July, 2008

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Article Index

Featured Member: The Dream Team
Article by: Justin Dorsey
Once upon a time, Satellite Industries manufactured the old-fashioned way. That is, it got lots of parts delivered to its headquarters, assembled and packaged them, and delivered them to their customers.
Featured Lean Leader: Rich Hiemenz, Skyline Exhibits
Article by: Manufacturers Alliance
Full Name: Rich Hiemenz
But I Know What the Problem is
Article by: Rip Stauffer
How often have you heard that? We are so close to our jobs, have so much experience…surely we know exactly what needs to be fixed. Sometimes, however, we are actually too close.
MN Economic Condition
Article by: Dr. Ernest Goss
For the month of July 2008, reported August 1, 2008. Minnesota's Business Conditions Index continues to hover around growth neutral.
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Featured Member: The Dream Team
Once upon a time, Satellite Industries manufactured the old-fashioned way. That is, it got lots of parts delivered to its headquarters, assembled and packaged them, and delivered them to their customers.

After all, no one could understand its manufacturing demands or assemble its products as well as it could! But then one day a curious thing happened. Three members of Satellite's management team were visiting a local plastic subcontractor when they had a collective epiphany. (Hence, the name 'dream team.') In the blow molding process, there was a long delay between heating up and cooling down of the plastic. They were observing the molding of a plastic door & frame, which took a full eight minutes to heat up, mold, and cool. Every eight minutes the press operator would get, trim and stack a new door & frame. He then waited a full eight minutes for another door/frame to come out of the press. As one, the dream team thought, "Why not have the press operator assemble the door to the frame during this down time?" However, that would require acknowledging that the sub-contractor could "manufacture" its product as well as Satellite could. Could it? As it turned out, even better.

Satellite realized that when the press operator assembled the door to the frame, they did so with the parts that came from the same extrusion. They matched! In contrast, when Satellite assembled the door to the frame, they almost never came from the same extrusion because they had been shipped to Satellite in different part lots. Now there is nothing new about sub-assembly, but what the dream-team began to see was a paradigm shift in Satellite's perception of itself as a manufacturer. What they were suggesting was that Satellite no longer think of itself as a manufacturer, but as a supply chain manager. Soon they began to envision an arrangement where their suppliers shipped directly to customers - and even handled customer complaints. Obviously, a lot was dependent on being able to "trust" their component manufacturers.

The rest of the Satellite management team liked their vision. Over the next two years, Satellite outsourced a majority of its manufacturing. [And, not to China - but rather to a core of domestic suppliers]. Did it work? Well beyond their expectations! For instance, one concern was whether they would lose control over the generation of "new" ideas. How would they know when a product could be made more efficiently? The answer was simply to "listen." With respect to new ideas, Satellite found itself listening more closely to its customers and designing new products in response to them. Regarding streamlining the manufacturing process, Satellite found that its subcontractors were better at offering suggestions to refining systems than it had been when it oversaw the entire process in-house.

Finally, it's important to understand the scope of what was at risk to appreciate the audacity of its wholesale shift in thinking. Satellite has seven domestic sites and offices in Belgium, London, Spain, France, Germany, Netherlands and Hong Kong, in addition to warehouses in the U.S., Netherlands, U.K., Germany, France, Italy and Korea. A substantial portion of its revenue is generated from its international operations, and Satellite products account for nearly half of worldwide production of portable sanitation equipment. Its change in culture had literally worldwide implications. However, it worked, and very well. For example, Satellite Vice President John Babcock told of a recent call from FEMA, looking for portable sanitation stations for an Iowa area struck by flooding. He took the call at 7:30 AM, and 100% of the requested equipment was on the site by 5:30 PM. As he says, "No way could we have built to order in so short a period of time in the past. Now, it's just a matter of inventory control. Obviously, our clients benefit from our supply chain management expertise."

Interestingly, Satellite still grapples with the "bottleneck" issue that plagues most manufacturers. Today, its bottleneck is "forecasting." While Satellite can forecast with precision how many units it will need in 30, 60 and 90 days, it can't yet predict the color in which they will be ordered. And of course, there's the small matter of predicting commodity prices. Today, most of its resins are made from petroleum or natural gas. However, plastics made from sugar cane and even carbon dioxide are in the developmental stage. When asked about whether "green" manufacturing was a concern, John Babcock answered with a resounding, "Yes." In simple terms, virgin plastics are required for surfaces that require a consistent color. Recycled plastics can be and are used to manufacture non-colorized surfaces, such as bases. Technology now exists to co-extrude a molded sandwich of two thin colored surfaces to a dark structural core surface. The result has been a dramatic increase in the use of recycled plastics - with more to come.

Satellite was founded fifty years ago and is still family owned and operated. It's an amazing story of focus, commitment, and success. Who would have guessed that the lowly portable latrine could offer such valuable lessons in Lean manufacturing? As with so many successful lean stories, it all turned on embracing a culture of "change." Not surprisingly, Satellite is an active member and participant in the Manufacturers Alliance. As John Babcock says, "We participate in the MA because we are proud of what we've accomplished and we want to share the lessons we have learned. But, we also know that it's an ongoing exercise and we are convinced of the value of peer networking. There are few MA seminars that are not attended by at least one person from our company. Coincidentally, yesterday four of our staff attended one. And, the Lean Accounting program has been particularly helpful. Ultimately, membership in the MA has provided us tangible benefits that have translated directly into making us an even better organization."
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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Featured Lean Leader: Rich Hiemenz, Skyline Exhibits
Full Name: Rich Hiemenz
Title: Graphics Department Supervisor
Company: Skyline Exhibits
Address: 3355 Discovery Road Eagan, MN



is a marketing communications company specializing in the design, manufacture and service of a wide selection of innovative modular exhibits and portable displays. With creativity and collaboration, Skyline designs exhibits to achieve its clients' aesthetic, functional, and financial objectives. Skyline Exhibits and its dealer network employ more than 1,500 people at over 140 design centers in over 40 countries where exhibitors live and exhibit.

Why did you complete the Lean Leader Certification? Skyline manufacturing has been moving more and more to a lean culture where it encourages and supports those who try to make positive changes and improvements. I was able to directly apply many of the concepts I learned while earning my Lean Practitioner certification and so was eager to continue on in the Lean Leader program.

What were the lessons learned from leading or training your team on a lean manufacturing project? First off, be prepared going in. Get management support for the project, get permission from the team member's managers for their time commitment, line up support departments such as maintenance and quality control if needed. Choose your team from a good cross section of the company. Some of our best ideas and contributions came from unexpected sources so encourage participation from everyone. Once changes and improvements are made, don't forget the most important part…Sustain!

Would you recommend others enroll? I would absolutely recommend others to enroll. There are so many practical concepts and ideas that are taught at the Manufacturer's Alliance that can be taken back and immediately applied to your work situation. In today's competitive manufacturing environment, I don't know how a company can stay competitive without applying at least some lean practices!
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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But I Know What the Problem is
How often have you heard that? We are so close to our jobs, have so much experience…surely we know exactly what needs to be fixed. Sometimes, however, we are actually too close.

A few years ago, I worked with a manufacturer of specialized printers. Each printer contained many small moving parts and electronic components. I had trained some Black Belts, and one production manager had chartered a Six Sigma project focused on supplier quality. The manager was convinced that if he could eliminate problems arising from two primary suppliers, his troubles would be over.

I had seen this situation before, and knew the downside of focusing on the supplier quality solution before getting your own house in order. The manager insisted: he had managed this process for several years, and just knew what the two largest process problems were:
  1. Many bad circuit boards from their circuit board supplier.

  2. Delays in parts received from a machine shop.

At the manager's insistence, we chartered the project and went to work. After the first meeting, we decided to include a representative from each supplier on the team. These valuable players quickly revealed some very telling points.

The circuit board maker had instituted Statistical Process Control several years earlier, tracking all important customer quality characteristics. They had excellent Gage R&R results on all measurement systems. Additionally, their contract stipulated that any card returned as defective and susequently testing OK would be returned to the printer company, and a testing fee would be assessed. Vendor records revealed that every card returned as defective had tested OK. Testing fees had amounted to tens of thousands of dollars per year.

Next, we looked at the process for soldering the circuit boards. After a couple of Designed Experiments and minor changes to the soldering equipment, some simple mistake-proofing jigs and a new SOP, that "supplier problem" went away for good.
Indeed, there were massive scheduling and delivery problems with the piece part vendor. Upon examining these problems more closely, we soon found the root cause: too many managers had the vendor's phone number! The shop was small, but had adequate production capability to meet the printer manufacturer's needs. The problem wasn't capacity, it was scheduling. For example, a lathe operator had set up to produce a large run of spindles needed for one of the printer sub-assemblies. The operator had barely started the run when she got a call from the printer repair parts manager. He had just learned that he was running low on a particular spool and needed twenty ASAP, to keep his inventory within min/max. The operator then stopped the spindle run and set up for the spools. This problem happened on a very regular basis.

Fortunately, it was also easily fixed. The production manager was assigned as the only direct liaison with the piece-parts vendor. He ordered parts according to a lean, rational scheme that channeled the entire flow of production and repair parts to the rhythm of actual customer demand.

Project results? The company, due to its wise decision to include vendors in the improvement teams, developed a better partnership with its suppliers and learned a lot more about its own processes and systems. The production manager learned that his gut might not always be the best source for decision-making data, and he immediately assigned the Black Belt to analyze the process for more improvement opportunities. Financially, the cost savings realized from fixing these two problems amounted to over $1.2 million dollars per year!

Interested in learning more about 6 Sigma Certification? Click Here
<img src="http://www.mfrall.com/newsletter/authorpics/RipStauffer.jpg"align="left">Rip Stauffer is the owner of Woodside Quality Solutions, a consulting firm specializing in continuous improvement including Six Sigma, TQM, and Lean. You can reach him at 952-361-5518 or at rip@woodsidequality.com.

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MN Economic Condition
For the month of July 2008, reported August 1, 2008. Minnesota's Business Conditions Index continues to hover around growth neutral.

The July index from a survey of supply managers in Minnesota advanced to 50.3 from 49.0 in June. Components of the overall index for July were new orders at 50.0, production at 56.4, delivery lead time at 55.0, inventories at 44.0, and employment at 43.0. "Even as the state's economy expands, it continues to lose jobs albeit at slow pace. As in other states, Minnesota firms are growing output with fewer workers. Over the past several months, rising commodity prices has negatively affected food processors in the state. On a more positive side, computer-and electronic-component manufacturers are experiencing improving economic conditions. Second-half job and output growth in Minnesota will be significantly below the trend,".
Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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