Md. effort targets efficiency

Lean: Through analysis and consultation, companies find ways to save money and perhaps attract clients.

September 16, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Chefs don't keep their knives anywhere but in the kitchen. Doctors don't stash their stethoscopes in a closet. But some manufacturers run their factories with those kinds of inefficiencies - mainly because they evolved that way and no one has bothered to ask why.

A state program designed to weed out those idiosyncrasies and help local firms improve efficiency and productivity has just certified a company as a "world class" manufacturer, its first.

PACE Worldwide Inc. of Annapolis Junction makes soldering systems that are used to attach or remove computer chips from mother boards. After five years of streamlining and analysis, it says it has cut operating costs by abut 20 percent.

Ordinarily that would mean a healthy boost in profit, but the electronics industry is in a major slump right now, and competition from overseas producers is putting intense pressure on prices. If the industry picks up again, PACE expects to see its profits rise about 5 percent because of increased efficiencies. But, for now, the changes mean the company was simply able to stay solvent.

"We were able to hold our own instead of sinking into an abyss," said PACE Chairman Eric S. Siegel, whose father, William, founded the firm in his Wheaton home in 1958.

The key change at PACE is the way the manufacturing process flows. A worker used to do just one job - say, cutting a piece of metal to a specific size - but now does several. That means instead of going down an assembly line, a product stays in one area, or cell, and is produced mainly by one person.

Additionally, PACE now makes a system only when a customer orders it, instead of stockpiling products on warehouse shelves. Workers are also encouraged to suggest changes and become more involved in the way operations flow.

As a result, the 135-person company has trimmed its inventory from about $6 million to an average of $1.7 million.

"Six million in cash was tied up in assets that were doing nothing," said John Walter, PACE's vice president of manufacturing and engineering. "Now that cash isn't tied up and is in the bank and can be used for new product development. It's excellent asset utilization."

The idea of taking efficiencies to new levels is generally traced back to Japan's efforts to rebuild its country after World War II, with Toyota taking the lead.

PACE is closing its facility in Laurel and consolidating all operations into its Annapolis Junction location - shrinking from about 120,000 square feet to 55,000. The company has laid off some workers because of dwindling orders, but said any headcount reductions due to increased efficiencies will be done solely through attrition.

"If you want people to buy into something," Siegel said, "you don't say: `Get more efficient, and then we'll fire you.'"

The Maryland World Class Manufacturing Consortium was started in 1997 and gets most of its funding - $617,000 this year - from the state's Department of Business and Economic Development. The 54 member firms also pay a $2,000 annual fee, which entitles them to limited consultations along with lectures by various manufacturing experts.

The consortium has a list of about 15 consultants nationwide that it has pre-screened and splits consultant fees with member companies that use them. PACE and the consortium, for example, each paid about $125,000 for the consulting services.

Once a company has achieved a certain level of efficiency, the state will certify it as "world class." The benchmarks are set by the state and aren't a national standard such as an ISO 9001 certification. The process is expected to take three to five years. "This is not a typical initiative that lasts a month or a week," said Roger Satin, the consortium's director. "This is a commitment by the entire company to change the way they look at and do business. It makes them much more efficient and much more attractive to customers."

Another firm - Novatec Inc. of Anne Arundel County, which makes machines that dry plastic resins before they are molded into products - has been able to drastically cut production time by making many of the same changes that PACE did.

By cleaning up and organizing work stations, changing the assembly process and only making the number of products ordered, the company has cut the time need to make one particular product - a feeder - from 10 days to 40 minutes.

"People were spending a lot of time looking for the right tool or material for a job. But then they'd wander around, and people might ask them a question about another job or they socialized or got distracted," said Greg Washburn, Novatec's manufacturing manager.

It may sound basic - keep tools where they're used, study the process to see where there's waste, listen to workers - but implementing the changes takes a commitment that many firms don't have, especially those whose chief executives are focused on short-term gains that will immediately boost stock prices, said Brian Heymans, president of the consulting firm Kaizen Institute in Austin.

"I am horrified, absolutely horrified, at the level of ignorance that has been around for decades," he said. "It's like raising kids. You cannot say `I'm going to raise my kid one week a month.' It's every day. And you cannot say `I'm going to do lean manufacturing this year,' and then next year do something else."

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