January, 2009

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Article Index

The double life of a non-profit manufacturer
Article by: Justin Dorsey
A non-profit manufacturer. Sounds like an oxymoron. Like jumbo-shrimp. Is there really such a thing?
Supply Chain Management - Supplier Evaluations
Article by: Bruce W Vetsch
Many organizations today are focusing on driving prices down even further to try to improve the bottom line. Companies outsourcing to China or elsewhere may find the attitude of their local suppliers becoming more dismal.
Compliance News - Looking Down The Wrong Side of the Barrel
Article by: Vija Kelly
One of the most dreaded statements we receive from clients, is "We want you to make us OSHA proof". Making OSHA compliance the priority is looking down the wrong side of the barrel.
MN Economic Outlook
Article by: Dr. Ernest Goss
For the month of January 2009, reported February 2, 2009. For a sixth straight month, Minnesota’s Business Conditions Index fell below growth neutral.
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The double life of a non-profit manufacturer
A non-profit manufacturer. Sounds like an oxymoron. Like jumbo-shrimp. Is there really such a thing?

And if there is, what could it possibly teach readers who are accustomed to arduous survival stories about Lean Manufacturing and Continual Improvement and the constant threat of off-shore competition? Well, it turns out that this company has had to deal with all of those struggles and has found its own answer to each of them - which is to say, "Yes. Yes, we can."

So, who is this company? It does business as Contract Production Services (CPS) - and it's been in business for more than 55 years. In industry jargon, it is a "hand" packager, assembler and manufacturer. At first blush, that sounds like a provider of low-cost labor. And, that was mostly true - once upon a time. Not today. Today, its clients e-mail it structure specs (size/shape of boxes/vacuum-formed-containers) and print specs (labels and instructions) and expect it to source and negotiate the pricing of those parts from its own list of vendors, and then package parts that it has laser-cut, die-cut, compression-fit, glued and/or otherwise assembled. Given the abbreviated turn around times that are its life-blood, it even needs to inventory most raw materials.


Who uses "hand" packagers/assemblers/manufacturers these days? Turns out, lots of companies. Companies like 3M, General Mills, Target, Andersen Windows and Caribou Coffee look to CPS for their turn-key approach to production.

So, what's its double life? The answer is that it gives 100% of its profits to its parent 501c3 organization: Vision Loss Resources (VLR). VLR is the merger of the Minneapolis and St. Paul Societies of the blind. Nate Gerard is CPS's Sales/Marketing Director. As he explains, "Everyone who works here - from the janitorial staff to the CEO - could work for more money somewhere else. But we're all driven by the passion that our hard work helps fund VLR's mission to teach blind and visually impaired people the skills they need to live on their own."

Like the visually impaired people it supports, CPS bristles at the notion of pity. As Nate points out, "We couldn't have lasted for 50 years if we were just surviving on hand-outs. We have a stringent business plan that depends on our delivering profits quarter in and quarter out. We have more than 100 employees to whom we provide health benefits, a healthy 403b match, and generous vacation packages. And I should add that CPS employees are fully sighted so we can handle any type of job."

Like all manufacturers, CPS has to deal with bottlenecks. Nate says that the bottle neck right now has to do with name-brand-recognition. "Frankly, we haven't done a very good job of reaching out and introducing ourselves to other manufacturers. And, we know that this is a fantastic time for us to be marketing ourselves. So, we're scrambling. But, we hope that our membership in the MA will help us meet those who we can help. These are tough times, and if we can help manufacturers lower their 'fulfillment' costs - then we want them to know about us. It is our mission to help our production partners. And we know that by helping them - we'll be helping our VLR constituents too."

It's a compelling story. A win/win in the double-life of a non-profit manufacturer.
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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Supply Chain Management - Supplier Evaluations
Many organizations today are focusing on driving prices down even further to try to improve the bottom line. Companies outsourcing to China or elsewhere may find the attitude of their local suppliers becoming more dismal.

My take on this is that there are more than enough companies in this country to supply what you need. How do you get them to supply product at a cost that is competitive?

One tool that can help the supply chain manager is the vendor survey, which can be sent to either your suppliers or your customers. In this vendor survey several key points should be emphasized. Those items are;
  1. Is there trust between us? And how can we build more trust?

  2. If I perform well how do we do more business together?

  3. How and can we implement a kan-ban system? (Deliver material only as needed)

  4. How can we best use the abilities you have to offer as a supplier?

  5. Are you making a profit on the items provided?

  6. How can we help you in the process or procedures to make better parts?

I have been pleasantly surprised by the outcome of this type of survey and have often found that the vendor will provide candid and truthful responses. You may find that the vendor is "making a profit" but could do better, or you are not giving the vendor enough work and they could do more. Based on the outcome of the survey, you can make some knowledgeable decisions on partnering with certain vendors.

There are some basic assumptions you need to keep in mind. Before you send out a survey asking for feedback, top management must be on board and open to the results. All departments should be part of your team so that when action is required there is nothing in the way of making improvements. Immediate results should not be expected or promised; it takes time to develop better vendor relationships and build trust. Don't try to fix too many items at one time. It is better to be selective and focus on the items you feel will net you the highest cost savings. Finally, enjoy your successes!
Bruce W Vetsch is a long time supporter of the Manufacturers Alliance and a subject matter expert in Supply Chain Management with lots of manufacturing experience.

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Compliance News - Looking Down The Wrong Side of the Barrel
One of the most dreaded statements we receive from clients, is "We want you to make us OSHA proof". Making OSHA compliance the priority is looking down the wrong side of the barrel.

A good safety program almost guarantees OSHA compliance, but OSHA compliance does not guarantee a good safety program. It does not ensure the avoidance of costly accidents. An OSHA violation may cost a company $3,000.00. A serious back injury may cost $1,000,000.00.

OSHA regulations concentrate on unsafe conditions, yet 95% of all accidents are caused by unsafe acts. If a company eliminates all the unsafe conditions, it has only eliminated 5% of accident causes. The forward looking company will try to minimize its exposure to both OSHA fines and accidents. There are many components of such a program:
  • Establishment and enforcement of safe operating procedures

  • An active safety committee

  • Good accident investigation

  • Empowering all persons to correct unsafe acts
Analysis of the hazards and required protection is both necessary and mandated by the regulations. After you have done that, enforcement on the floor is a matter of some very simple rules that must be followed without any ands, ifs or buts:
  • No one may operate any equipment without training

  • Shortcuts are unacceptable

  • No one may bypass, disable or otherwise interfere with guards or safety devices

  • No unauthorized alterations or repairs on any equipment

  • Lockout/tagout procedures must be used when required

  • If personal protective equipment is required, it must be worn, no exceptions
Good safety committees have been shown to be a major factor in building a safety culture. To be good, a safety committee must have real duties, hold regular meetings which all members attend, have management support and visibility. Some duties required of a safety committee include:
  • Communication with workers about safety concerns or potential hazards

  • Regular safety inspections of the workplace and assignment of corrective actions

  • Accident investigations

  • Evaluation of how the safety program is working

  • Setting safety goals for the organization
However, the Safety Committee should not take on the sole responsibility of correcting unsafe situations. If a fire extinguisher is consistently blocked in an area, the Safety Committee member who notices it should have someone in the immediate work area clear it. They should be given the explicit authority to enforce safety rules.

The biggest mistake that organizations make is to stop accident investigation with the "First Report of Injury". Although required for reporting injuries to an insurance company, this document will not help you avoid future accidents.

For example, an employee slips on an oil slick. The immediate cause of the accident is the oil spill. Identifying the immediate cause of the accident and correcting it, however, does not ensure that the accident will not reoccur, even if it satisfies "First Report" needs.

An accident investigation reveals that the forklift was leaking. The leaking forklift was a "contributing cause" to the accident. Fixing the forklift does not ensure that the accident will not reoccur. If the investigators found no documented maintenance log, a possible "underlying" cause was the lack of routine maintenance. This may not be the "root" cause of the accident. Let's assume daily inspections had revealed the problem, but the problem had not been corrected. Possible "root" causes for this situation include: Not enough equipment, Not enough personnel, Lack of communication, System/process failure. Only when this cause is fixed, are future accidents prevented.

The best organizations are those in which everyone feels they have a stake in safety. There are many ways to bring about this kind of an organization:
  • Never compromise on safety rules–not for your best worker who won't wear safety glasses, not for production schedules, not for any reason

  • Affirm as well as correct–praise people for compliance, or for changing their behavior

  • Celebrate the fact that you have a safe shop
The single most important factor in bringing about a safety culture in any company is good, honest, meaningful communication. Managers, and even company executives, who walk around the floor praising and correcting enforce the message that safety is a core value of the company.
<img src="http://www.mfrall.com/newsletter/authorpics/vijakelly.jpg"align="left">Hazard Management is a consulting and training firm specializing in occupational safety and hazardous waste management. Call Vija Kelly at 651-697-0422 for more information.

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MN Economic Outlook
For the month of January 2009, reported February 2, 2009. For a sixth straight month, Minnesota’s Business Conditions Index fell below growth neutral.

The index, a leading economic indicator based on a survey of supply managers in the state, dropped to 30.1, a record low, down from December’s 32.2. Components of the overall index for January were new orders at 25.6, production at 28.0, delivery lead time at 47.7, inventories at 26.1, and employment at 28.4. “Weakness was reported by firms across the business spectrum in the state from durable goods manufacturing to telecommunications. The state’s unemployment rate has risen to its highest level in almost 25 years. Based on our survey, I expect the state’s jobless rate to continue growing and top 8 percent by end of the second quarter of 2009,” said Goss.
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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