Waste busters

Hank Turner of Empire Machinery and Tom Berger of Fuchs Machinery have adopted lean principles at their companies to eliminate waste in every process

by Rich Vurva

People familiar with lean production principles typically associate the concepts with manufacturing. While it’s true that most industrial distributors first learned about lean from their manufacturer customers and suppliers, a growing number are beginning to adopt lean practices in their own businesses. Companies such as Empire Machinery & Supply Corp. in Norfolk, Va., and Fuchs Machinery in Omaha, Neb., have learned that lean thinking helps them become more efficient. It also draws them closer to customers.

Empire Machinery began its lean journey when a major customer, Northrup Grumman, invited Empire and other select suppliers to participate in a lean certification effort. The shipbuilder wanted all of its suppliers to become lean. In fact, the company agreed to pay half the costs of the certification effort. Empire Machinery was the first Northrup Grumman supplier designated as a certified lean enterprise by the Virginia Applied Technology and Professional Development Center at Old Dominion University.

Company president Hank Turner says the certification helps Empire demonstrate its quality commitment to customers.

“Lean is the big thing now. Customers want to know they’re dealing with someone who understands the importance of getting the job done right the first time,” he says. “It pays to do business with us because you don’t have to correct someone’s mistake.”

Vice president of operations Jim Sands adds that the lean certification provides salespeople with another way to differentiate themselves from the competition, and sell quality instead of price.

“They can say we’re lean certified and guarantee first-pass accuracy on their orders. Everyone understands there’s a lot of cost involved in correcting errors, including processing credits and handling returns. When customers order from us, they know it’s going to be right,” Sands says.

Standardizing warehouse procedures
Empire began its effort by assembling two employee teams to study workflow in the warehouse. The goal was to improve how the warehouse in Norfolk operated, and then transfer that knowledge to its Hampton and Richmond, Va., branches. Working separately, the teams discovered the company had multiple processes in place for picking, packing and shipping customer orders from four separate departments.

“We were checking orders for some customers and not checking orders for others. We did special packaging for some customers and not for others. Because we involved all of our team leaders from every department, they saw the process and understood the need to change and simplify,” says Turner.

After mapping out each step — in a process called value stream mapping by lean proponents — the teams joined forces to devise standard operating procedures. Today, instead of having individuals assigned to pull or pick orders for specific customers in a limited section of the warehouse, employees are cross-trained and can perform multiple tasks from a centralized staging area.

“We were able to take the same number of individuals and give our warehouse manager back approximately 18 hours a week in manpower. Instead of having someone sitting idle because they didn’t have anything for their particular job function, now they’re doing everything,” says Sands.

One lean tenet is to strive for continuous improvement by eliminating wasted motion and steps that don’t add value to the customer. For example, instead of making assumptions about when customers need to receive their order, inside salespeople are doing a better job of qualifying customer requirements and sharing that information with the warehouse. Adopting a flexible schedule where some warehouse employees work from 7 a.m. to 3 p.m. enabled Empire to extend its order cutoff to 5 p.m. and still guarantee to customers their order would arrive the next day.

Recognizing that third-party logistics companies can deliver some shipments more cost-effectively than company trucks, Empire increased its use of UPS for small parcel shipments and Estes Express Lines for less-than-truckload freight. The moves generated savings of about $150,000 annually in labor and truck fleet costs. The company also eliminated four positions through attrition at the same time it increased its on-time delivery and first-pass accuracy rates to 99 percent.

“We ask ourselves one question: How can we do what we do better than we’ve ever done it before?” Sands says.

Fuchs goes lean
Fuchs Machinery president Tom Berger says he was familiar with the advantages lean provides his customers, but wasn’t convinced of its application to distributors. During a visit to a supplier’s lean manufacturing operation, he started to realize how Fuchs could benefit from lean.

“I attended a distributor advisory board meeting at Kennametal IPG in Augusta, Ga. We toured their facility and saw how they implement lean thinking in their manufacturing practices,” Berger says. He also witnessed how Kennametal incorporated lean thinking into their office environment.  “It wasn’t until I saw it first hand that I realized it would also apply to the way we run our business,” he says.

Berger invited a lean trainer from Kennametal to Omaha to conduct a lean seminar for Fuchs employees in early 2004. Later that year, Fuchs hosted a three-day seminar led by supplier De-Sta-Co Industries, which also embraces lean manufacturing concepts. This time, five customers participated in the event, along with Fuchs outside salespeople, managers and other Fuchs employees who work inside customer facilities. One of their assignments was to conduct a kaizen (quick improvement) event at a customer location to look for improvement opportunities.

Bill Kiefer, manager of industrial products, participated on a team assigned to a shelving manufacturer. Their objective was to reduce a bottleneck occurring as parts came off a punch press operation and sat in storage carts spread throughout the production room floor.

“We came up with a pallet rack that allowed them to stage items in the order they came out of the punch press,” Kiefer says. “By eliminating the bottleneck, they were able to boost production on their existing equipment and avoid buying another production machine. They also freed up a considerable amount of floor space.”

Such exercises demonstrated to Berger not only the value that lean principles offer manufacturers, but also convinced him his company could play a role in bringing lean concepts to customers.

Lean training
Fuchs has held two separate lean educational seminars for customers and prospects. An event conducted in Omaha last October attracted 140 participants; attendance at a similar session in Denver in December was lower because of bad weather. The two-day sessions included presentations from Fuchs employees and suppliers such as Kennametal, De-Sta-Co, Marposs and CribMaster.

Berger says both educational events were successful and plans to hold additional sessions in the future.

“If American manufacturing is going to live a long, healthy life, they’ve got to get waste out of the system. We are trying to educate our customers in lean concepts for their well being,” Berger says.

Fuchs received approval from the Society of Manufacturing Engineers (SME) to offer Continuing Education Unit (CEU) credits for the educational sessions. SME members who participated in the sessions received a certificate indicating how many CEU credits they earned.

Since embracing lean, the company also revamped its award-winning cost documentation program to better reflect lean principles.

“The reporting we give to customers plugs right into the documentation they need inside their facility. Even the display plaques we use are based on a format that looks like a write-up for a lean event,” says Dennis Laforge, cutting tools application specialist.

Focusing on lean principles has proved to be another way for Fuchs to differentiate itself.

“Lean has allowed our people to be much more valuable to customers. They’re looked at as more of an asset than just a salesman trying to sell product,” Kiefer says. “When you walk up to a customer who looks at one of your people who has saved them thousands of dollars on processes that repeat every year, compared to someone else who is trying to sell on price, it makes selling on price that much more difficult.”

Berger was surprised to learn how many customers were already using lean manufacturing concepts. Their involvement in lean provides Fuchs with another reason to communicate with lean coordinators, purchasing managers and other executives they might not ordinarily deal with on a daily basis. As fellow proponents of lean, they share a common bond.

“This is a process, not a project. It doesn’t have an end. As long as you continue to reevaluate how and why you do things, you’re making progress,” Berger says.

This article originally appeared in the May/June 2006 issue of Progressive Distributor. Copyright 2006.

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