Edson Puts The Squeeze On Waste
"We've totally embraced Lean. I firmly believe that unless all of North American manufacturing adapts Lean, we face grave consequences."
By Ron Richardson (As Published in Plant Magazine)
Ron Richardson, a former editor of Plant is a freelance writer and editor based in Toronto.
Robert Hattin started out as a hard-nosed skeptic about the values inherent in Lean manufacturing. Now he's a confident convert and a disciple of the production philosophy that preaches the value of squeezing waste out of all plant operations. His epiphany on the road to realization and acceptance came after rather reluctantly attending at a Lean workshop arranged by Canadian Manufacturers and Exporters (CME).
"I came away a believer and an advocate," says Hattin, president of Hamilton, Ontario based Edson Packaging Machinery Ltd. An ISO 9001- accredited company with 70 employees, Edson custom designs/builds automatic and symptomatic case packing machines and peripheral devices. They handle everything from paper towels, canned goods, and confectionery items. As a story on the company in USA Today said, its machines "flip, fold, stuff and glue cardboard containers."
Edson racks up annual sales in the $10-million range from a global base of buyers that includes both Fortune 500 companies and small-scale ventures. But the lion's share of its customers is in the US.
Edson, around since the early 1960s, was started by Ed McCrudden, beginning as a garage-based operation supplying local food packagers. Now, the engineer-to-order company is housed in a 4,645-square-metre facility, opened in 1995 not far from the original owner's starting point.
Manufacturing Ignored
Born in Bancroft, Ont., Hattin is a mechanical engineering graduate from Niagara Community College and gained 20 year's manufacturing experience in a range of duties handled at Westinghouse and a material handling firm in nearby Grimsby. He and a partner bought Edson as the fourth management group since its founding "with the aspirations to put a little more energy into the company and leverage its history of reliable packaging machinery."
Now in his late-forties, he says: "I've seen the large corporate side of manufacturing and I knew that wasn't for me as a lifetime career. I am more of an entrepreneur. Edson already had good solid engineering practices, but we found that we needed to develop some new equipment quickly because our product life cycle had about 2 years to go. After that we were going to be on a quick decline."
"They just don't get it!" Robert Hattin, president of Hamilton-based Edson Packaging Machinery Ltd., is talking about federal and provincial governments that, with some exceptions, largely ignore the plight of Canadian manufacturers. Canada's fastest currency rise in postwar history has hit his company, as it has thousands of other business operations. The higher loonie was particularly harsh on Hattin's markets in the US and elsewhere and increased his production costs. "Last year we had a 30% increase in the value of the Cdn dollar, a 30% hit in employment and, because most of our sales were in the US, a 30% hit on revenue and our first revenue loss in 12 years," Hattin declares..
As a member of Canadian Manufacturers and Exporters (CME), Hattin was a part of a delegation that met recently with David Dodge, Governor of the Bank of Canada. "We got our message across that the Canadian dollar is becoming increasingly irrelevant; but it was like giving water to a dead man it didn't hurt, but it didn't do any good."
He says the people in Ottawa "don't understand and they don't listen."
He cites another Canadian Manufacturers and Exporters (CME) meeting in the capital, under the Manufacturing 20/20 banner,to focus on the future of the industry.
"We were at the Chateau Laurier, only about 500 steps from Parliament Hill, but no MPs came to the meeting except the two scheduled speakers. Industry Minister James Emerson promised to accelerate the depreciation rate, and that has fallen through and Immigration Minister Joe Volpe said he was going to open the doors to more skilled immigrants, and that hasn't happened either.
"It's sad, really. We had about 500 people at that Canadian Manufacturers and Exporters (CME) meeting representing about 350,000 jobs and only two senior representatives of the government were on hand."
(Since this interview with Hattin, the Federal Government has promised to ease immigration rules and speed up the flow into Canada.)
He warns that economists say once manufacturing slips below 8% of the economy, "it's a quick trip to hell."
Hattin, who serves on the Canadian Manufacturers and Exporters energy committee, also has harsh words for the Ontario Government and its failure to come up with a viable plan to ensure industry a reliable, sustainable supply of electricity. "We've already had brownouts and will undoubtedly have more until those at the top get their act together."
He believes the industry has an obligation to tell governments that without a viable environment, offshore manufacturing and buying will continue to increase."You reap what you sew." The real problem, he says, is that the large multinationals with branches in Canada are bowing out the quickest. They want a quick fix, so they say, 'Let's go to China.' Some don't even explore if they have a North American option. They could probably put in an automated production line but they would rather go for cheap labor costs offshore.
However, he does feel with the right economic climate created by government giving some protection from future currency volatility and industry doing its part by working smarter manufacturing can survive and even prosper." We've got smart people and great machinery. We need programs like Lean and we can't give up. I think what Canadian firms need to know best is short runs and Quick Changeovers. With small batches and diversity, we can do it." Robert Hattin, a reformed waster, is a vocal Lean advocate and loud critic of the current manufacturing environment in Canada.
Hattin has invested heavily in R&D since taking over. At one point R&D expenditures reached 40% of annual revenue. Now it's back to about 15%. "But we're still one of the top research spenders in R&D from a machinery standpoint in Canada. "
Edson is not in a low-cost manufacturing environment, so the only way it can get ahead is through technology and efficient and effective production methods, says Hattin. "We always had the people and the products, so the third thing we have concentrated on is the process. "
That's why Edson went Lean. "We've totally embraced the concept," declares Hattin. "We've had some downsides but we've also had some great successes. I firmly believe that unless all of North American manufacturing adapts some version of Lean as a management system, we face grave consequences. We have to become more disciplined in terms of processes and the reduction of waste or we will lose more business to offshore competitors." Quality isn't an issue. He says the Chinese can make very good stuff. In fact, Edson uses Chinese-made tools in its plant that he says work very well.
Indeed, Canada has to get moving, he says. "We're already 20% less efficient and effective at manufacturing than the US, and it's in the number four spot. We're number 10 and dropping quickly. We have to Lean Advisors or get out of the way, otherwise the short time we have left to get more competitive as an industrial nation will be gone."
Hattin is a firm believer that Lean practices affect companies and the economy in very fundamental and positive ways. "It forces everyone to look at how we do business. We can't just dump process issues to the next guy and hope that they will get fixed. It's time to engage." As far as he's concerned, managers who don't or won't adopt Lean need to find another profession where "pride, competitiveness and accountability don't mean anything."
On the road to reaching his Lean goals, Hattin has followed the directions set down by Ottawa-based Lean Advisors Inc. (LEAD), whose advisors work with clients interested in driving waste out of their organizations.
"Our role was to assist Edson in developing a road map to implement Lean throughout the entire organization," says Mike Boucher, a senior advisor with Lean Advisors. "It quickly became evident that improving workflow was not simply something we had to do on the shop floor, but that it extended into the office area and specifically within engineering design. Since it typically operates like a job shop, we had to understand the entire flow from client request through to engineering design, production planning, purchasing, to fabrication and assembly."
Lean Advisors worked with Edson to provide an introduction to Lean via a staff workshop to give everyone a common understanding of the flow process and an implementation plan.
"In our Edson experience," says Boucher, "we found that engineering design started a wave of work with the release of drawings, which was then amplified through production scheduling before it hit the shop floor. The production floor was inundated with work and invariably invested effort and time on the right work at the wrong time or the wrong work at the right time. This predictably resulted in late delivery dates that traditionally would be blamed on poor production."
Lean Advisors's primary effort was to understand the work right out of the engineering section, understand what production required and in what order, then systematically release the drawings in that order.This helped smooth out the flow and ensure the right things were done at the right time.
A key objective is to place the responsibility for change with the managers, supervisors and staff that own the process and engender a cultural shift.
"We chose Lean Advisors as advisors because they understood our issues," says Hattin. "We are not an auto plant or a Tier 2 component supplier to that industry. This means we're not an assembly line production environment in the true sense of the word. We're basically a job shop. And applying Lean Principals to a job shop is difficult because your takt time - the time available to produce one unit of output is basically all over the place. We build units as small as a table and some that fill a room. One may take two weeks to assemble, another eight months.
Another of Edson's Lean building blocks is the use of Hamilton-based Questica Inc.'s software program developed for running a custom design manufacturing shop, particularly an engineered-to-order operation where critical schedules are involved for the design, material ordering and fabrication scheduling.
"Edson was one of a group of five companies that worked with us to create the program for commercial use," says Questico president Dennis Parass.
Using Lean Methodology, Edson has driven its inventory down by 62% to a current $200,000 level by eliminating its "batch mentality" production and ordering methods. Cash flow is better and there's no longer a need to add extra production space.
"One of our wrong, old core beliefs was that inventory is good," says Hattin. "We thought it provided rapid availability to parts and allowed us to get to work quicker. That was the first sacred cow sacrificed on the altar of Lean management." He says there were some veteran employees who felt "a good deal of pain" when the old way of operating was tossed out.
"Our mantra now is unless we have an order for it, we don't build it. That and some multi-skilled plant people - for which we pay them extra for the additional skills have made us more effective."
By freeing up space previously used for inventory, Edson was able to shelve a plant extension it considered.
Forms Of Waste
Each week, Edson Packaging Machinery Ltd. president Rob Hattin provides an "Update" newsletter to employees to keep them posted on company activities. In one issue he defined the seven types of internal operating waste to be eliminated as:
Overproduction
Uses up valuable time, material, labor and resources for unneeded parts.
Waiting
Inactive period in downstream processes from the upstream process not delivering on time.
Transport
Unnecessary or lengthy movement of material from one operation to another.
Extra Process
Additional operations done to a part such as rework, reprocessing, handling and storage.
Inventory
Waste occurs when extra parts are made that aren't directly required for a customer's order.
Motion
The extra steps taken to accommodate an inefficient work layout.
Defects
Non-conforming parts or items that don't meet a customer's expectations qualify as waste.
Beating Bottlenecks
Edson's facility includes 10 metalworking stations, two fabricating stations and one paint booth. Hattin says the paint booth is always a Lean pinch point, because by its nature, it's batch-operated. "But we're getting around this with fast-dry paints and other coating techniques."
The material components machined and processed comprise 45% aluminum, 40% steel, 10% stainless steel and 5% plastics. "Versatility and flexibility in cut-off saws, mills, our brake press and other tools is important to us," he says. "We have no tools that are extremely sophisticated, except our FADAL multi-axis milling centre used for highly profiled shapes and repetitive items."
Kanban
In establishing its waste-control mode, Edson established its own modified version of the Toyota-inspired kanban system. "Kanban, in its pure definition," explains Hattin," is a production control system that uses cards or tickets as visual signals to trigger the flow of information and materials during the manufacturing process. Building everything from small parts to large packaging systems, means setting our takt time - the pace or flow of operations - was quite difficult. We established an arbitrary takt time of 4 hrs and we now try to design elements of the machine to fit that avg time. Edson's Kanban Board set up in its primary subassembly, uses color tags representing the flow and type of work planned. It establishes the sequence or priority of the '4 hr assembly' based on the demand of the downstream customer. We try not to deviate from that sequence as that's what sets the flow to meet the assembly and production segments.
Edson scrapped a computer-based kanban system in favor of its manual set up because "it's self-managed and provides quick visibility on the tasks on hand." Everyone can see what's going on in about 10 sec. and know what the next job is." A 2nd Kanban Board is used for sub-assembly work. It marries the on-site produced parts with the purchased components to create the right assembly sequence. Material management is key to making the system work because purchased parts make up to 50% of the value of our machines. It's essential that suppliers deliver quality parts on key dates. Inventory has been reduced by 50% in the past 18 mths. Inventory was at 20% of sales, now it's 5%. The new goal is 2%.
Supply Chain
Hattin says some Canadian suppliers are helping his company reduce its purchasing costs by tightening their prices and turnaround times. Some vendors have responded but others are still struggling with the concept of a changing economy and have been dumped.
"For those [vendors] that don't think the way Edson does," says Hattin,"we just go directly to the manufacturer or to a local distributor who understands the Flow. Why people would think any other way is beyond me.
Hattin says Edson's Questica ERP system keeps a watchful eye on orders that need to be placed and delivered. Edson is now buying from vendors who use identifying labels on the "kits" of parts shipped so they can be delivered and directed to the exact assembly area as required. "We love suppliers who can do that," says Hattin,"and we have noticed a substantial reduction in lost parts." He believes Lean Tools can be used in modified or customized forms by any business, not just in manufacturing.
"We're just getting started on the lean route, but we're absolutely certain it's the only path to follow. I hope all Canadian manufacturers and enterprises who haven't done so already will soon start walking down this path as well." As for Hattin's Lean ambitions, he's thinking big. "I'm certain that one day Edson will win the Shingo Award; then I'll know my time is done."