Tom runs a supply chain consulting company called ThreeCore (http://www.threecore.com/) that specializes in helping tech companies sort out their supply chain issues.  His company finds the best suppliers around the world to help his clients save money & time both overseas and locally.  His overwhelming conclusion is that US based manufacturers, while they have improved competitiveness, lack a real customer service culture compared to their Asian counterparts.  Based on my years sourcing for Staples, I would absolutely agree.

My best Asian suppliers stood out from my first interaction with them and progressively got better as we worked together.  Customer service would start at the first e-mail inquiry from me that would be replied at 2am their time answering my question and also providing me additional background on the company.  The e-mail dialogue would continue with increasing speed and expanding content until I would decide to visit them.  They would pick me up at the airport, provide a factory tour and inevitably we would settle in a conference room packed with samples.  The meeting would be all about design – what if?, how about?, would this work? type of questions and by the next day I would have fully landed costs on the new designs we talked about.  Samples would arrive at my home office within a week of when I returned from my trip.

In contrast, Tom is shocked when American companies blame the customer on why they were delayed or why there were cost issues.  His strong advice to me was to keep telling our customers what we are doing to help them be competitive.  We need to tell them what we’ve done on their in-process jobs and what we are doing to improve the lead time.  We need to tell them what needs to be changed in the design to improve cost and/or lead times.  We need to tell them what we’ve done last month and what we are going to do next month to help them.  And in return, our customers will tell us what to work on next.

Soma, who works predominately with local private equity firms on supply chain challenges, supports this thinking.  After reviewing an idea we had on how to improve the extended supply chain, he concluded that it would just confuse our customers.  His recommendation was to focus on what we could do to improve their design.  With that as a start, we could then work on what else we could do to help our customers.  This may lead us to extended supply chain, or not, but it will always lead us to improving service to our customers.

With this in mind, we are starting our search for another Customer Service Manager so that our CSM to Customer ratio is lower and we have more time to dedicate to each customer.  When the new person is hired, we will roll out an expanded service approach that includes more frequent updates as well as monthly business summaries for our key customers.  In the meantime, we are on the hunt for examples of great customer service organizations that we can learn from and apply to our situation with our customers.  In July we have our annual customer survey to measure our performance.  It will be an exciting challenge to see if we really did make a difference.

Cathy works for a defense related communications company.  She found us after she had tried working with several other sheet metal fabricators.  It turns out that the drawing she had was not entirely clear and she also had tight quality requirements.  Our competitors had tried and failed to meet her requirements.  Last year we said “yes” and we were able to produce some of the best parts her engineers had seen, but the parts still didn’t meet her quality requirements. 

Next thing we know, we get a deviation and her engineers are requesting more parts with similar challenges.  And away we went to build another great part, but not quite to spec and then another deviation would come.  Eventually, we said “no” because this type of work is fun and challenging, but it took us off course from providing great parts, on-time, to spec. at a pace that works for our customers.  So no matter how interesting these parts were, when she called again this past week asking for more parts, I had to say “no.”

Andy brought another customer to our Grand Opening and they immediately wanted to work with us.  Some of their initial parts looked interesting and we thought maybe we could help them.  Then we got their quality requirements.  It turns out these parts needed to have their own individual quality plans, welders need to be certified with welds that needed to be tested water tight, and assemblies needed to be serialized on special stainless nameplates.  Certainly we can do this work, but just as in Cathy’s case, this type of work takes us off course from providing parts at the pace of our other customers.

Why is pace so important?  In our facility, almost every manufacturing step can be broken down into steps that are between 30 and 120 seconds long.  If every part can move between manufacturing steps at about the same time, then any part can move between steps at about the same time.  The result is that production is easier to balance and the whole factory moves at about the same pace.  When things are humming, everyone gets their parts on-time.

What keeps things from humming?  The biggest culprits are big chucks of time that can’t be broken down into 120 second increments.  Some are internal, like set-up time, and this is a big focus for us.  Some are external, like product mix, and this unfortunately means a “no” for Cathy and Andy.  We learned the hard way that if we take on products that don’t fit our pace, the flow in the facility stalls and all of our customers suffer the consequence.  And just like we have a 120 second pace, there are other good shops that have 30 minute or 60 minute paces and those are the perfect places for Cathy and Andy. It just doesn’t make sense to add new customers that will hurt our existing ones.

So when you show us a new part, and we hope you do, we might go quiet a minute or two.  We have enough experience to know how to make it, we’re just thinking through the manufacturing steps to make sure it fits our pace.  If it does, we know you’ll get a great part, on-time at a great price.

Each customer counts on us to keep costs down in part by aggregating the needs of all our customers so that we can fully load our machines and pass along the productivity savings.  As customers have worked to lower their inventory risk, they have reduced their lot sizes and need shorter lead times.  The result is that we have a smaller window to group jobs together, balance the machines and fill them up to achieve that cost savings.  In this new economy, guys like Steve are more and more valuable in helping balance the production flow.

We see this trend of smaller lots sizes and reduced lead times as a permanent part of business today and in the future so we are changing with the times.  First, we are aggressively cross training our employees so they can “float” between work centers to help smooth our production flow.  Second, we are investing to reduce set-up times so the speed bumps caused by switching over to new jobs are reduced.  Lastly, we are working with key suppliers to help them maintain steady deliveries by providing them steady orders.

Our belief is that our customers are faced with the same situation we are faced with.  Steady, high volume manufacturing has left the region for lower cost areas around the globe.  Our customers, our selves, and our suppliers are left with the high mix, low volume challenge I have just described in this blog.  What if ETM could help level the production flow for our customers the way our best suppliers help level our production?  We believe the skills we are learning can help our customers; however, it is not as easy as pouring Steve into the situation and things will automatically level out.

One of the many tools that Steve brings to ETM is Value Stream Mapping.  It’s a fancy word for a process map with process times.  We use this in-house to examine where we are losing “non-value added” time like parts waiting to be worked on or people waiting for parts.  This same tool can be refocused on the supplier-customer interactions (both in material and information flow).  By working on the linkages together, we can smooth out production for everyone, lower costs for everyone and improve the competitiveness for everyone.

Want to learn more?  Steve, Greg, Mike or I would welcome an opportunity to talk more about the amazing possibilities we see from a well balanced supply chain.

Beth is a strong marketer in her own right and an internationally recognized consultant in business survey design and interpretation.  Last year she asked to talk with me about how luck had played a part in ETM’s success.  My first thought was, “Why in the heck does someone so strong analytically want to look at business luck?” As we got to talking, I realized Beth has a unique blend of analytical and intuitive skills that could help peel back the layers of luck in business.

Ever since Jim Collins in “Good to Great” noted that there were only 2 common leadership traits among all the great company CEO he interviewed – humility and luck – I have been fascinated by how to use both more effectively in leading my business.

“Luck.  What an odd factor to talk about.  Yet good-to-great executives talked a lot about luck in our interviews…. The emphasis on luck turns out to be part of a pattern that we came to call the window and the mirror.  Level 5 leaders look out the window to apportion credit to factors outside themselves when things go well (and if they cannot find a specific person or event to give credit to, they credit good luck).”

In Beth’s new book, “Lucky By Design”, she has laid out a roadmap that helps prepare business leaders for whatever situations might unfold.  Not surprisingly, she included several analytical tools such as customer surveys, net promoter scores, primary & secondary research, customer lifetime value, and contingency planning.  We certainly were the beneficiary of her advice 3 years ago as we worked to rebound from the Great Recession.

Like Beth, I believe that preparation helps make for good luck.  We still user her SMART goals (specific, measureable, achievable, realistic, & time-based) when we conduct our annual planning.  We also use her Business Growth Scorecard to check to make sure we have a well-balanced strategy.  Most of all, we work ON the business more than IN the business and that helps us provide more value to our customers every day.

If you want to learn more about Beth Goldstein, she can be reached at http://www.m-edge.com/ or a copy of her new book can ordered from the site.

Good Luck!

Brian has been a tough employee for us.  He has been with the company 7+ years and does a phenomenal job setting up and running the punch press.  In the past few years he has also taken on operating the laser and the high speed punch press.  We all appreciate and acknowledge his outstanding contribution.  And, at the same time, he would make a larger contribution if he became an expert a setting up the laser and the high speed punch.  How do we ask him to take on more when he feels like he’s giving it his all?

I was surprised the other night when my management team started talking about some of our employees and how our capacity is limited by what our employees are able to take on.  I thought this was going to be a complaint session, but it went a surprisingly different direction.  We have several outstanding employees that we’d love to train to take on more.  Some of us were worried that they will reach the limits of their capability.  Our attention turned toward us as a management team and how we are preventing them from getting to the next level.

With a little help from Lesa, we’ve come to think as stress as a big reason our employees can’t take on more.  The machines are complex, which puts a lot of pressure on our employees to learn tough skills, so they get intimidated and give up.  Customer order sizes have reduced and there is more variability, so they can’t count on anything being steady these days.  For sheet metal parts, there are typically 7 operations and each one could have issues, and there is this constant pressure to ship on-time despite the issues that come up.  All this results in a lot of stress for a person who just wants to do an honest day’s work helping our customers and feel like they made a difference that day.

Some might say this pressure is part of the sheet metal business and get with it or get out of it.  But there are less and less sheet metal workers available.  We believe we have some of the best around.  So what do we do now?

As a manager, my job is to solve problems and develop my people.  It looks to me like if Brian or any other employee is “stuck” in some part of his or her development, that’s a problem I need to solve.  The skill development is there and readily available.  I need to focus on lowering the stress level so development is not so painful and more employees are willing to step up.  This could mean slowing down the learning process or developing easy-to-read guides or leveling out production or making sure there is a place for everything & everything is in its place.

As a supplier, I see my customers using every skill they have to acknowledge our efforts and ask for more.  The best customers help level out our production or provide forecasts so we can level production.  Good customers have a smooth, efficient ordering process or easily adopt our ordering process.  I’d like to say that every customer is the same, but the ones that acknowledge us and lower the variability that causes stress are the ones we make more offers to help.  We want to take on more, because they make it easy for us.  And this is exactly what we are aiming for with our own employees.

Prior to the re-focus on quality, it was normal to inspect the part while it was being built, inspect the part after it was built, and then inspect the part after it was received.  There were large QC areas with several inspectors at everyone’s location and an entire secondary flow for returned goods, disposition, rework/repair, re-inspection and re-shipment.  In the same way our customers only pay for good parts, they also only pay for parts.  They don’t want to pay for the packaging, the shipping, the unpacking and the packing disposal – particularly when it is 50%, 20% or even 18% of the product cost.  They are also smart enough to know that even if these costs aren’t spelled out separately on the invoice, they are still there (just like poor quality costs were there).

So how do we tackle $0 logistics goals?  A good consultant would have you map the product transportation path and note the time, money and energy used in transporting the product.  A simple pareto analysis would indicate the first areas to work on and then the extended supply chain team (supplier-manufacturer-customer) would go to work eliminating those costs.  Bill, one of our most innovative customers, worked with us to convert large parts of his that were palletized so that ultimately a tractor trailer was safely loaded with these parts without any packaging at all.  We saved $40 in pallet costs, $5 in strap costs, $5 in packing labor, $5 in unpacking labor and about $10 in scrap removal costs.  That was $65 saved for every 75 parts (about 8% of the product cost).

Another approach to achieving $0 logistics goals is to re-think the whole manufacturing model.  Instead of one large manufacturing plant shipping to all locations of the US, we believe that small, agile factories supplying locally gets us closer to $0 logistics costs.  This idea is not new.  Large contract manufacturers have manufacturing campuses or hubs all over the world to reduce the logistics costs outbound.  These campuses also host several suppliers so the inbound logistics costs are much lower.  I sometimes think the “localvore” movement in food (buying fresh, locally) is similar to what we are attempting to do.  We are working toward building just-in-time (fresh) and shipping locally (towards $0 logistics).  With that in mind, every day we are talking with our suppliers and our customers to get closer to building just what our customers need, just when they want it with as little packaging and transport as possible.

The internet isn’t always your best friend. Early on, Ryan needed to switch the locks out on the new building.  No internet connection?  No problem.  Ryan jumps on his phone with unlimited phone/messaging/internet and clicks away.  In short order, we meet  with him the locksmith.  We start reviewing the pricing and everything sounds very expensive.  A few questions later, we find out he drove 90 miles to call on us and he pays a service to get a high search listing – both of which were included in the mark-up.  From then on we used yellow pages or local yelp to find local help.  Since then, we’ve gotten faster service and better pricing.

People don’t do what you ask them to do.  Right after the locks were changed and there was still only one master key, Ryan asked the tech to lock up and place the one master key in a hiding spot for Ryan to pick up the next day.  One key, one spot, no problem.  The next day, Ryan shows up to find the key is missing.  He calls the tech who “forgot” and left the keys on a desk inside, but he would be happy to come down later in the day for a $125 service charge.  With a work crew coming in the next few minutes, he had no choice.  He smashed the back door window, opened the door to let the crew in and then rushed off to find replacement glass for the back door.  Every time I see that back door, I remember that lesson.

Even simple projects can easily go off track.  Almost as soon as we got into the new building, we needed phones and internet to help coordinate everything.  A quick call to Verizon and phones were set up.  How come people could call us but we could call out?  It turns out that the phone lines were routed through a neighboring building which wasn’t legal.  No phones.  OK, maybe Comcast internet could also set us up with IP Phones.  Nope.  Comcast said they didn’t own the conduit to the building, so there would be a $4K dig fee.  Back to Verizon.  But wait, the neighboring company finds the man-hole, proves that conduit is owned by them and Comcast eliminates the dig fee.  Oops, the construction crew is delayed due to a freak winter storm in October, then the set-up crew comes in, then the installation crew has to come in.  A three day install has turned into a three month install.

Know your value, always.  When I interviewed Ryan we discussed the scope of the project and costs involved.  He clearly had a part in helping decrease costs and I wanted to reward him for the savings he found.  Every day we talked about quotes and savings options as we weighed the schedule versus the budget.  On the next to last day, he asked what his bonus would be.  I asked what his savings had been – and he didn’t know.  With that as homework, he came back the next day remembering only three areas he and vague costs savings.  Sadly, an extra few hours of reviewing e-mails could have resulted in a much bigger Christmas bounty.

Ryan is a bright guy with a willingness to do anything and a pleasant persistence that was invaluable to getting the job done.  He will be missed.  I am much the wiser for the lessons that Ryan has reminded me of and I am convinced that he will be a valuable asset to the company that hires him after he is graduated.  We wish him all the best.

As most of you know, ETM Manufacturing is re-locating our facility to a larger, more modern facility inLittleton,MAon December 16th.  Norm’s delivery route is inWilmington.  When he reviewed the logistics costs that included fuel, maintenance expenses, and lost opportunity costs (time not selling to other customers), he decided he could not make money and chose to shut down his business.  This was a sobering thought; ETM implemented supply side economics at its most brutal consequence.

In the dangerous world of metal supply chains, we live Norm’s reality every day as well.  Our new plant is located inLittleton– 30 miles closer to our #2 customer.  As more Boston area OEMs migrate outward to lower cost I-495 towns, we suppliers need to migrate also or suffer the same brutal consequences that Norm discovered.  We would eventually close, just as Mico Manufacturing and J&J Fabricators closed (both of which were located along I-95).  Logistics costs do matter in the compressed supply chain world we now work in.

At ETM Manufacturing, we have a general rule that we serve OEMs that are within a 100 mile radius of our plant.  This radius is just about enough mileage to load a truck, deliver its contents and return in a day.  This also helps us support the smaller lot sizes that our customers are requiring and still only be a day away in deliveries.  The ideal would be to have daily deliveries to our entire customer base in JIT fashion to help them lower their inventory costs as well.

The regrettable reality is that ETM has helped put a supplier out of business in order for our own company to grow stronger.  At the same time, we have helped put electricians, plumbers, drywallers, painters, HVAC techs and local equipment companies to work as we completed a $500K renovation of the building.  And we’ll still need Norm’s products – even more as we continue to grow – so we may actually help save a business.  Thanks again Norm for all your support and even more for the life lesson that our decisions really do have consequences.

When we talk with our customers, they are asking for shorter lead times and smaller lot sizes.  This makes sense as we all work together to lower our inventory risk, take cash out of the supply chain and re-invest in new product development.  Our more progressive customers are providing the forecast expertise to help us with lead times, we in turn are investing to improve cycle times, and we would expect our equipment suppliers to be helping us lower set-up costs.  Their focus continues to be on faster run times when study after study shows the wasted time (and cost) is outside of the equipment run time.

In fact some time, it helps to slow the equipment down.  Gary and Kevin worked on a project recently that had a 1 minute run time in the punch, but a 45 second form time and a 15 second hardware time.  With the material transfer time added into the mix, the cell wasn’t running smoothly.  They ended up slowing the punch time down to match the material transfer time + forming time + hardware time.  The result was a well balanced line that flowed well and consistently produced a part every 65 seconds.  Based on my experience from the industry show, I’m not sure the equipment folks think about how their equipment affects the entire material flow.

The other area from the show that surprised me was how little the equipment manufacturers we talked with were able to differentiate themselves.  In our instance, we were actively looking for a wet surface grinder that we could locate close to the sheet metal cells.  They all asked the standard questions about material type, sizes and thicknesses.  And then they proceeded to talk about how their machines were built.  No one asked about how we would use the equipment (i.e., how we would load it, how frequently we would use it, how many times we would move it, etc.).  With this missing differentiation conversation, we went with the system that was lowest cost and the other 3 manufacturers lost out.  I will never know how the other 3 could have helped us more.

This “missing” information at the show re-affirmed that we need to continue to improve how we listen to our customers to really understand their concerns.  We need to do a better job of explaining how our services can help them solve their problems better.  Otherwise, in a sea of choices, our customers will choose on price, just like we did, and they’ll never know how we could have helped them save so much more.  There is too much at stake to not take advantage of this opportunity.

One of the many reasons I like our type of manufacturing business is the immediacy of the customer feedback.  If we miss a delivery by a day, it really does matter.  If we can help ship a day early, that matters too.  Depending on the complexity of the part and the urgency of the customer, we have built prototypes in a day or truckloads in a week.  On average, we hear back from our customers within 4 weeks of their order and their feedback is invaluable.

The other week Kelly called to pull in an order by a few weeks.  In our effort to help her, we had a back-up painter, but the painter wasn’t qualified.  So, we built the parts, sent the first parts to the back-up painter and a few days later she approved the samples and away we went with the balance of the order.  She was able to use the initial samples to feed her assembly line until the balance arrived later in the week.  This kind of quick feedback is what enables us to stay agile and help provide a crisis resilient supply chain for Kelly and all of our strategic sourcing partners who are challenged by rising CEO standards.

Sometimes I worry that maybe our focus on supply chain compression and distributed manufacturing is pre-mature or unnecessarily complex for local OEMs.  But this year alone, out of the 20 supply chain professionals we work with, 4 people (20%) have been replaced.  Clearly CEOs are expecting more from their people, but we also need to raise our standard.  On time delivery, quality and cost are just the beginning.  The turn over rate confirms that the work we are doing with supply chain compression and distributed manufacturing is the right thing to do and now is the right time to do it.

Ian Smith, an advisor to the company, keeps reminding me that ETM Manufacturing is actually in the people promoting business.  If we do our job right to continually improve operations and keep looking to make valuable offers, our customers will do the right things at the right times to get the promotions they deserve.  In fact, their promotion is confirmation that we are providing the highest standard of service.  My belief is that Phil, with all the work he has done, will get that promotion albeit with another company.  Meanwhile, his departure is an immediate reminder that we too still have a lot of work to do.