Middle Market Manufacturing: How to Create Impactful Change

Across the U.S. Midwest from the end of WWII to the 1980s, most towns and cities had multiple middle market manufacturing companies that employed the local residents. The U.S. also had manufacturing suppliers, including pattern makers, tool and die makers, and container distributors to support these companies. The network of suppliers was local and regional; supply chains were short and simple.

Fast forward to the 21^st century, and times have certainly changed. While middle market manufacturing is still prevalent in the Midwest and other areas within the U.S., the supply chains that support them have changed. Companies have been forced to compete in a global market. The reality for manufacturers today is that continuous improvement is no longer an option—it is a necessity.

Manufacturing Operational Improvement – Where to Begin?

Today’s middle market owners understand the value of innovation and improvement but often seek a pragmatic conversation about “where to begin” the improvement process. FortéOne operating partners have hands-on operations expertise in building cultures of innovation and continuous improvement. And it is usually a combination of proven tools and hands-on experience that can make a difference in manufacturing plants.

Example: Plant is bogged down with no clear path to improvement

It’s not uncommon for a manufacturing plant to become bogged down, performing at less-than-satisfactory levels month after month despite great energy and effort. When the bad months string together and no clear path forward is apparent, it may be time to honestly assess the situation. Here are some common problems FortéOne experts have found in plants experiencing poor operations and quality:

1. Preventable small problems that cause large losses of efficiency and profitability – those that repeatedly pop up and reduce efficiency and throughput

• • Minor accidents, like slips and trips, bumped/hit against, or operator error
  • Product put on quality hold and/or thrown away, maybe from labeling errors, missing ingredients, a batch that does not perform, or incorrect count or weight
  • Equipment downtime from inadequate maintenance, poor cleaning, or incorrect adjustment
  • Employee errors, like incorrect batching, short cuts to procedures, or inadequately trained personnel

2. Repeated big problems that can potentially put the entire company at risk – those that happen occasionally and demand immediate attention

• • Serious customer complaints, such as foreign material contamination or mis-shipped product
  • Significant inventory errors or variances
  • Major downtime from a problem that recurs from time to time
  • High scrap rate on a problematic product or operation

3. Workforce issues that persist and can result in high turnover, poor plant performance, and possibly encourage unionization issues

• • Routine operations rely heavily on a small core team of key employees while most of the workforce remains generally uninspired
  • Key employees are working too many hours resulting in burnout or uneven overtime
  • Unhealthy competition between some managers
  • Lack of development of line leads, supervisors, and/or department heads which prevents adequate succession in the event of turnover

4. Plant areas that are cluttered or dirty or require special work before audits or visits
5. Rising controllable costs

What Has Not Worked?

Quite often, management has tried various solutions that either failed or did not last:

• Replacing weak managers or propping them up with additions to staff
• Redistributing responsibilities, adding more work to the best managers
• Mandating cost cuts, e.g. to overtime, training, or maintenance
• Deferring capital investment in equipment replacements, maintenance parts, or facility work
• Serial programs-of-the-month or ineffective training programs

The Solution that Works – Two Initiatives

FortéOne operating partners have made significant improvements in underperforming plants through implementing two broad initiatives. Usually, both programs are activated simultaneously since they spread the work (and success) over more people and they work together without overlap. One focuses on the hourly workforce and supervisors. The other mainly involves the managers.

Little capital or incremental expense is required, and improvements are realized fairly quickly.

Both programs require visible and sustained support from the plant manager and the CEO. It is also important that the opinion leaders in the plant, as well as the plant manager and CEO, tell people, “We’re doing this. We need your support. Don’t fight it.” Not surprisingly, after results are achieved, it is normal to hear comments like, “This is what we should have been doing all along,” and “This is what I’ve been trying to tell you guys. You finally listened.”

The programs use elements from Lean Manufacturing, GFSI quality schemes, and Six Sigma, as well as proprietary home-grown techniques developed through firsthand experience. The techniques are tried-and-true. The success of the effort, however, depends on more than the techniques themselves. The most important factors are (i) teaching in a retainable manner and (ii) in-plant execution—how well the people understand and take it all to heart to meaningfully change their work habits.

Some highlights of the two programs are:

Workforce Program – after explanation to upper Operations management, this is aimed at supervisors and hourly employees

• Engages hourly employees
• Stabilizes operations at a high level of order and reliability
• Improves work life for the employees, supervisors, and managers
• Becomes self-sustaining after achieving the tipping point
• Permanently eliminates or minimizes many recurring preventable small problems

 Management Team Program

• Develops cooperation between departments
• Improves and standardizes work-life/company culture
• Teaches problem-solving skills and team skills
• Extends beyond the plant; includes front office functions
• Establishes a method to address big problems in the future
• Using Root Cause Analysis permanently eliminates or minimizes repeated problems

Requirements for Success:

The most important requirement is commitment:

• Personal, visible, sustained support from the CEO and the Plant Manager
• Buy-in and support from the union, if applicable. (Union support has never been an issue. The programs respect the contract, reduce grievances, and help sustain employment.)
• Recognize there are no silver bullets—results take time and ongoing commitment. FortéOne can achieve these significant results typically with on-site implementation 2-3 days/week within 6-10 months
  • 2-3 days per week are required for the FortéOne operating partner to tailor implementation to the specific plant and workforce, earn credibility, stay relevant, and sustain momentum
• 6-10 months are required for the employees to learn, buy in, and cement new work habits.

Results

Following are some hard and soft metrics these programs have achieved:

“Hard” Measurable Improvements on Key Performance Indicators include

• Accident frequency rate reduced 72%
• Direct labor cost decreased 5%
• Overtime reduced 51%
• Pounds per shift increased 31%
• Service rate increased 11%
• Quality complaints reduced 51%
• Inventory reduced 9%
• Freed up enough previously used plant space to install 5 new lines in 2 plants to meet increasing demand

“Soft” improvements

• Plant department managers working together much more easily and effectively.
• Chairman of the Board asking, “Tell me about the culture change. On the plant walkthrough today, people looked me in the eye, smiled, and said ‘Hello.’ That’s never happened before.”
• Front office manager commenting, “When I was in the plant today, [name of employee] called me over and said, “Come and look at what we’re doing.”
• QA Manager reporting that an employee asked him to come audit his area.
• Suppliers, customers, outside Sales managers, auditors, and servicemen who have been coming to the plant periodically for many years, commenting, “I’ve never seen the place looking this good. What did you do?”
• 365 readiness for unannounced audits or short-notice visitors

Summary

Middle market manufacturing is experiencing a resurgence in the U.S., but global competitors continue to raise the bar. Continuous improvement is not easy, and most middle market companies have untapped opportunities to increase efficiency and profits. The challenge is identifying and seizing those opportunities because rarely do middle market companies have experienced internal resources who can identify and implement the most impactful change. FortéOne has been providing middle market manufacturing companies with those resources for more than 20 years. If you would like a pragmatic partner who can work with you to take your manufacturing operation to the next level, please give us a call.

Contributors: Mark Rittmanic & Jim Todd