October 20, 2011
Anderson Dahlen is a precision sheet metal job shop. It’s an industrial contractor that designs and fabricates entire systems for the processing sector, everything from mixing systems for the chemical industry to holding tanks for dairy plants. It also fabricates architectural metal for commercial construction. In other words, the company doesn’t fit neatly into one category. Managers know this, which is why they’ve developed a unique approach to job management that centers on teams
Anderson Dahlen refuses to be pigeonholed. The company has typical fabrication processes—cutting (including two lasers and a waterjet), bending, welding, finishing—but its business model is anything but typical (see Figure 1). It’s a precision sheet metal job shop. It’s an industrial contractor that designs and fabricates entire systems for the processing sector, everything from mixing systems for the chemical industry to holding tanks for dairy plants. The company also fabricates architectural metal for commercial construction.
All these projects are manufactured within Anderson’s Ramsey, Minn., plant, giving the company a variety of capabilities to sell, which helped during the recession. Anderson didn’t avoid a revenue dip; few companies did, especially those tied to the construction and capital equipment markets. But because the firm offers a variety of services—design work; processing equipment fabrication; field work and installation; and high-mix, low-volume component fabrication—the revenue drop wasn’t as dramatic as it could have been.
Capital equipment and commercial construction spending plunged in 2009. Commercial construction remains down, and capital equipment investment remains a challenge for Anderson in certain industries. Many of Anderson’s food processing customers continue to build new plants internationally. When they do, they’re using fabrication resources local to those new plants, be they in China, South Africa, or anywhere else. This is partly why Anderson’s growth has been somewhat flat since 2009.
Still, sources emphasize that the company would be in far worse shape if it were not for some significant strides toward diversification. Some employees work on monthslong projects requiring frequent changes, unique material requirements, and numerous material handling challenges. Such work is so different from its low- to medium-volume, custom metal fabrication business, which turns orders around in a few days or weeks. It’s not uncommon to see small parts nested dynamically on the laser cutting machines to allow for kitted part flow (all parts of a subassembly traveling together), followed by a nest of several large stainless steel pieces that will become part of a massive processing system.
“We believed diversification would be key to our success,” said David Knoll, vice president. “When we focused only on the larger projects, they would come, we’d be busy, and then there would be decline, when we’d be working on acquiring the next project.”
Other companies would undergo a similar cycle, which would force them to hire for the busy times and lay off during the respites. Such an environment makes for a very unstable work environment, and that’s something Anderson managers wanted to avoid.
The company’s job shop work helps balance the highly cyclical, project-oriented fabrications. Still, managing such a diverse web of work wasn’t easy. “When we tried to run different types of work all through one shop, with one management style, we ran into a lot of problems with deliveries,” Knoll recalled. “The project part of the business is much different from [job shop] component fabrication.”
The company has overcome this problem with a unique management structure involving teams. Anderson has five teams, each dedicated to a group of fabricated products with similar fabrication requirements:
Teams monitor their products from beginning to end and have dedicated, specialized personnel that carry a project to fruition. Most welders are tied directly to a team, for instance, because each team deals with projects with unique joining requirements. Most teams also have dedicated quality assurance personnel who inspect to customer requirements. Along the way the teams coordinate Anderson’s shared resources, including laser cutting, waterjet cutting, bending, machining, and shipping.
The formation of these teams evolved over time. “The reason for this evolution,” Knoll explained, “was that we were struggling to use those internal resources, which became very difficult to manage as we grew.”
Workers heard this over and over 15 years ago. A sales coordinator would come to the floor, present a work order—usually involving late changes to a large project—and ask if the workers could shove it to the front of the queue. This wasn’t easy or particularly efficient. Such orders would throw a pebble into the operational pool, causing ripples throughout the organization.
Significant projects—large processing systems for chemical, food, or similar plants—often have late changes. And unlike the component side, these large projects usually involve parts that have not been manufactured before. All this made scheduling such projects a bear.
This is why managers decided to move resources that didn’t need to be shared into teams. Today each team gets a certain percentage of the schedule for a certain resource, “and teams can’t interfere with another team’s time on that resource, because they have to meet their schedule as well,” Knoll said.
A critical factor here is that each team leader has an ownership stake. These team leaders want to see the entire organization succeed, not just one team—because if their mishaps cause other teams to falter, it can affect the entire company, and the value of their stake may decline. This means that one team throwing another team off schedule—essentially robbing Peter to pay Paul—isn’t in anyone’s best interest.
If upper management sees a need for improvement or change at the shop level, they start with specific teams. They are closest to the customers, after all, and as Anderson managers see it, if customers aren’t happier than they were before, their improvement efforts are lacking.
“We work with one team,” said Richard Trnka, CAD systems manager. “We get feedback from them, we map processes, and we start developing processes for improvement. We get the bugs out, and then we introduce that new process to the other teams.”
Improvements have focused on information transparency and efficient movement of materials on the floor. For instance, several years ago one of Anderson’s teams analyzed some of the material handling practices in the heavy welding bays, where welders used one of two overhead cranes to carry components into their workcells. Each bay had 20 welders who waited an average of 15 minutes for a crane, and usually it was for workpieces weighing less than 3,000 lbs.
Managers analyzed the return on investment for one 4,000-lb.-capacity, 20-ft.-long jib crane and discovered it would pay for itself and then some within three years. Now welders have a dozen such jib cranes at their disposal, and all of Anderson’s teams are benefiting (see Figure 2).
The company also conducted a time study in the laser area and found that, though workers remained busy almost constantly, the laser actually cut material only 30 percent of the time. That’s not optimal beam-on time by any stretch. The issue was operators spent too much time moving metal. To improve matters, Anderson employees moved the flat-part deburring machine closer to the laser cutting machine, assigned workers as dedicated material handlers, and added jib cranes to improve material handling. Over time this more than doubled direct-labor efficiency in the cutting area.
Of course, all these material handling improvements don’t mean much if workers can’t find the correct material in the first place, and this wasn’t easy considering the diverse product mix. The raw stock inventory consists of stainless and carbon steel structural, plate, and sheet material—and several years ago all of it lay haphazardly in the building. None had dedicated locations, which meant laser cutting operators spent much of their day on a material hunt.
A raw stock revamp was in order. First, they assigned all raw stock to specific locations, and all pieces were entered into the shop ERP system, Made2Manage®. Anderson didn’t want to continue building its ever-greater “just in case” inventory, so any material that wasn’t found was marked as “buy” in the system, meaning the material would be purchased when a job demanded it. Anything in raw stock inventory not purchased or used for one year was scrapped (see Figure 3).
Certain changes, Trnka said, must come from the top down, and when it came to inventory reduction, this included purchasing. Today Anderson relies on about a dozen preferred vendors, down from about 50 a decade ago.
Back then the thinking was that more vendors would reduce risk. With so many suppliers, somebody was bound to have material on hand. Managers found, however, that splitting business among so many metal suppliers meant that Anderson wasn’t a major revenue source for any of them, so few if any had incentive to reduce material delivery lead-time. Moreover, merely managing such a long supplier list not only created a lot of extra work, it also fostered confusion. So today Anderson’s purchasers have pared that metal vendor list to those dozen principal suppliers that deliver most metal within two days.
The shop chose vendors not just on price, but on the services they provided. For instance, under the previous system, whoever initiated a purchase order would also order material. If material required, say, 12 in. of steel tubing, vendors would supply that pipe only in 20-ft. lengths. That person would assign only that 12 in. of tube to the job cost, while the remaining 19 ft. of tubing went back into inventory.
“After a while we ended up with a massive amount of raw stock because of this,” Trnka said. “So we reduced that by more than 50 percent by looking at our actual usage and making deals with our metal suppliers. Now we can purchase pieces of certain items at a reduced cost.”
Today Anderson is able to order material in smaller lengths or batches, so that the ordered material comes closer to matching what is actually needed for a job.
The shop also required vendors to provide material certification data. After all, if the shop couldn’t maintain adequate traceability standards, it couldn’t do business in several major sectors it serves.
“If a component doesn’t have a heat number in our production environment, I don’t care if that part has a thousand hours of machining,” Trnka said. “We have to throw it in the garbage and start again.
“Whenever we have a pressure vessel job come in, we ensure we account for every piece of metal in that vessel,” Trnka continued. “We need to know exactly what melt it came from, the exact metallurgy, and so on. This was always a struggle, because we move so many different materials in the shop. Some of them are [pressure vessel] jobs, and some of them aren’t. So if it was a job to be done to the ASME code, we did what most shops do: purchase material specific for that job.”
Any material remnant not used for that job would go back into inventory, but it wasn’t organized. The shop didn’t know which materials were previously certified and which weren’t. So when new jobs came in requiring certified material, the company simply ordered enough certified material for the entire job again, sent the remnants back to inventory, and the cycle continued. Not only did ordering material after the purchase order delay manufacturing, but raw stock continued to mount, sit there unsold, and tie up cash. Something had to change.
Enter enterprise product data management (PDM), which Anderson now uses to manage material data. About three years ago the company integrated SolidWorks® Enterprise PDM software. “Every piece of material that comes in the door is scanned, and it starts an approval process that goes through the company electronically,” Trnka explained.
Now the shop’s metal vendors provide data for every piece of metal that comes in the shop, standardizing raw stock management (see Figure 4). All material comes in the door with a bar code, which is scanned, sending information immediately to the materials manager, who examines it to ensure all the required data, including the heat number, is available. That person submits the material for approval, sending it on to Anderson’s engineer, and assigns a code identifying the material as certified for particular jobs. From there the metal goes into inventory.
According to sources, Anderson has found a way both to react more quickly to customer demands and actually reduce the overall value of inventory, because that inventory is (unlike before) tightly monitored and replenished only as necessary. “The material certifications are searchable within our SQL database,” Trnka said. “We can always tell where a particular heat number was used. If you put in a job number, you get a list of all the [material] certifications immediately.”
The company also tracks material in its ERP system. When a part comes off the laser or band saw, the system shows not only what bin the material came from, but also the heat number. “That is documented in our Made2Manage system so we have that redundancy built in to be able to go back and track each one of our pieces of material to the initial source,” Trnka said.
Say a piece of metal without the necessary certification documents slips into production. Operators scan parts before working on them. If a certain piece arrives at a sawing station, the operator scans the part, and the system flags him if that metal did not receive the appropriate certifications. Seeing this, the operator stops; retrieves new, certified material; scans it; receives the go-ahead; and commences sawing. This solves the traceability problem when it’s least costly—early in the process.
The material database is permanent, so the material documentation remains for traceability. If years later a failure occurs when a unit is in operation, and litigation ensues, Anderson can search the database to find all the material certifications needed for the case.
The ERP does more than help traceability. Previously, for instance, laser operators spent a lot of time making job routing labels for every part that emerged from the nest. Today nobody spends time making labels. Instead, the operator scans in a bar code on a shop floor PC terminal, and all the labels for the parts on the nest are printed (see Figure 5). Each flat component blank gets a bar code. After this the work-in-process moves to a staging area, where it is retrieved for downstream processing.
The system compares actual metal usage to what was estimated for the job and adjusts costs accordingly. If a nest has a remnant that goes back to raw stock, the software tracks that as well. If the remnant isn’t usable, then that material is charged to the job.
All of this improvement came from a company essentially organized into five minifirms. The structure helps Anderson coordinate various services that are unusual to see under one roof. Without this team approach, its numerous improvement efforts in all likelihood would not have taken place, especially if everyone continued to compete for shop floor time.
The organizational structure has helped the company survive in markets that have become seriously challenged during the past six years. The spending pie has shrunk in Anderson’s major markets: capital equipment and commercial construction.“If the customer calls, he deals with only one project manager and only one team,” Trnka said. “On a large project, customers typically will visit our plant to inspect the work prior to shipping. They talk to the same people every time they’re here.”
Only those companies that can offer the best service at a good price can compete. Evidently, Anderson Dahlen is one of those companies.
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