January, 2008

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Article Index

Lean is one more change in a long line of changes for this manufacturer
Article by: Justin Dorsey
In 1952, Robert Klas, Sr. - then a recent graduate from Hamline University - was working in sales for Northwestern Stamp Works in St. Paul.
Customer Focus in a Price-Conscious World
Article by: Lynn Moline & Mike Braun
The headline was hardly news to manufacturers: "Price drives customer decisions." Granted, the recent local newspaper headline was reporting the latest retail customer findings from the University of Michigan's American Customer Satisfaction Index (ACSI).
Cheap Labor Shouldn’t Drive Offshoring Decisions
Article by: Kelly Salwei
Supply chain management leaders know that the best reasons to establish manufacturing functions in another country aren’t always about labor costs. Nor is it the wisest strategy to shut down a facility and “move” it.
Lean Office Certification Congratulations
Article by: Manufacturers Alliance
Congratulations to Jim McCarthy for being the first Lean Office Practitioner certified by the Manufacturers Alliance! He is a Lean Champion for Tescom Corporation, a local manufacturer of pressure control solutions for a multitude of industries.
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Lean is one more change in a long line of changes for this manufacturer
In 1952, Robert Klas, Sr. - then a recent graduate from Hamline University - was working in sales for Northwestern Stamp Works in St. Paul.

When he caught wind that it was going to sell its experimental "TapeMark" division that printed logos on self-wound tape - he made the bold decision to buy it. In the years that followed, he would make sales calls by day and run his presses at night. Slowly, business grew - in no small part because Mr. Klas never lost his entrepreneurial spirit of always looking for a way to improve on his company's processes. Early examples of this quest for perfection were collaborations with 3M on automobile pin-striping and labels for Tonka Toys. In both cases, flawless printing was essential.

That obsession with and reputation for perfection has opened a bewildering array of opportunities for the Tapemark of today. While it still prints labels, its real growth area is in the area of pharmaceutical and medical applications. Perhaps the product-line that best illustrates its incredible sophistication is its line of "Snap®" packaging. The product itself is a single use or dose application of cream, gel, paste or lotion which is sandwiched between a stiff backer and a foil face. One of its sophistications is that each package can have one chamber or two - which allows for the contents to be "mixed" at the point of application. And, both the front and back are serrated. The result is that when the backer is bent in half - and snapped - the foil on the front perfectly separates releasing its content evenly and completely. (Because of its pharmaceutical nature, this evenness and completeness are essential). As if that weren't enough, the hard backer is a perfect platform for instructions or other printing.

But, the manufacturing challenge didn't stop there. Tapemark also has to be able to inject precise amounts of the customers' particular pharmaceutical liquid - under rigid FDA procedures and often in "clean" rooms - into each of the tiny packages. Putting all of that together truly is an amazing accomplishment. But its ability to do so also means that its services are in great - and growing - demand.

Obviously, the kinds of manufacturing rigor that go into products like Snap® place an incredible demand on processes and people alike. Mr. Klas Sr. and his son Robert Klas Jr. who succeeded him as the company's President recognized that they needed to bring-in an outsider to guide their company into the ever increasing demands of this kind of hyper-technical manufacturing. In Andy Rensink, they saw someone with the dual combination of experience in management and Lean Manufacturing. And that was what they were looking for. Their vision in seeking someone with a Lean background speaks volumes of the lessons they had themselves learned over the years about the incessant role that "change" plays with all manufacturing. In terms of Lean practitioners, the one remark that all of them make is that the fundamental success or failure of Lean always turns on its commitment - or lack thereof - by the company's leaders. Fortunately for Tapemark, the Klas' are avid proponents of Lean.

Today, Matt Bilbo is Tapemark's Director of Operations and Continuous Improvement. His original position at Tapemark was as a Shift Manager. And, he came to Tapemark after stints with Target, Wyeth, and Lockheed Martin. Tapemark's Lean journey began in late 2006 when Andy and Matt brought in a consultant to help them layout a long term strategy. The real work began in 2007. In just one short year, the Tapemark team oversaw the consolidation - without interrupting ongoing operations - of six (6) facilities into three (3) and the execution of thirty four (34) different Kaizen events. Along the way, they reconfigured every production cell and physically moved twelve of them. The result of all this change was that productivity improved by 30%. For 2008, their goal is to begin to track the actual dollars-and-cents contribution of Lean to the bottom line.

When asked about his big-picture conclusions about the experience, Matt speaks about the difficulty in making Lean a constant. "What I would say is the 'essential' challenge of Lean is that it ultimately stands for the proposition that effective manufacturing is proactive rather than reactive. And, it's really, really hard to get people to stop thinking about putting out fires and to focus, instead, on streamlining the agreed-upon processes. Ultimately, I think it's a 'trust' issue. It can be hard to believe that the very problems that you're so used to dealing with will go away if you just trust in the process. But, the lesson of Lean is that they will. On the other hand, when you do let go and trust in the systems and see that they really do avoid those problems - it is a truly liberating experience."

When asked whether the Manufacturers Alliance played a role in Trademark's Lean journey, Matt said that he and several others were active members of the Leaders Alliance. And, like so many others before him - Matt applauded the company "tours." "The tours are super! It may sound corny, but they help keep us on our toes. Sure, we've accomplished a lot. But, those tours remind us that others are working just as hard. Whether you like it or not, in manufacturing change is a way of life."
Justin Dorsey, Director of Sales & Marketing, Advanced Capital Group located at 50 South Sixth Street, #975 Minneapolis, MN 55402. call (612) 230-3009, email jdorsey@acgbiz.com, or visit www.acgbiz.com.

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Customer Focus in a Price-Conscious World
The headline was hardly news to manufacturers: "Price drives customer decisions." Granted, the recent local newspaper headline was reporting the latest retail customer findings from the University of Michigan's American Customer Satisfaction Index (ACSI).

Manufacturers are acutely aware of the trend among their customers: while some level of quality is expected, customers want bottom-line value.

If value, or price, is a primary driver of buying decisions, it may seem superfluous to track any other measures of customer satisfaction or to spend time getting to know the customer better. Yet, a deep understanding of customers and their needs is perhaps more critical now than ever. In today's price-driven world, the manufacturers who know exactly what constitutes value in the eyes of customers gain competitive advantage because they offer those features that the customer values; they win loyalty, even in commodity markets; and they use customer awareness to motivate employees to produce quality goods.

Those are some pretty strong claims. The evidence supports them. Companies that truly understand what customers value neither over- nor under-serve their customers and can carve out previously unrecognized profitable markets. An obvious example is the "MinuteClinic" phenomenon in health care. The very notion of offering medical care in a retail store flies in the face of conventional wisdom: it cannot possibly handle all the health problems families face; there is no doctor or specialist on staff; and the "clinics" are not clinics at all, but rather, demarcated spaces in stores. Yet, the MinuteClinic concept is wildly successful by every measure. Why? Because the creators of this novel type of health care identified the greatest needs of the greatest number of customers--common, minor, easily diagnosed health concerns--and the biggest customer complaints-- appointments with long waiting times--to design a service that caters to a huge underserved market.

Deeply understanding needs and value from the customer's perspective also helps increase customer loyalty. In recent weeks, three different manufacturing executives told me that even though much of what their companies produce can be sourced overseas, they win contracts because they have developed personal relationships. They have acquired an insider's view of how their customers think so they can offer special services tailored to each individual customer's needs.

In one company, the account executive (with help from his engineering and production teams) has repeatedly demonstrated to customer executives that his company can be trusted to do what it promises, so he keeps winning business. Another company realized that its immediate customers are its manufacturers' reps so the company learned the criteria reps use when deciding which of many products to promote and then figured out how to meet those criteria. The third company realized that low price is its customers' primary concern, but that on-time delivery also matters. So the company quotes two prices, one for product from low-cost but less reliable Asian sources and one from higher-cost, more reliable local sources. If Asia fails to deliver on time, the customer willingly pays the higher price for locally sourced products.

Finally, some manufacturers use customer contact to motivate employees to do quality work. The principle here is that employees will work with greater care when they realize that other humans, not some faceless corporate entity, will use what they produce. To accomplish this, three companies I recently visited encourage employees to watch customers use the product. All three make products or components that find their way into retail stores. Employees visit the stores to see who buys or uses their products, how customers react to the products, and how well the products look and work.

Clearly, customer focus is a competitive business strategy. To further illustrate the point, it's well known that Toyota wrote the book on manufacturing efficiency. It's a lesser known fact that Toyota also is relentless about seeking to understand car buyer preferences by expecting its design engineers to practice genchi genbutsu, going out to see for themselves what customers want. In designing the Toyota Sienna minivan, the project engineer went on an extended road trip as way to see what customers want. He drove minivans in every state and every Canadian province to learn what does and doesn't work.

Of course, manufacturers don't have to go to such extremes to understand their customers; fortunately, your salespeople can tell you a lot and you can learn from having regular conversations with your customers. But the main point is to realize that even when price is paramount, getting closer to the customer can still provide a competitive edge.
Lynn Moline, owner of Lynn Moline Associates, Inc., is a consultant and trainer who specializes in executive development, executive team alignment, and planning. Mike Braun is a partner at CLG, a company that provides behavior-based strategy execution and performance improvement services.

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Cheap Labor Shouldn’t Drive Offshoring Decisions
Supply chain management leaders know that the best reasons to establish manufacturing functions in another country aren’t always about labor costs. Nor is it the wisest strategy to shut down a facility and “move” it.

Significant cost savings can be achieved when manufacturers focus on operating efficiencies and material sourcing rather than facilities and labor in a cost-migration plan. Here are a few things to consider:
  • Revisit Sourcing: Considering the labor costs of the components you purchase, evaluate sourcing alternatives in lower-cost countries whenever possible. Plus, you’ll need this established supply chain in order to relocate additional functions.

  • Think Broader: Low wage does not necessarily mean low skill. Consider outsourcing knowledge-based and back office functions to another country, from marketing to customer service.

  • Be Selective: Choose the host country carefully. While China is the hot country of the moment, its political and property rights environment may not be right for your company.

  • Create a risk and benefit profile with a horizon of 20 or 30 years — the average investment for a new facility. Based on that, target three or four key countries for further investigation.

  • Leverage Labor: Research or go back to simpler, less-automated processes for your products to leverage the cheaper labor costs. This will also reduce costs on start-up.

  • Build a Market: If you plan to offshore production, look for ways to increase or create a market in that country. The overall goal remains to sell more than you’re sourcing, and keep production close to end users.
Kelly Salwei, CPA, CMA, is a principal at <a href="http://www.otcpas.com/">Olsen Thielen</a>, St. Paul and Minneapolis, and leads the manufacturing and distribution niche group.

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Lean Office Certification Congratulations
Congratulations to Jim McCarthy for being the first Lean Office Practitioner certified by the Manufacturers Alliance! He is a Lean Champion for Tescom Corporation, a local manufacturer of pressure control solutions for a multitude of industries.

Jim agrees with local practitioners that the most untapped improvement opportunities are in the office and says that lean office is the "next frontier for lean with 60% - 80% of cost being in the office". The third component of the office certification - the practical application projects - had a significant impact on customer orders and inventory. He says "I was able to cut the time to process an order by over 76%, as well as decrease inventory by 82%".

Training helps internalize Lean principles and definitely aids in reducing resistance to Lean implementation. For that reason Jim recommends the Lean Office Certification and wishes that more employees at his facility had significant training in Lean. To learn more about the Lean Office Certification click here
The mission of the Manufacturers Alliance is to provide peer-to-peer training, education, and resources which inspire manufacturing companies to continuously grow, improve, and stay competitive.

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