Lean Manufacturing for the Contract Manufacturer
Applying lean tools can lead to job shop success
By Patrick Waurzyniak
Lean manufacturing typically is considered the domain of large OEMs, but adopting a lean philosophy can also pay great dividends for smaller contract manufacturers and job shops willing to tackle the project.
Practitioners of lean manufacturing can offer practical tools for implementing lean programs, yet often the high costs of consultants and lean training programs pose a barrier for many smaller manufacturers. While larger manufacturing concerns at an automotive OEM or Tier One auto supplier may be able to afford such programs, contract manufacturers or job shops can benefit when lean programs are tailored to their specific needs. SME and the National Association for Job Shops and Small Manufacturers (NAJS, Jackson, MI) in June held a conference Making Lean Work for the Job Shop and Small Manufacturer aimed at smaller shops looking into implementing lean manufacturing techniques.
For lean transformations to be successful, a lean program targeted at small and medium-sized manufacturers is essential, notes Gary Conner, author of Lean Manufacturing for the Small Shop, with a hybrid approach to lean that capitalizes on the similarities while noting the differences between OEMs and smaller shops. Conner cites the work of Sunset Manufacturing Co. (Tualatin, OR) as an ideal example of a job shop successful in implementing the lean concepts in his book.
Over the past two years, Sunset Manufacturing has implemented lean programs at the job shop, which employs about 30 people near Portland and manufactures parts for automotive, medical, and high-technology companies. Sunset makes parts that include winches, lift kits, and axle components for aftermarket auto parts manufacturer Warn Industries Inc. (Clackamas, OR), plus medical parts and metal enclosures or cabinets for computers. Owned by Jim Warren, the company turned to lean programs partly to help diversify its customer portfolio, particularly in the area of medical manufacturing, notes Rob Nees, Sunset vice president and lean champion.
"We've been pretty heavy into the high tech industry, but we're really trying to diversify now, and a lot of what we're doing with lean is actually allowing us to get into some industries that we haven't been able to penetrate, like medical and retail," Nees says.
At Sunset, the shop uses flexible cell configurations with CNC equipment including five HMCs from Hitachi Seiki and one milling machine from Toyoda Machinery USA (Arlington Heights, IL), with three more Toyoda machines on order. The cells are capable of lights-out machining with robots feeding the three machines in each cell. "We have quite a few lathes, but we haven't really focused on that area, because there hasn't been as much opportunity," Nees says. "We're seeing that now, and within the last six months we bought a Nakamura lathe with live tooling on it, which also has milling capabilities."
Sunset's lean efforts to date have concentrated on implementing several lean toolbox components, including 5S programs, visual controls, setup reduction, poka-yoke (mistake-proofing), and some value-stream mapping, Nees notes. "With value-stream mapping, we actually did a very detailed job just a little while ago," he adds. "We've done this on a limited basis, on a particular portion of our value stream, where we really dug into the setup side of it," Nees says. "The overall value stream is more of a door-to-door thing, which encompasses all of the material handling side of production. We've always broken it down into separate islands, and we value-stream-mapped those islands. We haven't actually taken a value stream and mapped the entire process until recently."
By adopting lean philosophies, Sunset Manufacturing was able to become more competitive on a greater variety of jobs, Nees points out, while increasing employees' awareness of issues and the importance of the company's lean efforts. Going lean helped Sunset reduce lead times and decrease its inventory of finished goods. "That was due mainly to the fact that we no longer feel the need to run an entire order at once," Nees says of inventory reduction. "We work more to customer demand now, not just to customer purchase orders."
Sunset initially decided to adopt lean after seeing how well some of its customers were doing with similar efforts, Nees observes. "We had to find a way to reduce lead times and our internal costs," he adds, "and as I said before, we wanted to open doors in industries we had struggled to break into for years. We realized that our survival depended on making the changes."
Breaking into medical manufacturing was a key goal, as well as making parts for new industries in retail industries like sporting goods, such as the metal component for mounting rifle scopes, Nees says. "The Kaizen event that spurred Sunset to get involved in lean was held at our largest customer, where they invited two people from Sunset to attend the pre-event training and the event," Nees recalls of the event at the contract manufacturer, a sheetmetal fabricating shop. "It was a huge time commitment that was well worth it. Sunset never realized the impact lean could have on our shop until we were exposed to it. We always believed that lean was for those companies that have assembly lines, products, and forecasts. Sunset can't take lean to the level that Toyota has, but we can pull from the same toolbox and achieve very good results.
| By implementing lean manufacturing, Sunset reduced inventories, lead times, and job setup times.
"What we learned from taking part in our customer's Kaizen opened our minds to the fact that we had tremendous opportunity for improvements," Nees adds. "All of us have similar issues--the lean tools are there to help businesses get better, improve processes, and make things easier for the workforce."
Nees credits the lean effort with substantially improving many key metrics critical to the shop's overall success. Lean helped Sunset Manufacturing reduce its lead times by at least 50%, improve flexibility, and reduce inventories by about 75%, he says. "I would say about 90% of our work is repeat work, and we're getting better at balancing out a weekly demand schedule with our customers," he says. "When I say reduced lead time, once we're set up and running these parts, typically we can pump out 50 - 100 pieces in less than a week, while in the traditional job-shop environment we'd run three months worth of parts and sit on them for two months.
"As we started to run out of parts in the inventory, we'd call the customer and say 'are you going to buy more of these?' then we'd get a PO and run three more months worth of parts. Now we don't do that. We actually dig into what the customer demand is. We're able to turn things around much more quickly for them, and keep our inventory levels low."
Lean manufacturing techniques also helped speed the shop's changeovers between jobs, improve safety in the workplace, and improved overall customer satisfaction, Nees says. "I would say an average changeover before lean was two to 21/2 hours, and now with lean, I'd say it's on average probably about 15 - 30 minutes."
Implementing lean at a smaller shop is not like the approach taken at large OEMs, Nees agrees, but most of the basic lean principles are the same. "It doesn't differ that much, you just have to figure out how to apply it to your business. That's the biggest challenge of all. All the tools are there, you have to figure out which ones are going to get the job done.
"One of the biggest differences is just that, to really implement lean in a smaller job shop, it's difficult to take time to train. But I don't think that a company like Ford or Toyota has an easier job of training people; I think they have more people that they can throw at actually developing those training-floor programs."
An OEM's greater resources and deeper pockets may make implementing lean easier for larger companies, but it doesn't necessarily make the OEM more effective. "It doesn't really matter to me. I don't see a big difference whether you have 1000 employees or 10 employees--you still have the same struggles as a corporation--everyone wants the same thing in terms of customer demand," Nees says.
"Our manufacturing is much different. We have islands of manufacturing--there's a saw, there's a lathe, there's a mill--and our biggest benefit when we started lean two years ago was that we have to keep spindles running to make money," he says. "So what do we do to do that? Well, we make sure that we don't have the spindles sitting when we're doing setups. We pulled everything that we could out of the internal part of a setup, and we do offline while that machine is running. And yes, there is time when the spindles sit, but reducing that time is where we see our biggest benefit as a job shop."
Lean's costs are likely seen as a big barrier by many smaller shops, though manufacturers that try lean programs quickly find that the rewards often outweigh the price tag. "It took us a while to get to the point where we realized that there was a need to invest in it," says Nees, adding that the investment absolutely paid off for Sunset Manufacturing. "In order for us to make it a worthwhile effort, and not the so-called 'flavor of the month,' we invested in training our entire workforce, and we still are logging new people into lean training. They're going to certain training courses, whether it's something that Gary Conner does, or a course offered by the Oregon Manufacturers Extension Partnership."
This article was first published in the August 2004 edition of Manufacturing Engineering magazine.