California still has the right stuff for manufacturers

Experienced manufacturing consultants ensure that even “dinosaur” technologies gain new life and meet California’s pressing productivity challenges.

by Ed Sullivan

As California manufacturers ponder their futures, many are considering relocating to other states or even going offshore. Others are looking at containing operational costs, trying to cope with the hemorrhage of orders and profits by cutting jobs – over 300,000 in the past three years. Yet for many companies the elimination of jobs or going offshore for cheap labor is a quick fix, and not a very realistic one.

“The major obstacle to profitability is not the cost of labor. The real enemy is waste,” said California Manufacturing Technology Consulting (CMTC) senior lean manufacturing consultant Saeed Madjidi. “There are many opportunities to reduce waste in the plant, from wasted capital and labor to space, energy, inventory, materials and so on. The opportunities are not just wage driven.”

CMTC is a not-for-profit organization with the mission to help Southern California’s small and medium-sized manufacturers improve their competitiveness. CMTC’s areas of expertise include lean manufacturing, quality management, information technology, strategic business and supply chain management services.

“Our lean manufacturing services are the answer to making improvements in manufacturing facilities and processes to reduce overhead expenses, increase productivity and grow margins – improvements that all manufacturing organizations need regardless of location,” said Madjidi.

To date, CMTC has helped more than 1,500 California companies, in markets ranging from hi-tech to heavy manufacturing, reduce costs, boost sales and retain employees as well as profits. One of the primary methods of doing this is through lean manufacturing services, which help manufacturers apply the latest manufacturing technologies and techniques that result in more efficient and productive production processes.

Lean manufacturing is a philosophy that uses manufacturing as a competitive weapon. The lean manufacturing concept calls for the removal of all non-value added activities, those that often cause bottlenecks and other forms of waste, from the production process.

Eliminating waste from manufacturing reduces production time and costs while maximizing quality and customer service. For example, through the elimination of waste, lean manufacturing can reduce inventories, lower the cost of production – including energy costs – save on shop floor and storage space, and save on labor costs without cutting jobs. Lean manufacturing applies to older industries as well as newer ones.

Although many people might associate lean manufacturing techniques with plants using new technologies, it is just as possible for those using traditional technologies to cut waste and improve efficiencies.

Strategic Materials Corporation (SMC), a South Gate, Calif., steel foundry decided to look at CMTC lean manufacturing services in late 2002 at the encouragement of one of its primary customers.

“Our production process is from the dinosaur age, technology-wise,” said SMC president Steve Livingston. “Essentially, we are a provider of steel and stainless steel alloy castings to the OEM pump industry. We melt in induction electric furnaces and pour products that range from 1/2 pound to 2,000 pounds. Our production capabilities range from a single product – often an emergency replacement – upward to about 100. Our customers are pump companies who sell to users who are typically in the oil industry, and may be large contractors, producers or refiners. The majority of them are offshore.”

Livingston describes his market are being purchase order driven. In the old days – the 1980s and 90s – purchase orders would come in for products quoted six to 10 weeks earlier. The products ordered would be shipped six to eight weeks later, a relatively comfortable turnaround time.

“In recent years lead times started to get tighter,” Livingston said. “Typically it’s about four weeks now, and that has begun placing significant demands on the system. Because we use a very energy-intensive electric melting process, we do our melting at off-peak hours, normally nighttime. With the high cost of electricity in Southern California, we can’t survive if we have to extend our melting hours into peak periods.”

At the same time, Livingston says there were a lot of reasons for SMC to want to stay located in South Gate. The area offers a number of advantages, including skilled labor, readily available materials and supporting businesses such as non-destructive test labs needed by the foundry industry. Also SMC had relocated in 1999, and the plant’s infrastructure, including a 1,700-amp power transformer, is important to its electric furnace operation.

“We knew that we had to react to increasingly shorter lead times,” Livingston says, “but we didn’t really understand that we also needed to become lean in order to remain competitive. That was pointed out to us when I visited our largest customer, Floway Pumps, in Fresno last year. A major player in vertical turbine pumps for chemical, oil and water applications, Floway had overhauled their plant and leaned out their processes in a very impressive way. They explained to me that they were far more efficient, had reduced lead times and eliminated waste. This would no doubt affect our business as one of their suppliers.”

Livingston said the writing was on the wall, that his own firm would have to improve on turnaround and continue to hold prices. He also learned that CMTC was involved with the lean processes that Floway had adopted, and decided to contact them.

“I had heard about lean manufacturing many times before, of course. But I was very leery about hiring so-called lean consultants because I had heard they were simply efficiency experts who would find fault with our manufacturing processes... then leave it to us to figure out how to improve them,” Livingston said. 

CMTC’s Madjidi visited SMC and explained the lean manufacturing process and what SMC might hope to get out of it. A CMTC consultant came onsite to study the production process and the flow of information, including a value stream map.

“The consultants then gave us a clear presentation of the steps involved in their work, how they would begin with value stream mapping to figure out where the waste was, and the steps it would take to improve of our processes,” Livingston said. He was convinced that SMC needed to go through the process to remain competitive in the supply chain.

One of the first steps was getting SMC’s approximately 30 employees to buy into the project.

“These were very loyal and knowledgeable employees who could have resented it if we simply forced the program on them,” Livingston said. “By including them in our discussions, we got their support and a lot of valuable input.”

As is often the case, SMC was unaware of waste caused by logistics involved in product flow and by misuse of space, the tying up of materials and excessive time in turning out its products.

Lean manufacturing training that included the participation of 10 key SMC employees, including production line people, managers and Livingston himself, followed the initial value stream mapping.

“What was especially amazing to me is that we had recently moved into our building, and we had had the unusual opportunity to lay out our plant exactly as we saw fit,” he said. “But we had made mistakes in the placement of equipment and allocation of storage space, mistakes that were causing us to work inefficiently and tie up materials.”

Livingston says that products sometimes traveled through the plant in a circuitous, spaghetti-like fashion. Product molds were made too far in advance, tying up space and costly chemically bonded sand used to make the molds. Also, since some customers no longer did their own finishing of castings, SMC sometimes had to rely on outside machine shops that might require more time than was available. And the front office data flow was not handled efficiently.

“Fortunately, we didn’t need to replace a lot of equipment to lean out our processes,” Livingston said. “Simply by adjusting our logistics and incorporating more efficient building of molds we were able to make significant progress. Importantly, this was all done without cutting any jobs. In fact, through the participation of our workers in the Kaizen process, we’ve been able to make continual progress.”

Kaizen is an intense and focused approach to process improvement. The word Kaizen means continual improvement. This methodology combines principles of lean manufacturing with other tools such as the 5’s of Workplace Organization and Standardization, Cells, Pull/Kanban, Setup Reduction and Line Balancing. The process incorporates team empowerment and problem solving to rapidly make improvements to a specific product or portions of a process.

Livingston says the lean manufacturing concept assured SMC will be able to compete well in the supply chain, delivering products on time without raising prices. He says that so far employees have raised their daily efficiency by a factor of about one and a half to two hours. Of vital importance, electric furnace operating hours are still confined to off-peak periods.

CMTC is going to continue to help SMC by installing an ERP (Enterprise Resource Planning) system in the future. Livingston said it should improve communications, workflow and overall efficiency even more.

Now an experienced believer in lean manufacturing, Livingston said he will no doubt recommend the process and CMTC to his suppliers.

“Even though we’re in a relatively archaic industry, the market has changed and is likely to become more demanding,” he said. “It only makes sense that everyone in the supply chain does what it takes to get leaner.”

So far, SMC’s investments in lean manufacturing have been modest, but the returns are fantastic, said Madjidi. On average, the National Institute of Standards and Technology (NIST) estimates that the returns on investments in lean manufacturing are three-to-one. Those savings occur through savings of overproduction, product rework, excessive inventories, production bottlenecks, inefficient transportation and underutilization of people.

In the case of SMC, the full value of CMTC’s lean manufacturing process may not be realized for another year or two. But in the meantime it helped the company maintain profitability and successful customer relationships while remaining in Southern California, a location that still offers the right stuff for SMC and others in the foundry business.

For more information regarding lean manufacturing, contact CMTC at 1149 W. 190th Street, Suite 2014; Gardena, CA 90248; (800) 300 CMTC; ; Fax ; or www.cmtc.com. Ed Sullivan is a technology writer based in Hermosa Beach, Calif.

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