its existing Southern California base. Consequently, a vacant, company-owned facility located in city of Compton, Calif., was chosen as the new site.

In order to stay in California, Ace Clearwater still had to find a way 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 Ace Clearwater's 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," Johnson said. "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," said Johnson. "With such a big task, we knew we needed help. Since we had used California Manufacturing Technology Consulting for several projects over the years, we contacted them this time to pull off the Honeywell acquisition. We knew that some people there, like Raymond Rhakshani, 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."

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 overall relocation project was then executed by coordinating the activities among constituents including Honeywell, an architect, the city planning commission, local regulatory agencies, machinery movers, Southern California Edison and third party contractors.

"The move was a massive 24/7 nonstop effort for several months," Johnson said. "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 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. It was amazing. Rhakshani and his group did a phenomenal job of keeping everything going."

By June of 2002, Ace Clearwater had managed to squeeze all of the required equipment into the much smaller space.

"With the help of CMTC, we were actually online three weeks ahead of schedule," said Johnson. "What made it work is that lean manufacturing techniques were integrated into the whole move. Everything was done with an eye toward being as efficient as possible. 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. I have to give CMTC 100 percent of the credit on that one."

Quick results yield greater competitiveness and more jobs
The lean-manufacturing facility layout reduced the need for floor space by improving the workflow, resulting in a reduction of unnecessary inventory.

"The new plant is now extremely efficient and the place is running like a top," said Johnson. "In looking at the data, our competitiveness increased by at least 50 percent because we were able to improve the building of our parts. There's a lot of operations outside of annealing and heat treating that we needed to do with our drop hammer operation, that we now don't have to do because of our new hydro-form and hydraulic presses. It's a much more efficient way of forming metal.

"The 'leaning out' of our processes also helped bring in a lot of new business," said Johnson. "Our new plant and equipment has opened up other opportunities that we didn't have before. The new capabilities allow us to offer more parts to our existing customer base such as Lockheed and Textron. Now we can compete with other, more horizontally integrated, houses. The plant runs two shifts to keep up with the demand. The increased demand has created an estimated 12 to 15 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-dollar sales increase. 

Manufacturing consultants lead for other businesses
CMTC’s manufacturing consultants provide 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 learn to fight back against the loss of business and jobs to out-of-state enterprises.

In a recent survey, the No. 1 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, as practiced by CMTC, usually begins with a lean factory diagnostic, where consultants assess how work and information currently flows through the subject factory. A baseline of metrics is established to act as guide points to determine how to apply lean methodologies to achieve the greatest impact.

Ultimately, the plan is rolled out in phases that involve project management, mentoring, knowledge transfer and joint implementation-a process which calls 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 percent of which have fewer than 250 employees.

Implementing the right solutions makes for brighter futures
Once 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. 

“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,” said Johnson. "This gives us a bit more of an edge to control our own destiny."

For more information regarding lean manufacturing, contact CMTC at 1149 W. 190th Street, Suite 2014; Gardena, CA 90248; (800) 300 CMTC; (310) 263-3060; Fax (310) 263-3062; or www.cmtc.com. 

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