The Challenge: This was a reasonably profitable $80M manufacturing business located in the Midwest. The business was comprised of five manufacturing plants that all supplied components to one final assembly plant. They were experiencing problems with meeting customer service and lead-time expectations as well as had issues with interplant quality and delivery problems. Over the years they had developed a workforce of highly skilled specialists that by its nature created in-house bottlenecks and inflexible production schedules.

The Fix: A marketing analysis revealed that a targeted price increase needed to be implemented on service parts. The management staff was rationalized and restructured. The Lean Manufacturing concepts of Just-in-Time and cellular manufacturing were introduced and implemented in all plants. Team environments were created along with a compensation system that rewarded cross training and personnel flexibility. Kanban inventories were used to draw key parts both within and between production plants. In addition, some major purchased components were also managed in consigned kanban inventories. A disciplined use of ERP was instituted that improved master production planning and production floor scheduling. In addition, long-term purchased part planning and supplier point-of-use inventory programs were also implemented.

The Results: The entire production lead-time was reduced from 94 to 40 days. Total inventories were reduced from $15 million to $9.5 million while simultaneously supporting improved customer service levels and a 35% increase in unit and sales output. Through aggressive cost reduction programs and a 40% improvement in productivity over $10 million was added to the bottom-line over a three year period. All these efforts supported doubling of quarterly profit margins (from $1.4 million to $2.7 million) the last year of the program.