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Piecing together the continuous improvement puzzle

At Miller Welding & Machine, various pieces of change come together to make everything click

Figure 1
David R. Miller founded Miller Welding & Machine with his wife Sara and his brother Lawrence (not pictured) in 1963

When Jeff Sipes stepped onto the shop floor at Miller Welding & Machine Co. (MWM) a couple of years ago, he saw the part flow problems immediately. The western Pennsylvania contract fabricator had more than doubled in size in just a few years. Times were good, but underneath the success were some weaknesses. The shop was busy, and it certainly looked busy, but no matter how hard the fabricator tried, customers complained about late orders. Nobody, it seemed, could keep ahead of the eight ball.

Sipes, principal of Indianapolis-based Back2-Basics LLC, saw piles of excess work-in-process at workstations. Parts weren’t moving. Did certain areas rely on traditional batch-and-queue processing? It turned out they did, but it wasn’t the only reason for the fabricator’s poor on-time performance. Workstations could have used a little more 5S, and the fetching and waiting for tools and materials caused job changeovers to take longer than they should have.

There was still another reason the shop struggled. Like so many contract fabricators, MWM suffered from highly variable demand, mainly because of high customer concentration in a few industries, especially in the construction equipment sector. This meant that the fabricator had to rely on temporary workers, which didn’t create the best company culture, considering so many different faces came and went over the years. More than that, huge swings in demand levels wreaked havoc on part flow.

Managers knew that no one fix would create noticeable change. But all together, a variety of initiatives changed things for the better. “We’re not there yet,” said Eric D. Miller, vice president of sales and marketing, “and if I understand continuous improvement correctly, that fact will never change. But we’ve certainly made some headway.”

Steel Beginnings

In 1963 Eric’s grandfather, David R. Miller, founded the company with his wife Sara and his brother Lawrence to support the local industries, including the mining, agriculture, and lumber sectors (see Figure 1). Like so many custom fabricators, the business started with small-time transactions. If a farmer’s hay baler needed repair, the shop was there to help.

Within a year he met Harry Nassif, who worked as a broker for steel mills for equipment refurbishment and general supplies. If a bearing housing needed to be reconditioned, Nassif brokered the deal to MWM. “Harry wanted a trustworthy partner in business, and my grandfather had no interest in sales,” Miller said. “He just wanted to concentrate on making things.”

So Nassif began to represent MWM, and Miller handled the manufacturing. “It fueled growth as we got into the steel mill industry,” Miller said. “This was really the first big shift in the business. It forged a relationship between the Nassif and Miller families that is still going strong 50 years later.”

By 1970 MWM was doing work for almost every steel mill and processing center in North America, and by 1980 the head count grew to about 80. “They thought they were diversified,” Miller said. “They worked for every kind of mill there was: plate mills, sheet mills, bar mills, structural mills. You name it, we did work for them. The problem was, of course, that they were all steel mills. But they thought an entire industry like that just couldn’t collapse. That just wasn’t possible.”

Of course, in the late 1970s the impossible happened, the steel industry did indeed collapse, and on one day in 1980 MWM sent home 65 of its 80 employees. “That was the worst day we ever faced,” Miller said.

Everywhere throughout western Pennsylvania, almost every custom fabricator and machine shop relied heavily, if not totally, on the steel industry. Owners were dumbfounded, and many waited. The steel business was such a dominant force in the region that it just had to come back, right? How could an economy function without an industry as basic as the steel business?

Figure 2
Post lean implementation, Miller Welding & Machine limits work-in-process to taped-off areas. It also shined the floor, which has had some intangible benefits. For customers and prospects, a shiny floor leaves a good impression.

“But my grandfather, my father, my uncles, they didn’t wait,” Miller said. “They said, ‘Our machines don’t care whether they’re making parts for steel mills, for ships, for agriculture, or whatever it is.’ So they started calling on original equipment manufacturers. That was the second big shift in the business.”

Because the Millers didn’t sit still, less than a year after the big layoff, MWM’s head count came back to 80. By 1990 that increased to 100, and by the mid-1990s it hit 250. Then, in 2000, the next big shift occurred. Many customers wanted ready-to-use, finished parts on their line, which meant adding paint capability. Managers were reluctant. Paint just wasn’t their expertise.

“But when it came down to it, if you’re going to serve customers, are you going to give work to somebody else who was willing to take a leap you weren’t willing to take? So they decided they needed to do it,” Miller said.

MWM bought a plot of land to build a new plant that had the space it needed to expand into powder coating and wet paint. The facility opened in October 2000, just in time for the 2001 downturn.

The facility remained largely underutilized for a few years, as MWM endured tough times. But by 2004 demand exploded, and revenue shot up to $29 million, more than the previous two years combined. Revenue in 2005 was more than 2003 and 2004 combined—and the pattern continued until 2008, when the company did $117 million in sales. “If we didn’t put that paint line in,” Miller said, “it would have never happened. That decision changed the company.”

In 2007 MWM was so busy it bought another plant 50 miles to the south. Business roared until the end of 2008, and then—like at so many other shops—orders fell off a cliff in 2009 and 2010.

Still, the paint facility allowed the shop to offer more services and, ultimately, climb out from the Great Recession quickly. This year the company, which has two plants in Brookville and another in Homer City, Pa., expects to do about $113 million in sales with 450 employees.

“In effect, we have 10 percent fewer people [than we had in 2008] doing the same amount of sales,” Miller said. “And to be honest, our performance has been OK historically, but it hasn’t been world-class. Coming out of the bad years, the industry shifted. Quality and delivery were the key focus for customers, and we struggled. We had always been regarded as high performers in quality, and we were still considered that, but we weren’t even close to hitting our customers’ goals.”

Starting in 2012 the company contracted with Sipes, who embedded himself with the operation for more than a year. He helped the company adapt concepts of lean manufacturing (and other improvement methods) to its contract fabrication environment.

The company also brought in another consultant, John Boyer of North Ogden, Utah-based J. E. Boyer Co., to tackle information systems, which ultimately led the company to start a sales and operations planning (S&OP) program.

Figure 3
5S at this welding workstation ensures that the welder has all the tools he needs.

This year all those pieces started to fit together. As Miller put it, “In the past three to six months, everything just started clicking. I’m hearing from nearly every customer we deal with that we’re a top performer in quality, in delivery, and in intangibles, meaning lean audits and other elements. Six months ago, if I had asked that question, I would have gotten a completely different answer.”

Building the Foundation for Change

Several years ago a major OEM customer invited MWM managers down to several suppliers that it considered to be world-class. Those suppliers weren’t in Wisconsin, Illinois, or any other hotbed of U.S. metal fabrication. They were in Brazil.

Some at MWM scoffed a bit, but all the same they flew to the Southern Hemisphere—where they were blown away. The suppliers’ floors were clean and shiny; workstations were organized; parts moved from one workcell to the next; and on-time-delivery rates were sky-high.

Back at MWM, managers knew things had to change, and this is partly why Sipes was given free reign when he began his work. “We would always discuss how we were going to do it,” Miller said. “But we weren’t going to discuss whether or not we were going to it. That decision was made, it was done, and we were moving on.”

MWM had grown extremely quickly, and its management structure hadn’t grown with it. In one sense the company prided itself on its flat structure; there weren’t that many management layers between the floor and the CEO. But this also contributed to communication problems, not necessarily because each department needed umpteen layers of middle management, but because few job functions had any authority that spanned across all departments and plants. If front-line personnel reported information about production, they usually sent that information up the ranks.

“We were pushing information toward authority,” Miller recalled. “We needed to push authority toward the information.” He added that this meant decision-making authority had to be pushed down the ranks.

Setting the stage for this change was Sipes, who spoke directly with front-line workers. He had the information, and he was given the authority to institute change. Several years into its improvement initiative, MWM now has a lean development manager, Rich Steel, who works with several leads in each of the company’s plants. The fabricator also has a lead in charge of total productive maintenance (TPM). No one on the shop floor officially reports to either position, but both the lean and TPM managers have the authority to make changes. Because they work on TPM and lean projects across all three plants, they can spread best practices throughout the organization.

Besides these organizational changes, MWM set the stage for improvement in a more literal fashion—by refinishing the floors (see Figure 2). For certain areas the company paid to have the floors cleaned in a way that, thanks to a special blast-cleaning process, ensured that the concrete stayed shiny, even after heavy use. MWM plans to refinish its plant floors in their entirety in the coming years.

Initially employees questioned the rationale: Why pay to have the floor look shiny? After all, shiny floors don’t help the company deliver quality parts any faster. All the same, shining the floors had two intangible benefits. First, it made a big difference when the sales team gave plant tours to customers and prospects. A clean space leaves a good first impression. Second, making an investment in something aesthetic showed everyone that things were changing.

As Miller recalled, “It showed everyone that we were serious.”

Figure 4
As part of basic 5S, this shadow board shows everyone where tools are, and makes it obvious if a tool is missing.

Learning Lean

All this provided the foundation for improvements. Sipes worked with managers on a book study, covering Jim Womack’s Lean Thinking. “Over the course of four weeks, we developed a baseline,” Sipes said, “describing what we mean when we talk about value, flow, and the big ideas around lean manufacturing.”

Communication improved. Company President David K. Miller (Eric’s father) started holding monthly all-hands meetings, which every employee attends. Separately, supervisors in every department meet and review quality and safety scores, then go through production for the past month, discussing problems and what they plan to do to fix them. Sometimes one department supervisor may not know that work his staff is producing is causing problems until he talks to another supervisor at a downstream process. Moreover, when supervisors hear others speak about problems, they inevitably detect similarities, ask questions, and develop strategies to fix problems in their own departments.

5S Audits

MWM now audits the 5S efforts in various work areas using a 10-question format. Auditors answer each question on a scale from 0 to 5 and then average them to produce a single 5S metric.

The audits take only a few minutes and focus on equipment, floors, and visual management. Are floors marked the way they should be? Is everything labeled? Has preventive maintenance on equipment been sustained? Are the right tools in the area, and are they on the proper shadow boards? Are there tripping hazards? Are tools and WIP areas (now limited to taped squares on the floor) color-coded correctly—yellow for stationary items, green squares for outgoing parts? Everything is visual, and people know where things are coming from and where they are going (see Figures 3 and 4).

Focus on Part Flow

MWM started conducting (and still conducts) three-day kaizen events. From the start many of these events focused on one of the most visible problems: part flow. When Sipes first toured MWM in 2012, he recalled seeing the telltale signs: mainly excess WIP. “Lack of flow was really the big issue,” he said.

For instance, in one production area workers made 10 batches, each of which had eight welded components—for a total of 80 pieces—and kits couldn’t be assembled until all eight batches were complete. “It was classic batch-style production,” Steel said.

Sure, by batching parts together the workers could produce more workpieces in less time, but that didn’t matter, because the downstream assemblers couldn’t do anything with them until all the batches were complete. Moreover, they delivered all eight batches at once, which overwhelmed assemblers as they searched for the kits they needed.

The solution wasn’t intuitive. Workers actually had to slow down. They produced a single kit at a time through the cell, and delivered just a few kits at a time to assembly. By producing one complete kit at a time, parts flowed based upon their takt time.

This meant that machines had to be changed over continually, so employees developed quick-change tooling. On the robot welding cells, for instance, they replaced nut-and-bolt weld fixtures, which required numerous tools to change out, with fixtures that have a common stud with a sleeve bushing and a thumb screw. It’s a toolless changeover.

Another focus area was on a large production line. “The area had three assembly tables, three weld positioners, a robotic weld cell, and several large machining centers,” Sipes said. “This was a significant piece of real estate.”

Figure 5
Before lean implementation, several welded subassemblies wait to be kitted. It was classic batch-and-queue.

As Steel recalled, “We were scheduling each area as an independent process. We weren’t connected as a total system.” Everyone worked to produce parts as quickly as possible; that is, they focused on local efficiency. “By the middle of the day, the area was just swelling with WIP.”

Sipes and Steel created a project plan to rearrange and improve this area over a month. During those weeks, the company moved three large machines, ground and polished the floors, implemented 5S and TPM, developed quick-change tooling for robots, and instituted kanban squares to control WIP.

“We took a line that was in a batch-and-queue style with a lot of push, to a pull-style system,” Steel said, adding that previously manufacturing time for one product could take anywhere from two to 11 days; they shortened that to seven hours (see Figures 5 and 6).

Smart Information Flow

Until recently, as soon as a new work order was created in the front office, it was released to the shop floor. Many thought this was a good thing: Production personnel saw future demand and had the information they needed to plan. Problem was, it was too much information.

MWM now creates a work order and sends it to an intermediate step, during which purchasing and scheduling departments can see future demand and plan accordingly. Top plant managers are involved as well, so they can allocate production resources over the coming months.

“But production supervisors don’t see the information,” Miller said. “When we get closer to the launch date, we then release the job to the floor. That way, it keeps the jobs that supervisors are trying to manage to a smaller list. There’s no sense in giving them eight weeks’ worth of information if you’re only expecting them to look a week out.”

Smart Inventory

The quickest changeover and smoothest part flow in the world wouldn’t by themselves have overcome another problem: inconsistent demand cycles. Miller’s managers certainly want to diversify their customer base, but they also know where the fabricator’s strengths lie. Many big players in the construction arena view MWM as a preferred supplier.

In construction, you can’t change the weather. Demand for construction equipment rises in the warmer months, which means OEMs need most of their parts in the first half of the year. So Miller relied on temporary workers and overtime to push orders through during periods of peak demand.

Knowing this, how could they even out demand throughout the year? The solution entailed what some lean purists might disagree with: MWM needed more finished-goods inventory—not just any finished-goods inventory, but what Miller called “smart inventory.”

“We used to be so tight with our finished-goods inventory; any disruption or an unexpected change in a customer’s ordering pattern would cause problems,” Miller recalled. “If customers ordered a little more than we thought they would, it created problems that reverberated throughout our production cycle.”

Figure 6
After implementing changes, the WIP (shown in Figure 5) has disappeared. All parts now are made individually and sent to assembly in a manner so that the downstream process can handle them efficiently. This slows individual processes, because of additional changeovers, but it reduces overall manufacturing time.

At specific work areas, though, shop foremen would receive a schedule—say, four components today, nine the next day, and eight the next. He knew his department had a maximum capacity of seven components a day. So to level-load the area, he would tell workers to overproduce the first day to meet the demand of the next two days. “The foreman did this just because he knew his line and knew what his people could do,” Steel said.

What about expanding this common practice companywide, over the entire year? Historically, managers didn’t want to build ahead, because they didn’t want to take on the risk of holding more finished-goods inventory. Today, however, they mitigate that risk through a strategy called sales and operations planning (S&OP), a methodology that essentially gets people from all areas of the business—top management, sales, finance, and production—talking and on the same page. Every month managers meet and carry out a formalized planning process. The resulting demand forecast becomes a living, collaborative document.

“S&OP provides top management teams a forum for having a collaborative discussion about balancing demand and supply on a regular and formal basis,” said John Boyer, the consultant who was brought in to help MWM implement the process. “It allows the team to make timely, fact-based decisions about resources, capacity, staffing, and materials that help the business ship on time, control costs, and manage investment.”

“Now we’re not jumping through hoops to try to meet huge upswings in demand,” Steel said. “Orders come to the shop floor, and people know what they need to produce every day. It’s a relatively consistent number that’s adjusted every month. It has taken a lot of variables out of the shop floor. A foreman now can walk the floor at a certain time and know he should see certain parts at certain work centers. If those parts aren’t there, he can ask questions.”

Sales team personnel talk with customers, read their forecasts, and compare those with historical trends. They also communicate continually with customers about any potential for product redesigns or demand changes. Then, for certain core products, the company builds to stock at a predetermined rate throughout the year—with daily, weekly, or monthly runs of certain components—to produce inventory required to meet expected demand during the busy season.

When MWM implemented this strategy, it was unfamiliar territory. Production supervisors talked to managers and asked why their department was being asked to make more of a certain product, especially since it already had a significant stockpile in inventory. But sure enough, several weeks later, as the busy season came to fruition, much of that inventory shipped out the door.

Miller conceded that the risk is still there; a customer could experience an unexpected crisis and pull a major order, leaving MWM with worthless inventory. He also admitted that this approach may not work for every custom fabricator.

But for MWM’s situation, the benefits of building more finished-goods inventory far outweigh the risk. It has made production more consistent, reduced the reliance on temporary workers, and helped streamline production. It has even been able to run some lines on a takt time rate, a concept usually reserved for low-product-mix operations.

Sipes added, “We used value stream mapping and takt time analysis to begin to determine where we needed to hold that smart inventory. It makes sense to develop a buffer so you can deal with the demand variation and, as a result, have the whole process work as smoothly as possible.”

All this helped the company perform more capacity-increasing improvements. “We’re going to reach record levels on some production lines this year,” Miller said, “and we could actually produce more without breaking a sweat.”

All the Pieces of a Puzzle

S&OP and the build-to-stock strategy that resulted wouldn’t have worked without other pieces of the puzzle in place: 5S and workplace organization, smooth part flow, sharing of best practices, moving authority to those with the information. All this and more contributed to an abrupt change earlier this year, when everything just clicked.

That’s when a manager from the materials department opened Miller’s office door. She just wanted to know if company sales were OK. Things seemed to be too calm: the shop floor, the front office, everywhere. No one was scurrying about in a panic. Did a large customer pull work? Was the company in trouble?

Miller smiled. “Not at all.”

Photos courtesy of Miller Welding & Machine Co.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.